Supreme Court may reel in Apple v. Samsung damage award

The long legal war between Apple and Samsung reached the Supreme Court today. For the first time in a century, the High Court considered what the limits of “design patents” should be.

Until they took up a starring role in Apple v. Samsung, design patents were like the poor, long-lost cousins of the better-known “utility” patents that cover machines themselves.

Here’s how this long-lasting technology case made its way to the high court: in 2012, the first Apple v. Samsung trial ended with a jury slapping Samsung with a $1.05 billion verdict for infringing Apple patents and trademarks. After appeals, that got whittled down to $548 million based entirely on patent infringement. With this Supreme Court case, Samsung is looking to get back the majority of that—the $399 million that’s based on three design patents.

The patents at issue are D618,677 (a black rectangle with rounded corners, shown above), D593,087 (with bezel on surrounding rim), and D604,305 (a colorful grid of 16 icons.)

In its petition to the Supreme Court (PDF), Samsung argued that the huge design-based award, which amounts to 100 percent of its profits for several types of phones, is a “ridiculous” result that will lead to a “flood of extortionate patent litigation.”

Just a part of the phone?

In today’s argument (transcript, PDF), Samsung lawyer Kathleen Sullivan explained her client’s point of view that a damage analysis needs to first consider what the “article of manufacture” is in the first place.

“The article of manufacture may be a part or portion of the phone, and you should look at two things, Your Honor,” said Sullivan. “If, as sometimes happens within a company, one division makes the glass front face and another division makes the innards of the phone, you would find out the transfer pricing between the divisions.”

“Suppose you had a case where it’s a stroke of genius, the design,” posited Justice Anthony Kennedy. He continued:

Suppose the Volkswagen Beetle design was done in three days, and it was a stroke of genius and it identified the car. Then it seems to me that that’s quite unfair to say, well, we give three days’ profit—but then it took 100,000 hours to develop the motor… Apple could have said well, people really like the front face disproportionately to all the other parts of the phone, so they could have used consumer survey evidence to prove that.

No reasonable jury could have found the entire product was at issue here for two reasons, Sullivan said.

“One, design patents cover ornamental appearance,” she said. “They cannot, by definition, cover the innards of the phone. So the functional innards of the phone cannot be part of what is claimed by the design patent.”

Next up was Brian Fletcher, a lawyer from the Solicitor General’s office, which was asked to weigh in on the case. Fletcher said the appeals court was correct when it found that a design patent infringement can result in an award of total profits, but the court was wrong when it stated that the “article of manufacture” at issue is always the entire product.

Of course, when the product is sold together, that leaves the court with the question of how to divide up profits. Fletcher noted that that complex issue hadn’t been briefed at the Supreme Court, and it probably shouldn’t be detailed in their opinion.

Finally, Seth Waxman argued for Apple. He didn’t directly oppose the idea that an “article of manufacture” could be less than the entire phone—he just said that definitely wasn’t appropriate in this case.