Today the U.S. Supreme Court overturned Apple's $399MM design patent infringment award against Samsung. A copy of the slip opinion can be found here. An in-depth post is to follow, so please check back soon.
The oral argument drifted between a discussion of how to apply a broad test to answer the question at issue and a discussion of how to apply such a test to the specific facts of the case. But a substantial amount of the discussion focused on developing a broad test and its feasibility, as opposed to how to actually apply the test to reach a decision under the facts of the case.
Kathleen M. Sullivan, on behalf of Samsung, began the oral argument with the basic premise that it “makes no sense” to award damages to Apple for the total profit on the entire smartphone (here, $399 million) based on “a single design patent on a portion of the appearance of the phone.” Sullivan argued that 35 U.S.C. § 289 “does not require that result,” and that “Apple and the government now agree that [§] 289 does not require that result.” Instead, Sullivan requested “that when a design patent claims a design that is applied to a component of a phone or a component of a product, or, to use the language of [§] 289, when a design patent is applied to an article of manufacture within a multi-article product,” that the Court “hold that [§] 289 entitles the patent-holder to total profit on the article of manufacture to which the design patent is applied, and not the profits on the total product.”
Justice Anthony Kennedy responded skeptically: “[t]he problem is … how to instruct the jury on that point.” According to Justice Kennedy, “If I were the juror, I simply wouldn’t know what to do … under your test.” “I’d have the iPhone in the jury room; I’d — I’d look at it. I just wouldn’t know.” Essentially, Justice Kennedy explained that neither Samsung nor Apple “gives us an instruction to work with.”
Sullivan countered that it would be sufficient to tell a jury that “the article of manufacture to which a design has been applied is the part or portion of the product as sold that incorporates or embodies the subject matter” of the design patent. Then, the jury “should be instructed that total profit must be profit derived from the article of manufacture to which the design has been applied.” But Justices Elena Kagan, Sonia Sotomayor and Ruth Bader Ginsburg questioned the practicality of implementing this type of instruction — including how to properly identify the relevant article of manufacture and how to determine the quantum of profit attributable to that article.
Addressing these two issues, Justice Kennedy referred to the “Volkswagen Beetle analogy” from the U.S. government’s amicus brief, which posited that “[i]f the design in question is the shape of the Volkswagen Beetle, for example, one might reasonably say that the either that the design determines the appearance of the automobile’s body or that it determines the appearance of the car as a whole.” (Brief for the United States as amicus curiae in support of neither party, p. 28.) Justice Kennedy hypothesized that if “Beetle design was done in three days, and it was a stroke of genius and it identified the car,” then it would be unfair to award three days' worth of profit if “it took 100,000 hours to develop the motor.” In response to a question from Justice Samuel Alito on this topic, Sullivan conceded that as to the article of manufacture, “the holder of the patent gets profit from the article, even if the profit does not come entirely from the design.”
But after further questioning from Justice Sotomayor, Sullivan asserted that “no reasonable jury could have found on this record that the entire product was the article of manufacture to which the design has been applied.” According to Sullivan, this is because “design patents cover ornamental appearance. They cannot, by definition, cover the innards of the phone.” “Just because you can show that most of the profit comes from the Beetle exterior does not mean the car is the article of manufacture.”
Brian H. Fletcher argued next for the U.S., as amicus curiae, in support of neither party. Fletcher first agreed with the Federal Circuit’s holding that § 289’s “provision for an award of total profits means that the patent-holder can recover all of the profits from the sale of the infringing articles [of] manufacture and not just the portion of the profits that the patent-holder can prove was caused by or attributable to the design as opposed to other features of the article.” But he cautioned that it is “a mistake” to read the Federal Circuit’s opinion “to have held that the relevant article of manufacture for which profits are owed is always the entire product that the infringer sells to customers.” Fletcher stated that “we understand all parties to agree with that now.” That is, when “the relevant article of manufacture to which a patented design may be applied is a part or a component of a larger product sold in commerce,” “all parties now agree that the patent-holder is entitled to only the profits from that infringing article and not to all” of the profits.
Justice Ginsburg interrupted: “When … the article of manufacture isn’t sold apart from the entire product, how should … the judge charge the jury on determining the profit attributable to the infringing article?” Fletcher responded that the fact-finder must first make a judgment as to “what’s the article of manufacture to which the design has been applied,” and then determine “how much of the total profits from the device are attributable to the infringing article.” Fletcher acknowledged that the latter has not been briefed, and that “[t]his case sort of stopped at the first step.” However, several follow-up questions forced Fletcher to explain how the latter question could be answered.
For example, Justice Kagan asked about “the hard cases,” such as how to determine what the relevant article is in the context of the Volkswagen Beetle analogy. Fletcher responded that “one can reasonably say that it’s either the body or the car,” and pointed to a four factor test described in the briefs: (1) “you should compare the scope of the patented design as shown in the drawings in the patent”; (2) “how prominently that design features in the accused article”; (3) “whether there are other conceptually distinct innovations or components in the article that are not part of or associated with the patented design”; and (4) “the physical relationship between the patented design and the rest of the article.” Fletcher then applied these factors to the Beetle analogy. When pressed on how to determine profits, Fletcher suggested that “the patent-holder make the argument that even though the article may be just a part of the product sold … really, that’s what sells it,” and argue for recovery of “a very substantial portion of the profits.”
Seth P. Waxman then argued on behalf of Apple, asserting that “whatever you determine the right [jury] instruction should be, there is no basis to overturn the jury’s damages verdict in this case,” because Samsung did not “ever identify for the jury any article of manufacture other than the phones themselves.”
Justice Stephen Breyer then steered Waxman to the broader issue of how to answer the question presented to the Court in terms of developing an applicable standard. With reference to the amicus briefs, Justice Breyer mentioned a “conclusion, which is a little vague,” where the design has “been applied to only part … of a multicomponent product and does not drive demand for the entire product,” that “the article of manufacture is rightly considered to be only the component to which the design applies. And only profit attributable to that component may be awarded.”
In response, Waxman conceded that “there is no question that in an appropriate case the jury can decide whether the article of manufacture to which the design is applied and to which it provides a distinctive and pleasing appearance could either be the article that’s actually sold to consumers, that’s bought by consumers, or it could be a component of it.” As to an applicable standard for a jury to use, Waxman stated that “the four factors that the Solicitor General articulated would be appropriate factors to consider.”
Chief Justice John Roberts appeared unconvinced: “It seems to me that the design is applied to the exterior case of the phone. It’s not applied to the — all the chips and wires [so] there … shouldn’t be profits awarded based on the entire price of the phone.” Waxman acknowledged that “[t]he profits are awarded on the article of manufacture to which the design is applied,” and the article may or may not be the “outside” part of the phone.
Justice Sotomayor asked Waxman if he agreed with the U.S. government’s “four-part test with respect to identifying just the article of manufacture.” Waxman agreed, with the caveat that “the factors that the jury will be told will depend on the evidence that the parties educe.” Rolling out the Beetle analogy yet again, Justice Sotomayor asked how to determine the profits to be awarded if the Volkswagen body is found to be the article of manufacture. Agreeing with Fletcher that the issue had not been briefed, Waxman stated that “conceptually, it is correct that under [§] 289 the patentee is entitled to the total profits on the sale of the articles of manufacture to which the design has been applied.”
Justice Sotomayor drove the point farther, using the Beetle as a good example “where the thing that makes the product distinctive does not cost all that much. There’s not been a lot of input. Somebody just — some engineer or some graphic artist or whatever woke up one day and said I just have this great idea for an appearance. But that’s the principal reason why the product has been successful.” “[T]he principal reason why the car has been successful has to do with this particular appearance, the design.” When asked if the fact that the principal reason why the car has been successful is due to the design is only relevant to the second inquiry, Waxman indicated that it would also be relevant to several factors in the government’s four-part test.
Sullivan concluded the oral argument with a brief rebuttal. She emphasized that “Congress did not say [that] you can’t segregate the proper article from the other articles that make up the product. So we can segregate [the] article from other articles within the product.” Sullivan stressed, however, that she was not attempting to apportion the value of the design in relation to the article. Rather, Sullivan asked the Court to “tell the nation’s economy that no one can claim a partial design patent on a portion of a front face of an electronic device and come in and get the entire profits on the phone.”
Overall, the representatives for Samsung, Apple, and the U.S. government all appeared willing to agree that the relevant article of manufacture for which profits may be owed under § 289 would not always be the entire product that an accused infringer sells to customers. Although the representatives proposed tests for determining the relevant article of manufacture and discussed — sometimes reluctantly — how to determine profits for such an article, the justices did not appear to be uniformly satisfied with such tests in view of the perceived difficulties of implementing them in practice.
Of course, patent attorneys love to have clear rules, clear definitions, and clear tests. Such clarity can yield clear guidance, which in turn can yield some measure of predictability for stakeholders and attorneys alike. Unfortunately, the oral argument did not do much to help patent attorneys see farther down the road as to these issues. While the oral argument gave us an opportunity to see the Court kicking the tires on various tests, we have no clarity as to whether any of these tests will have any traction. The Court seemed reluctant to favor any one particular test, meaning that once again the only thing we can see clearly is the dichotomy between the Court and patent attorneys in terms of having a clear rule, definition, and/or test. This is reminiscent of the Court’s reasoning in KSR, e.g., “Application of the bar [on patents claiming obvious subject matter] must not be confined within a test or formulation too constrained to serve its purpose” (KSR Int’l Co. v. Teleflex Inc., 127 S.Ct. 1727, 1746 (2007)), as much as it is reminiscent of the Court’s reasoning in Alice, e.g., “In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case” (Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347, 2357 (2014)).
So, regardless of whether the Court adopts one of the proposed tests, develops another one or opts to let that Volkswagen Beetle coast down a hill, it appears likely that patent attorneys will be left to navigate on their own without clear guidance as to the destination. Unless the Court surprises us by announcing a clear rule, definition, and/or test, it appears that design patentees will continue to attempt to define their claimed article of manufacture to be as much of a sold product as possible (aiming for higher damages), whereas accused infringers will continue their attempts to place limitations on that definition (aiming to minimize damages).
And, we may be left at the side of the road when it comes to how to determine profits for such an article — however it may be defined. If expert testimony would be used (discussed as a possibility during the oral argument), one can envision an analogy to how expert testimony is used in trademark litigation as to likelihood of confusion, strength of a mark, etc. This can be incredibly subjective, and complicated by how much weight may be given to it by the Court. In the case of design patents that show any portion of the article in broken lines, the complexities of design patent litigation may be exacerbated by the use of expert testimony.
Where does this leave us in the meantime? Without knowing what test — if any — that the Court might announce, it is difficult to give concrete advice for drafting new design patent applications. However, it appears that portfolio diversity may continue to be the key to starting the car. That is, it will likely continue to be good practice in most cases to include multiple embodiments that claim different amounts of an article of manufacture in a design application. While it may also be difficult to predict exactly what type of infringing products will appear somewhere down the road, having multiple embodiments that claim different amounts of an article of manufacture may increase the chances of success for a patentee’s arguments for a broad definition of the claimed article of manufacture.
The International Trade Commission (ITC) recently terminated a Section 337 investigation, Certain Quartz Slabs and Portions Thereof (II) (Inv. No. 337-TA-1017), which involved U.S. Patent Nos. (1) D712,666; (2) D712,670; (3) D751,298; (4) D712,161; and (5) D737,058.
Discussed in detail on the Oblon ITC 337 Law Blog here and here, notably, the case involved the assertion of only design patents, the above-identified design patents, directed to quartz slabs. Also, the Commission declined to send the case to the ITC's Early Disposition Pilot Program, because Respondents' request that the Commission utilize the Early Disposition Pilot Program relates to only two of the five asserted design patents, and therefore does not involve a case dispositive issue, and use of the Early Disposition Pilot Program in this particular scenario would unduly delay resolution of the entire investigation.
This case is follow-on to Apple v. Samsung in 2012, which, generally speaking, included the U.S. District Court for the Northern District of California's denial of Samsung’s post-trial motion for judgment as a matter of law, new trial or remittitur (Pet. App. 114a-153a), followed by the U.S. Court of Appeals for the Federal Circuit (Pet. App. 1a-36a) denial of a rehearing en banc.