The U.S. Supreme Court unanimously overturned a $400 million damages award against Samsung for infringing Apple's smartphone design patents. In a decision that upsets a long-standing rule for calculating damages for design patent infringement, the Court held that damages can be based on profits from individual components of the smartphones. Before yesterday's decision, the plaintiff in a design patent infringement case could recover the entire profits from the sale of an infringing device, even if the design patent only covered a small portion of the device. The Supreme Court's decision opens the door for a rule that could significantly reduce exposure in design patent infringement cases.
The Court did not, however, provide a rule for determining whether damages should be based on the whole device or some smaller portion of the device. Instead, the Court remanded the case to the Federal Circuit to craft a rule and apply it to the case at hand. In essence, then, the Court kicked the can down the road on providing a specific test for determining design patent damages, both in Samsung v. Apple, and in all future design patent infringement cases.
Key to the decision is 35 U.S.C. § 289, the statutory provision for design patent damages. It allows for profit disgorgement based on a defendant's use of a patented "article of manufacture." Section 289 also states that the infringer "shall be liable to the owner to the extent of his total profit." Thus, a determination of damages for design patent infringement involves a two-part analysis—identify the "article of manufacture" to which the infringed design applies, and determine the total profits the infringer made selling that article of manufacture.
The Supreme Court partially addressed the first part of the analysis and asked "whether, in the case of a multi-component product, the relevant 'article of manufacture' must always be the end product sold to the consumer or whether it can also be a component of that product." Based on the text of the statute, the Court concluded that "the term 'article of manufacture' is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading 'article of manufacture' in Section 289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase." The Court thus reversed the Federal Circuit's ruling that components of the infringing smartphones could not be the relevant article of manufacture because consumers could not purchase those components separately from the smartphones. However, the Supreme Court declined to state a test for the first step of the Section 289 damages inquiry and remanded that issue to the Federal Circuit. Yesterday's decision did not identify the correct "article of manufacture" in the case, and left that question open for another day.
Going forward, it will be critical to identify the relevant "article of manufacture" in developing design patent prosecution and litigation strategies. At the moment, there is significant uncertainty in the law, and that uncertainty highlights the advantages of obtaining and asserting multiple design patents of varying scope for a given product. For example, a strategy involving multiple design patents that cover both the entire product and individual components of that product provides a hedge against changes in the law that will be developing over the coming years. Filing of design patent applications of varying scope can maximize the scope of patent coverage while also maximizing potential damage awards.
