In an opinion handed down on December 6th, 2016, the Supreme Court continued its tradition of unanimously overruling the Federal Circuit while chipping away at the power of patents. While the decision itself was brief and uncomplicated, it characteristically left the most difficult questions to be debated in the lower courts.
Justice Sotomayor penned the Court’s opinion, reversing the Federal Circuit decision in Apple Inc. v. Samsung Elecs. Co. from 2015 (735 F.3d 983). That decision, in which the court upheld a jury verdict of infringement against Samsung and an award of $399 million in damages to Apple, held that a design patent infringed by a single part of a multi-component product always entitled the patent holder to the defendant’s total profit realized from the product. The amount awarded to Apple represented Samsung’s total profit from the sale of its infringing Galaxy smartphones that incorporated the front face and icon grid designs covered by Apple’s design patents.
Under the Patent Act, a party who, without license, applies a patented design to an “article of manufacture” or sells such an “article of manufacture,” is liable to the patent owner “to the extent of his total profit.” (35 U.S.C. § 289.) The Federal Circuit found that the phrase “article of manufacture” meant the entire final product even where a design patent only covered a small component of the final product, reasoning that individual features are not sold separately and consequently could not be distinct “articles of manufacture” for the purposes of a damage calculation. Apple therefore was entitled to an award equal to Samsung’s total profit on infringing Galaxy smartphones, even though Apple’s design patents only covered small components of the smartphones.
In reversing, the Supreme Court held that the term “article of manufacture” contemplates both an entire product and a component of an entire product. “The text resolves this case” opined the Court. “That a component may be integrated into a larger product... does not put it outside the category of articles of manufacture.” According to the opinion, this reading brings § 289 into line with the prevailing interpretations of other sections of the Patent Act which already allows design patent protection for a sub-component of a multicomponent product and utility patent protection for a “manufacture,” which is a term interpreted to include individual parts of a larger multipart product.
In summary, when a design patent covers only a single component of a multi-component product, a patent owner is not guaranteed to receive damages equal to the profits on the entire multi-component product. To obtain damages for the infringement of a design patent under § 289, a patent owner faces two steps: 1) identifying the relevant article of manufacture to which the patented design has been applied; and 2) determining the infringer’s total profit resulting from the specific article of manufacture.
The opinion creates uncertainty for the future of design patents because the Court left open how either of those two steps are to be applied in a given case. Samsung and Apple had both asked the Court to decide the first step—whether the accused smartphones or a particular component of the smartphones was the article of manufacture in this case. The Court declined, however, because doing so would require laying out a test for making that determination. While the United States, as amicus curiae, had suggested a specific test, the Court determined that it was not adequately briefed by the parties.
The Court’s decision adds much more complexity to the second step that was not previously part of the analysis when applying § 289. When the relevant “article of manufacture” is determined to the be the entire product, then all the past methods of determining the total profit are still applicable. However, if the relevant “article of manufacture” is a component of the entire product, then the method of determining the total profit is left to be interpreted in the lower courts because the Court’s opinion did not even mention it, let alone define a test. This is despite the fact that the issue was discussed extensively during oral argument. There, both Samsung and Apple actually agreed that a jury should be instructed that “total profit” means “the profit derived from the article of manufacture to which the design has been applied.” However, some of the Justices were not convinced that the issue was so simple. “The problem is how to instruct the jury on that point”, began Justice Kennedy. “If I were the juror, I simply wouldn't know what to do under your test.” In other words, how is a fact-finder supposed to determine the amount of profit attributable to a specific component of a multi-component product? The solutions posited in arguments included expert testimony and consumer or market surveys; expensive additions to an already notoriously expensive patent litigation effort.
From a legal standpoint, this holding reduces the viability of design patents as tools to protect intellectual property, and the introduction of additional steps for the patent holder to prove damages certainly reduces the appeal of design patents further.
The opinion is Samsung Electronics Co. v. Apple Inc. (Case No. 15-777, 137 S. Ct. 429, 196 L. Ed. 2d 363)