Samsung and Apple argued in America’s highest court today, capping off years of patent lawsuits with a debate over a tiny piece of the overall case. The arguments the Supreme Court heard today address how much of the profits from a product — in this case, a smartphone — should be awarded to the holder of a design patent when their patent is infringed. (A quick refresher: design patents protect the "ornamental design" of an invention, while the more familiar utility patents protect functional elements.)
Samsung argued that the damages awarded in the case (some $400 million) should be greatly reduced because Apple was awarded damages on the profit of the entire phone, not just the profits on the parts that infringed Apple’s patents. The three patents at issue here are related to the design of the iPhone’s front face; the overall appearance of the rectangular design with rounded corners and a bezel; and the sides, back, top, and bottom of the device (the rest of the phone), as well as the circular home button.
How much money should infringing a single patent cost in damages?
Justices expressed skepticism with Samsung’s argument that because a smartphone is filled with thousands of patented components that a design patent should result in awards amounting to a fraction of the total profits of the phone, though it’s hard to read too much into how a Supreme Court decision might turn out from oral arguments alone.
"How do we announce the right test for that?" asked Justice Sotomayor. The design of the phone "might drive the sale." An iconic design for an automobile might come to a designer as "a stroke of genius" in just a few days said Justice Kennedy, while the rest of the car could take hundreds of days to design. "Then it seems to me that it is quite unfair to give three days’ profit" to someone whose design was infringed when that design is so significant to the overall product.
The Volkswagen Beetle was brought up numerous times as an example of an iconic product that nonetheless had many other components inside it. Justice Alito noted, supporting Samsung’s argument, that while the design of the car was important, it would not have sold in the same numbers if it cost 10 times as much or if it only got two miles per gallon. "Nobody buys a car, even a Beetle, just because they like the way it looks." Still, "the thing that makes the product distinctive might not cost very much," noted Justice Kagan. "The car has to run and it has to do all the other things that cars do," but the primary reason for its success could be because of its design.
The Volkswagen Beetle was brought up numerous times
Another comparison was made to a lawsuit regarding a movie script, noting that though the script was important, it would be unreasonable to award profits from a star actor or director in an infringement case.
Much of the more technical aspects of the argument revolved around how much of the profit in a phone is derived from a particular "article of manufacturing" like the screen assembly or the front of the phone, as opposed to the chips and transistors on the inside of the device. An "article of manufacturing" is a legal term in the relevant statute, and Samsung has argued that it should be defined as an individual component part like the screen, rather than the entire product that a consumer buys. Samsung has argued that in such a case, the profits awarded should only come from the individual component rather than the entire device.
"Infringement of a patented cupholder design could result in an award of the total profit on a car," argued Samsung in its brief, which would obviously be an absurd result. Apple agreed that profits could be awarded solely on a component of the product, but said that in this case, the "article of manufacturing" was the entire phone because the design patents in question are so essential.
"The infringement wasn’t found on the whole phone. It asserted three narrow patents," explained Kathleen Sullivan, Samsung’s attorney, in a press conference on the steps of the Supreme Court. "The patent doesn’t apply to the internals of the phone, so Apple doesn’t deserve profits on all of Samsung's phone."
When asked how, under its argument, a single narrowly tailored design patent can have any financial value to a complex phone with 250,000 patented features, Sullivan appeared to criticize the entire concept of design patents.
"It maybe shouldn’t" have any financial value, Sullivan said. "There may be other ways for a company that invents an important product to get patents on other features of their phone. Apple asserted a lot of utility patents on their phones, so you’re right that a design patent... if it’s only applied to a part of a product, does become far less valuable."
Apple strongly disagreed, suggesting that significant financial damage awards are the best way to discourage copying of patented products.
For the average consumer, the case won’t really have much impact
"Everyone at Apple is dedicated to innovation and delivering the very best products for our customers. Our designers and engineers are distinguished by their originality. And they take great pride in their work," said Noreen Krall, Apple’s chief litigation officer, in a statement. "We firmly believe that strong design patent protection spurs creativity and innovation. And that’s why we’ve defended ourselves against those who steal our ideas."
For the average consumer, the case won’t really have much impact if any. It’s narrowly tailored to discussion of damage awards in jury-decided cases involving design patents — basically how much money changes hands in the unlikely event that a design patent infringement case goes to trial and is successful. The vast majority of lawsuits are settled out of court, and patent cases are even more likely to be settled. Still, design is hugely important part of of consumer culture, whether we’re taking about smartphones, cars, or handbags, and patents on products can be worth hundreds of millions of dollars — if not more.
A ruling is expected before the end of the Court’s term in June.