Tuesday, October 11, 2016

Today's Oral Argument in Samsung v. Apple

The U.S. Supreme Court today heard oral argument in Samsung Elecs. Corp. v. Apple, Inc.  Here's a link to the transcript.  This is the case involving Apple design patents relating to the iPhone.  The district court and the Federal Circuit both interpreted the relevant statute, 35 U.S.C. § 289, as requiring a defendant to disgorge its entire profit earned from the sale of a design-patent-infringing product.  The statute reads: 
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, recoverable in any United States district court having jurisdiction of the parties.   
Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement. 
The question presented to the U.S. Supreme Court is "Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?"  For previous discussion on this blog of the case, the statute and its history, and the briefing leading up to today's oral argument, see here and previous posts linked therein.

Overall, I found this to be a fairly confusing argument.  It seems to me, however, that both sides and the government (as amicus curiae) ultimately are agreeing that the first step of the analysis is to identify the relevant article of manufacture, though there is some disagreement about exactly how you do that, with the government proposing a four-factor test that in the government's (but not Apple's) view shouldn't take into account the extent to which the design contributes to the demand for the article.  (Assistant Solicitor General Fletcher:  "[W]e say you should compare the scope of the patented design as shown in the drawings in the patent, how prominently that design features in the accused article, whether there are other conceptually distinct innovations or components in the article that are not part of or associated with the patented design, and finally the physical relationship between the patented design and the rest of the article" (p28).)  The second question is how much of the profit on the sale of the end product is attributable to that article of manufacture (not how much is attributable to the patented design of that article).  To answer this second part, the parties may need to present expert testimony on the cost of production and the extent to which the design drives demand for the article.  Some of the justices seemed to suggest that this sort of analysis requires some kind of apportionment or causation analysis, which may be contrary to Congress's intent, while others seemed to question whether the profit to be awarded in this case rightfully could include profit attributable to the internal working of the phone.   

I'm guessing, though it's only a guess, that the Court will adopt some sort of two-step test along the lines discussed at oral argument; and that, in order to determine what unit should be considered the relevant article of manufacture, the trier of fact may take into account whether that unit (including both its design and its functional attributes) is a substantial part of what drives the demand for the entire product.  This still entitles the patent owner to the entire profit from that unit, however one goes about determining what that is, and not just the profit attributable to the design.  It's still going to be a mess trying to explain all of this to a jury, though; and the idea that the owner of a design patent should get any portion of the profit beyond what is attributable to the design itself is economically irrational, even if that was what Congress intended during the administration of Grover Cleveland.

Update (Thursday, October 13):  For additional commentary on the oral argument, check out Sarah Burstein's post on Patently-O and MIchael Risch's on Written Description.

1 comment:

  1. I think your last sentence sums it up. The two factor test, as rational as it may be, is exactly what the Supreme Court ruled in Dobson v. Hartford. In that case, the court talks about the value of the weave, the dye, etc. -- all the components of a carpet, only one of which is covered by the design. And Congress promptly legislated around it. I don't know how you get around that while also interpreting the statute to provide for a better, more rational outcome.