Under the provisions of the United States Patent Act, the sale of “any article of manufacture” to which an infringing design has been applied makes the infringer liable “to the extent of his total profit” with respect to the article of manufacture. In other words, the language of the Act specifically bars apportionment of an award of profits for infringement of design patents.[1]
This statutory bar on apportionment harkens back to the nineteenth century, following a United States Supreme Court decision which considered the basis for determining profits or damages for infringement of a carpet design. The court made the following comparison:
…between two carpets of equal cost to make and equal merit as to durability of fabric and fastness of color, each with a pattern pleasing to the taste, one having a design free to be used and the other a design protected by a patent, the latter may or may not command in the market a price larger than the former. If it does, then the increased price may fairly be attributed to the design, and there is a solid basis of evidence for profits or damages. But short of this, under the rules established by this Court, there is no such basis. [2]
In the event, there was no difference in market price and the design patentee recovered nothing.
Thus in the world of 1880’s era carpets, damages or profits were not directly attributable to design infringement, making design patents obsolete. To address this, in 1886 Congress amended patent law to afford design patents the same protections afforded trademarks, entitling the design patentee to “all the profit the infringer made on the goods marketed.” [3]
In the intervening years, this has generally been interpreted narrowly by courts to mean that the infringer is liable for all profits made on the final product as sold to the consumer. However, in the case of multi-component articles, such a narrow interpretation can lead to grossly disproportionate awards. Consider the example of a $10 cup holder design incorporated into a $20,000 car; [4] should the infringing car manufacturer be liable for the profits on the entire car? The issue of whether the “article of manufacture” must always be the end product sold to the consumer went before the United States Supreme Court in the Apple v Samsung dispute.
History of the Apple v Samsung Suit
In 2011 Apple filed suit in the United States against Samsung for, among other things, infringement of four design patents. [5] Justice Koh of the District Court for the Northern District of California heard the case, and a jury found three of the four design patents to be infringed by at least one of the 28 Samsung smartphones at issue. [6] After the dust settled, the damages award totaled nearly a billion dollars. [7] Of that, $399 million corresponded to the entire profits on 11 smartphones found to infringe one or more design patents.
The Court of Appeal for the Federal Circuit upheld the verdict with respect to both utility and design patent infringement. [8] Samsung appealed the $399 million awarded for design patent infringement to the United States Supreme Court on the basis that the award should have been limited to profits on the infringing “article of manufacture” rather than the entire product sold to consumers.
The US Supreme Court: an “article of manufacture” can be an individual component
In arriving at an award under §289 the Supreme Court identified two steps: 1) identify the “article of manufacture” to which the design has been applied; and 2) calculate the infringer’s total profit made on that article of manufacture. The Court found the threshold matter before it as being the scope of the term “article of manufacture”. The Court concluded that the term encompasses both the end product as sold to the consumer, and the individual components of a multi-component product whether sold separately or not. However, the Court declined to adopt a test for determining the relevant article of manufacture in the absence of adequate briefing from the parties.
The case has been remanded to the District Court where the case began. Justice Koh has now received briefs from both parties and is set to determine whether a new trial is warranted. If so, Justice Koh will have the opportunity to set out a test for determining the relevant “article of manufacture”.
Andrea Uetrecht is a JD Candidate at Osgoode Hall Law School and was enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.
[1] 35 USC §289.
[2] Dobson v Hartford Carpet Co, 114 U.S. 439 (1885), 5 S. Ct. 945, at 444.
[3] Samsung Electronics Co Ltd v Apple Inc, 580 US (2016) (Brief of amicus curiae American Intellectual Property Law Association in support of Respondent) at 12, citing S Rep 206, 49th Cong, 1st Sess (Mar. 9, 1886) at 2.
[4] Apple Inc v Samsung Electronics Co Ltd, Court of Appeals for the Federal Circuit, appeal no. 2013-1129, at 26.
[5] Apple Inc v Samsung Electronics Co Ltd, 11-cv-01846-LHK, Document 1, online: https://www.unitedstatescourts.org/federal/cand/239768/1-0.html.
[6] Apple Inc v Samsung Electronics Co Ltd, United States District Court for the Northern District of California, 11- cv-01846-LHK, Document 1341, online: https://www.unitedstatescourts.org/federal/cand/239768/1931-0.html.
[7] The court found that the jury made a legal error in assessing damages for infringement for 14 of the 28 products, upholding $639,403,284 in damages and ordering a partial retrial on the remaining damages. Apple was awarded $290,456,793 in the retrial; see Apple Inc v Samsung Electronics Co Ltd, 11-cv-01846-LHK, Document 2271.
[8] Apple Inc v Samsung Electronics Co Ltd, Court of Appeals for the Federal Circuit, appeal nos. 2014-1335 and 2015-1029.
