The ‘smartphone war’ case

In business, certainty matters. Volatility and uncertainty are some of the most dangerous impediments to rekindling the American economy.  Look no further than the rippling effects of the constant “will they or won’t they” raise rates chatter from the Federal Reserve as a prime example.  Imagine the thought process of an up-and-coming entrepreneur on the verge of taking the big leap to start his or her first business in an economic and regulatory environment that is so burdensome and wrought with uncertainty and a lack of clarity.

It is incumbent on our government to foster an environment that allows businesses to thrive, which spurs job growth, innovations and investment into new products and services.  In my new book, Reviving America, I detail several ways to help restore hope and prosperity in the country: repealing Obamacare, replacing the tax code and reforming the Federal Reserve. These reforms are the core of what it will take to give American entrepreneurs and small businesses a better chance to compete and thrive in today’s competitive global marketplace.

{mosads}The unfortunate passing of U.S. Supreme Court Justice Antonin Scalia has turned the nation’s attention to the High Court.  Justice Scalia was a judicial giant and a tireless defender of judicial principles based on the Constitution, not political or personal whimsy.  His ability to articulate and defend his arguments made him the most influential conservative judicial leader in the Court’s modern era.  And while we pause to grieve his sudden passing and reflect upon his storied legacy, the business of the Court and its important work carries on.  With many highly anticipated decisions pending this term and many other high-profile petitions pending before the Court, the full impact of Justice Scalia’s passing may not be known for some time. 

One potentially landmark case that is pending before the Supreme Court – one that the Court must accept – could forever alter the innovation landscape. If left unaddressed by the High Court, or if the Justices render a wrong decision, the case will stunt investment in new technologies and seriously disfigure the landscape for the next generation of American innovators.

The so-called “smartphone war” case involves two of the world’s largest companies: Apple and Samsung.  In the appellate courts, Apple has alleged that Samsung infringed on a small set of its design patents.  Design patents cover only ornamental features and play no role in how a product actually functions.  One of the design patents in question merely covers the rounded rectangular shape of the corners of certain portions of the iPhone and another will likely be invalidated completely by the U.S. Patent Office. 

What makes this case unique, and potentially damaging, is the lower court’s interpretation of a design patent law that dates back to 19^th century – a time when design patents only applied to simple, not technical, products with one design like a rug or a carpet.   This is light years away from a modern smartphone that contains upwards of 250,000 patents. 

If not interpreted correctly – an appellate court did render a wrong decision – the case in question will end up awarding all profits earned by an infringing product to the plaintiffs.  You read that correctly:  total profits for a single design patent on the shape of a product that contains hundreds of thousands of patents.  The damages awarded in this case are exorbitant. But worst is the chilling “do not innovate” warning it would send to businesses and would-be innovators alike.

This case is far greater and more important than just Apple vs. Samsung.  What certainty would an entrepreneur have to bring a product to market with the fear that – unbeknownst to him or her – a company may hold a design patent for something trivial like a shape or non-functional component that is coincidentally also part of the entrepreneur’s product?

It can’t be stressed enough: if left uncorrected by the Supreme Court, the lower court’s misguided interpretation would set a national precedent, one that could make it nearly impossible to bring a product to market.  The risks would simply be too high for innovators and would-be manufacturers to commit the resources necessary to research, design, manufacture and bring to market a new high-tech product.

It’s been over a century since the U.S. Supreme Court has heard a case related to design patents, and in that time modern technology has advanced in unimaginable ways.  In the modern technology era, it’s imperative that the Supreme Court provides common sense clarity as to how the remedies available for infringement of design patents should be applied to modern innovators. By hearing the case Apple vs. Samsung – and rendering the right decision – the High Court would help unleash a new, robust era of American ingenuity not just in the technology space but in every sector of the economy that relies on risk takers to bring new technologies to market. 

Forbes is a publishing executive, editor-in-chief of Forbes magazine and twice a candidate for the Republican presidential nomination.