Yesterday, the Supreme Court unanimously reversed a decision of the Federal Circuit in the long-running iPhone litigation between Apple and Samsung and we, the Software & Information Industry Association (SIIA), welcomed it. The Federal Circuit had held that when a design patent is infringed, the plaintiff is entitled to the total profits from the infringing product—even where the infringing product has many components. The lower court had permitted Apple to recover all of the profits from the sale of infringing Samsung Galaxy phones, despite the fact that the allegedly infringed elements were minor ornamental components of the overall product.
In more formal terms, the Federal Circuit had found that section 289 of the Patent Act granted the owner of an infringed design patent the rights to the “total profits” from the “article of manufacture”—a concept that works well with carpets or tchotchkes, but poorly with multi-function devices like cell phones.
The lower court’s approach set up some profoundly perverse incentives. SIIA filed an amicus in that case because of the risk that the Federal Circuit’s interpretation of design patent damages could create a whole new—and potentially far more expensive—fight against non-practicing entities. Examples abounded: the use of a design-patent protected icon in a graphical user interface could lead to a jury award for all profits from the sale of a photo editing program. The use of a design-patented cup holder could lead to all profits from the sale of a self-driving car. And so on. If the lower court’s approach prevailed, we fully expected to see the same kinds of activity that had occurred in the utility patent space: non-practicing entities purchasing design patents and suing companies for infringement.
The Supreme Court rejected that approach. Writing the 8-0 opinion, Justice Sotomayor looked at the statute’s plain language and found that the way that the phrase “article of manufacture” was used in the statute, it could apply to part of a multi-function product. The court held—as SIIA and others had urged—that “the term “article of manufacture” broad enough to encompass both a product sold to a consumer and a component of that product.” (On pages 6-7 of the slip opinion, the Court cited materials that only appeared in SIIA’s brief).
Although this win is significant, the case is not over. The Court remanded the case back to the Federal Circuit to determine how to apply the phrase “article of manufacture” to Samsung’s infringement. We will continue to watch it.