Amicus Curiae Brief — Nike, Inc. v. Wal-Mart Stores, Inc.

MOTION FILED

JUL & 7 1999

No. 98-1942

IN THE SUPREME COURT OF THE UNITED STATES

NIKE, INC.,

Petitioner.

WAL-MART STORES, INC. and

HAWE YUrc, iNC.,

Respondents.

On Petition for Writ of Certiorari To the United States Court

of Appeals for the Federal Circuit

Amici Curiae Brief Supporting Petitioner and

Motion for Leave to File Amici Curiae Brief

Edward J. Kessler Curt Krechevsky

Attorney of Record Assistant General Counsel

David K.S. Cornwell Douglas A. Batt

Tracy-Gene G. Durkin Technology Counsel

Sterne, Kessler, Reebok International Ltd.

Goldstein & Fox P.L.L.C. The Rockport Company, Inc.

1100 New York 100 Technology Center Drive

Avenue, N.W., Suite 600 Stoughton, MA 02072

Washington, D.C. 20005-3934 (781) 401-5000

(202) 371-2660

AMICI CURIAE REEBOK INTERNATIONAL LTD.

AND THE ROCKPORT COMPANY, INC.’S MOTION

FOR LEAVE TO FILE A BRIEF AMICI CURIAE

Pursuant to Rule 37.2 of the Rules of this Court, amici,

Reebok International Ltd. and The Rockport Company, Inc.,

respectfully move for leave to file the attached Brief of Amici

Curiae in Support of the Petition for Writ of Certiorari.

Petitioner Nike, Inc. has consented to the filing of the brief.

This motion is necessary because Respondents have denied

consent. The amici share a common concern regarding the

interpretation of "damages" in 35 U.S.C. § 287.

Reebok International Ltd. ("Reebok") is a manufacturer

of footwear, apparel and equipment in the United States.

Among its products, Reebok markets REEBOK shoes

throughout the United States. The Rockport Company, Inc.

("Rockport") is a wholly-owned subsidiary of Reebok.

Rockport is also a manufacturer of footwear and apparel in the

United States. Among its products, Rockport markets

ROCKPORT shoes throughout the United States.

Reebok and Rockport, like petitioner Nike, Inc.

("Nike"), have expended substantial sums in designing shoes

and in promoting and protecting these designs. Reebok and

Rockport consider these designs to be among their most

valuable assets and are committed to protecting their rights in

the designs of REEBOK and ROCKPORT shoes through the

United States (utility and design) patent laws.

Neither Reebok nor Rockport have a stake in any of the

parties to this litigation or the result of this case. They are,

however, deeply concerned about the possibility that the Federal

Circuit’s decision in this case, reversing the district court’s

opinion with respect to the interpretation of "damages" in 35

U.S.C. § 287, will be allowed to stand. Such a decision, left

intact, would cause serious harm to design patent holders.

Reebok and Rockport’s interests would be directly and

adversely affected if the Federal Circuit’s decision is not

reversed. Amici therefore respectfully seek leave of this Court

to file the attached brief in support of the Petition for Writ of

Certiorari.

Respectfully submitted,

GOLDSTEIN

STERNE, KESSLE

Date: July 6, 1999

Edward Jt

Attorney of Record

David K.S. Cornwell

Tracy-Gene G. Durkin

Sterne, Kessler, Goldstein & Fox P.L.L.C.

1100 New York Avenue, N.W.

Suite 600

Washington, D.C. 20005-3934

(202) 371-2660

Curt Krechevsky

Assistant General Counsel

Douglas A. Batt

Technology Counsel

Reebok International Ltd.

The Rockport Company, Inc.

100 Technology Center Drive

Stoughton, MA 02072

(781) 401-5000

TABLE OF CONTENTS

I. STATEMENT OF INTEREST ................

II. SUMMARY OF ARGUMENT ................ 2

Il. SS 3

A. DESIGN PATENTS ARE PARTICULARLY

VALUABLE TO THE FOOTWEAR

eee 3

B. THE FEDERAL CIRCUIT’S STATUTORY

CONSTRUCTION AND USE OF

LEGISLATIVE HISTORY WAS

A 7

es EVEN IF THE FEDERAL CIRCUIT’S USE

OF LEGISLATIVE HISTORY WAS

CORRECT, THEIR ANALYSIS WAS

FLAWED IN AT LEAST FIVE

Se i cece caves. 10

‘, THE FEDERAL CIRCUIT’S DECISION

MISREADS THE LEGISLATIVE HISTORY

OF 35 U.S.C. § 287 AND IGNORES

PRECEDENT OF THIS COURT ...... 10

Nw

THE FEDERAL CIRCUIT’S DECISION

IGNORES THE PURPOSE AND EFFECT OF

THE PATENT ACTOF 1952 ....... 15

TABLE OF CONTENTS

2

4)

IV. CONCLUSION

(CONTINUED)

THE FEDERAL CIRCUIT’S DECISION

DOES NOT ACCORD PROPER WEIGHT TO

THIS COURT’S DECISION IN ARO

MANUFACTURING ......0cceeees 16

THE FEDERAL CIRCUIT’S DECISION

CONVENIENTLY DISMISSES SOME

LEGISLATIVE HISTORY OF THE

PATENT LAWS WHILE CONSIDERING

UU ves coekdes een wodaeees 17

THE FEDERAL CIRCUIT’S DECISION

DID NOT OBSERVE AN “ANOMALY”

IN TITLE 35, BUT INSTEAD CREATED

Se as ova aeds hats eebeas 17

il

TABLE OF CASES

Aerogroup Int'l, Inc. v. Marlboro Footworks. Ltd

1997 WL 83395 (S.D.N.Y. May 7, 1997)

Aldridge v. Williams

3 U.S. (How.) 9 (1844) ..............

Aro Mfg. Co. v. Convertible Top Co.

3T1 US. 476 (1964) .................

Avia Group Int'l, v. L.A. Gear California

853 F.2d 1557, 7 U.S.P.Q.2d (BNA) 1548

[8S eg, | see

Braun, Inc. v. Dynamics Corp. of America

975 F.2d 815, 24 U.S.P.Q.2d (BNA) 1121

ee es SUED hoes scdace eco...

Caminetti v. United States

242 U.S. 470 (1916) .................

Conroy v. Aniskoff

507 U.S. 511 (1993)... 0.0

Duplate Corp. v. Triplex Safety Glass Co.

298 U.S. 448 (1936) .................

Hirschey v. FERC

777 F.2d 1 (D.C. Cir. 1985) ...........

Mansell v. Mansell

490 U.S. 581 (1989) ................

ill

ere he

TABLE OF CASES

(Continued)

Nike, Inc. v. Wal-Mart Stores, Inc.

138 F.3d 1437, 46 U.S.P.Q.2d (BNA) 1001

(Fed. Ci. 1990) 6.6 c<ss20050000se eee cies passim

Nike, Inc. v. Wal-Mart Stores, Inc.

41 U.S.P.Q.2d (BNA) 1146 (E.D. Va. 1996). passim

Trans Alaska Pipeline Rate Cases

4360.5. 631 GSTS) cscs ceea a0 eee 7

United States v. Missouri Pac. R_R.

270 U.S. 200 CIEE). enn ke eee 7

United States v. Public Util. Comm'n of Cal.

345 U.S. 290 (19S) 6. cia eee eee 8,9

IV

TABLE OF STATUTES AND OTHER AUTHORITIES

a |: , ae passim

EM 66 5.050-a4 se a dce ed oddon kee: passim

S| a es passim

PIE es esa yice csvdedsdeece te lin. passim

Act of July 19, 1952, Ch. 950, 66 Stat. 792........ passim

H.R. Rep. No. 1503, 79th Cong. 2d Sess. ............. 1]

128 Cong. Rec. $8659 (daily ed. July 19, 1982). ....... 14

Reed Dickerson, The Interpretation of and Application of

UR 6 50 ihb 40 wed ¥ 0.00 oho los eo ck. 12

Todd J. Gillman, Attorney Puts Foot Down About Sneaker

Patents: Avia Takes Shoe Pirates to Court to Protect Design.

Washington Post, July 20, 1987...................... 6

Oliver Wendell Holmes, Collected Legal Papers ........ 8

Greg Melville, Big Shoe Firms Turn Up Heat In Brand

Wars; Companies Pursue Legal Action to Protect

Trademarked Logos, Designs, Footwear News, March 17.

ST TUS o'We 54 40 645 ¥ 0 belo s'cbbe se Kde'ekcccnc:. 3

Office of Legal Policy, U.S. Dep't of Justice, Using and

Misusing Legislative History: A Re-Evaluation of the

Status of Legislative History in Statutory Interpretation,

seat tl aE ea ne 10

TABLE OF STATUTES AND OTHER AUTHORITIES

(Continued)

Norman J. Singer, Sutherland Statutes and Statutory

Construction § 45.02 (Sth ed. 1992). ................ 7,8

Kenneth W. Starr, The Role of Legislative History in Judicial

Interpretation: A Discussion Between Judge Starr and Judge

Be OR , ere Pore res ore 9

Patricia M. Wald, Some Observations on the Use of

Legislative History in the 1981 Supreme Court Term, 68

SE, EF Eo aces oe ateeweseetes ares 8

Design Patents January 1977 - December 1996: A

Technology Assessment and Forecast Report, U.S. Patent

and Trademark Office, Office of Electronic Information

Products/TAF Program, April 1997................. 3,4

Charles J. Zinn, Commentary on New Title 35 U.S. Code

"Patents" 1952 U.S.C.C.A.N. (66 Stat.) 2507 .......... 15

vl

I. STATEMENT OF INTEREST

The parties represented in this amici curiae brief are

Reebok International Ltd. ("Reebok") and The Rockport

Company, Inc. ("Rockport). Reebok is a manufacturer of

footwear, apparel and equipment in the United States. Among

its products, Reebok markets REEBOK shoes throughout the

United States. Rockport is a wholly-owned subsidiary of

Reebok. Rockport is also a manufacturer of footwear and

apparel in the United States. Among its products, Rockport

markets ROCKPORT shoes throughout the United States.

Reebok and Rockport have expended substantial sums

in designing shoes and in promoting and protecting these

designs. Reebok and Rockport consider these designs to be

among their most valuable assets and are committed to

protecting their rights in the designs of REEBOK and

ROCKPORT shoes through the United States (utility and

design) patent laws.

Neither Reebok nor Rockport have a stake in any of the

parties to this litigation or the result of this case. They are,

however, deeply concerned about the possibility that the Federal

Circuit’s decision in this case, reversing the district court’s

opinion with respect to the interpretation of "damages" in 35

U.S.C. § 287, will be allowed to stand. Such a decision. left

intact, would cause serious harm to design patent holders.’

' Pursuant to Rule 37.6, none of the parties or their counsel has

contributed either substantively or monetarily to the preparation of this

brief. Specifically, only Reebok International Ltd. and The Rockport

Company, Inc. have made a monetary contribution to the preparation and

submission of this brief.

Il. SUMMARY OF ARGUMENT

The nature of the footwear industry and the industry's

use of design patents to prevent infringers from making a

considerable profit "knocking off" protected designs warrant the

grant of a writ of certiorari. Limiting a design patent holder to

recovery of an infringer’s profit only after the point when

marking or actual notice is initiated will seriously limit the value

of a design patent, and reverse the trend of cases like Avia

Group Int'l, v. L.A. Gear California, 853 F.2d 1557, 7

U.S.P.Q.2d (BNA) 1548 (Fed. Cir. 1988) that have breathed

new life into the design patent.

The Federal Circuit's statutory construction of 35

U.S.C. § 287, in light of 35 U.S.C. §§ 284 and 289, and use of

legislative history was incorrect. Accepting, arguendo, the

Federal Circuit s use of ‘legislative history was correct, their

analysis was flawed in several respects. The Federal Circuit's

decision misread the legislative history of 35 U.S.C. § 287, and

ignored this Court’s precedent in Aro Mfg. Co. v. Convertible

Top Co., 377 U.S. 476 (1964). The Federal Circuit also

overlooked the purpose and effect of the Patent Act of 1952.

Furthermure, the Federal Circuit’s decision did not

accord proper weight to this Court’s decision in Aro Mfg. The

Federal Circuit's decision conveniently dismisses some

legislative history of the patent laws while considering others.

The Federal Circuit did not observe an "anomaly" in Title 35 but

in essence created one. Accordingly, this Court should grant a

writ of certiorari.

to

iil. ARGUMENT

A. DESIGN PATENTS ARE PARTICULARLY

VALUABLE TO THE FOOTWEAR INDUSTRY

Design patents are now more valuable then ever, in part

due to the Federal Circuit’s line of cases beginning with Avia

Group Int'l, v. L.A. Gear California, 853 F.2d 1557. 7

U.S.P.Q.2d (BNA) 1548 (Fed. Cir. 1988). In the footwear field

especially, the protection provided by a design patent is

extremely valuable in fighting "knock off" products. The

problem of "knock off" products is not new. In 1987-1988.

Avia, a former subsidiary of Reebok, was involved ina design

patent litigation against L.A. Gear, in which L.A. Gear was

found to have infringed two Avia design patents. See id. In this

landmark case, the Federal Circuit affirmed a grant of summary

judgment of infringement in favor of Avia. At the time. the

culture in the footwear industry was that competing companies

felt free to copy the popular styles of its competitors. The Avia

case sent a message to would be infringers that it would be very

expensive for them to "knock off" footwear designs in the

future. No longer could they get a "free ride" on other

companies’ research and development efforts.

Since the Avia decision, design patent applications and

enforcement actions have increased not only within the

footwear industry, but have spread to other industries as well.

One commentator has observed that "today’s shoemakers are

protecting the integrity of their emblems and designs at all costs,

taking their competitors to court when they believe they are

being unlawfully ripped off." Greg Melville, Big Shoe Firms

Turn Up Heat In Brand Wars: Companies Pursue Legal Action

to Protect Trademarked Logos, Designs, Footwear News.

March 17, 1997, at 1. This trend is further evidenced by the

rise of issued design patents from approximately 4000 per year

3

in the early 1980's, to over 11,000 per year since 1994. See

Design Patents January 1977 - December 1996: A Technology

Assessment and Forecast Report, U.S. Patent and Trademark

Office, Office of Electronic Information Products/TAF

Program, April 1997.

The district court awarded $6 million to Nike. See Nike,

Inc. v. Walmart Stores, Inc., 41 U.S.P.Q.2d (BNA) 1146 (E.D.

Va. 1996). This award represents the largest design patent

award to date and is the high point of this trend of increased

protection and value offered by the design patent. However,

most design patent infringement cases never make it to trial. As

the infringing products are often times identical copies of the

patented design, infringement is not usually contested by the

accused party. All that remains to be determined is the amount

of damages owed to the patent holder. In making this

determination, it has been the practice to account for infringer’s

profits both before and after marking or actual notice, in light of

the Federal Circuit’s decision in Braun Inc. v. Dynamics Corp.

of America, 975 F.2d 815, 824 (Fed. Cir. 1992) (holding that

because "total damages" and "profits" have different meanings,

total profits are not subject to enhancement under 35 U.S.C. §

284). The Federai Circuit’s recent panel decision in the Nike

case goes against this commonly held and long standing

interpretation of patent damages, as set out by the Federal

Circuit's own precedents.

As stated above, few design patent cases make it to trial

and even fewer make it to the appellate level. In fact, since its

birth in 1982, the Federal Circuit has only had the opportunity

to consider a handful of design patent cases. The success of the

design patent cannot be measured by the number of reported

cases. The enormous value of the design patent is found in the

silent enforcement actions which are undertaken daily by design

patent holders. Due to the scarcity of appealed design patent

4

cases, however, the important issue of interpreting the meaning

of the word "damages" as used in 35 U.S.C. § 287(a) may not

come before this Court again for some time. It would be

disastrous for many design patent holders and entire industries

if an erroneous panel decision were allowed to stand and be

afforded precedential weight. This Court has before it now the

opportunity to reinforce the proper interpretation of the

remedies available under design patent law, and clarify an

important aspect of design patent law.

Most disturbing is the fact that the Federal Circuit’s

decision ignores not only this Court’s precedent and its own

prior rulings, but also the reasoning of the most recent district

court design patent cases to rule on the issue. The lower court

Nike decision properly held that the marking provisions do not

limit recovery of infringer’s profits, given the "*longstanding’

and ‘important’ distinction in patent law between damages and

profit." Nike, 41 U.S.P.Q.2d (BNA) at 1149 (quoting Braun,

975 F.2d at 824). At least one other district court has similarly

held that "the marking statute does not preclude an award of the

infringer’s profits prior to the patentee marking the product or

giving notice to the infringer." Aerogroup Int'l, Inc. v.

Marlboro Footworks, Ltd., 1997 WL 83395, *6(S.D.N.Y. May

7, 1997) (also citing Braun, 975 F.2d at 824).

Both district court opinions relied on the only precedent

afforded them by the Federal Circuit (i.e., Braun). The Nike

panel, however, quickly distinguished the Federal Circuit’s prior

decision in Braun, despite recognizing that its decision in light

of the controlling precedent is "anomalous." Nike, Inc. v. Wal-

Mart Stores, Inc., 138 F.3d 1437, 1445 (Fed. Cir. 1998). As

the Federal Circuit’s decision will have the effect of overruling

these recent district court decisions, developed in light of the

Federal Circuit’s earlier holding in Braun, it is important that

this Court have an opportunity to consider the issue.

be

Furthermore, it is important to realize that the nature of

the design field and how complying with the marking provisions

is often impractical. The following 1987 observation by

Michael W. Blommer, then Executive Director of the American

Intellectual Property Law Association, remains true today:

In footwear and fashion, items go out of

style faster than patents get granted... . In

the area of designs, sometimes the market's

passed you by the time the patent issues.

Manufacturers like Reebok [and Nike],

they re constantly changing the style of their

shoes. They're going to start selling their

shoes while the patent is pending. The

knock-off artists are in and out of the market

in a year or two.

Todd J. Gillman, Attorney Puts Foot Down About Sneaker

Patents; Avia Takes Shoe Pirates to Court to Protect Design,

Washington Post, July 20, 1987, at F3. Retooling to mark

products after a patent issues takes time and is expensive. By

the time the design patent is granted and the shoe is marked,

desire for the original design may be waning due to the presence

of "knock-offs." Further, in the time it takes to mark the

product with the patent number, the infringer continues to make

a considerable profit "knocking off" the protected (and

apparently quite popular) design at the expense of companies

who perform research and development to create the popular

styles.

Limiting a design patent holder to recovery of an

infringer’s profits only after the point when marking is initiated

will seriously limit the value of a design patent and reverse the

trend that has to this point allowed design patents to flourish.

Such a holding is not required by a plain reading of the statute

and is in conflict with recent district court and Federal Circuit

decisions that have helped strengthen the design patent right.

B. THE FEDERAL CIRCUIT’S STATUTORY

CONSTRUCTION AND USE OF LEGISLATIVE

HISTORY WAS INCORRECT

Reebok and Rockport generally agree with Nike's

position set forth in their Petition for a Writ of Certiorari as to

the Federal Circuit's erroneous method of statutory

construction. Thus, those arguments concerning the Federal

Circuit’s departure from such precedents as Mansell y Mansell.

490 U.S. 581 (1989) and Trans Alaska Pipeline Rate Cases,

436 U.S. 631 (1978), are not repeated herein. The Federal

Circuit's decision, if left intact, would set design patent law on

a perilous path. Thus, this brief further sets out more Clearly

those areas in which Reebok and Rockport believe the Federal

Circuit’s analysis was flawed.

Any analysis of the use of legislative history must first

begin with the plain meaning rule. The rule. Originating from

Sir William Blackstone's Commentaries, states. "Where the

language is plain and admits of no more than one meaning the

duty of interpretation does not arise and the rules which are to

aid doubtful meanings need no discussion." Caminettiv. United

States, 242 U.S. 470, 485 (1916). Under the rule. if the words

of a statute are clear and construction of them will not lead to

an absurd result, the words are assumed to be the "final

expression of the meaning intended." United States v. Missouri

Pac. R.R., 278 U.S. 269, 277-78 (1929). It is only when a

5

statute is ambiguous that courts should refer to legislative

history. Norman J. Singer, Sutherland Statutes and Statutory

Construction § 45.02 (Sth ed. 1992). In short, statutes must

not be made a plaything for lawyers to manipulate and

transmogrify to suit the purpose of their clients. A statute is

considered ambiguous when it is capable of being understood

by reasonably well-informed persons in either of two or more

senses; or some of the words used may refer to several objects

and the manner of their use does not disclose the particular

objects to which words refer. /d. Therefore, the Federal

Circuit’s resort to legislative history after admitting, as the

district court found, that 35 U.S.C. § 287(a) is clear on its face

1s very troubling.

Many esteemed judges have commented on the

problematic aspects of using legislative history (especially in

light of unambiguous statutes). Judge Wald of the D.C. Circuit

has observed that the use of legislative history has become so

prevalent that, "no occasion for statutory construction now

exist when the Court will not look at legislative history."

Patricia M. Wald, Some Observations on the Use of Legislative

History in the 198] Supreme Court Term, 68 lowa L. Rev. 195

(1983). Justice Holmes wrote, "we do not inquire what the

legislature meant; we ask only what the statute means." Oliver

Wendell Holmes, Collected Legal Papers 207 (1920). Justice

Jackson concurred in this position, stating his preference for

making decisions "by analysis of the statute instead of by

psychoanalysis of Congress." United States v. Public Util.

Comm'n of Cal., 345 U.S. 295, 318 (1953).

The concerns about the use of legislative history can be

placed into two broad categories: separation of powers and

practical. Kenneth W. Starr, The Role of Legislative History in

Judicial Interpretation: A Discussion Between Judge Starr and

Judge Mikva, 1987 Duke L.J. 371, 375. First, separation of

powers concerns arise when courts consult legislative material,

thus creating winners and losers as they "elevate the views of

some and denigrating or rejecting the views of others. The

courts may be acting in an area that should be out of bounds to

the unelected branch." /d. at 375. In accordance with this view

was Justice Jackson, writing:

"When we decide from legislative history . .

. We must place ourselves in the place of the

majority of Congress and act according to

the impression we think this history should

have made on them... . That process seems

to me to be not the interpretation of a statute

but creation of a statute."

Public Util. Comm'n, 345 U.S. at 318. Second, practical

concerns arise because it is well known that "technocrats,

lobbyists, and attorneys have created a virtual cottage industry

in fashioning legislative history so that the Congress will appear

to embrace their particular view in a given statute... . This

history-making can work as an abuse of the legislative process."

Starr, supra at 377. More recently, Justice Scalia, concurring

in Conroy v. Aniskoff, 507 U.S. 511 (1993), criticized the

majority for employing legislative history after declaring a

statute to be "unambiguous" and "unequivocal." He wrote:

That is not merely a waste of research time and

ink; it is a false disruptive lesson in the law . . .

. This undermines the clarity of law .. . We are

governed by laws not by the intentions of

9

legislatures. As the Court said in 1844: The law

as it passed is the will of the majority of both

houses, and the only mode which is spoken is in

the act itself.

Id. at 519 (quoting Aldridge v. Williams, 3 U.S. (How.) 9, 24

(1844)). A 1989 report to the Attorney General is in accord

with this view. It states:

[A] basic principle is that legislative history that

specifies how general statutory language is to be

applied should not be considered binding on the

interpreter.

Office of Legal Policy, U.S. Dep't of Justice, Using and

Misusing Legislative History: A Re-Evaluation of the Status of

Legislative History in Statutory Interpretation, Jan. 5, 1989, at

80. Thus, given the admittedly clear and unambiguous statue in

question, the Federal Circuit’s use of legislative history which

results in something other than a plain meaning application, is

inappropriate and not supported by precedent.

c EVEN IF THE FEDERAL CIRCUIT’S USE OF

LEGISLATIVE HISTORY WAS CORRECT,

THEIR ANALYSIS WAS FLAWED IN AT LEAST

FIVE RESPECTS.

1. THE FEDERAL CIRCUIT’S DECISION

MISREADS THE LEGISLATIVE HISTORY OF 35

U.S.C. § 287 AND IGNORES PRECEDENT OF

THIS COURT

The Federal Circuit’s decision on the meaning of the

word "damages" in 35 U.S.C. § 287(a) rests, in part, on the

legislative history of the 1946 Patent Act. Nike, 138 F.3d at

10

1442. More specifically, the Federal Circuit points to a

Committee on Patents Report, H.R. Rep. No. 1503, 79th Cong.

2d Sess., where Representative Pepper stated this bill "would

not preclude recovery of profits as an element of general

damages." The Federal Circuit then mis-characterizes Pepper’s

statement by stating that, "calling infringer’s profits ‘an element

of general damages’ was not unusual, for it reflected common

usage." Nike, 138 F.3d at 1442. The text of H.R. 531] (the bill

that amended the predecessor of 35 U.S.C. § 287), however,

changed the statute from:

"for an infringement the complainant shall be

entitled to recover in addition to the profits

to be accounted for by the defendant, the

damages the complainant has sustained

thereby"

(emphasis added), to:

"for an infringement the complainant shall be

entitled to recover general damages which

shall be due"

(emphasis added).

The report went on to state that "the object of the bill is to

make the basis of recovery in patent-infringement suits general

damages, that is any damages that the complainant can prove,

not less than a reasonable royalty . . . rather than profits and

damages" (emphasis added). In fact, this Court cited the same

committee report to justify its holding that no recovery for

infringer’s profits may be obtained under Section 287. Aro

Mfg. Co. v. Convertible Top Co., 377 U.S. 476. 506 (1964).

1]

Thus, the legislative history demonstrates that the term

"general damages" in the amended bill meant damages at law--

economic loss or just compensation to the complainant which

can include the complainant’s lost profits--and not "infringer’s

profits" which is why they are specially set out in 35 U.S.C. §

289.° If this argument seems to make the legislative history

unclear, perhaps one should follow one commentator’s sarcastic

advice that "whenever the legislative history is ambiguous it is

permissible to refer to the statute." Reed Dickerson, The

Interpretation of and Application of Statutes 164 (1975).

In Hirschey v. FERC, 777 F.2d 1 (D.C. Cir. 1985), then

Circuit Judge Scalia wrote in a concurring opinion:

I frankly doubt that it is ever reasonable to

assume that the details, as opposed to the

broad outlines of purpose, set forth in a

committee report come to the attention of,

much less are approved by, the House which

enacts the committee's bill.

In 1982, the following illuminating exchange occurred

between members of the Senate, in the course of floor

debate on a tax bill:

* Should one accept the Federal Circuit's “common usage"

argument to call infringer’s profits part of general damages, it is

worthwhile to consider 35 U.S.C. § 296 adopted in 1992: "remedies

[against a state for patent infringement shall] include damages, interests,

costs, and treble damages under section 284, attorneys fees under section

285, and the additional remedy for infringement of design patents {of the

infringer’s profit] under section 289" (emphasis added).

1?

Mr. ARMSTRONG. ... My question, which

may take [the chairman of the Committee on

Finance] by surprise, is this: Is it the

intention of the chairman that the Internal

Revenue Service and the Tax Court and

other courts take guidance as to the intention

of Congress from the committee report

which accompanies this bill?

Mr. DOLE. I would certainly hope so....

Mr. ARMSTRONG. Mr. President, will the

Senator tell me whether or not he wrote

the committee report?

Mr. DOLE. Did I write the committee

report?

Mr. ARMSTRONG. Yes.

Mr. DOLE. No; the Senator from Kansas

did not write the committee report.

Mr. ARMSTRONG. Did any Senator write

the committee report?

Mr. DOLE. I have to check.

Mr. ARMSTRONG. Does the Senator

know of any Senator who wrote the

committee report?

Mr. DOLE. I might be able to identify one,

but I would have to search. I was here all

during the time it was written, | might say,

and worked carefully with the staff as they

worked....

Mr. ARMSTRONG. Mr. President, has the

Senator from Kansas, the chairman of the

Finance Committee, read the committee

report in its entirety?

Mr. DOLE. | am working on it. It is not a

bestseller, but | am working on it.

Mr. ARMSTRONG. Mr. President, did

members of the Finance Committee vote on

the committee report?

Mr. DOLE. No.

Mr. ARMSTRONG. Mr. President, the

reason I raise the issue is not perhaps

apparent on the surface, and let me just state

it:.... The report itself is not considered by

ue Committee on Finance. It was not

subject to amendment by the Committee on

Finance. It is not subject to amendment now

by the Senate... . If there were matter

within this report which was disagreed to by

the Senator from Colorado or even by a

majority of all Senators, there would be no

way for us to change the report. I could not

offer an amendment tonight to amend the

committee report . . . [FJor any jurist.

administrator, bureaucrat, tax practitioner, or

others who might chance upon the written

record of this proceeding, let me just make

the point that this is not the law, it was not

voted on, it is not subject to amendment, and

we should discipline ourselves to the task of

expressing congressional intent in the statute.

Hirschey, 777 F.2d at 7-8 n.1 (citing 128 Cong. Rec. $8659

(daily ed. July 19, 1982)). Therefore reliance on the committee

report discussing Section 287 is tenuous at best.

14

_ THE FEDERAL CIRCUIT’S DECISION IGNORES

THE PURPOSE AND EFFECT OF THE PATENT

ACT OF 1952

The Federal Circuit correctly noted that with the 1952

codification of the patent law, "Section 284 as written did not

state the 1946 Act’s concept of recovering profits as an element

of general damages, a purported ambiguity." Nike, 138 F.3d at

1442. The Federal Circuit, however, chose not to follow the

logical result of its observation. The Patent Act of 1952. Pub.

L. No. 82-593, 66 Stat. 792, did more than codify all of the

Revised Statutes sections pertaining to patents. The Act’s

purpose was to "revise and codify the laws relating to patents."

H.R. 7794, 66 Stat. 792. This bill was a result of:

a preliminary draft [being] prepared and

distributed widely during the year 1950. .

Since this draft was intended principally to

elicit suggestions and criticisms from the

patent bar and others interested in the subject

it contained many proposed changes in

substantive law which had been suggested

during the past quarter century.

* * A

Finally in May of 1952 the [House

Committee on the Judiciary] reported out a

‘clean’ bill.

Charles J. Zinn, Commentary on New Title 35 US. Code

"Patents", 1952 U.S.C.C.A.N. (66 Stat.) 2507. Therefore,

assuming the legislative history of the 1946 Act. upon which the

Federal Circuit relied, is clear, it must be viewed in light of the

subsequent codification and interpretation of the 1952 Act.

3. THE FEDERAL CIRCUIT’S DECISION DOES NOT

ACCORD PROPER WEIGHT TO THIS COURT’S

~~ DECISION IN ARO MANUFACTURING

The Federal Circuit states that while this Court, in Aro

Mfg. “clarified the measure of recovery for infringement, it did

not deal with the patent marking requirements." Nike, 138 F.3d

at 1442. In Aro Mfg., this Court held that "damages" as used

in 35 U.S.C. § 284 meant that a patent infringement

complainant can only recover their losses and not infringer’s

profits. Aro Mfg., 377 U.S. at 507. Thus, the Federal Circuit's

statement is baffling for at least two reasons. One, they accept

the fact that "damages" in Section 284 does not include the

equitable relief of infringer’s profits, notwithstanding their

earlier reliance on the 1946 Act's legislative history; and two,

they presume this Court was not aware of Section 287’s

marking requirements when this Court decided a case under

Sections 271 and 284 of the same title. This is simply too much

to swallow. The Federal Circuit attempts to limit the holding of

Aro Mfg. to utility patents by stating that while it "eliminated

recovery for infringer’s profits in utility patent infringement, this

remedy for design patents was unaffected." Nike, 138 F.3d at

1443. However, this Court stated, generally, that "in patent

nomenclature what the infringer makes is ‘profits,’ and what the

owner of the patent loses by such infringement is ‘damages.’

Aro Mfg., 377 U.S. at 505 (quoting Duplate Corp. v. Triplex

Safety Glass Co., 298 U.S. 448, 451 (1936)). Therefore, this

Court drew a distinction between design and utility patents

when they distinguished between "damages" and "infringer’s

profits."

16

4. THE FEDERAL CIRCUIT’S DECISION

CONVENIENTLY DISMISSES SOME

LEGISLATIVE HISTORY OF THE PATENT LAWS

WHILE CONSIDERING OTHERS

The Federal Circuit mentions that in the 1952 Patent

Act, the phrase "knowing that the same has been so applied"

was removed from Section 289 which provides an additional

remedy (i.e., infringer’s profits) to holders of design patents.

Nike, 138 F.3d at 1442. The Federal Circuit admits that this

phrase, which was in the original 1887 version of Section 289,

is "relevant to the marking statute." /d However, the Federal

Circuit simply dismissed this fact rather than naturally

concluding that the additional remedy afforded by Section 289

(i.e., infringer’s profits), at least after 1952, is irrespective of the

marking provisions of Section 287.

5. THE FEDERAL CIRCUIT’S DECISION Dip Not

OBSERVE AN "ANOMALY" IN TITLE 35, BUT

INSTEAD CREATED ONE

The Federal Circuit goes on to suggest that the

"marking statues underwent an independent evolution leading

to the anomaly we today observe where the word ‘damages’ has

different meanings in different provisions of Title 35." /d at

1443. The supposed "anomaly," however, has not been residing

in the patent statute, but rather was created by the Federal

Circuit. This "independent evolution" analysis again ignores the

purpose of the 1952 codification of the patent laws.’

The plain meaning of 35 U.S.C. § 287(a) does not lead

to an absurd result when collectively considered with Sections

* See supra note 1.

17

287, 284 and 289, and the prior case law. The only absurd

result is the now internal judge-created inconsistency within the

patent laws, which the Federal Circuit and its exclusive patent

appellate jurisdiction was, in part, created to prevent. The

consistency that was previously exhibited in Aro Mfg. (damages

do not include infringer’s profits) and Braun (no trebling of

infringer’s profits because they are not damages) has been

destroyed by the Federal Circuit’s decision. The word "profit"

is used only once in Title 35 (i.e., Section 289) whereas the

word "damages" appears six times. The only reasonable

conclusion is that the word "profit" was intentionally used in

Section 289 and that the drafters of the Patent Act of 1952 were

well aware that one does not include the other. The Federal

Circuit’s decision, if left intact will open the door for equally

absurd arguments such as "offers to sell, or sells" as recited in

35 U.S.C. § 271 is not equivalent or means something different

than "offering to sell, or selling" as recited in 35 U.S.C. § 287,

and thus producing countless more "anomalies." This court

should act to prevent such an unwarranted increase in statutory

construction issues for lower courts and this Court to decide.

18

IV. CONCLUSION

For the foregoing reasons, Reebok and Rockport

respectfully submit that the district court correctly found that

Nike was entitled to the infringers’ profits under 35 U.S.C. §

289 irrespective of the marking requirements of 35 U.S.C. §

287(a). Accordingly, this Court should grant a writ of

certiorari.

Dated: July 6, 1999

Respectfully submitted,

STERNE, KESSLER, GOLDSTEIN

Attorney of Record

David K.S. Cornwell

Tracy-Gene G. Durkin

Sterne, Kessler, Goldstein & Fox P.L.L.C.

1100 New York Avenue, N.W. Suite 600

Washington, D.C. 20005-3934

(202) 371-2660

Curt Krechevsky

Assistant General Counsel

Douglas A. Batt

Technology Counsel

Reebok International Ltd.

The Rockport Company, Inc.

100 Technology Center Drive

Stoughton, MA 02072

(781) 401-5000

19