IP Law Daily Federal Circuit’s reading of ‘article of manufacture’ in smartphone design patent case too narrow, reversed by Supreme Court
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Tuesday, December 6, 2016

Federal Circuit’s reading of ‘article of manufacture’ in smartphone design patent case too narrow, reversed by Supreme Court

By Jody Coultas, J.D.

In a unanimous decision, the Supreme Court reversed and remanded a Federal Circuit decision upholding a jury’s award of damages to Apple Inc. based on infringement of its design patents by Samsung Electronics, Co. Ltd. At issue was whether, in the case of a multicomponent product, 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 concluded that, in the case of a multicomponent product, the relevant "article of manufacture" for arriving at a damages award need not be the end product sold to the consumer but may be only a component of that product. The holding was reversed and the case was remanded for further proceedings consistent with the court’s opinion (Samsung Electronics Co., Ltd. v. Apple Inc., December 6, 2016, Sotomayor, S.).

In August 2012, a jury awarded $399 million to Apple for Samsung’s infringement of Apple’s mobile device utility patents, design patents, and trade dresses. On May 18, 2015, the U.S. Court of Appeals for the Federal Circuit upheld the jury’s determination that Samsung infringed Apple’s utility and design patents and that the patents were valid, but the court reversed the verdict as to Apple’s trade dress, finding that the asserted trade dresses—covering certain design features of Apple’s iPhone—were invalid as directed to functional elements.

The Federal Circuit affirmed the jury’s award of Samsung’s entire profits from sales of products that infringed Apple’s design patents, finding that Apple provided sufficient evidence to allow the jury to account for any functional aspects in the asserted design patents. The court rejected 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 granted Samsung’s petition for a writ of certiorari on the issue of whether, where a design patent is applied to only a component of a product, an award of the infringer's profits be limited to those profits attributable to the component. Samsung maintained that when a design patent is applied to a component of a phone or product, or when a design patent is applied to an article of manufacture within a multi-article product, Section 289 entitled the patent-holder to the total profit on the article of manufacture to which the design patent is applied, and not the profits on the total product.

35 U. S. C. §289 provides that a patent holder may recover the total profits gained by an infringer from the manufacture or sale of the "article of manufacture to which [the patented] design or colorable imitation has been applied." Thus, courts must identify the "article of manufacture" to which the infringed design has been applied and then calculate the infringer’s total profit made on that article of manufacture.

The Federal Circuit’s narrow reading of "article of manufacture" was contrary to the text of §289 and reversed by the Court. To resolve the dispute, the Court looked to the plain meaning of the terms at issue and the text of the statute. The term "article of manufacture" encompasses both a product sold to a consumer and a component of that product. Simply because a component may be integrated into a larger product, does not put it outside the category of "articles of manufacture." Construing "article of manufacture" to cover only an end product sold to a consumer was too narrow. This reading was consistent with §171(a) of the Patent Act which permits a design patent that extends to only a component of a multicomponent product. Also, the holding was consistent with the Court’s reading of the term "manufacture" in §101, which makes "any new and useful . . . manufacture" eligible for utility patent protection. Thus, the Federal Circuit’s conclusion that components of the infringing smartphones could not be the relevant article of manufacture because consumers could not purchase those components separately from the smartphones was reversed, and the case was remanded.

The parties asked the Court to resolve whether, for each of the design patents at issue here, the relevant article of manufacture is the smartphone, or a particular smartphone component. Such a determination would require the Court to set out a test for identifying the relevant article of manufacture at the first step of the §289 damages inquiry and to parse the record to apply that test in this case. The briefings were inadequate to make such a determination, and it was not necessary to resolve the question presented in this case. The Federal Circuit may address any remaining issues on remand.

The case is No. 15-777.

Attorneys: Kathleen M. Sullivan (Quinn Emanuel Urquhart & Sullivan, LLP) for Samsung Electronics Co. Seth P. Waxman (Wilmer Cutler Pickering Hale and Dorr LLP) for Apple, Inc.

Companies: Samsung Electronics Co.; Apple, Inc.

MainStory: TopStory Patent

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