On Tuesday, December 6, 2016, the U.S. Supreme Court decided Samsung v. Apple, Appeal No. 15-777, with Justice Sotomayor delivering the opinion for a unanimous Court. Samsung reverses a decision by the U.S. Court of Appeals for the Federal Circuit that damages for Samsung’s infringement of Apple’s design patents should be based on the entire sales price of Samsung’s phone. The Federal Circuit previously held that this greater measure of damages applied because the sub-component covered by Apple’s patent was not sold to end users separately from the phone.
The statute examined by the Supreme Court is 35 U. S. C. §289, which provides a damages remedy specific to design patent infringement. Section §289 indicates that a person who manufactures or sells “any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit.”
As noted by Justice Sotomayor, this case involves Samsung’s infringement of Apple’s designs for its early-generation smartphones such as the original iPhone. Procedurally, a jury found that many of Samsung’s smartphones infringed Apple’s design patents. Apple was awarded $399 million in damages for Samsung’s infringement, which was the entire profit Samsung made from its sales of the infringing smartphones.
The Federal Circuit subsequently affirmed the design patent infringement damages award. In doing so, the Federal Circuit rejected Samsung’s argument that the profits awarded should have been limited to the infringing “article of manufacture” rather than the entire infringing product. The Federal Circuit explained that limiting the damages award was not required because the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.”
On appeal from the Federal Circuit, the Supreme Court has now held that the Federal Circuit’s reading is inconsistent with §289. In doing so, the Court initially indicated that arriving at a damages award under §289 involves two steps. First, the “article of manufacture” must be identified. Second, the infringer’s total profit made on that article of manufacture must be calculated. The Court then went on to note, however, that “[t]his case requires us to address a threshold matter: the scope of the term ‘article of manufacture.’ The only question we resolve today is whether, in the case of a multicomponent 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.”
The relatively short opinion by Supreme Court standards – just over eight pages – puts it simply: “The text resolves this case. The term ‘article of manufacture,’ as used in §289, encompasses both a product sold to a consumer and a component of that product.”
The Court then went on to explain: “‘Article of manufacture’ has a broad meaning. An ‘article’ is just ‘a particular thing’…And ‘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’…An article of manufacture, then, is simply a thing made by hand or machine. So understood, 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. 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.”
The Court also observed that such a reading of an “article of manufacture” in §289 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 Court then noted that the courts and the Patent Office have read §171 to permit a design patent for a design extending to only a component of a multicomponent product.
Concluding its opinion, the Court then indicated that “The Federal Circuit’s narrower reading of ‘article of manufacture’ cannot be squared with the text of §289. The Federal Circuit found that components of the infringing smartphones could not be the relevant article of manufacture because consumers could not purchase those components separately from the smartphones…reading ‘article of manufacture’ in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.”
EDITORIAL NOTE: For more on this case please see Supreme Court overturns $400 million Apple verdict and Supreme Court skeptical of Apple at oral arguments.