Apple and Samsung have been engaged in litigation in the USA since 2011 over the issue of whether various Samsung smartphones infringed a number of Apple’s design patents. Last year, the US Federal Circuit affirmed a jury award of $399 million of damages in favour of Apple, comprising Samsung’s entire profit on the sale of those smartphones. On 6 December 2016, the US Supreme Court intervened in the latest chapter in this long-running saga to reverse the Federal Circuit’s decision and remand it back to that court for further consideration.
Notably, this was the first occasion in which the Supreme Court had looked at a design patent case in over a century. However, it had also seemed to be a rare opportunity for judicial clarity on a controversial issue – for infringements involving multi-component products, should damages be calculated based on the value of the whole end product sold to consumers, or on the basis of only a particular component of that product?
This is an issue regularly arising in disputes regarding what constitutes a FRAND royalty for standard essential patents, an area in which there is still little judicial guidance in the US or Europe. The Supreme Court’s judgment offers little new insight. Instead, it focuses almost entirely on the meaning of the wording “article of manufacture” in the relevant statute (35 USC §289). The Federal Circuit had previously held that only the entire smartphone could be an article of manufacture, as its components were not sold separately to ordinary consumers. The Supreme Court reversed this, holding that “article of manufacture” encompasses both a product as sold to a consumer and a component incorporated into that product, even though not sold direct to consumers.
The Supreme Court declined to comment on whether the relevant articles of manufacture at issue in the case were the entire smartphones or the particular smartphone components, remanding this question to the Federal Circuit. For (F)RAND royalty calculations, a US Court of Appeal has previously suggested that different cases may require different methodologies for damages models (see here). If the Supreme Court had provided a more wide-ranging decision, it might have included useful guidance as to when it’s appropriate to base damages on the value of an entire product, and when the value of a component alone is more suitable.
As things stand, we will have to continue to wait to see what the Federal Circuit decides on remand. Alternatively, the judgment of the UK High Court in the FRAND case Unwired Planet v Huawei, due to be handed down in early 2017, may offer us more to get stuck into.