On December 6 2016 the Supreme Court rejected the Federal Circuit's interpretation of a damages statute in Apple v Samsung over Apple's smartphone design patents, and remanded the matter to the Federal Circuit. In so doing, the court raised the possibility that the $399 million in damages previously awarded to Apple could be reduced significantly.
Section 289 of Title 35 of the US Code provides that damages for the infringement of a US design patent shall be the total profit from an "article of manufacture" to which the patented design (or a colourable imitation thereof) has been applied. Assessing damages under Section 289 involves:
- identifying the relevant 'article of manufacture'; and
- calculating the infringer's total profit from that 'article of manufacture'.
In 2011 Apple sued Samsung for infringement of design patents covering the screen and case for a smartphone and was awarded $399 million in damages – Samsung's entire profits from the sale of the infringing phones. Samsung appealed the award to the Federal Circuit, arguing that damages should have been based on profits from the infringing components of Samsung's phones (eg, the screen or case) rather than profits from the phones in their entirety. On appeal, the Federal Circuit upheld the $399 million award and rejected Samsung's argument, finding that the components of Samsung's phones could not be 'articles of manufacture' under §289 because consumers could not purchase the components separately from the phones.
In a unanimous decision written by Justice Sotomayor, the Supreme Court reversed the Federal Circuit's decision, holding that "[t]he term 'article of manufacture,' as used in §289, encompasses both a product sold to a consumer and a component of that product" (emphasis added). The court observed that its expansive reading of 'article of manufacture' to include components is consistent with dictionary definitions, which do not limit the terms 'article' or 'manufacture' to refer only to finished products sold to a consumer. The court also observed that its reading of 'articles of manufacture' is consistent with other sections of the patent statute – namely 35 USC §171(a) – which permits design patents for designs extending to a component of a multicomponent product, and 35 USC §101 which permits utility patents for, among other things, parts of a machine.
The court declined to resolve the issue of whether, for each of the Apple design patents in question, the relevant 'article of manufacture' is the entire phone or a particular component thereof. The court noted that Apple and Samsung did not adequately brief that issue, and that "the Federal Circuit may address any remaining issues on remand".
For further information on this topic please contact Christopher E Loh at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100) or email ([email protected]). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.
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