Supreme Court overturns $400 million Apple verdict against Samsung in smartphone design patent infringement case

By Gene Quinn & Steve Brachmann
December 6, 2016

Supreme Court

On Tuesday, December 6, 2016, the U.S. Supreme Court issued a decision in Samsung Electronics Co. v. Apple which found by a unanimous 8-0 vote that a damages award for design patent infringement may be limited to revenues attributable to a component of an article of manufacture and not the entire article itself. Tuesday’s SCOTUS decision overturns a judgment reached in May 2015 at the U.S. Court of Appeals for the Federal Circuit, which would have awarded nearly $400 million in damages to Apple Inc. (NASDAQ:AAPL) for the infringement of three design patents by mobile devices marketed by Samsung Electronics (KRX:005930).

The case was appealed by Samsung after the U.S. Court of Appeals for the Federal Circuit  upheld a patent infringement award to Apple Inc. (NASDAQ:AAPL), finding that Apple was entitled to receive 100% of the profits Samsung obtained through the sale of the infringing smartphones. The award was granted under U.S. Code Title 35 § 289, which gives a plaintiff the right to a defendant’s total profits on an “article of manufacture” deemed to be infringed upon design patents held by the plaintiff. The Supreme Court did not have a problem with the damages calculation, but instead had a problem with what constitutes an “article of manufacture” capable of leading to a total profits award.

§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.

The 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?” Much of the oral argument focused not he issue of apportionment of damages. The statute does not allow for apportionment of damages with respect to design patent infringement and ultimately the Supreme Court did not discuss the apportionment issue in its decision. Instead, the Supreme Court focused on the definition of an “article of manufacture.”

 

Thumbnail Sketch of the Dispute

This design patent dispute relates to the ongoing patent war between two technology giants. 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.

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. All totaled, the amount won by Apple as a result of the infringement (i.e., damages as well as pre-judgment and post-judgment interest) reached to $399 million.

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. See Apple v. Samsung (Fed. Cir. May 18, 2015).

The Federal Circuit’s decision from May 2015 upheld the traditional interpretation of §289, finding that the whole of the infringing Samsung smartphone products was the only permissible article of manufacture because consumers could not buy the smartphone in individual components. In oral arguments presented to the Supreme Court on October 12th, Samsung’s counsel made the case that the damages award should not be derived from the entire profits on the sale of design patent-infringing smartphones when those design patents only covered a portion of the device’s appearance.

 

Article of Manufacture

As explained by the Supreme Court, determining the proper 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.” Therefore, it was essential to determine the proper scope and meaning of the term  “article of manufacture.”

Before diving into the critical question, the Supreme Court explained that it was making only a limited ruling today. :

The only question we resolve today is whether, in the case of a multi-component product, the relevant “article of manufacture” must always be the end product sold to the consumer or whether it can also be a component of that product.

In searching for the meaning of the critical term “article of manufacture,” the Supreme Court consulted the American Heritage Dictionary. According to that dictionary, the word “article” means “a particular thing.” The word “manufacture” means “the conversion of raw materials by the hand, or by machinery, into articles suitable for the use of man” and “the articles so made.” Thus the Supreme Court defined the critical term thusly: “An article of manufacture, then, is simply a thing made by hand or machine.”

Given that a component of a product is a thing that is made by hand or machine, the Supreme Court to conclude 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.” Having reached that conclusion the Supreme Court had little difficulty concluding that the narrow interpretation of  §289 by the Federal Circuit, which found that the article of manufacture could only cover an end product sold to consumers, was inappropriate.

 

Case Remanded

Both Samsung and Apple had asked the Supreme Court to determine whether the appropriate article of manufacture in this case was the entire smartphone or whether it was a particular component of the smartphone. After deciding that it is possible that an article of manufacture could be a component of the product sold to consumer the Supreme Court punted on this key question, instead deciding to remand it to the Federal Circuit for further consideration. According to the Supreme Court the briefing was insufficient for them to reach that question.

The Court explained:

The parties ask us to go further and resolve whether, for each of the design patents at issue here, the relevant article of manufacture is the smartphone, or a particular smartphone component. Doing so would require us to set out a test for identifying the relevant article of manufacture at the first step of the §289 damages inquiry and to parse the record to apply that test in this case. The United States as amicus curiae suggested a test, see Brief for United States as Amicus Curiae 27–29, but Samsung and Apple did not brief the issue. 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. Doing so is not necessary to resolve the question presented in this case, and the Federal Circuit may address any remaining issues on remand.

The fact that the Supreme Court did not reach the critical question in this case feels like a copout. Those familiar with the Supreme Court will understand that this type of decision is typical for a Court that does not like to answer the key question before them, instead preferring to vaguely shed light on the matter and then kick it back down for further proceedings by lower tribunals. This type of SCOTUS dance is extremely typical when it comes to constitutional law cases, but has been absent with respect to the Court’s patent jurisprudence for some time. Indeed, if anything this Supreme Court has gone well beyond the questions presented, frequently talking about patent trolls who are not in the room, and relying on facts (sometimes dubious facts) submitted in amicus briefs to support their fundamental reconfiguration of U.S. patent law.

Perhaps the decision to say very little is a signal that the Court will revert back its traditional preference to decide as little as possible. There is also the small outside chance that with only 8 Justices the Court decided it would be better to say less rather than risk the decision being anything other than unanimous. Given that the Court was so preoccupied with apportionment of damages during oral arguments and the fact that the decision does not raise the issue of apportionment at all, perhaps that signals there was a divide on that particular issue that prevented the Court from going further than saying it is possible that an article of manufacture could be less than the whole unit sold to consumers, which is a pretty low energy way to have disposed of this case.

 

The Future of Design Cases

This decision in Samsung Electronics Co. v. Apple will have lasting effects on future cases involving design patents to the detriment of those who own design patents, according to a statement released by Case Collard, partner at Dorsey & Whitney LLP. “The Supreme Court has given Samsung a slight reprieve,” Collard’s statement reads. “This decision was only about damages, so Samsung’s liability for infringing Apple’s patent still stands. But now, the $399 million damages award will likely be much less after a trip back down to the trial court. The Supreme Court’s decision brings damages law for design patents in to accord with the damages law for utility patents. No longer can a patent holder get all of the profits from the sale of a product infringing a design patent. Instead, they may recover the profits attributable to the infringing feature. Design patents are an often overlooked tool to protect IP. While they are still very valuable, this decision reduces slightly the advantages of a design patent by limiting the amount of damages that can be recovered.”

“The biggest takeaway from this decision is that there’s a lot more work to be done,” said Enoch Liang, partner at LTL Attorneys LLP. “The Supreme Court only answered a very narrow question, whether the term ‘article of manufacture’ constitutes the entire product or only a component.” Liang notes that it will be up to Federal Circuit to not only design a test which would allow a jury to determine whether a design patent covers the entire product or a component, and then that test would need to be implemented in a retrial. “This is only chapter one, there’s still chapters two, three, four and five to be written,” Liang said. Although the Supreme Court declined to issue any opinion on the test which could be applied to determine the scope of what is covered by a design patent, a four-part test for such a determination can be found on pages 27 to 29 of an amicus curiae brief filed by the U.S. Solicitor General’s office on behalf of the U.S. government in favor of neither party in this case. Because Apple and Samsung did not file briefs on this issue, the Supreme Court declined to lay out a test despite noting that such a test existed in the U.S. amicus brief.

Liang believes that this Supreme Court decision will have both a broad implication and a narrower implication as to how design patent infringement awards will be determined in the future. The broad implication involves the new evolving definition of what constitutes an “article of manufacture,” but the narrower implication on how much of the device is covered by the design patents remains to be determined. “That’s the real $399 million question here,” Liang said. “Ultimately, I think it gives defendants an additional arrow in their quiver to limit the damages that design patentees can claim.” Whereas design patent litigation had existed as an all-or-nothing proposition for the parties involved, defendants now have a mechanism to argue that damages awarded should be limited to a certain component. “I think that it takes the wind out of the sails for plaintiffs when it comes to negotiating leverage” during design patent litigation, Liang said.

Although it could take a few years for the implications of the Supreme Court’s decision in this case to play out, the design patent sector is a fairly small part of the U.S. patent landscape. As Liang notes, this was the Supreme Court’s first decision on design patents since Gorham v. Company v. Wright, a design patent case decided in 1871 involving the design of spoon and fork handles. “That tells you two things,” Liang said. “First, design patents aren’t nearly as litigated as utility patents. If they were, there would be more Supreme Court cases. Two, it tells you that this is a real sea change in how design patent infringement awards are going to be calculated.” However, given the fact that design patents are a niche area of the U.S. patent landscape, “a sea change in the design patent world is probably only a ripple in the overall ocean of patent litigation.”

 

What this All Means?

The Supreme Court decision could have been much worse for design patent holders. Because the Court did not venture down the apportionment rabbit hole and instead decided the case based on what constitutes an “article of manufacture” there will be many design patents that should be unaffected. For example, when automobile manufacturers obtain a design patent on a particular part there should be little serious question as to what will be the “article of manufacture.” The Supreme Court acknowledged as much at the beginning of the decision saying:

In the case of a design for a single-component product, such as a dinner plate, the product is the “article of manufacture” to which the design has been applied. In the case of a design for a multicomponent product, such as a kitchen oven, identifying the “article of manufacture” to which the design has been applied is a more difficult task.

In this case Apple obtained a patent on the casing for the smartphone, which meant that a great many things inside the case were not covered by the design patents in question, making the case more difficult than those where the design patent is on a single-component product.

So the good news is that the Supreme Court did not decide the case on apportionment grounds. Those with design patents on single-component products will also be unaffected. But this decision is not a good one for design patent holders like Apple who have design patents covering multicomponent products. Of course, the game now returns to the Federal Circuit, who must come up with a test to satisfy the Supreme Court. Good luck with that Federal Circuit!

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Gene Quinn

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 14 Comments comments.

  1. EG December 7, 2016 8:44 am

    “The fact that the Supreme Court did not reach the critical question in this case feels like a copout.”

    Hey Gene,

    You’re being too kind. It was a “copout,” one in long line of decisions in the patent area by SCOTUS when it reverses, as it usually does, a ruling by the Federal Circuit favorable to the patent owner. Not enough briefing on what “article of manufacturer” means to provide a definition/guidelines? You’ve got to be kidding. Frankly, Our Judicial Mount Olympus is embarrassing in how often it punts on it’s Constitutional responsibility provide meaningful guidelines to the lower courts, as well as us “mere mortals” to apply in future cases

  2. EE December 7, 2016 9:01 am

    I don’t mean to suggest the decision is not an improvement over the status quo (I think it is), but it’s hard to buy the proposition that it doesn’t involve apportionment. I think the most accurate description is that it facilitates apportionment at the component-level, rather than the patent level. There is a difference, to be sure, but the point is that the standard still involves apportionment.

  3. Anon2 December 7, 2016 9:06 am

    Applying a design to a multicomponent article might factually involve applying the design to multiple components of the article.

    In cases where the design IS the overall shape of the entire article, presumably “applying” the design to the article or equally that the article has had the design applied to it, is the act of forming of the article to that shape or the fact of that article having been formed into that shape.

    For a multicomponent article, where the design is the overall shape, in the act of the design being applied, both the container and that which is inside it are shaped in accordance with the design: in fact all of the components are formed and/or shaped and carefully arranged so as to complete the overall design once assembled.

    The outer shell of a multicomponent article has no more of a monopoly over the applied design than say a waterproof skin over the shell, or a soft shell over the outer shell, or even a further coat of paint, etc. each of these also has the design applied to them.. they take on the overall shape, but their presence does not negate the fact that other components have had the design applied.

    Far from the innards of something not having had the design applied to them, they have been carefully arranged and interconnected and fit together so as to bring about the shape and form of the design, and but for the design being imposed upon them, that careful arrangement, interconnection and fitting (into that overall design shape), would not have been made.

    When a multicomponent article like a smartphone is functional and where it is desirable or necessary to save space, the consequences of imposing a design shape are even more apparent. Placement, shape, interconnecting of various components must be carefully and sometimes drastically varied to remain functional and in accordance with the design/shape. Although the design itself does not confer nor benefit from functionality, the fact that the multicomponent article must be functional means that many if not all of the components are constrained and imposed upon by the design and thus, each of those components have had the design applied to them.

    The design when it is a shape,is applied substantially to all the components of a multicomponent article when they must form an integrated (functioning) whole, particularly when space is limited.

  4. Russ December 7, 2016 10:49 am

    “The design when it is a shape,is applied substantially to all the components of a multicomponent article when they must form an integrated (functioning) whole, particularly when space is limited.”

    I’m on Windows, and not a lawyer .. and this is clear to me, from the court records .. SAM copied ~80% of iPhone 1.0 .. no wonder, God, Jr. (Steve Jobs, RIP) went crazy .. heck, it might be argued, SAM IMPROVED on iPhone 1.0 ..

    A pure, flat-out case of heavy copying, IMHO ..

  5. Anon2 December 7, 2016 4:22 pm

    Russ@4

    Agreed re. copying 80%.

    As for your not being a lawyer, my comment @3 is just a non-legal opinion, which is not based on design patent case law (I am not an expert) but merely an observation of what the plain words of the statute seem to mean and the logical implications of trying to fit things into a shape knocking off the design of a competitor’s product.

  6. DaveR December 7, 2016 4:25 pm

    What a cop out by the SCOTUS! Re-read the applicable statute and give it its plain meaning. People don’t buy nor or they offered components of a smart phone, e.g. to choose what case then what cameras, etc. Sure, you can choose to include more inherent memory for additional cost, but go try ordering an iPhone 6 with the latest camera and stabilization and optical and digital zoom features and let me know if you can buy one from an Apple dealer. I doubt it because I have tried to do so. Likewise, if the buyer wanted the Samsung OS and other features, the buyer had to buy the Samsung product with the case that infringed the Apple design patent{s], but Samsung could have chosen during their product design stage not to copy Apple. The buyer can choose a different model phone and generally has to do so in order to get as close as possible to the combination of or the key feature or features of most interest to that buyer… and the case with whatever design shapes and ornamentation that comes with the overall package having those key features. Or the key feature to the buyer may be the shape of the case. It’s always been a take it or leave it proposition, so I don’t see the validity of Samsung’s apportionment argument.

    Also, what will the CAFC or SCOTUS do if/when presented with a copyright infringement case, e.g one in which a home builder copies only the porch of an architect’s custom designed home for a single build for a single client? Apportionment? What if the architect’s custom design is different from a 100 year old Sears catalogue house only due to those porch details? I realize different statutes apply, but many of the issues are similar since the architect’s work has to be both functional as a house yet is honored with copyright protection due to its artistic aspects. Is the SCOTUS mucking up these waters, too?

    The SCOTUS decision to me appears to be mostly calculated to knock down the value of design [and other patents] and to increase the cost of litigation and to assist the litigation bar.

  7. Gene Quinn December 7, 2016 4:35 pm

    EE-

    I agree with you for the most part.

    When I say that the decision is not about apportionment I mean it is not about apportionment from a damages perspective. The statute says you cannot apportion damages for design patents, so it would seem the Supreme Court felt constrained by the exceptionally clear statutory language. Had they ignored the statutory language and made the decision about apportionment from a damages perspective that would have had negative consequences for even design patent holders who have protection on what they called single component designs.

    With respect to multicomponent designs, it seems almost certain that the test will wind up feeling a lot like apportionment. The apportionment will be with respect to components.

    -Gene

  8. Russ December 7, 2016 5:53 pm

    One more thing about whether or not SAM “copied” APPL —

    I’m going on memory on this .. I believe that SAM was asked in court to produce its workpapers on its “invention.” And SAM could not. While APPL could.

    A big deal, IMHO.

  9. EG December 8, 2016 6:57 am

    Hey Gene,

    This cop out in Apple reminds me of this adage: “With great power comes great responsibility.” Frankly, and especially in our nook of the law, SCOTUS generally grips the former (“power”) tightly, but also generally abdicates on the latter (“responsibility”).

  10. step back December 8, 2016 2:59 pm

    Let’s rename SCOTUS as TROIPL

    The Third Rail of IP Law.

    (Nothing wrong with name calling, especially because we are the troll-aiding, deceptive draftsmen of all those claims to purely abstract ideas with nothing significantly more.)

  11. Anon December 8, 2016 9:59 pm

    step back,

    Is there pizza in it for me?

  12. EG December 9, 2016 10:07 am

    “(Nothing wrong with name calling, especially because we are the troll-aiding, deceptive draftsmen of all those claims to purely abstract ideas with nothing significantly more.)”

    step back,

    Amen! Breyer is by far the worst offender. Every time I hear someone refer to Breyer’s derogatory statement in Mayo about the “draftsman’s art,” I frankly cringe. BTW, how would Breyer feel if we derisively referred to him as “technologically-challenged) by pointing to his abacus/King Tut illustration during in oral argument in Alice as being equivalent of a computerized system. (Just one of many Breyer faux pas in oral argument which include his absurd Carl Sagan-like statement during oral argument in Cuozzo Speed that there are “billions of issued U.S. patents”).

  13. Night Writer December 12, 2016 8:05 am

    What is happening is that we are getting more and more removed from the rule of law and our Constitution. Breyer is front and center with an ignorant man put into power. If you want to understand why it appears that our society is falling apart, then you have to understand the lowly likes of Breyer and Lemley.

    When people like this stop caring about ethics, then it opens the door to people like Trump. The only hope is to go back to ethics.

  14. step back December 13, 2016 12:51 pm

    Night @13

    I don’t think Justice Breyer truly understands that his world view might be wrong.
    He has appeared on a number of televised interviews where he explains his “intellectual” /philosophical comprehension of the world. Basically he adopts a Socratic approach to getting to a Socratic truth on the basis of posed hypotheticals, i.e. if King Tut had a magic abacus man who could keep track in real time of all the chits in Egypt then solvency would be automatic don’t you see?

    The problem with such an approach of course is that it assumes truths not in evidence and moreover truths that violate the laws of physics, chemistry and thermodynamics.

    Bryer is like that genius guy in the movie, “The Princess Bride.” He thinks he knows it all when unfortunately for him he knoweth much less than that.

    https://patentu.blogspot.com/2015/12/astute-alice-judges-position-their.html