Market Insight

Design patents are the latest casualties of the Apple, Samsung smartphone patent war; review of the Supreme Court decision and its ramifications

December 09, 2016  | Subscribers Only


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On December 6th, the United States Supreme court released a decision to send the patent case between Apple and Samsung back to the Federal Circuit. This insight will provide the background of the decision and provide IHS Markit’s view on the decision’s potential impact on the smartphone industry.

 

Background:

On May 2015, the United States Federal Circuit ruled Samsung to pay Apple $548 million for the damages caused from the infringement of 3 design patents and 3 utility patents. The damage amount from the infringement of 3 design patents was $399 million. After Federal Circuit ruling, Samsung raised an issue regarding the damage calculation of the 3 design patents and brought the case to the Supreme Court.

The damage amount from the Federal Circuit ruling was calculated based on the section 289 of the patent act shown below: 

It is unlawful to manufacture or sell an "article of manufacturer" to which a patented design or a colorable imitation thereof has been applied and makes and infringer liable to the patent holder "to the extent of his total profit."

In order to calculate the damage amount, the Federal Circuit interpreted following two items from the section 289:

  • The first item is the “article of manufacture”. The Federal Circuit ruled that this is the end product sold to the customer.
  • The second item is the “extent of his total profit”. This means Samsung is liable for the entire profit it has made from the infringed products. Federal Circuit ruled the entire profit made from Samsung’s 22 smartphones during the damage period was $399 million.

The contested item at the Supreme Court argued by Samsung was the “article of manufacture”. Samsung argued that the “article of manufacture” should be the front face or the screen instead of the entire end product sold.

 

The Supreme Court’s decision:

Below are the statements included in the Supreme Court’s decision:

  • In the case of a multicomponent product, the relevant "article of manufacture" for arriving at a section 289 damages award need not be the end product sold to the consumer but may be only a component of that product.
  • The Federal Circuit's narrower reading cannot be squared with section 289's text.
  • Court declines to resolve whether the relevant article of manufacturer for each design patent at issue here is the smartphone or a particular smartphone component.

 

What are the implications of the Supreme Court's decision?

What are the decision's potential impact on the smartphone industry?

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Geography
USA
Category
Mobile Devices
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