The definitive smartphone war saw the conclusion of its most decisive battle on 6 December, with the US Supreme Court unanimously reversing the Court of Appeals for the Federal Circuit’s 2015 decision in Samsung v Apple, because its reading of “article of manufacture” was too narrow.
Heralded as largely a win for Samsung, the Supreme Court essentially told lower courts that Section 289 of the Patent Act’s ‘article of manufacture’ can mean both the product as a whole and a component therein when a court is deciding damages for infringement of a design patent.
The cornerstone smartphone case saw Samsung accused of copying key design elements of Apple’s flagship iPhone. Apple, asserting three design patents covering the iPhone’s screen shape, round corners, and bezel and icons, won the Federal Circuit’s backing in May 2015, with the appeals court upholding the original jury’s decision to award $399 million in damages based on Samsung’s entire profits from the sale of smartphones found to contain the three patented designs.
The Supreme Court’s decision effectively means that design patent infringement damages can be restricted to the profits derived from the infringed components—the iPhone’s screen shape, round corners, and bezel and icons—rather than the entire smartphone, Samsung’s Galaxy line, of which they are a part. The $399 million in damages that Apple was originally awarded will therefore have to be reviewed and likely reduced.
But the Supreme Court declined to go a step further and resolve whether, for each of the design patents at issue, the relevant article of manufacture is the smartphone, or a particular component, ensuring further skirmishes in the future. As Rick McKenna, partner at Foley & Lardner, put it: “It is unfortunate that the Supreme Court was not in a position to provide some guidance on this important topic so it is possible that we will enter into years of turmoil over the proper tests for calculating damages for infringement of a design patent.”
“Let us hope that the courts provide us with some clarity on this important issue and that we don’t have to wait another 100 years for the Supreme Court to provide guidance.”
Laura Shoppe, president of intellectual property consultancy Fuentek, discussed the implications of the Supreme Court’s refusal to resolve this issue.
She said: “It feels like the Supreme Court or the Federal Circuit need to create a test which would look at the implications of the design upon other patents. For example in this case, if the Supreme Court had ruled in favour of Apple, it would create an unstoppable wave of litigation where almost any company in this space would be entitled to, and would almost certainly try to sue other companies with even slightly similar designs.”
What kind of test could the Supreme Court have designed? As Justice Sonia Sotomayor wrote on behalf of the unanimous court: “The US [Department of Justice] as amicus curiae suggested a test, but Samsung and Apple did not brief the issue. We decline to lay out a test for the first step of the Section 289 damages inquiry in the absence of adequate briefing by the parties. Doing so is not necessary to resolve the question presented in this case, and the Federal Circuit may address any remaining issues on remand.”
McKenna explained: “During the oral arguments and in several of the amicus briefs, the court was presented with various proposed tests for determining the relevant ‘article of manufacture’ but this was not an issue which was argued or briefed extensively by Apple or Samsung.”
“So, the court exercised restraint and sent the case back down to the lower courts to formulate a test for how best to determine the relevant ‘article of manufacture’ for the calculation of damages. The Supreme Court provided no guidance or hints to the lower courts on how to devise such a test.”
“Identifying the relevant ‘article of manufacture’ entails a case-specific analysis of the relationship among the design, the product, and any components,” the US Department of Justice (DoJ) explained in its amicus brief.
“The fact finder should identify the article in which the design prominently features, and that most fairly may be said to embody the defendant’s appropriation of the plaintiff’s innovation. Relevant considerations include the scope of the claimed design, the extent to which the design determines the appearance of the product as a whole, the existence of unrelated, conceptually distinct elements in the product, the extent to which various components can be physically separated from the product as a whole, and the manner in which the components were manufactured. While the plaintiff bears the ultimate burden of establishing the infringer’s total profit, the defendant, as the manufacturer or seller of the product in question, should bear the burden of identifying any component that it views as the relevant article of manufacture.”
Michael Sandonato, partner at Fitzpatrick, Cella, Harper & Scinto and chair of the firm’s electronic and computer technologies practice group, explained: “The DoJ’s brief wisely treats the issue as one of statutory interpretation as well, but focuses on the question of what the relevant ‘article of manufacture’ is, and argues that it sometimes may be a component of the finished product. The DoJ would have the fact finder identify the ‘article of manufacture’, and in that sense eschews the Federal Circuit’s more categorical rule.”
What the Supreme Court did say was telling enough for commentators to agree that Samsung will be the happiest with the result.
Justice Sonia Sotomayor wrote on behalf of the unanimous court: “The Federal Circuit’s narrower reading of ‘article of manufacture’ cannot be squared with the text of Section 289 of the Patent Act.”
She explained that “article of manufacture” is broad enough to encompass both a product sold to a consumer and a component of that product. “A component of a product, no less than the product itself, is a thing made by hand or machine. That a component may be integrated into a larger product, in other words, does not put it outside the category of articles of manufacture.”
McKenna commented: “This decision is arguably a partial victory for Samsung because it delays any final decision on the damage award. Apple obviously would have preferred a blanket affirmation of the Federal Circuit decision and the multimillion dollar damage award.”
Ewan Grist, associate at Bird & Bird in London, agreed: “This decision will be welcomed not only by Samsung, which will now return to the Federal Court for an undoubtedly more favourable assessment of what it needs to pay over, but also more widely by manufacturers of complex, multi-component technology products. In reaching this decision, the US now broadly falls into line with the approach which would have be taken by the UK courts to the question.”
Hejab Azam, IP analyst at PatSnap, added a caveat, pointing out: “Damages that reflect the fact that only parts of a design have been infringed is less of a deterrent than being entitled to all the profits from sales of the product concerned, but is still a deterrent. The law also provides for other remedies, including injunctive relief that can have a major impact on the business of an infringer.”