Many people have heard of the patent dispute between Apple and Samsung dating back to a 2011 Northern District of California lawsuit. In a legal battle that has lasted over 6 years, gone through two jury trials, and endured appeals to the Federal Circuit and U.S. Supreme Court, one issue remains uncertain: the measure by which to calculate damages in a design patent infringement case.
In 2011, Apple sued Samsung for infringing upon iPhone design patents. The following year, a jury awarded Apple $399 million in design patent infringement damages—Samsung’s entire profit from sales of the infringing phones. Samsung appealed, arguing that the jury’s damage award should have been limited to only part of the profit (as only part of the phone’s design was copied from Apple). After the Federal Circuit affirmed the jury’s award, Apple Inc. v. Samsung Electronics Co., 786 F.3d 983 (Fed. Cir. 2015), the Supreme Court granted certiorari and reversed. Samsung Elecs. Co. v. Apple, Inc., 137 S. Ct. 429, 434 (2016).
At the center of the Supreme Court’s decision is the damages provision specific to design patents under 35 U.S.C. § 289. In relevant part, section 289 reads: “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[.]” (emphasis added).
In interpreting section 289 for the first time, the Supreme Court explained that “[a]rriving at a damages award under § 289 . . . involves two steps. First, identify the ‘article of manufacture’ to which the infringed design has been applied. Second, calculate the infringer’s total profit made on that article of manufacture.” Samsung Electronics, 137 S. Ct. at 434. As used in section 289, the term “article of manufacture,” the Supreme Court continued, “encompasses both a product sold to a consumer and a component of that product.” Id. In other words, “reading ‘article of manufacture’ in § 289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.” Id. at 436 (emphasis added). However, not surprisingly, the Supreme Court stopped short of establishing a test for identifying the article of manufacture under section 289 and remanded to the Federal Circuit for reassessing damages. The Federal Circuit, in turn, remanded the case to the district court for further proceedings. Apple Inc. v. Samsung Elecs. Co., 678 Fed. Appx. 1012 (Fed. Cir. Feb. 7, 2017).
The case is now back before Judge Lucy Koh of the Northern District of California. On October 22, 2017, after Apple and Samsung briefed the issue, Judge Koh ordered a new trial. In her order, Judge Koh adopted a test proposed by the Department of Justice (“DOJ”) in an amicus brief filed in the Supreme Court appeal in this case. “The test for determining the article of manufacture for the purpose of § 289 shall be the following four factors:  The scope of the design claimed in the plaintiff’s patent, including the drawing and written description;  The relative prominence of the design within the product as a whole;  Whether the design is conceptually distinct from the product as a whole; and  The physical relationship between the patented design and the rest of the product, including whether the design pertains to a component that a user or seller can physically separate from the product as a whole, and whether the design is embodied in a component that is manufactured separately from the rest of the product, or if the component can be sold separately.” Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846-LHK, 2017 U.S. Dist. LEXIS 177199, at *111 (N.D. Cal. Oct. 22, 2017)
This test is short of a victory for either side. As Judge Koh notes, and as expected, the plaintiff bears the burden of persuasion on identifying both the relevant article of manufacture as well as the amount of total profit on the sale of that article. Id. If plaintiff succeeds in meeting both, only then does the burden shift to defendant to present evidence of an alternative article of manufacture and any deductible expenses. Id. at *111-12.
To date, it remains unclear whether this test will withstand scrutiny. That said, given that both Apple and Samsung suggested in their briefs at least some level of acceptance of the test, it is unlikely either party will challenge it. It is likely, however, that Apple and Samsung will settle their dispute short of another trial. A settlement means that, at least for now, the test will not be challenged. Since Judge Koh’s order is not binding on any court, it will be interesting to see whether other courts in the Northern District and within the Ninth Circuit will adopt the same test. But even then, short of an appeal to the Federal Circuit, the issue remains unresolved. For now, though, Judge Koh’s order provides some much-needed guidance.
A more promising appeal, however, comes from Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc., Case No. 3:17-cv-1781-HZ (S.D. Cal. 2017), a Southern District of California design patent infringement case and the first case involving a jury verdict awarding damages after the Supreme Court’s Samsung decision. Like Judge Koh, Judge Marco Hernandez in Columbia Sportswear also adopted the DOJ’s test, and on September 29, 2017, the jury awarded Columbia $3 million in damages.
Judgement in Columbia Sportswear was entered on November 22, 2017. The parties have 30 days to appeal.