Why it matters: On December 6, 2016, the Supreme Court decided Samsung v. Apple, holding that, for purposes of a "total profits" damages award for infringement of a design patent under Section 289 of the Patent Act, the relevant "article of manufacture" can be limited to one or more individual infringing components of a "multicomponent" end product, even where the individual components are not separately sold to ordinary purchasers.
Detailed discussion: On December 6, 2016, the Supreme Court handed down its decision in Samsung v. Apple, the first case involving design patents to come before it in over a century. The Court sided with Samsung, reversing the Federal Circuit's affirmance of the $399 million jury verdict won by Apple in the Northern District of California. The Court articulated a two-step analysis for determining the "total profits" damages award for infringement of a design patent under Section 289 of the Patent Act. 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. The Court held that, in the case of a "multicomponent" end product such as a smartphone, the relevant "article of manufacture" for reaching a "total profits" damages award for infringement of a design patent can be limited to one or more individual infringing components of that entire end product, even where the individual components are not separately sold to ordinary purchasers. We covered the Court's grant of certiorari in the case in our April 2016 newsletter under "The Supreme Court Agrees to Review Question of Design Patent Law."
Section 289 of the Patent Act
The statutory provision at issue in the case was Section 289 of the Patent Act, entitled "Additional remedy for infringement of design patent," which provides in relevant part that: "Whoever during the term of a patent for a design, without license of the owner … applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale … shall be liable to the owner to the extent of his total profit …." 35 U.S.C. § 289 (emphasis added).
To briefly review, Apple sued Samsung in the Northern District of California in 2011 alleging that certain Samsung smartphones infringed three of Apple's design patents covering the following specific, limited portions of the phone's design: (1) a particular black rectangular front face with rounded corners; (2) a substantially similar rectangular front face with rounded corners plus a surrounding rim or "bezel"; and (3) a particular colorful grid of 16 icons on a black screen. The federal jury found that several Samsung smartphones did infringe Apple's three design patents and awarded Apple $399 million in damages, which, in accordance with Section 289, amounted to the "total profit" Samsung made from its sales of the infringing smartphones.
The Federal Circuit affirmed the district court's damages award in 2015. While acknowledging arguments that "an award of a defendant's entire profits for design patent infringement makes no sense in the modern world," the Federal Circuit said that it was "bound by what the statute says, irrespective of policy arguments that may be made against it." Thus, under "the clear statutory language" of Section 289, the Federal Circuit said it was prevented from adopting a "causation" or apportionment rule because on the statute's face an "article of manufacture" constitutes the entirety of the product that is being sold (which in this case meant the entire smartphone as consumers could not purchase separate components thereof).
Samsung appealed to the Supreme Court, which, in March 2016, agreed to hear the case as to the following question presented: "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?" Oral argument was held on October 11, 2016.
The Court's Holding
In a unanimous decision written by Justice Sonia Sotomayor, the Court reversed and remanded, rejecting the Federal Circuit's finding that "the entire smartphone [was] the only permissible 'article of manufacture' for the purpose of calculating §289 damages because consumers could not separately purchase components of the smartphones." The Court went on to hold that the Federal Circuit's reading was not consistent with Section 289.
The Court began its analysis by reviewing the language of Section 289 and stating that "[a]rriving at a damages award under § 289 thus 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." The Court clarified that its opinion focused on the first step in the Section 289 analysis: "The only question we resolve today is whether, in the case of a multi-component product, the relevant 'article of manufacture' must always be the end product sold to the consumer or whether it can also be a component of that product."
In holding that an "article of manufacture" under Section 289 "encompasses both a product sold to a consumer and a component of that product," the Court said that "the text [of Section 289] resolves this case." After parsing the definitions of the individual words "article" and "manufacture," the Court concluded that "the term 'article of manufacture' is broad enough to encompass both a product sold to a consumer as well as a component of that product ... That a component may be integrated into a larger product, in other words, does not put it outside the category of articles of manufacture."
The Court justified its reading of Section 289 as being consistent with other provisions of the Patent Act, citing in particular to Section 171(a) (making eligible for design patent protection "new, original and ornamental design[s] for an article of manufacture") and Section 101 (making eligible for utility design protection "any new and useful … manufacture … or any new and useful improvement thereof") and ultimately concluded that "[t]he Federal Circuit's narrower reading of 'article of manufacture' cannot be squared with the text of §289."
The Court declined to go a step further and resolve whether, for each of the three design patents at issue in the case, the relevant "article of manufacture" was the entire smartphone or its individual components because "[d]oing so would require us to set out a test for identifying the relevant article of manufacture at the first step of the §289 damages inquiry and to parse the record to apply that test in this case … We decline to lay out [such] a test … Doing so is not necessary to resolve the question presented in this case, and the Federal Circuit may address any remaining issues on remand."