Yesterday, the Supreme Court heard arguments in the long-running Samsung v. Apple design patent litigation and took special note of the technology industry’s concerns. The Court was reviewing a decision from the United States Court of Appeals for the Federal Circuit holding that someone found to infringe a design patent could be liable for all of the profits made from the infringing product, even if the reason that consumers bought the product was in substantial part because of its functionality. We wrote previously about that here. The reason for the lower court’s holding stemmed from the language of 35 U.S.C. 279, which says, in relevant part (emphasis added):
“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…”
In this case, Samsung was ordered to pay hundreds of millions in profits on its Galaxy phone based on the infringement of patents covering three minor design facets of the iPhone. According to the lower court, the relevant “article of manufacture” was the entire phone. Together with other members of the technology industry, SIIA filed an amicus brief on the merits because the Federal Circuit rule created a host of perverse incentives, and a real risk that creators of multi-function software and products could be forced to disgorge profits based on an infringing icon or economically immaterial product shape.
In its brief and at oral argument, even Apple eschewed the Federal Circuit rule, along with the United States and Samsung. In its brief, it admitted that the relevant “article of manufacture” is the specific portion of a multi-component device to which the design applies. It instead focused its efforts on arguing that even if the rule applied by the Federal Circuit was correct, the record entitled it to keep the multi-million-dollar award. That approach did not appear to be terribly successful. Most of the Court’s questioning—to both sides and the government—involved how to develop and apply a test that both respected the statute and prevented plaintiff windfalls.
SIIA’s brief played an important role to the Court in answering this question, and it sought answers from each advocate. We argued that a sensible interpretation of the statute required that the phrase “article of manufacture” has to mean the portion of a multi-component device to which the design patent has been applied. For things like wall hangings and carpets, the patent owner could and probably should receive all the defendant’s profits. In contrast, however, a patent owner cannot receive all of the profits from the sale of a car merely because a competitor’s cup holder infringed its design patent—if it could, today’s utility/method patent troll problem would be dwarfed by comparison. The Court seemed to be interested in that approach. For example, (T. at 54-55 (abridged)):
JUSTICE BREYER: But I have a question on the general issue, which I think is tough. And the general question that I have is I have been looking for a standard. Now, one of the standards -- which are all quite close; the parties actually in the government are fairly close on this -- but is in a brief for the Internet Association, the software industry. And you know that brief I'm talking about on Facebook and some others. … And that's the problem in the case. So I thought -- and that's why I pointed to the brief I did point to -- that history is matters here, and we're talking here about a multicomponent product.
MS. SULLIVAN (Samsung): That's right, Your Honor.
JUSTICE BREYER: And if you don't tell the jury that there is that distinction, I think you either disregard what Congress meant in its statute or you create the kind of absurd results that your brief is full of. So that's what I'm looking for.
MS. SULLIVAN (Samsung): Your Honor --
JUSTICE BREYER: And that's why I looked at page 23, and it says that seems to do it.
MS. SULLIVAN (Samsung): We're fine with page 23 of the tech company's brief, and that points to why you must remand in this case.
Our goal in filing these briefs is to educate the court about the impacts of its decision on our members, and to provide a way to resolve these questions that does not harm those interests. Although handicapping on oral argument is a risky proposition (and certainly, an amicus does not have to be cited or mentioned to be influential), we are gratified that the Court considered what we had to say, and that it asked the parties about the approach we proposed— a proportional one that respects creative incentives and prevents windfalls. That, in a nutshell, is why we file.
A decision is expected sometime in early 2017.