On Tuesday December 6, 2016, in Samsung Electronics Co. v. Apple Inc., 580 U.S. ___ (2016), the Supreme Court unanimously rejected the Federal Circuit’s “narrow reading” of “article of manufacture” for purposes of damages for infringement of a design patent, and reversed the Federal Circuit’s affirmance of a $400,000,000 damages award to Apple.  The Court’s decision is an important step toward limiting what many have viewed as an outdated damages regime for design patent infringement.

The Patent Act prohibits the unlicensed use of a patented design “or any colorable imitation thereof, to any article of manufacture for the purpose of sale” as well as the unlicensed sale or exposure to sale of “any article of manufacture to which [a patented] design or colorable imitation has been applied.”  35 U.S.C. § 289.  A successful design patent plaintiff is entitled to recover from an infringer the “total profit” from the unauthorized use of “the patented design” on the “article of manufacture.”  Id.

Apple sued Samsung in 2011, alleging that various Samsung smartphones infringed three design patents.  Slip Op. at 3-4.  The design patents covered “a black rectangular front face with rounded corners,” “a rectangular front face with rounded corners and a raised rim,” and “a grid of 16 colorful icons on a black screen.”  Id. at 3.  In 2012, a jury found that some of Samsung’s smartphones infringed the design patents and awarded Apple $399,000,000 in damages.  Id. at 4.  This amount was based on the “total profit” Samsung made from its sales of the infringing smartphones.  Id.; 35 U.S.C. § 289. 

On appeal to the Federal Circuit, Samsung argued that the damages award was improperly calculated because it was based on profits derived from the entirety of each infringing smartphone, rather than the components of the phones found to infringe the Apple design patent (i.e., the camera shell or body).  Id.; see 786 F.3d at 1002.  According to Samsung, because each Samsung smartphone was comprised of numerous components, the damages should have been limited to profits attributable to the components that incorporated the patented designs.  Id.  The Federal Circuit disagreed, finding that the components of each smartphone were not sold separately from the smartphone as a whole, and therefore did not qualify as “distinct articles of manufacture to ordinary purchasers.”  Id.  In the Federal Circuit’s view, only the smartphone in its entirety qualified as an “article of manufacture” within the meaning of section 289.  Id

The Supreme Court reversed.  The Court framed the issue of assigning design patent damages as a two-step inquiry:  first, identification of the “article of manufacture” to which the infringing design has been applied; second, to calculate the infringer’s profit made on the article of manufacture.  Samsung required the Court to consider the Federal Circuit’s evaluation of the first step.  Samsung, 580 U.S. at ___ (slip op., at 5).

The Supreme Court explained that “[t]he text [of §289] resolves this case.”  Id. at 6.  The Court held the Federal Circuit’s restriction of “article of manufacture” to only a final product sold to a consumer was a “narrow” reading of section 289 that “cannot be squared with the text.”  Id. at 7-8.  “The term ‘article of manufacture,’ as used in §289, encompasses both a product sold to a consumer and a component of that product.” Samsung, 580 U.S. at ___ (slip op., at 6).  Relying on dictionary definitions to support its conclusion that “an article of manufacture . . . is simply a thing made by hand or machine,” the Court held that the statutory language is broad enough to encompass the individual components of a multicomponent device.  Id.  The Court further noted that its interpretation of “article of manufacture” was consistent with the term’s use in 35 U.S.C. §171, the provision governing what subject matter can qualify for a design patent, and 35 U.S.C. §101, the provision governing what subject matter can qualify for a utility patent.  Id. at 6-7.

The Court declined, however, to decide whether “for each of the design patents at issue here, the relevant article of manufacture is the smartphone, or a particular smartphone component.”  Id. at 8.  The Court explained that such a determination would require it to develop a test for identifying relevant articles of manufacture.  Id.  While the United States as amicus curiae had proposed a test,[1] neither Samsung nor Apple had briefed the issue.  The Court declined to articulate a test, instead leaving it to the lower courts to fashion a methodology for identifying the “article of manufacture” to which liability for design patent infringement may attach.

Various implications of Samsung seem likely.  While clarification of the “article of manufacture” is important to the ongoing development of patent damages law, it may not prove the most challenging aspect of the inquiry.  In many cases, identification of the article of manufacture is more straightforward that ascertaining the “total profits” derived from the sale of the article.  The latter issue will almost certainly require new expert and trial approaches to establishing, or refuting, damages associated with infringement of a design patent.  Also, the Court’s decision almost certainly will mean that many design patents will be viewed as not carrying the same value they did prior to Samsung.  Nevertheless, the additional clarity that will result from Samsung, and the lower courts’ application of it, will help parties better evaluate their rights and exposure in the marketplace and litigation.  It will also help to sharpen the focus on valuation of design patent assets, and portfolios in which they exist.

-- By Jason S. Angell and Josh Young

[1] The Government proposed a case-specific “article of manufacture” test that called for the fact finder to consider the scope of the design claimed in the plaintiff’s patent, the relative prominence of the design within the product as a whole, whether the design is conceptually distinct from the product as a whole, and the physical relationship between the patented design and the rest of the product.  Brief for United States as Amicus Curiae 27–29.