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Supreme Court Reverses Apple/Samsung Design $399M Damage Award

In Samsung Electronics Co., Ltd. v. Apple, Inc., case no.  15-777 (S.  Ct. Dec.  6, 2016) (Available Here), the Supreme Court reversed and remanded Apple’s $399 million dollar ($399M) design patent damage award which was earlier approved by the Court of Appeals for the Federal Circuit for infringement of several Apple design patents.  The Supreme Court held that in the case of a multicomponent product, the relevant “article of manufacture” for arriving at a 35 U.S.C. §289 damages award need not be the end product sold to the consumer, but may be only a component of the product.  

    Apple, Inc. (“Apple”) sued Samsung Electronics Co. (“Samsung”) for infringement of several Apple design patents based on its iPhones.  The Apple design patents cover various features of the iPhone, including a black rectangular front face with rounded corners, a rectangular front face with rounded corners and a raised rim and a grid of 16 colorful icons on a black screen.  A jury found infringement and Apple was awarded $399 million in damages, representing the entire profit Samsung made from its sales of the infringing smartphones.

    The Patent Act establishes design patent damages at 35 U.S.C. §289.  “Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.”

    The Federal Circuit affirmed the damages award rejecting 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 Federal Circuit had identified the entire smartphone as the only permissible “article of manufacture” for the purposes of calculating §289 damages because consumers could not separately purchase components of the smartphones.  In reversing the Federal Circuit, the Supreme Court found that this interpretation is not consistent with §289.  

    The Supreme Court found 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.  This interpretation is 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 US Patent Office and the courts have understood §171 to permit a design patent for a design extending to only a component of a multicomponent product.  

    Accordingly, the Supreme Court found that the term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not.  Thus, the Federal Circuit’s reading of “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.

    The Supreme Court, however, declined to lay out a test for the first step of the §289 damages inquiry in the absence of adequate briefing by the parties.

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