Supreme Court Rules on Design Patent Infringement Damages

By: Joyce B. Klemmer

It has been 120 years since the Supreme Court has ruled on a design patent case. On December 6, 2016, it ruled in favor of Samsung in the case Samsung Electronics Co., v. Apple Inc., No. 15-777.

Apple Inc. released its first-generation iPhone in 2007. Apple secured many design patents in connection with the release. Among those patents were the D618,677 patent, covering a black rectangular front face with rounded corners, the D593,087 patent, covering a rectangular front face with rounded corners and a raised rim, and the D604,305 patent, covering a grid of 16 colorful icons on a black screen. After Apple released its iPhone, Samsung released a series of smartphones that resembled the iPhone. Apple sued Samsung in 2011, alleging, inter alia, that various Samsung smartphones infringed Apple’sD593,087, D618,677, and D604,305 design patents.

The original Apple v. Samsung trial in 2012 resulted in a jury verdict on a majority of Apple’s patent infringement claims against Samsung. A California jury found that 26 of Samsung’s mobile devices, including the Galaxy Prevail, Gem, Indulge and Infuse 4G, infringed Apple’s patents, resulting in a $1.05 billion damages award in Apple’s favor. Citing jury error, District Court Judge Lucy Koh struck $450.5 million off the original judgment. Samsung ultimately paid Apple $548 million in damages in December 2015. Of that amount, $399 million of the damages was attributable to design patent infringement – the entire profit Samsung made from its sales of the infringing smartphones.

The United States Court of Appeals for the Federal Circuit affirmed the design patent infringement damages award. In doing so, it rejected Samsung’s argument “that the profits awarded should have been limited to the infringing ‘article of manufacture’”— for example, the screen or case of the smartphone—“not the entire infringing product”—the smartphone. 786 F. 3d 983, 1002 (2015). The Federal Circuit reasoned that “limit[ing] the damages” award was not required because the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.”

Section 289 of the Patent Act makes it unlawful to manufacture or sell an “article of manufacture” to which a patented design or a colorable imitation thereof has been applied and makes an infringer liable to the patent holder “to the extent of his total profit.” 35 U.S.C. §289. The Federal Circuit identified the entire smartphone as the only permissible “article of manufacture” for the purpose of calculating §289 damages because consumers could not separately purchase components of the smartphones. The Supreme Court granted certiorari, 577 U. S. ___ (2016) and, on December 6, 2016, it reversed the judgment of the Federal Circuit and remanded for further proceedings.

The Supreme Court reasoned 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.” As a threshold matter, it addressed the scope of the term “article of manufacture.” Consistent with 35 U.S.C. §171(a), which makes “new, original and ornamental design[s] for an article of manufacture” eligible for design patent protection the Court ruled that “[t]he term “article of manufacture,” as used in §289, encompasses both a product sold to a consumer and a component of that product.” “[R]eading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.”

The Court declined to articulate a test for identifying the relevant article of manufacture for the first step of the §289 damages inquiry because the parties did not brief the issue. Thus, the Federal Circuit will have to address the issue on remand. The Federal Circuit may consider the test proposed by the United States as amicus curiae:

• First, examine the scope of the design claimed in the plaintiff’s patent, including the drawing and written description, for insight into which portions of the underlying product the design is intended to cover, and how the design relates to the product as a whole.
• Second, the factfinder should examine the relative prominence of the design within the product as a whole.
• Third, the factfinder should consider whether the design is conceptually distinct from the product as a whole.
• Fourth, if the design pertains to a component that a user or seller can physically separate from the product as a whole, that fact suggests that the design has been applied to the component alone rather than to the complete product.