Samsung v. Apple: How SCOTUS Changed Patent Damages Standard

Section 289 provides that a design patent owner can recover an infringer’s “total profit” as damages for the sale of “any article of manufacture to which such design … has been applied.” 35 U.S.C. § 289. In Samsung Electronics Co., Ltd v. Apple Inc., No. 15-777 (Dec. 6, 2016), the Supreme Court held that the “article of manufacture” referred to in 35 U.S.C. § 289 can be a component of a multicomponent product and need not be the end product sold to the consumer. Id. at 5-6 .

Apple owned several design patents covering components of a smartphone. Samsung, No. 15-777 at 4. A jury found that Samsung infringed Apple’s patents and awarded Apple $399 million in lost profits, representing “the entire profit Samsung made from its sales of the infringing smartphones.” Id.

On appeal to the Federal Circuit, Samsung argued that the damages award should instead have been limited to the contribution that each patented component made to the sales of the smartphone. Id. at 4. The Federal Circuit found for Apple, holding that the “article of manufacture” for purposes of awarding damages under 35 U.S.C. § 289 was the entire smartphone and not its individual components. Id. The Federal Circuit reasoned that, because the consumer could only purchase the entire smartphone–and could not purchase its individual components–that the smartphone was the article to which the patented design had been applied under section 289.

The Supreme Court reversed, holding that the article of manufacture could be one or more components of the smartphone and need not be only the smart phone itself. The Court first observed that a damages award under section 289 involves two steps: (1) identifying “the ‘article of manufacture’ to which the infringed design has been applied” and (2) calculating “the infringer’s total profit made on that article of manufacture.” Id. at 5.

The Court phrased the question for review as whether “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.” Id. at 5. The Court concluded that the article of manufacture can be a component of a multicomponent product. Id.

The Court based its conclusion on the plain text of section 289. Dictionaries define an “article of manufacture” as a particular thing. Id. at 6. The Court reasoned that this was a broad enough definition to cover both end products and their components. Id. The incorporation of one article of manufacture into another does not cause it to stop existing for the purposes of section 289. Id.

The Court, however, refused to identify the relevant article of manufacture or to lay out a test for identifying the relevant article of manufacture because the parties did not brief the issue. Id. at 8. Instead, the Court remanded these issues to the Federal Circuit. Id.