U.S. Supreme Court Opens A Can Of Worms With Design Patent Decision

Jan
06

PatentPatent protection is available for a “new, original and ornamental design for an article of manufacture,” commonly known as a design patent. 35 U.S.C. § 171(a).  Design patent infringement cases before the United States Supreme Court are exceedingly rare.  In fact, the last time the Supreme Court tackled a design patent case, President Grover Cleveland became the first—and only—president to wed in the White House, Apache leader Geronimo surrendered, and the Statute of Liberty was dedicated in New York Harbor.  The year was 1886 and the Court had before it the notable Dobson cases, involving the infringement of a patented design for a carpet. See Dobson v. Harford Carpet Co., 114 U.S. 439, 5 S.Ct. 945, 29 L.Ed. 177 (1885); Dobson v. Dornan, 118 U.S. 10, 17, 6 S.Ct. 946, 30 L.Ed. 63 (1886).  In accordance with patent laws at the time, a plaintiff was required to show what profits or damages were attributable to the use of the infringing design, as opposed to the value of the underlying article of manufacture.  This “apportionment” rule made it difficult for a design patent owner to recover more than a nominal sum from an infringer.  This was exemplified in the Court’s decision—finding patent infringement—but awarding damages of only six cents.

In response to the Dobson cases, Congress passed the Patent Act of 1887 which removed the need to apportion damages and provided that the infringer of a design patent should be liable for “the total profit made by [the infringer] from the manufacture or sale… of the article or articles to which the design, or colorable imitation thereof, has been applied.”  The Patent Act of 1887 was subsequently codified as 35 U.S.C. §289.66 in the Patent Act of 1952, which remains in force to this day.  The codified language reads, in relevant part:

Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250….

Thus, infringers of a design patent must turn over the “total profit” made from the sale of an “article of manufacture” that uses the protected design.

Over a century after the Dobson cases, the United States Supreme Court has again tackled the issue of damages in a design patent infringement case.  In Samsung Elecs. Co. v. Apple, Inc., Case No. 15-777, 137 S. Ct. 429, 196 L. Ed. 2d 363 (Dec. 6, 2016), Apple sued Samsung alleging, among other things, that various Samsung smartphones had infringed Apple’s design patents directed to individual smartphone components (e.g., front face, bezel and display screen).  The U.S. Court of Appeals for the Federal Circuit affirmed the district court’s findings of design patent infringement, including a damages award totaling $399 million which equaled Samsung’s total profit made from sales of the infringing smartphones.  In reaching its decision, the Federal Circuit rejected Samsung’s arguments that damages should be limited to profits from the infringing components of the smartphone, rather than the entire smartphone itself.  The Federal Circuit held that such apportionment was prohibited by Congress under § 289 and that the phrase “article of manufacture” must always be the end product sold to the consumer.  In a unanimous ruling handed down in December 2016, the Supreme Court overruled the Federal Circuit’s decision and tossed out the $399 million award.

Penning the opinion for the Supreme Court, Justice Sotomayor explained that the Federal Circuit’s interpretation of “article of manufacture”—to cover only an end product sold to consumers—“gives too narrow a meaning to the phrase.” Instead, the Court found that for purposes of calculating damages for design patent infringement, the phrase encompasses “both a product sold to a consumer and a component of that product.”  The Court noted that this interpretation is consistent with 35 U.S.C. §§ 101 and 171(a), which cover patents extending to components of multicomponent products.  The Court failed to mention, however, how this reading squares with the Dobson cases and the legislative intent of Congress in passing the Patent Act of 1887.

In addressing the scope of the phrase “article of manufacture,” the Supreme Court set forth a new two-step inquiry: (1) identify the “article of manufacture” to which the patented design has been applied; and (2) calculate the infringer’s total profit resulting from that article of manufacture. The Court declined to set out a test for identifying the relevant article of manufacture at the first step of the § 289 damages inquiry, stating that it was not adequately briefed by the parties to make such a determination.  Thus, the question remains for lower courts to interpret, including how a fact-finder is supposed to determine the amount of profit attributable to a specific component of a multi-component product.  For these reasons, the Court’s opinion unfortunately creates ambiguity for the future of design patents and opens up the proverbial can of worms for design patent owners who are now left with a complicated damages inquiry.  Patent applicants will therefore need to work closely with their patent attorneys to broadly define the “article of manufacture” during patent prosecution to ensure maximum damages awards in potential future litigation.  For more information, please see: Samsung Elecs. Co. v. Apple, Inc., Case No. 15-777, 137 S. Ct. 429, 196 L. Ed. 2d 363 (Dec. 6, 2016).

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.

 

 

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