On December 6 the U.S. Supreme Court handed down its much anticipated decision in Samsung Electronic Co. v. Apple Inc. The opinion deferred for another day clarification of key policy questions raised by the design patent system.
Writing for a unanimous Court, Justice Sonia Sotomayor reversed and remanded a Federal Circuit decision upholding a $399 million damages award to Apple for infringement of its design patents by smartphone manufacturers. Section 289 of the Patent Act makes it unlawful to manufacture or sell an “article of manufacture” to which a patented design or a colorable imitation thereof has been applied and makes an infringer liable to the patent holder “to the extent of his total profit.” A jury found that various smartphones manufactured by Samsung and other companies infringed design patents owned by Apple that covered a rectangular front face with rounded edges and a grid of colorful icons on a black screen.
Apple was awarded $399 million in damages—Samsung’s entire profit from the sale of its infringing smartphones. The Federal Circuit affirmed the damages award, rejecting Samsung’s argument that damages should be limited because the relevant articles of manufacture were the front face or screen rather than the entire smartphone. The court reasoned that such a limit was not required because the components of Samsung’s smartphones were not sold separately to ordinary consumers and thus were not distinct articles of manufacture. The Supreme Court rejected the Federal Circuit’s statutory interpretation, holding that an “article of manufacture,” which is simply a thing made by hand or machine, encompasses both a product sold to a consumer and a component of that product. Because the term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not, the Court opined that the Federal Circuit’s narrower reading could not be squared with Section 289’s text.
The Court, however, declined to resolve the “big question” in this case, which had been discussed during oral argument – namely, whether the relevant article of manufacture for each design patent at issue here was the smartphone or a particular smartphone component. In leaving resolution of this “and any other issues” to the Federal Circuit on remand, the Court in effect “punted.” (The Justice Department suggested an inherently malleable and vague “four consideration test” to this question in its Samsung v. Apple amicus brief.) Expert commentators have highlighted this issue (see, for example, here), which, because of the plain language of Section 289 (“extent of the total profit”), bears directly on the quantum of damages for which a design patent infringer may be held liable. How the Federal Circuit deals with the “article of manufacture” question may have significant implications for incentives to obtain and protect design patents.
An even bigger unanswered question is the appropriateness of the federal legal structure for the protection of designs. Design patents are fairly readily obtained – they do not have to satisfy the multiple requirements for patentability (centered on inventiveness, novelty, and advance over prior art) that must be met by utility patents (hurdles that have become even harder to surmount over the last decade due to a host of Supreme Court decisions that have made it harder to obtain and defend utility patents). Moreover, unlike utility patents, other federal intellectual property laws, covering trade dress and copyright, offer protections similar in kind (albeit not exact substitutes) to that offered by the design patent system. Accordingly, whether existing federal legal measures covering designs are suboptimal and merit being “redesigned” merits further study. Stay tuned.
The Heritage Foundation.
This article was published by The Heritage Foundation.