Samsung v. Apple – Supreme Court Limits Damages in Design Patent Cases
Monday, December 19, 2016
In a closely watched case involving the cell phone “war” between Apple and Samsung, a unanimous Supreme Court reversed a damages award against Samsung of nearly $400 million and moved the law regarding damages for infringement of design patents into a new area of uncertainty.1
The case involved a successful claim by Apple that Samsung infringed three Apple design patents directed to various ornamental features of a cell phone.2 In a design patent infringement action, besides the traditional measure of patent damages “adequate to compensate for the infringement” available to all patent holders under 35 U.S.C. § 284, there is an “additional remedy for infringement of a design patent” available under 35 U.S.C. § 289 which allows recovery of infringers “total profit.” Specifically, the statute provides that if an infringer “(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… .”3 It was under this statute that Apple secured its damages award in a jury trial that was affirmed by the Federal Circuit. The issue presented to the Supreme Court was whether the phrase “article of manufacture” used in Section 289 necessarily referred to the product being sold or could include components of the thing sold.
Apple argued that neither the district court’s jury instructions nor the Federal Circuit’s opinion required that “the relevant article of manufacture must always be the entire product as sold,” but rather the question as to the relevant “article of manufacture” on “which the infringer’s ‘total profit’ should be awarded is, when disputed, a factual question for the jury.” This very factual issue the jury determined against Samsung—at least according to Apple.4 Samsung, predictably enough, disagreed, arguing that the Federal Circuit’s opinion created a categorical rule that the design-patent holder prevailing in an infringement case would always be awarded “the infringer’s total profit on the entire product as sold—no matter how partial the patent or how limited the contribution of the patented feature to the product’s value or sales.”5 Samsung also argued that an award of infringer’s profits should be limited to the profit “attributable to the ‘article of manufacture’ to which an infringing design is ‘applied’” and ‘“made from the infringement’” (i.e. the patent owner would have the burden to prove profits were “attributable to infringement of the patented design.”).6
The United States appeared as amicus curiae supporting neither party. It rejected Samsung’s apportionment limitation, arguing that Section 289 “unambiguously permits a patent holder to recover the infringer’s entire profits from the “article of manufacture” to which the design was applied, regardless of the extent to which those profits are attributable to the infringing design.” However, it also maintained that the ‘“article of manufacture’ will not always be the finished product that is sold in commerce. Rather, the relevant article will sometimes be a component of the ultimate item of sale. In such cases, the patentee is entitled only to the infringer’s total profit for that component, not its total profit for the finished item.” In this, it disagreed with the Federal Circuit’s approach, which is characterized, contrary to Apple’s position, as invariably making the “article of manufacture” the “entire product as sold.” This the United States maintained “would result in grossly excessive and essentially arbitrary awards.” Instead, the United States offered that the ‘“article of manufacture’ inquiry entails a case-specific examination of the relationship among the design, any relevant components, and the product as a whole” and it suggested several detailed considerations that should be weighed in the inquiry.