On December 6, 2016 the Supreme Court ruled on the nearly $400 million dollar damages award to Apple, Inc. adding yet another chapter in the nearly five year-long case between the technology giant and a competitor, Samsung Electronics, Co. in Samsung Electronics Co., LTD., et al., v. Apple Inc., 580 U.S. __ (2016). When Apple released its first-generation iPhone back in 2007, it secured multiple design patents which included the black rectangular front face, rounded corners, raised rim, and grid of 16 colorful icons on a black screen. Subsequently, Samsung released a series of smartphones that resembled the iPhone and Apple sued in 2011 alleging, inter alia, that Samsung’s various smartphones infringed Apple’s design patents. Apple was successful in securing a three hundred and ninety-nine million dollar damages award, the entire profit Samsung made from the sales of its infringing smartphones. When the case was brought to the Federal Circuit in May of 2015, the court affirmed the damages award, holding that Apple was entitled to the total profits gained by Samsung on its infringing smartphones because consumers could not separately purchase components of the smartphone. On application of Samsung, the Supreme Court granted cert.
Section 289 of the Patent Act allows a patent holder to recover the “total profit” an infringer makes from the manufacture or sale of the “article of manufacture to which [the patented] design or colorable imitation has been applied.” 35 U.S.C. §289. The Supreme Court held that determining the “total profit” is thus a two-step process: (1) identify the “article of manufacture” and (2) calculate the infringer’s total profit made on that article of manufacture. The only question answered by the Supreme Court in the opinion relates to step 1 and is whether, in the case of multi-component products such as a smartphone, 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 Court reasoned that “article of manufacture” has a broad meaning, broad enough to encompass both a product sold to a consumer and a component of that product. Therefore the Federal Circuit’s finding that the entire smartphone was the only permissible “article of manufacture” for the purposes of calculating §289 damages, was too narrow an interpretation of “article of manufacture.” Thus the Court reversed the Federal Circuit’s finding that the $399 million damages award was proper based on that reasoning.
Notably, the Court declined to address whether the relevant “article of manufacture” for the specific case at hand was indeed the smartphone or a particular component of the smartphone, our step 2, because of a lack of briefing from the parties. That issue was remanded to the Federal Circuit, leaving Apple and Samsung once again to battle it out in this ongoing dispute.