SCOTUS Makes Big Decision Regarding Design Patent Damages

SCOTUS Makes Big Decision Regarding Design Patent Damages

The U.S. Supreme Court recently issued its much-anticipated decision in , which revolved around how to calculate damages in design patent infringement cases. In a unanimous decision, the Court held that Samsung could be liable for only those profits associated with the infringing components of the phone rather than the whole device.

Determining Design Patent Damages

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. It further provides that one who “applies the patented design … to any article of manufacture … shall be liable to the owner to the extent of his total profit, … but [the owner] shall not twice recover the profit made from the infringement.”

Samsung and Apple’s intellectual property dispute centers on a series of design patents that protect various aspects of the iPhone’s iconic design, including its rectangular front face with rounded edges and a grid of colorful icons on a black screen. After Samsung introduced smartphones with similar features, Apple filed a design patent infringement lawsuit.

The jury found Samsung liable for infringement of Apple’s design patents and awarded Apple $399 million in damages, which represented Samsung’s entire profits from the sale of smartphones found to contain the patented designs. On appeal, the Federal Circuit Court of Appeals rejected Samsung’s argument that damages should be limited because the relevant “articles of manufacture” were the front face or screen rather than the entire smartphone. According to the Federal Circuit Court of Appeals, a design-patent holder is entitled to an infringer’s entire profits from sales of any product found to contain a patented design, without any regard to the design’s contribution to that product’s value or sales, because the components of Samsung’s smartphones were not sold separately to ordinary consumers and thus were not distinct articles of manufacture.

Supreme Court’s Narrow Patent Ruling

The Supreme Court held that the relevant “article of manufacture” for determining a damages award is not limited to the end product sold to the consumer, but may also be only a component of that product. The decision rested exclusively on the Court’s interpretation of the statute and avoided the larger issues raised on appeal.

As interpreted by the Court, “an article of manufacture … is simply a thing made by hand or machine.” Accordingly, the justices held that term is “broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not.” Moreover, the justices concluded that “reading ‘article of manufacture’ in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.”

While the Supreme Court decision brings some clarity to design patent damages, it did not establish a clear test for determining whether the profits should apply to a product as a whole or its individual components. “We decline to lay out a test for the first step of the §289 damages inquiry in the absence of adequate briefing by the parties,” Justice Sotomayor wrote.

Going forward, it will be up to the Federal Circuit to establish a standard. Given the ongoing litigation between Samsung and Apple, it would not be at all surprising if the Federal Circuit’s test ends up back before the Supreme Court.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Shane Birnbaum, at 201-806-3364.