Design Patent Damages After Samsung v. Apple – If the Supreme Court Knows How to Calculate Damages, They’re Not Telling Us
By Michael P.F. Phelps
 
Apple’s design patent suit against Samsung certainly has earned its newsworthy status.  Take the two biggest players in the booming smartphone market, lock them in protracted and heated battle, and slap one with a staggering $400 million in damages, and you have the makings for the design patent case of the century.  In fact, this literally is the first Supreme Court design patent case in a century.
 
With a setup like this, you might expect the Supreme Court to issue a larger-than-life decision to settle the law and explain how design patent damages are supposed to work.  Something like a Philips or a Graver Tank.  Maybe even a modern version of a Graham v. John Deere.  An epic decision to match the theatrics of the case.  Something to settle the law and give us confidence in the patent system.
 
That didn’t happen.
 
We got another Alice.
 
Ok.  Maybe it’s not that bad.  Maybe I was a little too excited about the prospect of the Supreme Court actually explaining how to measure design patent damages under 35 U.S.C. §289.  That’s the part of the law that says a design patent infringer is liable to the “extent of his total profit” for applying the patented design to an “article of manufacture.”  In this case, Apple was slated to scoop up Samsung’s entire $400 million in profits for the Galaxy smartphone, because portions of Samsung’s phones infringed Apple’s design patents covering similar portions of smartphones.  Despite the fact that the claims cover only part of the phone, and only part of the phone infringed, the District Court and the Federal Circuit agreed that Samsung’s “article of manufacture” was the entire phone, making Samsung’s entire profits for the entire phone the measure of damages.
 
That frames up the issue: if the design patent only covers part of the product being sold, is the patentee entitled to the entire profits for the entire product?
 
Not surprisingly, Samsung didn’t like the idea of giving away all of its profits for infringing merely ornamental features.  Much of their phones’ profitability is undoubtedly attributable to the high technology electronics living under the ornamental skin.  Furthermore, if Samsung must hand over its entire profit because only a portion of the ornamental design infringed Apple’s patents, what would happen if Samsung were sued for infringing a patent covering the remaining portions of the design?  Would it have to surrender another amount equal to its entire profits?
 
The Supreme Court unanimously agreed with Samsung.  Kind of.  Specifically, the Court agreed that the Federal Circuit erred when it considered the entire phone to be the “article of manufacture” for measuring the damages.
 
The Supreme Court’s logic, in a nutshell, is that the term “article of manufacture” encompasses both completed products and subcomponents of those products.  Thus, a subcomponent that is integrated into a multicomponent product is still its own “article of manufacture.”  The Court notes that this is consistent with 35 U.S.C. §171 (the enabling statue that permits filing design patents in the first place), which is historically understood to permit design patents for individual components of a multicomponent product (more on this below), and 35 U.S.C. §101.
 
In contrast, the Federal Circuit held that the separate components of the phone covered by the patents “could not be the relevant article of manufacture because consumers could not purchase those components separately from the smartphones.”   The Federal Circuit’s is inconsistent with the Supreme Court’s  holding because it ignores that separate subcomponents can be their own articles of manufacture.  And so the Supreme Court threw out the $400 million damages award.
 
It’s right after this that the Samsung opinion starts making waves that we will be feeling in the design patent community for years to come.  That’s because that is where the opinion basically stops.
 
At first I thought just had a bad copy of the order, because it seemed like the last few pages were missing.  Where does the Supreme Court explain how to determine what the relevant “article of manufacture” is for determining damages?  Where do they explain how to actually determine the damages attributable to a subcomponent “article of manufacture” that is sold as an integral part of a larger “article of manufacture?”  Spoiler alert: they don’t.
 
This is a classic case of “judicial restraint”—deciding only the issues that must be decided to enter judgment on the case.  Efficient, but hugely unsatisfying to the legal community.  The reason they give for stopping short is that the parties had not briefed the question, making the Supreme Court’s review premature.  However, the Supreme Court did make it perfectly clear that the first step in deciding damages under §289 is to decide what the “article of manufacture” is.
 
This brings us back to the Court’s comments about 35 U.S.C. §171.  This statute states “[w]hoever invents any new, original and ornamental design for an article of manufacture may obtain a patent therefor.”  One gets the sense from the comments about “articles of manufacture” being portions of larger “articles of manufacture,” that the Court interprets  the statutory phrase “design for an article of manufacture”  to mean that the claimed design defines what the article of manufacture is.  This fits nicely with the citation to the Ex parte Adams decision from 1898, which talks about articles of manufacture being assembled into a multicomponent product.  The specific language of the Court’s citation to the 1980 Application of Zahn decision also seems consistent with this interpretation.
 
But there’s a problem.  The Zahn decision (authored by no less than esteemed patent scholar Justice Giles Rich) was quite clear that the scope of a claimed design under 35 U.S.C. §171 can be for a portion of an article of manufacture.   This makes the question of deciding what the “article of manufacture” is rather unclear.  On one hand, one could say that the “article of manufacture” is the claimed design, and nothing more, as the Supreme Court may be suggesting.  On the other hand, the Zahn decision would support an argument that the “article of manufacture” is anything from the specific design claimed in the patent and the entire product to which it might be applied.
 
So now you see why this is an Alice, and not a Philips or a Graham.  The Supreme Court cut Samsung from the noose (for now), but has not answered the critical questions raised by the opinion.  How does one decide what the “article of manufacture” is, and how does one decide the damages for selling that article of manufacture?  Like with Alice, we are left with little guidance and the promise of uncertainty.
 
But don’t lose hope.  We’ll figure it all out.  Eventually.
 
Think about these questions, and watch with me for further developments.


 
 
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