Design Patent Damages May Be Limited to the Profits Attributable to the Infringing Component of a Product, Rather than the Whole Product

Abstract

The Supreme Court found that damages for infringing a design patent on features of a smartphone can be based on profits from the components with the infringed designs and does not need to be based on total profits for the entire smartphone. The relevant "article of manufacture" with the infringed design must be identified, which may be a component of a multicomponent product, then the infringer’s total profit on that article of manufacture is calculated. The Court declined to further provide a test for identifying the relevant article of manufacture.

Apple owns design patents covering smartphone features including a grid of icons on a black screen, a black rectangular front face with rounded corners, and a rectangular front face with rounded corners and a raised rim. A jury found several Samsung smartphones include these features and infringe Apple’s design patents. And it awarded Apple $399 million in damages based on the entire profit Samsung made from its sales of the infringing smartphones. The Federal Circuit affirmed the damages award, reasoning the damages for infringing a design patent on a smartphone should be based on the all the profits Samsung made from selling its accused smartphones because consumers could not separately purchase the specific smartphone components with the infringing designs. The Supreme Court disagreed and held that damages for infringing a design patent may be limited to the profits attributable to the infringing component of a multicomponent product, such as a smartphone, rather than the total profits obtained for the entire product.

Background

U.S. design patents protect new ornamental designs for an article of manufacture, and infringers are liable for profits resulting from manufacturing or selling articles having the infringing design, or $250, whichever is greater. The article of manufacture with the infringing design may be a single component product, such as a dinner plate with a patented design, or a multicomponent product, such as a smartphone, where the infringing design is included in only a component of the product rather than the whole product. The Federal Circuit upheld the jury’s finding that Apple’s design patents cover certain design features of Samsung’s smartphones and affirmed the damages award based on Samsung’s total profits from sales of those smartphones. In doing so, the Federal Circuit reasoned that the entire smartphone was the only permissible "article of manufacture" for purposes of calculating design-patent damages, because consumers could not separately purchase the individual components of the smartphones with the infringing designs. On appeal, the Supreme Court addressed this question of whether the relevant "article of manufacture" in the case of a multicomponent product can be a component of that product, or whether the "article of manufacture" must always be the end product sold to the consumer.

The Samsung Decision

In a unanimous decision, the Supreme Court held that, for design patents, an infringing "article of manufacture" can be a component of a multicomponent product and need not always be the end product itself. Applying this interpretation in the Samsung case, the court found that damages should have been based on the total profits attributed to only those components with the infringing designs in Samsung’s smartphones, which may be less than all profits from sales of the smartphones. Accordingly, the Supreme Court reversed the judgment of the Federal Circuit and remanded the case for a new damages determination under the proper standard. The Supreme Court found the lower court’s damages calculation was inconsistent with the meaning of an "article of manufacture" in the patent law statutes and precedential decisions of the courts. To determine design-patent damages, a court must first identify the "article of manufacture" to which the infringed design has been applied, and then it must calculate the infringer’s total profit made on that article of manufacture. Based on its analysis of statutory construction and precedent, the court concluded the relevant "article of manufacture" may be either the end product sold to a consumer or a component of that product. Based on dictionary definitions and prior decisions of the courts and the Patent Office, the Supreme Court found the plain meaning of an "article of manufacture" is simply a thing made by hand or machine, which may be either a product or a component of a product. The Court rejected the Federal Circuit’s interpretation that would require an "article of manufacture" to be a separately sold product or component. While the Supreme Court concluded that design-patent damages may be calculated as the total profits from an "article of manufacture" that is only a component of a multicomponent product, the Court declined to further provide a test for identifying the relevant "article of manufacture."

Strategy and Conclusion

This case illustrates that damages for infringing a design patent covering a design applied to fewer than all components of a multicomponent product may be limited to the total profits attributed to those components with the infringing design, or $250, whichever is greater. The apportionment of total profits to only those components with the infringing designs may be complicated if the components do not have an assigned commercial value or are not easily separable within the product. As a result, while it still may be straightforward to determine design-patent damages for designs applied to a single component product, the Samsung decision may make it more difficult to determine damages when a design patent is infringed by a multicomponent product.

Further Information

The Samsung opinion can be found here.