On Tuesday, December 6, 2016, the U.S. Supreme Court ruled in favor of Samsung Electronics as to the damages it owes to Apple in a design patent dispute that has been in the courts for years. The ruling potentially relieves Samsung of having to pay $399 million to Apple for patent infringement. A jury previously ruled in Apple’s favor, determining that Samsung had infringed on certain patents that cover design elements of the iPhone.
At issue is an 1887 rule that provides companies found liable for infringing design patents on “an article of manufacture” must pay as damages their entire profits from the infringing design. The issue before the Supreme Court focused on this phrase. The Court held that “an article of manufacture” is broad enough to encompass both the entire product sold to a consumer (here the Samsung phone) or merely the components of the product that were found to have been infringed (here, the black rectangular face with rounded corners, among other design elements).
Interestingly, the Court did not determine which interpretation should be applied in this case, but instead stated either measure of damages may be correct depending on the facts of a case. Samsung and Apple will head back to the lower court to continue the argument as to the appropriate measure of damages.
The interpretation of “an article of manufacture” is important because it determines the measure of damages. For example, as in this case where Apple was initially awarded $399 million, the measure of damages was based on the profit Samsung earned on the entire phone. However, if the award of damages was apportioned based on the profit made on the individual infringing components, then the damages may be much less.
Samsung supporters argued that awarding the entire profits when just certain features of a product were infringing would stifle development of products and investment in same. Apple supporters argued that design is central to the success of a product and violators should be forced to turn over all profits from infringing designs and products.
A design patent protects the way an article looks, the ornamental appearance, which includes the shape or configuration of the article. A utility patent, which is more common, protects the way an article is used and how it works. New products frequently contain other patented ideas. Often, companies will license their patents to each other to minimize infringement claims. However, as Samsung and Apple have learned, the competition to make the next, best thing, particularly in the electronics industry, causes companies to take big chances, and sometimes it doesn’t work out very well.