Supreme Court Rules Design Patent Damages Can Be Limited to Components, Overturning $400M Apple Award Against Samsung

On December 6, 2016, the U.S. Supreme Court issued a unanimous 8-0 decision in Samsung Electronics Co. v. Apple, clarifying the scope of damages available under design patent law. The Court held that damages under 35 U.S.C. §289 for design patent infringement may be limited to the profits attributable to a component of a multi-component product, rather than the total profits from the entire product.

This ruling overturned a May 2015 decision by the U.S. Court of Appeals for the Federal Circuit, which had affirmed a nearly $400 million damages award to Apple Inc. for Samsung’s infringement of three design patents embodied in Samsung’s mobile devices. The Federal Circuit had held that Apple was entitled to 100% of Samsung’s profits from the sale of the infringing smartphones, interpreting the entire smartphone as the relevant “article of manufacture.”

Samsung had appealed the Federal Circuit’s decision, challenging the interpretation of “article of manufacture” under §289, which provides that a patent owner may recover the total profits made by an infringer from the sale of the infringing article. The Supreme Court’s decision did not dispute the damages calculation itself but focused on the statutory meaning of “article of manufacture.”

Section 289 states that whoever, without license, applies a patented design to any article of manufacture for sale, or sells such an article, shall be liable to the patent owner for the total profit made on that article. The key question presented was whether, when a design patent covers only a component of a product, the infringer’s profits award should be limited to profits attributable to that component.

The design patents at issue—U.S. Design Patent Nos. D618,677, D593,087, and D604,305—claim specific design elements of Apple’s iPhone. The dispute arose amid a broader patent war between Apple and Samsung, involving additional utility patents and trade dress claims related to the iPhone’s design and user interface.

After a jury found Samsung liable for infringement and dilution, the district court initially awarded Apple over $639 million in damages but ordered a partial retrial on damages related to periods when Samsung lacked notice of some patents. The retrial resulted in a damages award of approximately $290 million, which the district court upheld. Including interest, Apple’s total recovery reached roughly $399 million.

The Federal Circuit affirmed the infringement and damages awards for the design and utility patents but reversed findings related to Apple’s trade dress claims. It held that the entire smartphone was the only permissible “article of manufacture” because consumers do not purchase smartphones in individual components.

At oral argument before the Supreme Court, Samsung contended that awarding total profits on the entire smartphone was inappropriate when the design patents covered only portions of the device’s appearance. The Supreme Court agreed that the term “article of manufacture” is broad enough to include both a complete product and a component of that product.

In its opinion, the Court explained that determining damages under §289 involves two steps: first, identifying the relevant article of manufacture to which the design was applied; second, calculating the infringer’s total profit on that article. The Court emphasized that it was resolving only whether the article of manufacture can be a component of a multi-part product, not which component applies in this case.

Consulting the American Heritage Dictionary, the Court defined “article of manufacture” as “a thing made by hand or machine,” encompassing both entire products and their components. It rejected the Federal Circuit’s narrow interpretation that limited the article of manufacture to the end product sold to consumers.

However, the Court declined to establish a test for identifying the relevant article of manufacture or to apply such a test to the facts of this case, citing insufficient briefing from the parties. It remanded the case to the Federal Circuit for further proceedings to determine the appropriate article of manufacture and corresponding damages.

The Court noted that the United States, as amicus curiae, had proposed a test, but since neither Apple nor Samsung adequately briefed the issue, the Court would not decide it at this stage.

This ruling marks a significant development in design patent law, limiting the scope of damages awards and potentially reducing liability in cases involving multi-component products. It also underscores the importance of clearly defining the relevant article of manufacture in infringement litigation.

The Federal Circuit will now reconsider the damages award in light of the Supreme Court’s guidance, which may affect the final amount Samsung owes Apple for the design patent infringements.