Tyler Laurence – After five long years in court, Apple has its sights set on $400 million, and Samsung isn’t too happy about it.
The two tech industry titans squared off on October 11th, when the Supreme Court heard oral argument to decide how damages should be calculated in design patent infringement cases. Here, the Court focused on whether Samsung’s infringement of the Apple iPhone’s design patents should result in damages amounting to the iPhone’s “total profit” or should instead be apportioned to the profits specifically stemming from the featured designs. The Court’s interpretation of a century–old statute will highly affect technological innovation, product creativity, and, of course, some very important stock prices.
While patent law protects both utility and design patents, the case at issue specifically focuses on damages for design patent infringement. Design patents protect a product’s appearance, shape, and configuration (i.e. the Coca-Cola bottle). Under 35 U.S.C. § 289, an infringer who “applies the patented design…to any article of manufacture for the purpose of sale…shall be liable to the owner to the extent of his total profit.”
This legal battle dates back to a lawsuit filed in 2011, when Apple claimed, inter alia, that Samsung’s Galaxy smartphone infringed on design patents protecting the iPhone’s rectangle design with rounded edges, raised bezel, and graphic interface featuring 16 icons (D618,677, D596,087, and D604,305). In 2012, the Northern District of California found in favor of Apple, awarding the iPhone creators over $1 billion in damages. After a retrial concerning only the damage award, the district court entered a $930 million judgment in favor of Apple, with nearly $400 million awarded for design patent infringement. The Federal Circuit maintained this damage calculation on appeal two years later. The lower courts, in short, concluded that the term “articles” in §289 points to the entire Samsung smartphone, even though the protected patents did not protect the entire phone design.
Samsung contended that the lower courts’ interpretation of “total profits” is unreasonable in the context of smartphones, because the smartphone was likely purchased by consumers for reasons unconnected to the infringed design. Setting a dangerous precedent, a miniscule infringement unrelated to the overall profits would trigger unjust enrichment by the protected party. Samsung, along with amici curiae from Dell, Facebook, and Google, noted that this interpretation would hamper technological innovation, and urged the Supreme Court to reverse the verdict so that a lower court could determine the actual profit derived from the design patents.
Apple instead argued that the overall success of the iPhone is directly attributable to the billions of dollars spent on its design, and that Samsung directly copied the iPhone’s design to get itself out of a financial slump. Backed by amici briefs from dozens of leading design professionals, Apple contends that it is impossible to determine an apportioned figure in the modern word, and this plain–language interpretation would curb any copycat products. While “articles of manufacture” may mean specific features of the product—Apple concedes—Samsung failed to prove it in this case. Lastly, Attorney Seth Waxman for Apple points to the House Report of 1887, which specifically removed a damage apportionment requirement, for the reason that “it is the design that sells the article.”
In sum, the Court generally seemed unimpressed with both sides’ methods to resolve the issue. “It seems to me that neither side gives us an instruction to work with,” noted Justice Kennedy. It is likely, however, that the Court will follow a recent trend in IP cases in rejecting bright-line rules created by the Federal Circuit in favor of a multi-factor balancing test. If this was the case, the court would interpret “article of manufacture” synonymous with the product itself in some instances, and the discrete profit–generating element in others, depending on the nature of the infringement.
For now, it looks like the Court is putting this case on airplane mode, since their decision is expected by June 2017.
