Supreme Court Rules Against Apple in Design Patent Case with Samsung, Remands to Federal Circuit to Formulate Test for Identifying Relevant “Article of Manufacture”

Yesterday, the Supreme Court held that the relevant “article of manufacture” for arriving at a damages award for design patent infringement need not be the end product sold to the consumer, but may be only a component of that product. In Samsung Electronics Co., Ltd., et al. v. Apple Inc., 580 U.S. ___, No. 15-777, slip op. (Dec. 6, 2016), a unanimous 8-0 opinion authored by Justice Sotomayor reversed the Federal Circuit’s ruling that Apple was entitled to $399 million in damages, and remanded the case to the Federal Circuit. The $399 million represented Samsung’s entire profit from the sale of the infringing smartphones. The appeal turned on the interpretation of the phrase “article of manufacture,” within the meaning of a 35 U.S.C. § 289 damages inquiry. The Supreme Court disagreed with the Federal Circuit’s conclusion that this statutory language necessarily refers to the product sold to consumers, and asked the Federal Circuit, on remand, to set out a test that can be used to identify as a first step in the damages analysis what should be considered the relevant article of manufacture, and then apply that test to the facts of this case.

As we have covered in detail here before, Apple sued Samsung in 2011, for infringement of design patents D593,087, D618,677, and D604,305, design patents covering a black rectangular front face with rounded corners, a rectangular front face with rounded corners and a raised rim, and a grid of 16 colorful icons on a black screen. Samsung v. Apple, Case No. 15-777, slip op. at 3. A jury found that several Samsung smartphones did infringe those patents and awarded $399 million in damages to Apple for Samsung’s design patent infringement. The Federal Circuit upheld the award, holding that the statutory language of 35 U.S.C. § 289 “explicitly authorizes the award of total profit from the article of manufacture bearing the patented design.” 786 F. 3d 983, 1001-02 (2015).

Specifically, the Supreme Court considered whether, in the case of a multicomponent 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. Samsung v. Apple, Case No. 15-777, slip op. at 5. The Court, relying heavily on dictionary definitions for “article” and “manufacture,” came to the conclusion that “article of manufacture” is simply a thing made by hand or machine. Id. at 6. As such, the Court held that the term “article of manufacture” can encompasses both a product sold to a consumer and a component of that product. Id.

The Supreme Court remanded the obligation to articulate the appropriate test because the issue had not been fully briefed by the parties in the existing appeal. While the Supreme Court did not resolve what the relevant “article of manufacture” should be, its disagreement with the Federal Circuit’s existing construction of the statutory language implies that, at least in this case, identifying the commercially available smartphone itself as the “article of manufacture” may have resulted in an unjustifiably large damages award.

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