On Tuesday, October 11, 2016, the U.S. Supreme Court heard oral arguments regarding the extent to which a design patent holder may recover infringement damages under 35 U.S.C. § 289 when multicomponent products are at issue. Section 289 states that an infringer of a design patent “shall be liable to the owner of the extent of [the infringer’s] total profit.” The statute, however, refers only to the “article of manufacture” to which the design is applied. It does not address what happens when multi-component products are sold but only one component infringes the design patent.
Both the district court and a panel of the Federal Circuit held that the relevant “article of manufacture” for which total profits are owed is always the entire product, even if only one component of a multicomponent product embodies the patented design.1 The potential impact of such a ruling is enormous, as it allows design patent holders to recover the entirety of the alleged infringer’s profits from the multicomponent product even if the infringing design is a small aspect of the overall product.2 In fact, under the Federal Circuit’s ruling, a design patent owner may possibly be able to recover greater damages than a utility patent owner from the same product, as damages for utility patents are often based on the “smallest salable unit.”3
In oral argument before the Supreme Court, both parties agreed that, contrary to the holdings of the Federal Circuit and the district court, an “article of manufacture” can be something less than the entire product.4 Thus, the parties agreed that the proper analysis under Section 289 is a two-part test:
(1) determine the “article of manufacture” and (2) determine the “quantum of damages” from that article.5 Both steps would likely be questions of fact for a jury to decide.6 The parties also agreed with the U.S. Solicitor General’s suggested four-factor test for determining the “article of manufacture.”7 Those factors include: (1) the scope of the design claimed in the design patent; (2) the relative prominence of the design within the product as a whole; (3) the existence of unrelated, conceptually distinct elements in the product; and (4) the physical relationship of the component to the rest of the product, such as whether the component can be physically separated from the rest of the product or whether it is manufactured separately.8
Despite this agreement on what the proper analysis under Section 289 should be, the parties disagreed as to what the “article of manufacture” should be in the present case.9 Unsurprisingly, Apple urged the Court to uphold the lower court’s finding that the “article of manufacture” is the entire smartphone.10 Chief Justice Roberts strongly disagreed with Apple, stating that “there shouldn’t be profits awarded based on the entire price of the phone.”11 Justice Alito appeared to be in agreement with the Chief Justice, and hinted that the “article of manufacture” in this case was only the outside case of the smartphone.12 Justice Breyer, on the other hand, suggested that the factual determination of “article of manufacture” should be saved for the lower court on remand after the Supreme Court articulates the proper analysis under Section 289.13
Samsung and Apple also disagreed on which party bears the burden of proof as to identifying the “article of manufacture.” Samsung argued that this was a subsidiary question in the damages analysis, and therefore the burden rests on the patent owner.14 Apple, on the other hand, repeatedly argued that Samsung had not identified any component, other than the entire phone, that could be the “article of manufacture,” implying that the burden rests on the alleged infringer.15
With regard to the second step – determining the quantum of damages from the article of manufacture – the U.S. Solicitor General and Apple both argued that the case currently before the Court only dealt with the first step and, therefore, the Court should not decide the particulars of how the quantum of damages should be determined.16 Samsung, however, proposed using means similar to those used when apportioning profits to the smallest salable unit during utility patent infringement damage calculations.17
Justice Kennedy expressed apprehension over this second step, asking whether Congress precluded apportionment of any kind when it enacted the Design Patent Act of 1887.18 Samsung responded by distinguishing between, on the one hand, apportioning the total profit of the “article of manufacture” to that part which is attributable to the value of the design and, on the other hand, apportioning the total profit of a multi-component product among each of the individual components.19 According to Samsung, Congress only forbade the former.20 Thus, if the “article of manufacture” is determined to be only one component in a multi-component product, fact-finders are allowed to segregate out the total profits of only that component.
Rather than the two-part test agreed to by the parties, Justice Breyer expressed a preference for a closely related test set forth in one of the amicus briefs.21 In essence, rather than using the “quantum of damages” language of the two-part test above, Justice Breyer would expressly tell a jury that the damages must be the total profits of the entire product if the product is a single-component product and consumer demand for the product is largely based on the design. He is concerned that failing to do so would result in apportionment based on how much of the total profits could be attributed to the patented design, which would violate the language and purpose of Section 289. See, e.g., Oral Arg. Tr. 55:2-6. Justice Breyer wants to ensure that any separating out of a component’s profits from the total profit of the entire product is limited to situations where (1) a multi-component product is involved, (2) only an individual component thereof infringes the design patent, and (3) consumer demand for the product is not driven by the design.22
While the parties agreed to the broad strokes of a Section 289 analysis during oral argument, it is unlikely that the opinion in Samsung v. Apple will issue quickly given the divergent views from the bench regarding certain details of the analysis. The Court has until the end of the current term – June 2017 – to issue its opinion in this case.