District Courts Deepen Divide Over Design Patent Profit Disgorgement for Section 289 Damages

Federal courts continue to grapple with whether profit disgorgement for design patent infringement is a legal remedy for juries or an equitable remedy for judges, an issue the US Court of Appeals for the Federal Circuit has yet to definitively resolve. A recent decision from US District Court for the Central District of California adds to the growing body of district court authority weighing in on this unsettled question.

THE UNRESOLVED QUESTION: PROFIT DISGORGEMENT UNDER SECTION 289

Section 289 of the Patent Act provides that an infringer of a design patent “shall be liable to the owner to the extent of his total profit, but not less than $250,” recoverable in federal district court.[1] Despite the statute’s long history, courts remain divided over whether this remedy is legal or equitable in nature.

That distinction carries meaningful procedural and strategic consequences. If profit disgorgement is deemed a legal remedy, the Seventh Amendment right to a jury trial may attach. If deemed equitable, the issue is decided by the judge. Plaintiffs may prefer jury determination where equitable considerations or perceived unfairness could drive higher awards or settlement leverage, while favoring bench determination where damages hinge on technical or legal analysis. Defendants may have the opposite preferences for the same reasons. As a result, the characterization of Section 289 disgorgement can influence pleading strategy, trial structure, and settlement posture.

The Federal Circuit has recognized the uncertainty surrounding this issue but has not squarely resolved it. In a 2019 decision, the Federal Circuit characterized the question of whether Section 289 disgorgement is a legal or equitable remedy as an “important issue,” and declined to decide it after vacating the underlying infringement determination.[2] In another frequently cited decision addressing disgorgement in the context of trade secret law, the Federal Circuit observed that “for patent infringement, disgorgement of profits was not historically available at law,” a statement that district courts have interpreted in differing ways.[3]

A GROWING DISTRICT COURT SPLIT

In the absence of clear appellate guidance, district courts have adopted divergent approaches.

Several courts have concluded that disgorgement under Section 289 is an equitable remedy to be decided by the court. For example, in Red Carpet Studios v. Midwest Trading Group Inc., the court found “no right to a jury trial for the equitable remedy of profit disgorgement under § 289, citing substantial precedent that 'an action seeking disgorgement of profits is equitable in nature.'”[4] Similarly, in Shure Incorporated v. ClearOne Inc., the court held “disgorgement is an equitable remedy” not subject to a jury trial.[5]

Other courts, however, have permitted juries to decide Section 289 disgorgement. In Kitsch LLC v. Deejayzoo, LLC, the court found that there was “insufficient authority to support the contention that disgorgement of profits from design patent infringement under 35 U.S.C. § 289 presents a purely equitable issue,” and concluded that submitting the issue to the jury was appropriate under the circumstances.[6]

THE CENTRAL DISTRICT OF CALIFORNIA WEIGHS IN

Most recently, the Central District of California addressed this issue in Kelly v. Fashion Nova. After reviewing the Federal Circuit precedent and other district court decisions regarding the nature of profit disgorgement as a remedy, and the court held that profit disgorgement under Section 289 is an equitable remedy to be decided by the bench.[7]

The court acknowledged that a prior decision from the same district, Kitsch LLC v. Deejayzoo, LLC,[8] in which the court declined to find disgorgement under Section 289 purely equitable. The Kelly Court distinguished Kitsch on the ground that it involved “a partial damages claim, that warranted a jury trial.”[9] Absent such overlapping legal damages, the court found the district court decisions determining that disgorgement under Section 289 is equitable persuasive, and determined that the case should proceed via bench trial.[10]

PRACTICAL IMPLICATIONS FOR DESIGN PATENT LITIGATION

These decisions reflect the continued uncertainty regarding whether profit disgorgement for design patent infringement is a remedy at law that should be decided by a jury or purely equitable.  The divergence among district courts appears to turn, at least in part, by whether the case also involves additional damages based on legal remedies that have historically been tried to a jury, such as plaintiffs seeking a reasonably royalty or lost profits. If so, courts seem more inclined to submit the profit disgorgement issue to the jury given the potential for overlap.

Given the lack of consensus, companies involved in design patent disputes should carefully consider the full extent of design patent remedies sought and be prepared that any damages claim involving Section 289 profit disgorgement may be tried to either a jury or bench trial. Whether profit disgorgement is tried to a jury, or the court may materially affect trial strategy, settlement posture, evidentiary presentation, settlement posture, and potential appellate issues.

Where possible, parties may benefit from seeking early clarification from the court whether the damages phase will proceed before a jury or the bench, particularly in cases asserting both equitable and legal remedies.

CONCLUSION

Disgorgement of profits under Section 289 remains a high-stakes and procedurally unsettled remedy in design litigation. Until the Federal Circuit provides definitive guidance, district courts are likely to continue charting divergent paths. Companies should monitor developments in this area and plan litigation strategies with flexibility to account for either a jury or bench determination.