What the Supreme Court said about Apple v. Samsung

The full text (minus footnotes) of a unanimous decision that went against Apple.

The most famous design patent case in U.S. history—and its $399 million penalty judgment—has been sent back to the appellate court.

What’s it all about? From my walk-up to the Oct. 11 hearing:

It’s not a question of whether Samsung’s smartphones infringed Apple’s patented designs. That’s been adjudicated. Samsung lost. It’s about a 1887 law that says any person who applies a patented design without permission “to any article of manufacture” is “liable … to the extent of his total profit.”

Samsung argues that in the 21st century, when manufactured devices may have hundreds of thousands of features, the law doesn’t make sense. It’s no longer practical. Apple insists that Samsung pay in full for its sins. Besides, if Samsung wants to change the law, it’s talking to the wrong branch of government.

Today the Supreme Court, in a unanimous decision, sided with Samsung but kicked the issue of how damages should be divvied up down to the lower court. Justice Sonia Sotomayor delivered the opinion:

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Section 289 of the Patent Act makes it unlawful to manufacture or sell an “article of manufacture” to which a patented design or a colorable imitation thereof has been applied and makes an infringer liable to the patent holder “to the extent of his total profit.” As relevant here, a jury found that various smartphones manufactured by petitioners (collectively, Samsung) infringed design patents owned by respondent Apple Inc. that covered a rectangular front face with rounded edges and a grid of colorful icons on a black screen.

Apple was awarded $399 million in damages—Samsung’s entire profit from the sale of its infringing smartphones. The Federal Circuit affirmed the damages award, rejecting 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.

Held: In the case of a multicomponent product, the relevant “article of manufacture” for arriving at a §289 damages award need not be the end product sold to the consumer but may be only a component of that product.

(a) The statutory text resolves the issue here. An “article of manufacture,” which is simply a thing made by hand or machine, encompasses both a product sold to a consumer and a component of that product. This reading is consistent with §171(a) of the Patent Act, which makes certain “design[s] for an article of manufacture” eligible for design patent protection, and which has been understood by the Patent Office and the courts to permit a design patent that extends to only a component of a multicomponent product.

This reading is also consistent with the Court’s reading of the term “manufacture” in §101, which makes “any new and useful . . . manufacture” eligible for utility patent protection.

(b) Because the term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not, the Federal Circuit’s narrower reading cannot be squared with §289’s text. Absent adequate briefing by the parties, this Court declines to resolve whether the relevant article of manufacture for each design patent at issue here is the smartphone or a particular smartphone component. Doing so is not necessary to resolve the question presented, and the Federal Circuit may address any remaining issues on remand.

The Opinion of the Court.

Section 289 of the Patent Act provides a damages remedy specific to design patent infringement. A person who manufactures or sells “any article of manufacture to which [a patented] design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit.” In the case of a design for a singlecomponent product, such as a dinner plate, the product is the “article of manufacture” to which the design has been applied. In the case of a design for a multicomponent product, such as a kitchen oven, identifying the “article of manufacture” to which the design has been applied is a more difficult task.

This case involves the infringement of designs for smartphones. The United States Court of Appeals for the Federal Circuit identified the entire smartphone as the only permissible “article of manufacture” for the purpose of calculating §289 damages because consumers could not separately purchase components of the smartphones. The question before us is whether that reading is consistent with §289. We hold that it is not.

The federal patent laws have long permitted those who invent designs for manufactured articles to patent their designs. Patent protection is available for a “new, original and ornamental design for an article of manufacture.” A patentable design “gives a peculiar or distinctive appearance to the manufacture, or article to which it may be applied, or to which it gives form.”

This Court has explained that a design patent is infringed “if, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same.”

In 1885, this Court limited the damages available for design patent infringement. The statute in effect at the time allowed a holder of a design patent to recover “the actual damages sustained” from infringement. In Dobson v. Hartford Carpet Co., 114 U. S. 439 (1885), the lower courts had awarded the holders of design patents on carpets damages in the amount of “the entire profit to the [patent holders], per yard, in the manufacture and sale of carpets of the patented designs, and not merely the value which the designs contributed to the carpets.”

This Court reversed the damages award and construed the statute to require proof that the profits were “due to” the design rather than other aspects of the carpets. (“The plaintiff must show what profits or damages are attributable to the use of the infringing design”).

In 1887, in response to the Dobson cases, Congress enacted a specific damages remedy for design patent infringement. The new provision made it unlawful to manufacture or sell an article of manufacture to which a patented design or a colorable imitation thereof had been applied. An act to amend the law relating to patents, trademarks, and copyright, §1, 24 Stat. 387. It went on to make a design patent infringer “liable in the amount of ” $250 or “the total profit made by him 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 1952 codified this. That codified language now 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 . . .

Apple Inc. released its first-generation iPhone in 2007. The iPhone is a smartphone, a “cell phone with a broad range of other functions based on advanced computing capability, large storage capacity, and Internet connectivity.” Apple secured many design patents in connection with the release. Among those patents were the D618,677 patent, covering a black rectangular front face with rounded corners, the D593,087 patent, covering a rectangular front face with rounded corners and a raised rim, and the D604,305 patent, covering a grid of 16 colorful icons on a black screen.

Samsung Electronics Co., Samsung Electronics America, Inc., and Samsung Telecommunications America, LLC (Samsung), also manufacture smartphones. After Apple released its iPhone, Samsung released a series of smartphones that resembled the iPhone.

Apple sued Samsung in 2011, alleging, as relevant here, that various Samsung smartphones infringed Apple’s D593,087, D618,677, and D604,305 design patents. A jury found that several Samsung smartphones did infringe those patents. All told, Apple was awarded $399 million in damages for Samsung’s design patent infringement, the entire profit Samsung made from its sales of the infringing smartphones.

The Federal Circuit affirmed the design patent infringement damages award. In doing so, it rejected Samsung’s argument “that the profits awarded should have been limited to the infringing ‘article of manufacture’—for example, the screen or case of the smartphone—“not the entire infringing product”—the smartphone. It reasoned that “limit[ing] the damages” award was not required because the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.”

We granted certiorari, and now reverse and remand. Section 289 allows a patent holder to recover the total profit an infringer makes from the infringement. It does so by first prohibiting the unlicensed “appli[cation]” of a “patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale” or the unlicensed sale or exposure to sale of “any article of manufacture to which [a patented] design or colorable imitation has been applied.” 35 U. S. C. §289. It then makes a person who violates that prohibition “liable to the owner to  the extent of his total profit, but not less than $250.”

“Total,” of course, means all. See American HeritageDictionary 1836 (5th ed. 2011) (“[t]he whole amount of something; the entirety”). The “total profit” for which §289 makes an infringer liable is thus all of the profit made from the prohibited conduct, that is, from the manufacture or sale of the “article of manufacture to which [the patented] design or colorable imitation has been applied.” Arriving at a damages award under §289 thus involves two steps. First, identify the “article of manufacture” to which the infringed design has been applied. Second, calculate the infringer’s total profit made on that article of manufacture.

This case requires us to address a threshold matter: the scope of the term “article of manufacture.” The only question we resolve today is 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. Under the former interpretation, a patent holder will always be entitled to the infringer’s total profit from the end product. Under the latter interpretation, a patent holder will sometimes be entitled to the infringer’s total profit from a component of the end product.

A.

The text resolves this case. The term “article of manufacture,” as used in §289, encompasses both a product sold to a consumer and a component of that product. “Article of manufacture” has a broad meaning. An “article” is just “a particular thing.” And “manufacture” means “the conversion of raw materials by the hand, or by machinery, into articles suitable for the use of man” and “the articles so made.” An article of manufacture, then, is simply a thing made by hand or machine.

So understood, the term “article of manufacture” is broad enough to encompass both a product sold to a consumer as well as a component of that product. A component of a product, no less than the product itself, is a thing made by hand or machine. That a component may be integrated into a larger product, in other words, does not put it outside the category of articles of manufacture.

 This reading of article of manufacture in §289 is consistent with 35 U. S. C. §171(a), which makes “new, original and ornamental design[s] for an article of manufacture” eligible for design patent protection. The Patent Office and the courts have understood §171 to permit a design patent for a design extending to only a component of a multicomponent product. This reading is also consistent with 35 U. S. C. §101, which makes “any new and useful . . . manufacture . . . or any new and useful improvement thereof ” eligible for utility patent protection.

“[T]his Court has read the term ‘manufacture’ in §101 . . . to mean ‘the production of articles for use from raw or prepared materials by giving to these materials new forms, qualities, properties, or combinations, whether by hand-labor or by machinery.’” The broad term includes “the parts of a machine considered separately from the machine itself.”

B.

The Federal Circuit’s narrower reading of “article of manufacture” cannot be squared with the text of §289. The Federal Circuit found 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. See 786 F. 3d, at 1002 (declining to limit a §289 award to a component of the smartphone because “[t]he innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers.”

But, for the reasons given above, the term “article of manufacture” is broad enough to embrace both a product sold to a consumer and a component of that product, whether sold separately or not. Thus, reading “article of manufacture” in §289 to cover only an end product sold to a consumer gives too narrow a meaning to the phrase.

The parties ask us to go further and resolve whether, for each of the design patents at issue here, the relevant article of manufacture is the smartphone, or a particular smartphone component. Doing so would require us 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 United States as amicus curiae suggested a test, see Brief for United States as Amicus Curiae 27–29, but Samsung and Apple did not brief the issue. We decline to lay out a test for the first step of the §289 damages inquiry in the absence of adequate briefing by the parties. Doing so is not necessary to resolve the question presented in this case, and the Federal Circuit may address any remaining issues on remand.

The judgment of the United States Court of Appeals for the Federal Circuit is therefore reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

4 Comments

  1. David Emery said:
    So what is “the article of manufacture” in a software-intensive system? Is it the screen? Is it the screw that holds the screen in place? Is it the software that enables the functionality in the hardware, and therefore not directly patentable? (I believe that’s the case, software is not patentable.)

    This decision raises more issues than it resolves, I think.

    0
    December 6, 2016
  2. John Kirk said:
    Steve Jobs had great strengths, but he had great weaknesses too. He was offended by Samsung’s copying of Apple’s designs and the legal action he started was more an act of vindictiveness than good business.

    It is my opinion that after the Samsung Trial (and probably long before)Tim Cook and Apple realized that patents were a useless tool for protecting Apple’s designs. Just to focus on one aspect of patent law, it is far too slow. Apple filed this suit, then had to wait years to go to trial, then had to wait years for the appeals to occur and it’s not over yet. Did patents stop Samsung from selling phones that copied Apple’s designs? No it did not. Did a verdict that Samsung violated Apple’s patents award sufficient damages to deter Samsung and other from copying Apple’s designs? No it did not.

    It is, again, my opinion that Tim Cook and Apple recognized that patents were a useless barrier to entry and switched tactics. They now focus on creating things that CANNOT be copied regardless of patent protection. They accomplish this by focusing on features that can only be created with intense integration of hardware and software. I think a good example of this is 3D touch. I don’t know, of course, but I doubt any competitor is even close to bringing out anything similar. Another example may be Apple’s fingerprint identification. Other manufacturers have this too, but Apple seems to be taking it to a whole new level. I’m getting so addicted to both 3D Touch and the ease of use with which I unlock my phone that I think I would find it jarring to move to another competing device.

    Strategy is about using your strength against an opponent’s weakness. Apple’s strength is integration. Things like 3D Touch and Apple Pay and even the Apple Watch are where Apple’s integration chops can shine and where the competitors will struggle to keep pace.

    6
    December 6, 2016
    • Richard Wanderman said:
      Great comment and great point. Of course, there was less stuff to integrate when the suit was started: the iPhone was “the thing.”

      That said, in my gut I get where Jobs was coming from having watched Microsoft do Windows and Patagonia clone Apple stores (actually, in the Patagonia case they took from each other) and more.

      0
      December 7, 2016
  3. Fred Stein said:
    Regardless of the outcome, the battle was worth it. Some legal battles serve to deter others and set precedent.

    Now this tricky question about the value of the design (external) vs. all the really complex important stuff on the inside – Is it really worth all the profits. I say yes. I can copy a Rolex and make a decent watch for a fraction of the cost. But all watch profits stem from their brand and style. Without branding, which includes an iconic form, plus marketing, advertising, and reputation, you’re selling a commodity with very low profit potential.

    We now have a new legal precedent. My opinion does not matter.

    3
    December 6, 2016

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