$399 million decision overturned as Samsung wins appeal in smartphone design patent case.
The Supreme Court’s decision in Samsung Electronics Co. v. Apple is generally good news for those who hold single-component design patents but not good news for those with design patents covering multicomponent products.
The high court found in an 8-0 vote that a damages award for design patent infringement may be limited to revenues attributable to a component of an article of manufacture and not the entire article itself. The December 6 decision overturned a judgment reached in May 2015 at the U.S. Court of Appeals for the Federal Circuit, which would have awarded nearly $400 million in damages to Apple Inc. for the infringement of three design patents by mobile devices marketed by Samsung Electronics.
Samsung appealed after the federal circuit upheld a patent infringement award to Apple and found it entitled to receive 100 percent of the profits Samsung obtained through the sale of the infringing smartphones. The award was granted under U.S. Code Title 35, Section 289, which gives a plaintiff the right to a defendant’s total profits on an “article of manufacture” deemed to be infringed-upon design patents held by the plaintiff. The Supreme Court did not have a problem with the damages calculation, focusing on what constitutes an “article of manufacture” capable of leading to a total profits award.
Section 289 says: “Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.”
History of the Case
This design patent dispute relates to the ongoing patent war between two technology giants. A jury found that Samsung infringed Apple design patents, its utility patents and also diluted its trade dresses. The infringed design patents are U.S. Design Patent Nos. D618,677, D593,087 and D604,305, which claim certain design elements embodied in Apple’s iPhone. The infringed utility patents are U.S. Patent Nos. 7,469,381, 7,844,915 and 7,864,163, which claim certain features in the iPhone’s user interface. The diluted trade dresses are Trademark Registration No. 3,470,983 and an unregistered trade dress defined in terms of certain elements in the configuration of the iPhone.
Following the first jury trial, the district court upheld the jury’s infringement, dilution, and validity findings over Samsung’s post-trial motion. The district court also upheld $639,403,248 in damages but ordered a partial retrial on the remainder of the damages because they had been awarded for a period when Samsung lacked notice of some of the asserted patents. The jury in the partial retrial on damages awarded Apple $290,456,793, which the district court upheld over Samsung’s second post-trial motion. On March 6, 2014, the district court entered a final judgment in favor of Apple, and Samsung filed a notice of appeal. All totaled, the amount won by Apple as a result of the infringement (i.e., damages as well as pre-judgment and post-judgment interest) reached $399 million.
On appeal, the federal circuit ultimately affirmed the jury’s verdict on the design patent infringements, the validity of two utility patent claims and damages awarded for the design and utility patent infringements appealed by Samsung. The circuit also reversed the jury’s findings that the asserted trade dresses are protectable.
The federal circuit’s decision from May 2015 upheld the traditional interpretation of Section 289, finding that the whole of the infringing Samsung smartphone products was the only permissible article of manufacture because consumers could not buy the smartphone in individual components. In oral arguments presented to the Supreme Court on October should not be derived from the entire profits on the sale of design patent-infringing smartphones when those design patents only covered a portion of the device’s appearance.
Article of Manufacture
As explained by the Supreme Court, determining the proper damages award under Section 289 involves two steps. “First, identify the ‘article of manufacture’ to which the infringed design has been applied. Second, calculate the infringer’s total profit made on that article of manufacture.” Therefore, it was essential to determine the proper scope and meaning of the term “article of manufacture.”
Before diving into the critical question, the high court explained that it was making only a limited ruling: “The only question we resolve today is whether, in the case of a multi-component product, the relevant ‘article of manufacture’ must always be the end product sold to the consumer or whether it can also be a component of that product.”
In searching for the meaning of the crucial term “article of manufacture,” the Supreme Court consulted the American Heritage Dictionary, which says the word “article” means “a particular thing.” The word “manufacture” means “the conversion of raw materials by the hand, or by machinery, into articles suitable for the use of man” and “the articles so made.” The Supreme Court concluded that “an article of manufacture, then, is simply a thing made by hand or machine.”
Given that a component of a product is a thing that is made by hand or machine, the Supreme Court concluded that the term “article of manufacture is broad enough to encompass both a product sold to a consumer as well as a component of that product.” So the high court determined that the narrow interpretation of Section 289 by the federal circuit, which found that the article of manufacture could only cover an end product sold to consumers, was inappropriate.
Case Remanded
Samsung and Apple had asked the Supreme Court to determine whether the appropriate article of manufacture in this case was the entire smartphone or a particular component of the smartphone. After deciding that it is possible that an article of manufacture could be a component of the product sold to consumers, the Supreme Court punted on this key question, instead deciding to remand it to the federal circuit for further consideration. The Supreme Court said the briefing was insufficient for it to reach that question.
Those familiar with the Supreme Court will understand that this type of decision is typical for a court that does not like to answer the key question before it, instead preferring to vaguely shed light on the matter and kick it back down for further proceedings by lower tribunals. This type of dance is extremely typical when it comes to constitutional law cases but has been absent with respect to the high court’s patent jurisprudence for some time. If anything, this Supreme Court has gone well beyond the questions presented, frequently talking about patent trolls who are not in the room and relying on sometimes-dubious facts submitted in amicus briefs to support its fundamental reconfiguration of U.S. patent law.
Perhaps the decision to say very little is a signal that the court will revert to its traditional preference to decide as little as possible. There is also the outside chance that with only eight justices, the court decided it would be better to say less rather than risk the decision being anything other than unanimous.
What it all Means
Because the Supreme Court did not venture down the apportionment rabbit hole and instead decided the case based on what constitutes an “article of manufacture,” many design patents should be unaffected. For example, when automobile manufacturers obtain a design patent on a particular part, there should be little serious question as to what will be the “article of manufacture.”
The Supreme Court acknowledged as much at the beginning of the decision: “In the case of a design for a single-component product, such as a dinner plate, the product is the ‘article of manufacture’ to which the design has been applied. In the case of a design for a multicomponent product, such as a kitchen oven, identifying the ‘article of manufacture’ to which the design has been applied is a more difficult task.”
In this case, Apple obtained a patent on the casing for the smartphone, which meant that a great many things inside the case were not covered by the design patents in question. This made the case more difficult than one in which the design patent is on a single-component product.
Of course, the game now returns to the federal circuit, which must determine the appropriate article of manufacture and come up with a test to satisfy the Supreme Court. Good luck with that!
