My partners Steve Jedlinski and Anthony Fuga recently wrote a valuable article about a new Federal Circuit decision dealing with functionality and exhaustion issues for design patents. It is republished below with permission.

In a relatively rare opinion regarding design patents, the U.S. Court of Appeals for the Federal Circuit weighed in recently on the requirements for design patents in its Automotive Body Parts Association v. Ford Global Technologies, LLC, No. 2018-1613 (Fed. Cir. 2019) decision.

The U.S. Patent and Trademark Office (USPTO) grants design patents to inventors with a “new, original, and ornamental design for an article of manufacture.” Automotive Body Parts Association (ABPA), an association of companies that distribute replacement auto parts, sued Ford seeking a declaratory judgment of invalidity and unenforceability on two of Ford’s design patents – one directed to the design of a vehicle’s hood and the other directed to the design of a vehicle’s head lamp. These designs were incorporated into Ford’s F-150 truck.

The U.S. District Court for the Eastern District of Michigan in Detroit entered summary judgment in favor of Ford, and ABPA appealed to the Federal Circuit again arguing that both design patents are invalid due to functionality or unenforceable under patent exhaustion/repair doctrines. For the reasons discussed in this Holland & Knight client alert, the Federal Circuit affirmed the lower court’s decision upholding Ford’s design patents.

The Federal Circuit first looked at ABPA’s invalidity arguments directed to lack of ornamentality under Section 171 of the Patent Act. Design patents must claim an “ornamental” design, not one “dictated by function.” Though a valid design may contain some functional elements, the design may not be “primarily functional.” There is no mandated test regarding the functionality of design patents, but the Federal Circuit has “often emphasized the presence or absence of alternative designs, noting that the existence of ‘several ways to achieve the function of an article of manufacture,’ though not dispositive, increases the likelihood that the design serves a primarily ornamental purpose.”

ABPA argued that consumers seeking replacement parts prefer vehicle hoods and headlamps that “restore the original appearance of their vehicles” and conclude that this preference equates to an aesthetic functional benefit to the designs.

The Federal Circuit disagreed: “the aesthetic appeal of a design to consumers is inadequate to render that design functional” and, therefore, invalid. The court went on, noting that the peculiar or distinctive appearance is the very thing for which the patent is given. “If customers prefer the ‘peculiar or distinctive appearance’ of Ford’s designs over that of other designs that perform the same mechanical or utilitarian functions, that is exactly the type of market advantage . . . contemplated by Congress in the laws authorizing design patents.” The Federal Circuit also noted that there are many alternative designs already existing that could fit the Ford truck and perform the same functions.

ABPA attempted to borrow the principle of “aesthetic functionality” from trademark law, but the court noted that trademarks and design patents serve different purposes and have different governing law: “trademarks promote competition by permitting a perpetual monopoly over symbols that ‘distinguish a firm’s goods and identify their source,’ ” while design patents “expressly grant to their owners exclusive rights to a particular aesthetic for a limited period of time.”

ABPA also asked the court to rule, as a matter of policy, that Ford’s design patents may only be enforced in the initial market for the sale of Ford’s trucks, and not the market for replacement parts. The court, however, noted that this would sidestep precedent, which asks “whether at some point in the life of the article an occasion arises when the appearance of the article becomes a ‘matter of concern.’ ” Accordingly, the court affirmed the district court’s determination that ABPA failed to prove Ford’s designs were functional.

The Federal Circuit also rejected ABPA’s argument that Ford’s authorized sale of its F-150 trucks exhaust Ford’s patent rights and allows the use of Ford’s designs on replacement parts. The court disagreed, and found that ABPA was attempting to establish special rules for design patents. The court, instead, looked to its Quanta Computer exhaustion decision related to the sale of microprocessors that embody a patented method. While the sale of that microprocessor embodying the method exhausts the patent, purchasers of those microprocessors could not make their own new microprocessors using the patent invention.

The court also noted that the right of use transferred to a purchaser by an authorized sale includes the right to repair the patented article. That right to repair, however, does not permit a complete reconstruction of a patented device or component. “The decisions of this Court require the conclusion that reconstruction of a patented entity, comprised of unpatented elements, is limited to such a true reconstruction of the entity as to ‘in fact make a new article.’ ”

Furthermore, though the sale of the Ford truck permits the purchaser (and downstream customers) to repair the designs as applied to the specific hood and headlamps sold on the truck, “the purchaser may not create new hoods and headlamps using Ford’s designs.” The Federal Circuit, accordingly, affirmed the district court’s ruling that ABPA failed to show that Ford’s designs are exhausted. Not surprisingly, this decision reaffirms that design patents do not have distinct exhaustion/repair guidelines but instead, follow the same rules as utility patents.