Bad News/Good News
In the December 6, 2016 decision of Samsung v. Apple, the U.S. Supreme Court, in a pithy 8 page opinion, made only one determination: that the text of Sec. 289 of the design patent damages statute means that the term “article of manufacture” encompasses both a product sold to a consumer and a component of that product.
It is not a surprising result, given Apple’s capitulation to the Solicitor General’s position in its brief and argument that determination of the article of manufacture is a question of fact. Thus, Apple agreed with the government and with Samsung. What was the Court to do?
The Supreme Court of the United States used an 1885 dictionary – a dictionary! – to change the meaning of statutory language that had been interpreted one way for well over 100 years. And there is little doubt that when Congress originally passed the law it did not consult a dictionary in deciding to use the phrase “article of manufacture”.
The bad news: by finding that the “total profit” of the infringer can be that of a component rather than the product sold to the consumer, the Court in effect resuscitated apportionment of design patent damages. This unquestionably will adversely impact the value of design patents.
The good news – if there is any – is that the Court declined to fashion its own test for determining the article of manufacture in any given case. This was surprising, given that this issue was the center of attention at oral argument. The Court apparently threw up its hands, unable to agree on any of the numerous tests proposed in the amicus briefs.
What Happens Next?
The Court punted the ball back to the Federal Circuit for the heavy lifting, charging it with the task of “addressing any remaining issues”, meaning devising a set of factors or tests to assist the finder of fact in determining the article of manufacture in any given case. In this particular case, the district court will likely need to receive arguments and evidence to determine the article of manufacture for Apple’s 3 design patents, characterized by the Court as: (1) “a black rectangular front face with rounded corners”; (2) “a rectangular front face with rounded corners and a raised rim”; and (3) “a grid of 16 colorful icons on a black screen”. After determining the various articles of manufacture, the district court will need to hear evidence to calculate the total profit of each. Good luck.
How Did the Court Goof?
As predicted in our post-oral argument newsletter in October, 2016, the Court sadly conflated the “article of manufacture” as used in sec. 171, dealing with design patent subject matter, with that used in sec. 289, dealing with damages for infringing a patented design. If one substitutes in Sec. 289 for “patented design” the phrase “design for an article of manufacture” that appears in Sec. 171, this is the result:
“Whoever … applies … the [design for an article of manufacture], or any colorable imitation thereof, to any article of manufacture…”
Clearly, the first article of manufacture is not the same as the second. The first refers to the patentee’s product, the second to that of the infringer.
The critical word “any” in sec. 289 was ignored by the Court. The use of “any” makes it quite clear (from the Court’s beloved “text”) that the total profit is that made on sales of the infringer’s product – any product – to which the patented design (that can be an entire patented product or a patented component/portion of a product) has been applied. That is what the statute says. It should be more than just a little unsettling to lawyers that the plain words of the statute do not mean what they say.
Congratulations must be extended to Samsung’s lawyers, who convinced the Supreme Court of the United States to interpret the clear language of a statute to mean something other than what it says.
What Does the Future Hold?
An optimist can hope that the Federal Circuit – presumptive experts in patent law – will fashion an article of manufacture test that takes into account the realities of modern day commerce and technology and the necessity for design patents to deter knock-offs. It would not be surprising, given the nature of these design patents, if application of the new test led to the same result: that the total profit is that of the smartphone sales.
Design patent practice and enforcement have been irrevocably altered. No matter what test the Federal Circuit devises, design patentees will be put to the expense of hiring expert witnesses to opine on each factor, e.g., the visual significance of the patented design compared to the overall appearance of the product, the cost/value of a component relative to the cost/value of the overall product, etc. And new strategies will need to be devised for filing and prosecuting design patents – this could mean fewer design patent applications for components, less use of broken lines to show unclaimed subject matter of a larger product, claims covering the appearance of an entire product (which will, in turn, make it easier for an infringer to avoid the claim scope), and the like.
We now enter a period of uncertainty. Accused infringers will no doubt take the position that the article of manufacture is less than the entire product that they are selling, while patentees will take the opposite position. Until the Federal Circuit establishes a test, and that test is applied by the district court in light of evidence it has yet to hear, and its findings are then appealed again to the Federal Circuit, and the loser of that appeal files for an en banc rehearing (which will be denied), and then files a Petition for Cert. to the Supreme Court (that will hopefully be denied) this issue will be unsettled. Thus, at least in the short term, and perhaps much longer, this decision will adversely affect enforceability of design patents against copycat knock-offs (the primary infringers of design patents), as well as greatly inhibit settlement of design patent disputes.