Supreme Court Juggles Design Patent Infringement Damages Tests in 'Samsung v. Apple'

The top court was considering Samsung’s appeal of the Federal Circuit’s ruling, which whittled down to $548 million the amount of damages it's required to pay Apple in a patent infringement lawsuit Samsung lost in 2012. The high court was considering only the amount of damages for Apple’s design patents, which Samsung claims should be further reduced by $399 million (see 1610070055). Samsung unsuccessfully sought a review of the scope of what constitutes a patentable design element (see 1603210057).

Justice Anthony Kennedy highlighted the dilemma the Supreme Court faced in deciding among disparate damages tests proposed by Samsung, Apple, the federal government and others. “If I were a juror, I simply wouldn’t know what to do,” Kennedy said. Samsung said the jury should award damages based only on profit that stems directly from the design elements of the 11 Samsung mobile devices that infringed on Apple’s design patents rather than the total profit that Samsung made from those devices. Apple said damages must be based on Samsung’s total profit from the infringing devices. DOJ proposed a four-question test for jurors that would include the scope of the patented design’s influence on an infringing product and the extent to which the patented design can be separated out from a device’s other elements.

Justice Sonia Sotomayor asked “how do we announce the right test” for determining damages. Justice Stephen Breyer suggested the Supreme Court “just ask the lower courts to listen to [all the parties’] arguments and work it out.” He spoke favorably of a proposal by the Internet Association, Software & Information Industry Association, Google and more than a dozen others that would limit damages on design patents to the specific component in an infringing product rather than based on the entire product’s value.

Chief Justice John Roberts suggested Apple’s design patents are only “applied to the exterior of the phone” and not to “all the chips and wires” inside. If correct, “there shouldn't be profits awarded based on the entire price of the phone,” Roberts said. Justice Samuel Alito and others referenced the design of the Volkswagen Beetle as an example of a product that had a widely recognizable design but also a range of internal parts unaffected by the design. “I can't get over the thought that nobody buys a car, even a Beetle, just because they like the way it looks,” Alito said. “If it is a real question whether the article of manufacture there is the design or the entire car, [it] gives me pause about the test for determining what is the article of manufacture.”

Justice Elena Kagan suggested “the thing that makes the product distinctive does not cost all that much” but may be the primary reason consumers buy it. Sotomayor said it’s possible “the phone could be seen by … a purchasing consumer as being just that rounded edge, slim outer shell. That might be what drives the sale.” Justice Ruth Bader Ginsburg asked how a jury could accurately separate the value of a phone’s design from its overall value. “When the article of manufacture isn't sold apart from the entire product, how should the judge charge the jury on determining the profit attributable to the infringing article?” she asked.

Samsung attorney Kathleen Sullivan of Quinn Emanuel told reporters afterwards that she’s “hopeful the Supreme Court will give a sensible and fair reading of the design patent damages statute, and we believe that will be a win for business and consumers.” Sullivan said previous federal court rulings that awarded a product’s full profit based on design patent infringement devalue all other “important patents that comprise a smartphone.” Apple firmly believes “strong design patent protection spurs creativity and innovation," said Chief Litigation Officer Noreen Krall in a statement. “That's why we've defended ourselves against those who steal our ideas. Eleven times now, Samsung has been found guilty of intentionally and blatantly copying the iPhone. Every court at every level has agreed. We think that's wrong and that it poses chilling risks to the future of design innovation.”

All parties “seemed to agree that the Federal Circuit got it wrong” in its May ruling “by saying that the article of manufacture has to be the thing that’s sold to consumers,” said Computer & Communications Industry Association Patent Counsel Matt Levy: “I was a little surprised that even Apple conceded” that point. “I think that means that the Federal Circuit’s decision has to be either vacated or modified somehow,” Levy told us. “The big question is how, and I think the justices were struggling to figure out what they should do for a test.” It’s not clear “that they were convinced” in favor of any of the tests proposed during oral argument or in amicus briefs, Levy said. CCIA sided with Samsung in its brief.

Public Knowledge Patent Reform Project Director Charles Duan believes justices are coalescing around a two-part damages test in which a court would initially determine which parts of a product are directly affected by a design patent and then determine how much of a product’s profits stem from those parts. Justices appeared to be looking toward a test that could be widely applied in design patent damages calculations rather than something narrowly tailored to the Apple-Samsung dispute, Duan said. PK sided with Samsung in a joint brief with the Electronic Frontier Foundation, American Antitrust Institute, R Street Institute and IP Justice.