On October 11, the United States Supreme Court heard oral arguments in Samsung v. Apple, a closely watched case involving how to calculate damages for infringement of a design patent. The result of this case will undoubtedly affect design patent litigation and jump start discussion of design patent law.
In 2011, Apple sued Samsung, claiming that the company’s Galaxy phone infringed design patents, utility patents, and trademarks in Apple’s iPhone. A year later a jury found in favor of Apple, awarding nearly $ 300 million in damages for infringement of all three types of intellectual property rights. The Federal Circuit in 2015 upheld the trial court judgment on all counts except for the trademark claims, which were found to be barred by the functionality defense. The Supreme Court subsequently granted Samsung’s certiori petition on the question of how to calculate damages for the design patent claims.
Apple asserted three design patents against Samsung. One design patent covered the rectangular, round-cornered front face of the iPhone. The second and third covered the round-cornered face with certain aspect ratio and corner radii and the display screen for the graphic user interface, respectively. Under section 289 of the Patent Act, someone who applies, without permission from the owner, the patented design to any “article of manufacture” for sale “shall be liable to the owner to extent of his total profit.” The district court, affirmed by the Federal Circuit, awarded Apple damages based on the full profits from all the iPhones Apple sold during the period of infringement.
Samsung contends that basing damages on the profits from the entire product overcompensates Apple. Instead, damages should be connected to the value of the design covered by the patent. The Supreme Court, by granting cert, seems to agree that there is a problem with interpreting the statute so broadly. A recurring hypothetical at the oral argument was a design patent covering a cup holder that is included in a Rolls Royce. Awarding the owner the full value of the Rolls Royce against an infringer of the cup holder is obviously excessive. But how to create general rule consistent with the statute that avoids excessive compensation?
During oral argument, Apple and Samsung agreed that recovery should be limited to the value of the “article of manufacture” to which the design is applied. That “article of manufacture” would be a part of the total product, such as the front face and display screen for the iPhone. Most of the debate during oral argument involved identifying a test that would assist the court in identifying the article of manufacture and calculating the profits to the design patent owner from this article. Samsung would leave it to the jury to determine the relevant article of manufacture with assistance from experts on how to calculate the profits attributable to this article. The Government, participating in the oral argument, urged a multifactor test for determining what constitutes the article of manufacture and detailed jury instructions on how to calculate profits, with assistance from a relevant accounting expert. Apple suggests a more abbreviated multi-part test to guide the trial court in determining damages.
The surprising aspect of the oral argument was the broad agreement among the parties that recovery for the entire product is inappropriate. What was frustrating is coming to some agreement about the proper test. The Court very likely will propose some multi-purpose test. A future article will explain the details of whatever test the Court prescribes.