Samsung Wins High Court Battle Over Apple iPhone Design Patents

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By Tony Dutra

Dec. 6 — The Supreme Court Dec. 6 reversed an appeals court decision requiring Samsung Electronics Inc. to turn over all the profits it made on smartphone sales that infringed Apple Inc.'s iPhone design patents ( Samsung Electronics Co. v. Apple Inc. , U.S., No. 15-777, 12/6/16 ).

The court unanimously held that a component of the final product can be the infringed design—not the entire phone. It sent the case back to the U.S. Court of Appeals for the Federal Circuit to reconsider the $399 million jury award to Apple. It’s unclear how much the award will be cut, or how long the decision might take.

The Supreme Court is demanding a a two-step inquiry: What is the “article of manufacture” to which Samsung applied the infringed design? What were Samsung’s profits on that article? But it deferred the first question to the Federal Circuit without offering any help.

“The Court did not articulate, or even suggest, what the test for determining what the article of manufacture should be,” Christopher V. Carani of McAndrews, Held & Malloy Ltd., Chicago, said. “The opinion is extremely narrower in scope.”

“The Supreme Court punted the ball—a medicine ball—back to the Federal Circuit,” design patent expert Perry J. Saidman, of Saidman DesignLaw Group, Silver Spring, Md., said in an e-mail.

Elizabeth D. Ferrill of Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Washington, predicted the appeals court would only determine the legal questions involved in the first question and pass the “questions of fact” to the district court.

“Back at the district court, there will be a new damages trial with a new test and new evidence,” Ferrill said. “It seems like it will be a long time until this case is resolved.”

What’s the Component in This Case?

Apple’s three design patents are on the iPhone’s shape, corners, translucent screen and colorful icon arrangement. The Federal Circuit’s now-vacated opinion distinguished the “innards” of phones from “their shells,” so the profits could conceivably be distinguished as well.

But the parties appeared to agree that, in some fact-specific cases, the patented design is so dominant that the relevant article of manufacture is, in fact, the entire product and not the component.

The U.S. government’s brief, filed by the Office of the Solicitor General, suggested a four-factor test that would allow a trial court to reach that conclusion. But the high court couldn’t rule on that test because the parties didn’t adequately comment on it, Justice Sonia M. Sotomayor’s opinion said.

Saidman said the Solicitor General’s test “doesn’t work well on a number of fronts.” The Federal Circuit “has its hands full,” he said. “Maybe they’ll ask for briefing from the parties; hopefully they won’t start with the SG test.”

One issue is that—after a court decides that only a component is infringed—the test doesn’t connect the inquiry’s first step to the second step.

For example, the government would tilt toward finding the whole phone infringed if “the design is a significant attribute of the entire product.” But it may not tilt all the way, and the court may still decide that the component is the relevant article, despite its design significance. In that scenario, the test does not address whether the attribute’s degree of significance affects the profit allocation to that attribute.

Also, the “colorful icon arrangement” does not track with the distinction between “innards” and “shells.” It is unclear how the government test would define what “article” is attached to the icon arrangement.

The district court faces a further complication. The judgment in the case encompassed 11 different Samsung phone models, but no device infringed all three patents asserted. Unless all three patents are deemed to cover the entire product, the district court will have to make different determinations for each.

Nevertheless, Carani was pleased that the court did not change the fundamental understanding of 35 U.S.C. §289, which deals with additional remedies for design patent infringement, on the extent of an alleged infringer’s liability.

“The court ruled that once the article of manufacture is determined, the patentee is entitled to all—underscore all—of the defendants’ profits,” he said. “The court rejected the notion that there is apportionment under Section 289.”

Kathleen M. Sullivan of Quinn Emanuel Urquhart & Sullivan LLP, New York, represented Samsung. Seth P. Waxman of Wilmer Cutler Pickering Hale & Dorr, Washington, represented Apple.

Nordock Inc. Benefits as Well

The high court is highly likely to remand a second case as well, Sys. Inc. v. Nordock, Inc., No. 15-978, which may be an easier one to decide.

After Samsung, the Federal Circuit ruled that Systems Inc. infringe Nordock Inc.'s patented design for one distinct component—a “lip and hinge plate”—that attaches to a dock leveler. U.S. Patent No. D579,754 doesn’t show the dock leveler, suggesting a clear distinction between component and product.

The court is set to decide the fate of Systems’ petition Dec. 9. It is highly likely to grant the petition, vacate the Federal Circuit’s opinion and remand for consideration along with, or at least in light of, the Samsung case.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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