Apple v. Samsung – A Smartphone is More than Just a Pretty Face
Since their initial release, smartphones have been a hot commodity with intense competition. One particularly contentious issue has been their appearance. During early development, Apple, Inc. (“Apple”) obtained several design patents covering the design of the now iconic appearance of the iPhone®, with its rectangular face, rounded edges, and grid of colorful icons on a black screen. Design patents cover the ornamental aspects or designs of a functional product. When smartphones began to emerge with similar appearance to the iPhone®, Apple sued several competitors, including Samsung Electronics Co. (“Samsung”), for infringement of Apple’s design patents. Under the U.S. Patent Act Section 289, a party can be held liable for infringement to the extent of the infringer’s profits from the infringing article of manufacture. When Apple won a jury verdict against Samsung, damages were awarded to Apple representing the entirety of Samsung’s profits made on the infringing smartphones. The two-part analysis for determining infringement damages for design patents includes 1) identifying the article of manufacture and 2) calculating the infringer’s total profit made on the infringed article of manufacture. Samsung then appealed to the Federal Circuit.
Under the same two-part analysis, the Federal Circuit upheld the jury verdict. With regard to the calculation of the amount of damages awarded, the Federal Circuit reasoned that since smartphones were not sold to customers separately from their shells, the smartphone in its entirety was the article of manufacture and damages for infringement need not be limited to less than the entire end product. Samsung then appealed to the U.S. Supreme Court, which took issue with the Federal Circuit’s analysis with regard to the articles of manufacture protected by Apple’s design patents.
In Samsung Electronics Co., Ltd. v. Apple Inc., 580 U. S. ____ (2016), on December 6, 2016, the U.S. Supreme Court reversed the Federal Circuit in a unanimous decision, holding that damages may be limited to only the profit made on the components covered by the design patents when a multicomponent end product is involved and remanding the case. Justice Sotomayor, writing for the Court, indicated that the term “article of manufacture” was interpreted too broadly by the Federal Circuit. The Court reasoned that understanding the meaning of the term “article of manufacture” was simple when dealing with single component products, such as a dinner plate. But when a multicomponent product, such as a kitchen oven, was involved, the definition of article of manufacture could be interpreted to cover the entirety of the kitchen oven or merely a component of the kitchen oven. In most cases, the majority of a multicomponent product is made of non-infringing components. The Court decided that the article of manufacture was not required to be the entirety of the multicomponent product for the purpose of calculating damages for infringement.
With the remand to the Federal Circuit, the Court is allowing the Federal Circuit to construct its own test to determine the scope of article of manufacture. Whatever test is developed will likely alter the economics of design patent litigation involving infringement of multicomponent products since the plaintiff will no longer be able to assume that article of manufacture will automatically be construed to encompass a multicomponent product in its entirety. This potential narrowing of article of manufacture may will likely reduce the amount of available damages and impact the attractiveness of litigation in some cases. So we will stay tuned for the Federal Circuit’s next move.