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IP Alert: Supreme Court Rules for Samsung Over Apple in Key Design Patent Case

December 7, 2016

Yesterday, in Samsung Electronics Co., Ltd. v. Apple Inc., the U.S. Supreme Court issued a significant decision in the law of damages for design patents, holding that damages for design patent infringement should be based on the components that infringed the patent rather than the entire product. The high court’s unanimous decision reversed the Federal Circuit’s ruling that Apple was entitled to the jury’s award of $399 million in damages—Samsung’s entire profit from the sale of its infringing smartphones.

In 2011, Apple filed suit against Samsung alleging infringement of three design patents: D618,677, D593,087, and D604,305. The D618,677 patent covered a smartphone including a rectangular front face having rounded corners, the D593,087 patent covered a smartphone including a rectangular front face having rounded corners and a raised rim, and the D604,305 patent covered a smartphone including a grid of application icons on a black screen.

At trial, a jury found that Samsung’s smartphones infringed the Apple design patents. The statute that addresses damages for design patents is different from the statute that addresses damages for utility patents. For design patent damages, 35 U.S.C. § 289 states that whoever “(1) applies the patented design, or any colorable limitation 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 limitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250 . . .” (emphasis added). The jury awarded Apple $399 million, the entire profit Samsung made from its sales of the infringing smartphones. The jury evidently considered the smartphones, as opposed to components of the smartphone, to be the “article of manufacture.”

At the Federal Circuit, Samsung argued that Apple should not have been awarded damages of Samsung’s entire profits on the entire smartphone product and that Apple should have been required to prove the value of the patented design features. The Federal Circuit rejected Samsung’s arguments and affirmed the jury’s damages award, holding that under 35 U.S.C. § 289, the entire phone was the “article of manufacture.” The Federal Circuit reasoned that because the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers,” the smartphone was the article of manufacture, as opposed to components of the smartphone.

Samsung asked the Supreme Court to review the Federal Circuit’s decision. In yesterday’s ruling, the Supreme Court stated that the only question it is resolving is “whether, in the case of a multicomponent 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.” The Court reversed the Federal Circuit’s ruling and determined that, at least in some instances, an article of manufacture can be a component of an end product (e.g., a portion or piece of a smartphone). In reaching this conclusion, the Court looked to the definitions of “article” and “manufacture” and considered whether those definitions were consistent with the usage of the term “article of manufacture” in 35 U.S.C. § 171(a) and 35 U.S.C. § 101.

First, the Court noted that “[a]n ‘article’ is just ‘a particular thing’” and that “‘manufacture’ means ‘the conversion of raw materials by the hand, or by machinery, into articles suitable for the use of man.’” Based on the definitions of “article” and “manufacture,” the Court concluded that “[a]n article of manufacture, then, is simply a thing made by hand or by machine” and thus 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.”

After determining that a component of a product can be an article of manufacture, the Court examined both 35 U.S.C. § 171(a), which defines subject matter eligibility for design patents, and 35 U.S.C. § 101, which defines patent-eligible subject matter, to determine if such a reading of the term “article of manufacture” was consistent with the usage elsewhere. With regard to 35 U.S.C. § 117(a), the Court noted that the U. S. Patent and Trademark Office and the courts have “understood § 171 to permit a design patent for a design extending only to a component of a multicomponent product.” With regard to 35 U.S.C. § 101, the Court noted that the term “article of manufacture” is a “broad term [that] includes ‘the parts of a machine considered separately from the machine itself.’”

The Court did not conclude whether, in this case, the article of manufacture is the smartphone or a component of the smartphone, but remanded to the Federal Circuit for further consideration.

The Court’s decision is significant. In future cases, courts considering damages for infringement of a design patent that covers a component of an accused device will require the patent holder to establish damages based on the sale of infringing components, and not necessarily the entire product. Courts will also require the patent holder to prove the value that should be attributed to the patented design features. In this respect, the law regarding design patent damages is becoming more consistent with that for utility patent damages.

For more information on this decision, please contact Fitch Even attorney George N. Dandalides, author of this alert.

For a related discussion on using consumer surveys to prove damages more precisely in complex product patent litigation, a recording of the recent Fitch Even webinar, “Determining the Value of One Patented Feature: A Behavioral Alternative to a Consumer Survey," may be viewed HERE.

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