Thought Leadership
By Steven I. Wallach, Esq.

U.S. Supreme Court Clarifies Damages Rule for Design Patents in Samsung v. Apple

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The U.S. Supreme Court in a unanimous decision has clarified—some would say completely changed—the answer to an important question in patent law: When a design patent is infringed, are lost profits awarded as damages based on the entire infringing product or on a component of the product that includes the patented design? Before the Court’s December 6, 2016 decision in Samsung Electronics Co. v. Apple Inc., most patent lawyers would probably have advised that, rightly or wrongly, the law provides that the entire product’s profits will be disgorged. Now the advice must be “it depends.” Those who thought “wrongly” were probably rooting for Samsung, which won the decision and arguably changed the design-patent landscape from one of unjust certitude to one of righteous ambiguity.

A design patent gives its owner a 14-year period of exclusive rights—starting when the patent issues—for a new, original, and ornamental design for an “article of manufacture.” (Design patents differ from what most people think of as patents: exclusive rights for a new and useful process, machine, manufacture, or composition of matter; those are more precisely referred to as utility patents, each having a term of 20 years from its effective filing date.) The applicable statute provides that, when a patented design is applied to an infringing article of manufacture, the patent owner is entitled to collect as damages the infringer’s total profit.

As part of its long-running, multiple patent disputes with Apple over smartphones, Samsung was tagged by a jury with owing $399 million for infringing three design patents owned by Apple. The damages were that hefty because the San Jose federal trial court, and then the U.S. Court of Appeals for the Federal Circuit, interpreted “article of manufacture” for damages purposes to mean an entire product—a smartphone—even though Apple’s patents were directed to designs for smartphone components, such as a rectangular front face with rounded corners and a raised rim. The Supreme Court’s 8–0 decision, in an opinion by Justice Sonia Sotomayor, reversed the Federal Circuit, holding that an article of manufacture is not necessarily an entire product, but can be a product component. Part of the High Court’s reasoning was that, if a design patent for an article of manufacture can permissibly be directed to components—as Apple’s patents were—then for purposes of assessing damages an article of manufacture may again be a component.

Now the $399 million damages award will likely be reduced; but it depends. That’s because the Supreme Court refused to provide in this decision the answer to another important question: When assessing damages, what is the test for determining whether the article of manufacture is a component or an entire product? The Court considered this issue insufficiently addressed by the parties, and so has remanded the case to the Federal Circuit to take up the issue. And after it does so, the disappointed party will undoubtedly petition the Supreme Court to consider what the test should be. So, it remains to be seen whether patent law will get more certitude or more ambiguity.