Earlier this month, the United States Supreme Court issued an opinion in the long-standing patent dispute between smartphone giants Apple and Samsung. See Samsung Electronics Co., LTD. v. Apple, Inc., 580 U.S. _____ (Dec. 6, 2016). In doing so, the Supreme Court clarified the scope of damages recoverable for infringement of a design patent by a product made up of multiple components.
Background on Design Patents
In addition to utility patents, which cover new and useful processes, machines, manufactures, and compositions of matter, federal patent law provides for design patents to protect new, original, and ornamental designs. 35 U.S.C. §171(a). 35 U.S.C. §289 makes it unlawful to create or sell an “article of manufacture” to which a patented design or an imitation thereof has been applied, and makes the infringer liable to the patent holder “to the extent of his total profit.”
The Apple v. Samsung Dispute
In 2011, Apple brought suit against Samsung, claiming that Samsung’s smartphones copied various patented design features of the iPhone, such as the iPhone’s black rectangular front face with rounded corners and its grid of sixteen colorful icons on a black screen. Eventually, the jury found in Apple’s favor. The jury initially awarded Apple over $1 billion dollars. This amount was subsequently reduced in a damages-only retrial to $399 million, representing the entire profit that Samsung made from the infringing smartphones.
On appeal, the Federal Circuit affirmed the damages award, rejecting Samsung’s argument that the damages should be reduced because the relevant articles of manufacture are the front face and screen, not the entire smartphone. The Federal Circuit reasoned that such a limit was not required because the components of the Samsung smartphones were not sold separately to ordinary customers and therefore were not distinct articles of manufacture.
Holding
The Supreme Court, in a unanimous opinion authored by Justice Sotomayor, reversed the Federal Circuit. The Court held that, in the case of products with multiple components (such as smartphones), the term “article of manufacture,” as used in §289, is broad enough to encompass both the product sold to the consumer and a component of the product. The Court wrote:
“[T]he term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.”
The Court’s holding indicates that Apple’s damages could be limited to the total profits associated with the smartphone’s front face and screen, as opposed to the total profits associated with the smartphone as a whole. However, the Supreme Court declined to rule on whether the relevant article for the design patents at issue was the entire Samsung smartphone, or a particular component of the smartphone. It also declined to provide a legal test to help make that determination. Instead, it remanded these issues to the Federal Circuit.
Practice Pointer
This decision could limit the damages that plaintiffs may recover in actions for infringement of design patents. Plaintiffs cannot assume that they are entitled to all the profits associated with complex infringing products (such as electronic devices) that contain many components. Defendants should strive to establish a record that the relevant article of manufacturer is something less than the entire accused product.
Note that the Supreme Court’s decision is in line with similar limitations on damages for infringement of utility patents. In general, the royalty base for utility patent damages must be on the “smallest saleable patent-practicing unit” and the plaintiff must show that the patented feature alone impels the customer to purchase the overall product. See, e.g., LaserDynamics v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012).