Supreme Court Changes Standard for Determining Damages for Design Patent Infringement

by Burr & Forman

Burr & Forman

Samsung Electronics Co., Ltd. v. Apple Inc. (No. 15-777)

In the closely-watched Samsung v. Apple case, the Supreme Court today issued a landmark ruling that changed the long-standing rule for calculating damages for infringement of a design patent.  Section 289 of the Patent statute states that an infringer who sells “any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit.”  35 U.S.C. § 289.  Apple’s design patents covered smartphones having a black rectangular front face with rounded edges and a raised rim, as well as a grid of 16 colorful icons on a black screen.  (Slip Op. at 3.)  Apple sued Samsung in 2011 alleging that various Samsung phones infringed Apple’s design patents.  Samsung was found to infringe, and the district court awarded Apple Samsung’s total profits from the sales of its infringing smartphones, which amounted to $399 million.  The Court of Appeals for the Federal Circuit affirmed the award, finding that entire smartphone is the only possible “article of manufacture” for purposes of calculating damages under §289 because consumers could not separately purchase the components of the smartphones covered by Apple’s design patents.

In a unanimous decision, the Supreme Court has reversed, finding that the “article of manufacture” recited in §289 can be a component of an end product sold to the consumer, and is not required to be the end product itself.  The Court reasoned that the term “article of manufacture” has a very broad meaning, and is simply “a thing made by hand or machine.”  (Slip Op. at 6.)  This broad definition of an “article of manufacture” encompasses both a product sold to a consumer as well as a component of that product.  (Id.)  The Court noted that the broad definition is consistent with §§ 101 and 171 of the Patent statute, which permit patents to be granted on individual components of a multicomponent product.  (Id. at 6-7.)  The Court therefore reversed the Federal Circuit’s decision that the “article of manufacture” under §289 must be the end product that is sold to the consumer (e.g., the infringing Samsung phones).  However, the Court expressly declined to articulate a standard for determining the relevant “article of manufacture” for purposes of §289, remanding that issue to the Federal Circuit.  (Id. at 8.)

The Court’s decision marks a significant shift from previous design patent damages jurisprudence, which has long awarded damages based on profits from sales of the end product.  The new standard will likely severely limit damages for design patent infringement, though the extent of the limit will likely depend on how lower courts determine what constitutes the relevant “article of manufacture” under §289.  The Court’s ruling also leaves open the question of how to calculate the “total profits” on a component of a multi-component product.  Thus, the Court’s ruling may be just the beginning –not the end– of the design patent damages issue.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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