Samsung’s $399 Million Damages Bill Looks Set to Shrink after U.S. Supreme Court Design Decision

Samsung’s $399 Million Damages Bill Looks Set to Shrink after U.S. Supreme Court Design Decision

The latest case (Samsung Electronics Co. v. Apple Inc.  580 U.S. (2016)) in the ongoing smartphone wars follows an earlier jury finding that Samsung smartphones infringed Apple’s registered designs. The registered designs, known as design patents in the US, cover a rectangular front face with rounded edges and a grid of colorful icons on a black screen. Apple was initially awarded damages of $399 million—Samsung’s entire profit from the sale of its infringing smartphones. The Federal Circuit affirmed the award.

This award was based on the U.S. Patent Act which prohibits the manufacture or sale an “article of manufacture” to which a registered design, or a colorable imitation, has been applied and makes an infringer liable “to the extent of his total profit,” 35 U.S.C. 289.

The issue at stake in the Supreme Court was whether the lower courts were correct in awarding the total profits (in this case USD $399 million) when other aspects of the infringing product may have contributed to its valuation.

In a unanimous decision, the Supreme Court reversed the lower courts’ decisions and remanded the case back to the Federal Court to address any outstanding issues. In particular, the Supreme Court decided that in the case of a multicomponent product, the relevant “article of manufacture” for a Section 289 damages award need not be the end product sold to the consumer but may be only a component of that product. That is, 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.

However, the U.S. Supreme Court did not lay down rules on how to determine what the appropriate level of damages should be or how they should be calculated. In particular, in this case, the U.S. Supreme Court declined to resolve whether the relevant article of manufacture for each design patent at issue is the smartphone or a particular smartphone component. This may cause some uncertainty in upcoming design cases, as the courts formulate a more rigorous procedure for establishing the level of damages.

For more information on protecting designs please contact William Murphy.