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Samsung Beats Apple in Design Patent Dispute but Questions Remain

Samsung won a significant (one might say explosive) victory in the Supreme Court today, as the Court ruled that Samsung did not need to pay Apple the entirety of its profits, nearly $400 million, from phones found to be infringing on the rival phone maker's design patents.

A jury found in 2012 that several Samsung smartphones had infringed on Apple's design patents, particularly in their rectangular shape, rounded edges, and similar displays. The cost to Samsung was to be all the profits from the phone -- originally more than a billion dollars, then reduced to $399 million in damages. That was going too far, the Supreme Court ruled today, holding that the relevant "article of manufacture" for determining damages need not be the entire phone, but may be only its component, infringing parts. When it came to telling courts how they should determine the proper article of manufacture, however, the Court was mum.

A Broad Reading to "Articles of Manufacture"

The ruling doesn't mean that Samsung did not violate Apple's patents, nor does it relieve the Korean company of damages to its competitor in Cupertino. But it does have the potential to significantly limit those damages and damages in similar design patent infringement cases.

At issue was what counted as an "article of manufacture" for Patent Act § 289 damages analysis. Section 289 states that whoever applies "a patented design, or any colorable imitation thereof, to any article of manufacture," without a license of the owner, shall be liable "to the extent of his total profit." Does that article of manufacture encompass the whole item sold, here the smartphone, or only the parts found to infringe a design patent?

Since consumers could only buy the infringing phones in their entirety, and not their component parts, the Federal Circuit ruled that the phone as a whole was the relevant article of manufacture.

The Supreme Court begged to differ. In a unanimous opinion written by Justice Sotomayor, the Court found such a reading to be inconsistent with the act.

"The text resolves this case," Justice Sotomayor wrote. "The term 'article of manufacture,' as used in § 289, encompasses both a product sold a consumer and a component of that product." That reading comports with other provisions of the Patent Act, the Court found, which allow for patents to protect both whole products and their parts. It is a broad term which cannot be narrowed to cover only the end product sold to a consumer.

A Win, and Some Resultant Uncertainty

The Court's ruling has some immediate impacts, but also leaves plenty left to be determined. Following today's opinion, the Federal Circuit's narrow reading of § 289 is no more. Samsung, too, will no longer be on the hook for a full $399 million -- but it will be on the hook for something.

How much, and how it's determined, remains to be seen. In the Court's narrow, brief opinion, the justices declined to address just how courts should identify the relevant article of manufacturer. It was enough, they said, that the Federal Circuit did it wrong. "We decline to lay out a test for the first step of the § 289 damages inquiry in the absence of adequate briefing by the parties," Justice Sotomayor wrote.

The case was the first design patent dispute to reach the Supreme Court in more than a century, but depending on how courts respond to existing uncertainty about how best to identify the relevant articles of manufacture, it might not be the last.

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