Patent Damages Statute at Issue in Samsung's Supreme Court Appeal of Apple Suit

The high court partially granted Samsung's petition in March for a review of the Federal Circuit ruling, which cut the amount of damages Apple was entitled to receive to $548 million. The top court agreed to hear the case only on the issue of determining damages, though Samsung also sought a review of the scope of what constitutes a patentable design element (see 1603210057). DOJ urged the Supreme Court to overturn the Federal Circuit’s ruling but didn’t side specifically with either Apple or Samsung (see 1606090073).

Samsung said in its brief “at a minimum, a new trial is necessary” at U.S. District Court in San Jose, California, with the Federal Circuit’s ruling vacated “based on instructional error.” The Federal Circuit “erred in approving the district court’s instruction that, under Patent Act Section 289, the jury should award the 'total profit attributable to the infringing products'" to Apple, Samsung said. “Such an instruction disregards both that the relevant 'article of manufacture' for determining total profit under Section 289 was the component to which the patented design was applied and that Section 289 limits recoverable total profit to the profit 'made from the infringement.'” The San Jose Court “erred in declining to give Samsung’s proposed instruction that the jury ‘should award only those profits which were derived from the article of manufacture to which Apple’s patented design was applied,’” Samsung said.

The only issue before the Supreme Court "is whether Samsung will be able to avoid fairly compensating Apple for its adjudicated infringement” under Section 289, Apple said in its brief. “Samsung’s effort to read an apportionment requirement into § 289 is at odds not only with the statute’s plain language, but also with Congress’s contemporaneous explanation that the remedy was enacted in response to decisions of this Court taking exactly the approach Samsung now advocates. ... Samsung introduced no evidence that the relevant articles of manufacture were anything other than the whole smartphones and never offered any calculation of § 289 damages based on anything other than the entire phones.” DOJ’s call for remand “rests on particular language in one instruction that is basically identical to language that Samsung proposed and neither challenged in an objection nor appealed to the Federal Circuit,” Apple said.

Tech firms and groups sided with Samsung in amicus briefs. The Federal Circuit’s decision is “deeply flawed,” said the Internet Association, Software & Information Industry Association and more than a dozen companies including Google, eBay and Facebook. When “a single component of a complex device infringes a patented design, the most natural interpretation of that text is that the component-specific design has been ‘applied’ only to the specific component, rather than the entire device,” the tech sector entities said.

Public Knowledge, the Electronic Frontier Foundation, American Antitrust Institute, R Street Institute and IP Justice jointly called for a full reversal of the Federal Circuit decision that would construe Section 289 “balance[s] the equities among patent owners, industry, and the public." The Federal Circuit decision “will undermine the patent system,” PK and the others said. They said patents will become undervalued.

The Computer & Communications Industry Association brief said the Federal Circuit decision “effectively grants exclusive rights over a device covered by tens of thousands of utility patents, even though the 'discovery' covered by the patent-in-suit is an ornamental feature. ... Design patent infringement will become a new tool for patent assertion entities to use to gain leverage. ... Within a few weeks of the Federal Circuit’s decision, a patent assertion entity used the decision to threaten Samsung itself.”

The American Intellectual Property Law Association joined design patent advocates in siding with Apple. AIPLA said the “legislative history of Section 289 supports the plain meaning of the statutory language and demonstrates the policy decision Congress made in providing this remedy to design patent owners.” Congress has made “somewhat different decisions” on damages for utility patents but hasn’t “moved away from its grant to design patent owners of the right to recover an infringer’s total, un-apportioned profits,” AIPLA said.

BSA|The Software Alliance sided with neither side. “Design patents provide important legal protection for software innovations, and effective remedies for infringement of design patents are therefore essential to provide the incentives needed to maintain investment in this critical sector of our Nation’s economy,” BSA said. “No other form of intellectual property -- including utility patents, copyrights, and trade dress -- serves as a substitute.”

“The big debate overall has been what are the interests of the design community vs. the tech community, so it will be interesting to see how the Supreme Court views the balance of those interests,” said PK Patent Reform Project Director Charles Duan. It’s hard to say how the eight sitting justices will split on the debate over Section 289’s statutory language, although “certainly there are justices with particular views on statutory construction,” Duan told us. Apple has been asking the Supreme Court to ignore Samsung’s argument about “the hypotheticals of design patent trolling and of patents on small features, so it’ll be interesting to see whether the court buys into that,” Duan said.

Foley Hoag patent lawyer Philip Swain said the court needs to decide the answers to two main questions: “Is it fair to award more damages for the narrower design patents than for utility patents? Was this the intent of Congress?” Observers should “look for the justices in the oral argument to ask a lot of policy questions about the congressional intent behind the design patent remedy statute,” said Swain, chairman of the American Bar Association IP Law Section Amicus Committee. “Did Congress intend that the infringer of a design patent should be liable for all of its profits for an entire product, even if there are many components in that product?”

Swain noted the Supreme Court’s recent unwillingness to give deference to Federal Circuit rulings in patent cases. “Several have expressed concern about the patent system, and specifically, about patent holders taking unfair advantage of patents that cover only small portions of a product,” Swain told us. The court “could end up making a very narrow decision concern the design patent infringement remedy,” Swain said. “Or, since this is the first patent damages case the Supreme Court has had in a long time, it could say something more sweeping about patent damages in general.”

The Federal Circuit ruled Friday 8-3 in favor of Apple in a separate infringement lawsuit against Samsung, reinstating a 2014 San Jose federal jury’s $119.6 million damages award over infringement of Apple’s patents on the slide-to-unlock, autocorrect and “quick link” to phone number functions. It overrode a three-judge Federal Circuit panel’s February ruling that Samsung hadn’t infringed the quick link patent and that the slide-to-unlock and autocorrect patents were invalid. Circuit Judge Kimberly Moore wrote for the majority that there was “substantial evidence of copying by Samsung.”