On January 9, 2017, in Samsung Elecs. Co. v. Apple Inc., the Supreme Court unanimously held that, under Section 289 of the patent statute governing design patent infringement damages, a patentee is only entitled to the total profit from the portion of a multicomponent product that infringes the design patent, not necessarily the total profit from the sales of the end product to consumers.1 However, the Court rejected the concept that any of the profits should be apportioned according to the value of the design patents (vis-à-vis, for example, the value of the utility patents embodied by the infringing product).2
The Statute-At-Issue
Section 289 provides, in relevant part, "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 . . . ." (emphases added).
Background
This portion of the well-known patent litigation between Apple and Samsung related to Apple design patents covering the "rounded-rectangle" shape and graphical user interface that have become synonymous with the iPhone. A jury in the Northern District of California found that Samsung infringed three of Apple's design patents and awarded Apple $399 million in damages—Samsung's entire profits for the infringing phones. On appeal, Samsung primarily argued that its phones embody hundreds of thousands of patented features—not owned by Apple—and thus an entire profits damages model is inappropriate. Nonetheless, the Federal Circuit affirmed, holding that the "article of manufacture" was the end product sold to consumers. The Supreme Court granted Samsung's petition for a writ certiorari to answer the question: "Where a design patent is applied to only a component of a product, should an award of infringer's profits be limited to those profits attributable to the component?"
The Supreme Court's Decision
A unanimous Supreme Court held that, for a multicomponent product, the relevant "article of manufacture" may be simply a component of that product, rather than the end product sold to the consumer.3 And, just because an individual component may be integrated into a larger, multicomponent product, that does not take the individual component outside the scope of an "article of manufacture."
The Supreme Court noted that this reading is consistent with both Sections 171(a) and 101. As to the former—which makes eligible for a design patent a "new, original and ornamental design for an article of manufacture"—the USPTO and courts have permitted such a design patent to cover only an individual component.4 As to the latter—which makes eligible for a utility patent "any new and useful . . . manufacture . . . or any new and useful improvement thereof"—"manufacture" has been broadly interpreted to cover components separately from the product itself.5
However, the Supreme Court's ruling was not necessarily a win for Samsung, as the Court refused to set out a test for determining the relevant "article of manufacture" in a Section 289 case, and in fact rejected the concept that any of the profits should be apportioned according to the value of the design patents (vis-à-vis, for example, the value of the utility patents embodied by the phones).6 The Supreme Court remanded the case to the Federal Circuit to address any remaining issues, including identification of the infringing "article of manufacture" and the total profits attributable thereto. On remand, the Federal Circuit declined to adopt either Samsung's or Apple's proposals, and instead further remanded the case to the district court for proceedings consistent with the Supreme Court's decision.7
Takeaways
- This decision has little applicability to utility patent damages, since damages for infringement of design patents are governed by an entirely different statute (Section 289).
- Even after this decision, design patents can still have significant value. Although the Supreme Court held that an individual component of a multiple-component product may constitute "an article of manufacture" under Section 289, it nonetheless acknowledged that a patent owner is entitled to an infringer's total profits, and explicitly refused to find that Section 289 contains a causation requirement (i.e., that the infringer's profits must be attributable to the patented design). Thus, the question is now just a matter of which component(s) the design was applied. And, while it is no longer a foregone conclusion, in many instances, and possibly on remand in this Samsung v. Apple case, a patent owner may recover an infringer's total profits on the sale of a multi-component product.
Footnotes
1 Samsung Elecs. Co., LTD v. Apple Inc., 580 U.S. __ (2016) (slip op., at 1).
2 Id. at 8.
3 Id.
4 Id. at 6.
5 Id. at 7.
6 Id. at 8.
7 Apple Inc. v. Samsung Elecs. Co., No. 2014-1335, 2015-1029 (Fed. Cir. Feb. 7, 2017) (slip op., at 4–5).
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