Supreme Court Interprets the “Total Profits” Remedy for Design Patent Infringement

April 7, 2017

By Michael Ginzburg

For nearly 130 years, a holder of a design patent protecting the design of a component could receive the total profits earned by the sale of a multi-component product that includes a component that infringes the design patent. In Samsung Electronics Co., Ltd., et al. v. Apple Inc., the United States Supreme Court overturned nearly 130 years of statutory interpretation by holding that liability for infringement of a design patent protecting a component of a multi-component product does not mandate that the patentee receive total profits attributable to the infringer’s sale of the infringing multi-component product as whole.

In 1887, the U.S. Congress passed a specific damages remedy for infringement of a design patent. The provision was included as section 289 of the Patent Act of 1952 and states as follows:

§289. Additional remedy for infringement of design patent 

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, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement. (July 19, 1952, ch. 950, 66 Stat. 813.)” 35 U.S.C. § 289.

Since its enactment, 35 U.S.C. § 289 has been interpreted to provide for recovery of the total profits earned by an infringer from the sale of an infringing product. This remedy has incentivized many patent applicants to seek design patent protection in addition to (or even sometimes instead of) seeking utility patent protection for their inventions.

Apple products are known for their distinctive designs as much as for their ease of use. Apple revolutionized smartphones when it first introduced the original iPhone in June 2007. To protect its intellectual property in the iPhone, Apple filed numerous utility and design patents. Apple’s competitors were quick to enter the market with similar smartphones. Samsung, in particular, began selling several smartphones that looked very similar to the iPhone.

Apple sued Samsung for, inter alia, patent infringement of three design patents, each of which related to a design feature included in the iPhone. The D618,677 patent related to “a black rectangular front face with rounded corners,” the D593,087 patent related to a “rectangular front face with rounded corners and a raised rim,” and the D604,305 patent related to “a grid of 16 colorful icons on a black screen.” Samsung Electronics Co., LTD., et al. v. Apple Inc., 580 U.S. ___, ___ (2016) (slip op., at 3). A jury determined that several of Samsung’s smartphones infringed one or more of the three design patents; the court awarded Apple $399 million, which were the total profits Samsung earned from the sales of the infringing smartphones.

Samsung appealed the damages award to the Court of Appeals for the Federal Circuit, which affirmed the damages award. The Federal Circuit reasoned that, because an end-user could not purchase any of the infringing components separately from the smartphones themselves, 35 U.S.C. § 289 allowed an award of the “total profits” from the sale of the infringing smartphones.

Samsung appealed the judgment of the Federal Circuit to the Supreme Court, which unanimously reversed the Federal Circuit. In the opinion written by Justice Sotomayor, the Court carefully parsed the text of 35 U.S.C. § 289 to lay out a two-step test for a damages award under § 289: “[f]irst, identify the ‘article of manufacture’ to which the infringed design has been applied,” and “second, calculate the infringer’s total profit made on that article of manufacture.” Id. at 5. The case ultimately hinged on the meaning of the term “article of manufacture.” The Court concluded that, although an “article of manufacture” could be a multi-component product sold to a consumer, an “article of manufacture” could also be a component of the multi-component product sold to a consumer. The Court supported this conclusion by explaining how it is consistent with other sections of the Patent Act, namely §§ 101 and 171(a). The Court declined to decide upon a proper test for the first step of the § 289 damages test, choosing instead to remand the question to the Federal Circuit.

Although the Court’s holding in this case overturned long-standing precedent, the holding is arguably more logically sound than the precedent it replaces. First, imagine a scenario where a patentee holds five design patents to components of a popular multi-component product and an infringer sells a similar multi-component product that includes components that infringe each of the five design patents. Should the infringer be liable for five times the total profits arising from the sale of the infringing multi-component product? The text of 35 U.S.C. § 289 arguably prevents such a result: “an owner of an infringed patent … shall not twice recover the profit made from the infringement.”

A second scenario more poignantly illustrates the tenuousness of the now-replaced precedent: a multi-component product includes five components, each of which is covered by a respective design patent held by a respective patentee. Should the infringer be liable to each of the five patentees for the total profits arising from the sales of the infringing multi-component product? Although 35 U.S.C. § 289 does not prohibit such liability, such a harsh remedy would have a chilling effect on the marketplace.

Takeaway

Although the Federal Circuit has yet to provide the test for determining whether the infringed “article of manufacture” in a given case is the entire multi-component product or a component of that multi-component product, in some instances, the test will undoubtedly result in the “total profits” being less than it would have been before the Court’s holding in case. Thus, in addition to pursuing design patents covering a multi-component product itself, applicants should aggressively pursue design patents for as many components of the multi-component product as possible. If possible, applicants for design patents covering components that may be used in multi-component products should consider pursuing additional forms of intellectual property protection, such as utility patents and trademark registrations for product configurations, to protect their components. Finally, holders of design patents protecting components that may be used in multi-component products need to reevaluate the value of these design patents to their intellectual property portfolios in light of the Court’s holding.

If you need help with an intellectual property matter, the attorneys at Fredrikson & Byron can help you understand your rights and advocate for your interests.