December 6, 2016 – The Supreme Court today rejected the Federal Circuit’s interpretation of a damages statute in litigation between Apple and Samsung over Apple’s smartphone design patents, and remanded the matter to the Federal Circuit. In so doing, the Supreme Court raised the possibility that the $399 million in damages previously awarded to Apple in its dispute against Samsung would be reduced by a significant amount.
35 U.S.C. §289 provides that damages for the infringement of a United States design patent shall be the total profit from an “article of manufacture” to which the patented design (or a colorable imitation thereof) has been applied. Assessing damages under §289 involves two steps: first, identifying the relevant “article of manufacture,” and second, calculating the infringer’s total profit from that “article of manufacture.”
In 2011, Apple sued Samsung for infringement of design patents covering the screen and case for a smartphone, and was awarded $399 million in damages—Samsung’s entire profits from the sale of the infringing phones. Samsung appealed the award to the Federal Circuit, arguing that damages should have been based upon profits from the infringing components of Samsung’s phones, such as the screen or case, rather than profits from the phones in their entirety. On appeal, the Federal Circuit upheld the $399 million award and rejected Samsung’s argument, finding that the components of Samsung’s phones could not be “articles of manufacture” under §289 because consumers could not purchase the components separately from the phones.
In a unanimous decision written by Justice Sotomayor, the Supreme Court reversed the Federal Circuit’s decision, holding that “[t]he term ‘article of manufacture,’ as used in §289, encompasses both a product sold to a consumer and a component of that product.” (emphasis added). The Supreme Court observed that its expansive reading of “article of manufacture” to include components is consistent with dictionary definitions, which do not limit the terms “article” or “manufacture” to refer only to finished products sold to a consumer. The Supreme Court also observed that its reading of “articles of manufacture” is consistent with other sections of the patent statute—namely 35 U.S.C. §171(a), which permits design patents for designs extending to a component of a multicomponent product, and 35 U.S.C. §101, which permits utility patents for, among other things, parts of a machine.
The Supreme Court declined to resolve the issue of whether, for each of the Apple design patents in question, the relevant “article of manufacture” is the entire phone or a particular component thereof. The Supreme Court noted that Apple and Samsung did not adequately brief that issue, and that “the Federal Circuit may address any remaining issues on remand.”