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Tuesday, 6 December 2016

BREAKING: Unanimous Supreme Court in Samsung v Apple finds that damages may be based on a component, not whole product

Has a bite been taken out of Apple's damages
 or is it too soon to tell?
The AmeriKat has perhaps become cynical over the course of 2016.  When asked recently what she thought motivates people's decision making process, her answer was resolutely "money".  Money, money, money (as Abba would say).  The Supreme Court has also had money on their mind (as Snoop Dog would say).

Today, in Samsung v Apple (2016), an unanimous Supreme Court has held that where a multi component product is concerned, damages need not be calculated on the basis of the whole end product sold to a consumer.  Instead, damages may be assessed on the basis of only a component of that product. The dispute concerns Apple's design patents for specific elements of the iPhone and Samsung's previous order to pay Apple $399 million in damages for infringing its designs.  For a summary of the background see the AmeriKat's previous posts here.

35 USC § 289 states that:
“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 . . . .” 
The question before the Supreme Court was:
Must the relevant "article of manufacture" always be the whole end product sold to the consumer or can it also be a component of that product?  
Depending on the answer, the design patent holder may always be entitled to the infringer's total profit of the whole product or only sometimes entitled. 

In a refreshingly short decision, Justice Sotomayor (delivering the opinion of the Court) stated that the term "article of manufacture" includes both a product sold to a consumer and a component of that product:
"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."
The Federal Circuit's narrower reading of "article of manufacture" was that because consumers could not purchase individual components of the whole product, they therefore did not constitute an "article of manufacture".  In their words "[t]he innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture to ordinary purchasers".  This, the Court held, could not be squared with the text of Article 289.  The Supreme Court therefore reversed the Federal Circuit's decision.

Although the parties had asked the Supreme Court to resolve, for each of the design patents at issue, whether the relevant article of manufacture was the smartphone or the particular component, the Court declined stating that:
"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."
So back to you Federal Circuit to figure out what the right test is....


The Grizzler said...

Hurrah! A much needed sane decision from the USA. Let's hope the Federal circuit can also follow this in suitable manner.

THE US anon said...

The Court has got it wrong.

"for sale any article of manufacture to which such"

The direct words of Congress state what the "article of manufacture" is that controls: it is the item that was offered for sale.

If components are offered for sale (as in aftermarket sales) , then those component sales count.

But such does not distinguish (or extinguish) OTHER sales that also count: the sales of a finished and complete product. The words as chosen by Congress simply are not vague here - there is NO license for the Court to create a new writing of statutory law here. The Court may not like the result of the words of Congress, but it is just not within their Constitutionally allocated powers to choose a different result.

Anonymous said...

Multi-billion dollar cruise liner with a patented tin whistle, or other such minor infringing article?

Get real US.

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