Supremes take Samsung v. Apple design patents damages case

On Monday, March 21, 2016, the United States Supreme Court accepted certiorari in Samsung Electronics v. Apple, Inc., which relates to how much Samsung owes for infringing Apple design patents.

The Supreme Court order simply stated: “The petition for a writ of certiorari is granted limited to Question 2 presented by the petition.”

The first question presented, which was not taken by the Supreme Court, related to whether design patent protection can extend to non-ornamental features.

The second question presented by Samsung in the petition for certiorari was: “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?”

Thumbnail Sketch of the Dispute

This case relates to the ongoing patent war between two technology giants who thus far have shown little interest in playing nice, presumably learning very little from the patent war fought between Kodak and Polaroid back in the 1980s and into the early 1990s.

A jury found that Samsung infringed Apple design patents, Apple utility patents and also diluted Apple’s trade dresses. The infringed design patents are U.S. Design Patent Nos. D618,677 (“D’677 patent”), D593,087 (“D’087 patent”), and D604,305 (“D’305 patent”), which claim certain design elements embodied in Apple’s iPhone. The infringed utility patents are U.S. Patent Nos. 7,469,381 (“’381 patent”), 7,844,915 (“’915 patent”), and 7,864,163 (“’163 patent”), which claim certain features in the iPhone’s user interface. The diluted trade dresses are Trademark Registration No. 3,470,983 (“’983 trade dress”) and an unregistered trade dress defined in terms of certain elements in the configuration of the iPhone.

[Supreme-Court]

Following the first jury trial, the district court upheld the jury’s infringement, dilution, and validity findings over Samsung’s post-trial motion. The district court also upheld $639,403,248 in damages, but ordered a partial retrial on the remainder of the damages because they had been awarded for a period when Samsung lacked notice of some of the asserted patents. The jury in the partial retrial on damages awarded Apple $290,456,793, which the district court upheld over Samsung’s second post-trial motion. On March 6, 2014, the district court entered a final judgment in favor of Apple, and Samsung filed a notice of appeal.

On appeal, the Federal Circuit ultimately affirmed the jury’s verdict on the design patent infringements, the validity of two utility patent claims, and the damages awarded for the design and utility patent infringements appealed by Samsung. The Federal Circuit also reversed the jury’s findings that the asserted trade dresses are protectable. We therefore vacate the jury’s damages awards against the Samsung products that were found liable for trade dress dilution and remand for further proceedings. See Apple v. Samsung (Fed. Cir. May 18, 2015).

Damages and § 289

The question about design patent damages accepted will require the Supreme Court to interpret 35 U.S.C. § 289, titled Additional remedy for infringement of design patent. § 289 says:

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.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

In its petition for certiorari Samsung argued that the Federal Circuit’s construction of § 289 disregarded the natural reading of the phrases “article of manufacture” and “made from the infringement.” According to Samsung, the Federal Circuit first erred in deeming the relevant “article of manufacture” to be the entire product sold separately to customers.

Second, Samsung argued that the phrase “shall not twice recover the profit made from the infringement” incorporates a causation requirement into § 289. The argument goes on to say that when § 289 is read as a whole, the “total profit” recoverable under its first paragraph of § 289 is limited to the “profit made from the infringement” as set forth in the second paragraph. That reading of § 289 seems a bit tortured to me, but rarely does the Supreme Court take a patent case to simply affirm the Federal Circuit.

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

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Join the Discussion

7 comments so far.

mike
March 23, 2016 03:12 pm
Well, it seems like this thread has beautifully demonstrated the necessity of the Supreme Court interpreting “shall be liable to the owner to the extent of his total profit”. Samsung and Anon2 argue “total profit” as meaning “the total profit obtained by infringing the patent which would not have been obtained had the patent not been infringed”, while Apple and Edward Heller argue “total profit” as meaning “the total profit obtained by selling any article which incorporates an infringement of the patent, however small the contribution of the patented portion of the article made to the actual profit obtained on the article”. The arguments and the answer should be interesting.
A Rational Person
March 23, 2016 11:03 am
Anon@4 (and further to Edward’s and Anon2’s points):

Sometimes part of what a company is selling is the “sizzle” and not the steak. And in the market for smartphones, by any rational observation of the market, Apple’s designs for the iPhone is significant part of its “sizzle” in selling iPhones.

Also, your example of beer is not a particularly good one with respect to design patents, because the physical design of the bottle by itself may not have much affect on beer sales. The “trade dress” of a beer bottle, on the other hand, could have a significant effect on the sales of a beer by conveying “upscale” or “craft beer” as opposed to “mass brand”.

For the effect of physical design on sales of the overall product, I would suggest a better example is shoes. The design of the shoe upper or the shoe lower (or tread) can have a significant effect on sales. For example, in 2016 I don’t think people are buying Chuck Taylor All Stars (“Chucks”) based on their ability to make you run faster or jump higher. People are buying the shoes because of their design, i.e., the “sizzle”, not because of their superiority in function as athletic shoes, i.e., the “steak.” Probable most of what Converse earns from the sale of Chucks is based on their design and trade dress. And, in fact, Converse has so argued in court:

http://www.law360.com/articles/471161/converse-says-footwear-maker-copied-chuck-taylor-design
Anon2
March 23, 2016 07:10 am
Physical things are not to be equated with the property rights to them.

If damages for particular breaches of specific rights are to be objectively tied to those specific breaches of those rights, then the question likely should be focused on the total value of profit caused by the breach.

The value of property in a thing is generally not divisible by component, especially when it is something which “applies” to the whole (like a design) in which case its affect is on a value of the whole.

What could the beer have been sold for, BUT FOR the design?

If, all things considered, the infringer would actually NOT have been able to sell beer at a profit i.e. they simply could not compete, (and this INCLUDES the case where each specific bottle of beer might be profitable on an accounting only of MERE components, but in a context where the company could only sell a tiny fraction of the total number of bottles which would have been required to sustain the business, pay for advertising, employees and keeping the factory running), then the accounting must be for the entire profit (why stop only at “profit” infringers pay themselves salaries no?… I guess one cant ignore the statute). In a case where the infringer could have sold the beer for some profit (and stay afloat) but say at only 30% of what was attainable after violation of patentee’s rights, then (in broad strokes) the infringer has unjustly benefited and does not deserve the extra 70% profit it obtained as a result of infringement. It would be an artificial and a superficial exercise to tie the design down to physical components, since, although there may be cases where this might work “coincidentally”, in general one should not restrict the analysis in this way.

It matters not whether the beer costs 3 cents to produce, or whether the diamond encrusted bottle cap accounts for 90% of the costs of the good sold. If in a particular context a design actually conferred 15% to the infringer, then its 15% of the total.

Something like a “but for” test gets to the heart of the substance, i.e. all things considered by HOW MUCH did the infringer unjustly profit as a result of the infringement?

Just my 2 cents, based on principles of justice as what I understand them to be.
Anon
March 23, 2016 06:22 am
As I see you do elsewhere, you are missing the point of the argument presented.

Let’s take your “bottle of beer” example.

Is the bottle design applied to the contents of the bottle?

Let’s posit a hypothetical and have a newly designed bottle. In that same bottle, a beer company sells different beers, aimed at different demographics.

At the lowest demographic, the beer in the same bottle is called “Schmitz.” Really nasty stuff. To move the product they price it really really low. It’s a college beer “favorite” because of a high alcohol content, and after the first beer, you lose the sense of taste anyway.

At the highest demographic, the beer is the best beer ever brewed. A stunning capability of reacting to the drinker’s chemical conditions instantly and providing a match to those conditions. Of course, this ability comes at the price of the alcohol content rapidly dwindling, and it is almost impossible to get a “buzz.” Let’s call this “Meta.”

The company uses the same bottle.

Of course, the second one is the highest priced beer on the market, and the company still has trouble meeting demand.

Now – and please pay attention – the question on the design of the bottle is raised.

Your answer as to the difference between “Meta” and “Schmitz” is….?
Edward Heller
March 22, 2016 08:03 pm
anon, whether the innards are patented or not is completely irrelevant.

Let us see.

What about the bottle of beer? Do we total profits on the bottle of beer, or do we subtract the value of the beer?
Anon
March 22, 2016 07:31 pm
“This is not the case where a design is applied to a an article that is, in turn, simply mounted on something else, or sold with something else”

I would disagree (at least in principle).

The design to a casing is indeed mounted on something else – the innards of the device. That innards is something else as well, given the prodigious number of patents within (and separate from) the casing.

Now if we want to return to the words of Congress and speak of “total profits,” as opposed to some portioning, well, we might find some common ground.
Edward Heller
March 22, 2016 06:18 pm
The three patented designs at issue are iPhone designs. Samsung applied these to its own phones. This seems to be a slam dunk case for Apple.

This is not the case where a design is applied to a an article that is, in turn, simply mounted on something else, or sold with something else. The designs are for aspects of the phones themselves and were clearly applied to the phones.

The argument about other things that go into making the phone valuable are a non sequitur. A design of a bottle applied to a beer bottle does not require discounting out the value of the beer in determining total profits. That was the apportionment that Congress intended to stop when it passed the present statute.