Total Profit Damages on Entire Product or Component for Design Patent Infringement

In 2007, Apple released its first generation iPhone. After Apple released its iPhone, Samsung released as series of smartphones “that resembled the iPhone.” In 2011, Apples sued Samsung alleging various infringement claims, including that Samsung’s smartphones infringed Apple’s D593,087, D618,677, and D604,305 design patents. A jury awarded Apple $399 million in damages for design patent infringement, the entire profit Samsung made from its sale of the infringing smartphones.

Samsung appealed arguing “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.” The court of appeals rejected that argument reasoning that “’limit[ing] the dam- ages’ 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.'”

The applicable statute at 35 USC 289 provides that a design patent infringer “…shall be liable to the owner to the extent of his total profit, but not less than $250….”

But the Supreme Court reversed holding that in the case of a multi-component product, the relevant “article of manufacture” for calculating total profits damages could be either (1) the product sold to a customer or (2) a component of that product, whether sold separately or not.

The court did not provide a test for determining whether, in a given case, “article of manufacture” for calculating profits should be the product sold to a customer or a component of that product.

The profits to the entire product will be greater than profits to a component of the entire product. Therefore, this decision has the potential to reduce the profits damages available to design patent holders and therefore to reduce the value of design patents.

Case citation: Samsung Elecs. Co. v. Apple Inc., 137 S. Ct. 429 (2016).