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The Supreme Court Changes Damage Calculations for Design Patents

In Apple Inc. v. Samsung Electronics Co., the United States Supreme Court looked at design patents for the first time in more than a century. The Patent Act provides a damages remedy specific to design patent infringement. On December 6, 2016, Justice Sonia Sotomayor, delivering the Court’s unanimous opinion, cited 35 U.S.C. §289 Additional Remedy for Infringement of Design Patent, which states, “a person who sells ‘any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit.’”

Previously, a federal jury had ordered Samsung to pay Apple $399 million for infringing design patents covering Apple’s iPhone—Samsung’s entire profit from the sale of its infringing smartphones. The United States Court of Appeals for the Federal Circuit affirmed the damages award, reasoning that the components of Samsung’s smartphones were not sold separately to ordinary customers and thus were not distinct articles of manufacture. Samsung argued that total profits cannot really mean total profits, because “it would be illogical for a car manufacturer to pay damages for the profits of a car sale when the only infringed component in the car is the cup holder.”

The Supreme Court addressed what it termed “a threshold matter: the scope of the term ‘article of manufacture.’” The question resolved is whether, in the case of 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.

According to the December 6 opinion, “article of manufacture” has broad meaning that encompasses both a product sold to a consumer and a component of that product, simply put, “a thing made by hand or machine.” Thus, defining “article of manufacture” as only an end product sold to a consumer gives it too narrow a meaning.

The Court gave two examples, noting a challenge: “In the case of a design for a single-component product, such as a dinner plate, the product is the ‘article of manufacture’ to which the design has been applied. In the case of a design for a multicomponent product, such as a kitchen oven, identifying the ‘article of manufacture’ to which the design has been applied is a more difficult task.” However, the Supreme Court did not lay out a test or method for identifying the relevant article of manufacture at the first step of a damages calculation.