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Supreme Court Rules on Design Patent Damages

In a unanimous but short opinion, the United States Supreme Court reversed the Federal Circuit’s Samsung v. Apple decision on damages and held that a design patent infringer’s liability may be limited to the profits of individual product components. (Historically, patent owners were entitled to the infringer’s profits from the sale of the entire product.) While unambiguous in its holding, the opinion offers no clarity as to how courts should decide when profits can be recouped based on the entire article or when they must be limited to profits associated with individual components.

The opinion centers on the statutory provision for damage awards in design patents — 35 U.S.C. § 289. Section 289 provides for the significant remedy of profit disgorgement based upon a defendant’s use of the patented “article of manufacture.” The infringer “shall be liable to the owner to the extent of his total profit.” The Court characterized the issue as whether, for a multi-component product, “the relevant ‘article of manufacture’ must always be the end product sold to the consumer or whether it can also be a component of that product.”

The Apple patents covered, among other things, a portable computing device with rounded corners. The challenge in Samsung v. Apple was whether to calculate the damages award based upon Samsung’s profits for its smartphone devices as a whole or instead whether profits could be narrowed to profits associated with individual components (such as the screen or phone body shape) even though those components are not sold directly to the consumers.

After reviewing Sections 101 and 171 of the Patent Act, which also refer to “article of manufacture,” the Court sided with Samsung and held that the statute allows for damages to be applied at the component level since the term “article of manufacture” includes both products as a whole and individual components of those products. It rejected the narrow interpretation of the Federal Circuit that a component of a product could never constitute an article of manufacture:

[T]he term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.

Unfortunately, the Supreme Court refused to offer any opinion or guidance as to (1) how a judge or jury in future cases might go about deciding whether the profits are tied to the product or limited to an individual component or (2) whether, in this case, the damages should be calculated based on profits attributable to the entire smartphone or only to the individual smartphone components. On remand, the Federal Circuit will have to wrestle with these issues and may need to reopen briefing before coming to a resolution.  We anticipate that there will be significant amicus briefing, and if you are interested in aiding the court in designing an appropriate test to determine the proper manner of determining damages, please contact us.

To our clients, design patents remain valuable assets but care should be taken to attempt to cover as much of a product as possible to ensure the maximum patent infringement recovery. As the courts articulate standards for determining design patent damages, we will provide further updates to keep interested parties aware of the risks involved in preparing, asserting, designing around and defending against design patents.