For Design Patent Damages, “Article of Manufacture” Not Necessarily Entire End Product
Justice Sotomayor, writing for a unanimous Supreme Court of the United States, held that for purposes of determining damages for design patent infringement under 35 USC § 289, the relevant “article of manufacture” may include either the end product sold to the consumer or simply a component of that product. Samsung Elecs. Co. v. Apple, Inc., Case. No. 15-777 (Supr. Ct., Dec. 6, 2016) (Sotomayor, Justice). This decision reverses a damages award of $400 million against Samsung, which had been affirmed on appeal by the US Court of Appeals for the Federal Circuit.
Apple sued Samsung for infringement of a range of its utility and design patents and dilution of its trade dresses. The district court entered final judgment in favor of Apple after a jury trial, upholding the jury’s findings of infringement, dilution and validity, as well its damage award that included $399 million in design patent damages, the latter equaling Samsung’s entire profit made from sales of the infringing smartphones. Samsung appealed.
The Federal Circuit affirmed the district court’s findings related to design patent infringement and design patent damages, notwithstanding Samsung’s argument that damages should be limited to profits from the front face, bezel or display screen design of the smartphone, not to profits from the entire smartphone. The Federal Circuit disagreed, stating that such apportionment arguments were rejected by Congress and prohibited under § 289 (IP Update, Vol. 18, No. 6).
According to the Federal Circuit, the term “article of manufacture,” as codified in § 289, does not mean specific components of an infringing article unless those components are sold separately from the end product. Rather, the Court found that the “total profit” accounted for under § 289 is the infringer’s total profits from an entire product, regardless of whether the infringement is attributable to the product as a whole or simply one or more components. The Court rejected criticism from amici that allowing an award based on infringement of a design of one component of a complex article “makes no sense in the modern world,” on the basis that it was bound to do so by statute.
Petition for Certiorari
Samsung petitioned for certiorari, arguing that rewarding profits for sales of an entire product where only a small component of that product was infringed over-compensates the patent holder by allowing massive windfalls exceeding the inventive value of the patents. Samsung raised the question: “[w]here a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?” (IP Update, Vol. 19, No. 3).
Supreme Court Decision
Justice Sotomayor explained that the Federal Circuit’s interpretation of “article of manufacture” was too narrow. Sotomayor explained that an award of damages under § 289 must follow a two-step inquiry: (1) identifying the “article of manufacture” to which the infringed design has been applied, and (2) calculating the infringer’s total profit made on that article of manufacture. Under the first step, in the case of a single-component product, the “article of manufacture” is the product itself. In the case of a multicomponent product, however, it may not be so obvious. The Supreme Court explained that under either circumstance, the term “article of manufacture” as used in § 289 may encompass both a product sold to a consumer and a component (or components) of that product.
The Supreme Court noted that, based on dictionary definitions of “article” and “manufacture,” the term “article of manufacture” is “simply a thing made by hand or machine,” noting that the definition is broad enough to encompass both an end product and the individual components of that product. As Sotomayor explained, this broader interpretation of “article of manufacture” is consistent with 35 USC §171(a), which defines the scope of eligible design patents thus: “[w]hoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor.” Because the US Patent and Trademark Office and the courts have permitted design patents for designs extending to complete products, as well as to components of a multicomponent product, the Supreme Court reasoned that “article of manufacture” should be understood to include both components and end products.
The Court declined to define the specific article of manufacture at issue since neither party had briefed the issue, and remanded the case to the Federal Circuit. In ordering remand, the Supreme Court declined to explain how the Federal Circuit or lower courts should go about the task of deciding whether profits apply to the product as a whole or to an individual component. “We decline to lay out a test for the first step of the § 289 damages inquiry in the absence of adequate briefing by the parties.”
Practice Note: Future patent holders will likely attempt to define the article of manufacture as broadly as possible in order to ensure the maximum damages award.
On remand, it will be interesting to see if the Supreme Court’s broader definition of the statutory “article of manufacture” language will be found to include digital designs, such as the graphical user interface (GUI) icons on the Samsung phones.
Soon after its decision in this case, the Supreme Court granted certiorari in another design patent case, Systems, Inc. v. Nordock, Inc., and immediately remanded that case to the Federal Circuit “for further consideration in light of Samsung Electronics Co. v. Apple, Inc.”