United States: What's In Your "Article Of Manufacture"?

Damages for utility and design patent infringement are generally governed by 35 U.S.C. § 284, which entitles prevailing patentees to compensatory damages that range from reasonable royalties to the patentees' lost profits. But there also is another kind of damages available for design patent infringement under 35 U.S.C. § 289: disgorgement of the "total profit" earned by an infringer who "applies" the "patented design" to "any article of manufacture." While Section 289 provides a means to recover potentially significant damages awards, it languished in relative obscurity for over a century, arising only in relatively rare design patent infringement cases, until recently.

Historically, the total profits disgorged under Section 289 were based on sales of the entire infringing product, regardless of the portion of the infringing product that was actually covered by the design patent. The Supreme Court changed this automatic "entire product" rule in Samsung Elecs. Co. Ltd. v. Apple, 137 S. Ct. 429, 436 (2016), by holding that, depending on the facts, the relevant "article of manufacture" could be either all or part of the infringing product.

By way of background, in late 2012, Apple won nearly $400 million in damages for Samsung's infringement of three design patents covering various aspects of the ornamental appearance of Apple's original iPhone product. See Apple Inc. v. Samsung Elecs. Co. Ltd., et al. , No. 11-cv-1846, Dkt. 1391 (N.D. Cal. Aug. 24, 2012). That figure represented 100 percent of Samsung's profits for sales of its phones that infringed the asserted designs. The United States Court of Appeals for the Federal Circuit affirmed this award. Samsung then appealed to the Supreme Court of the United States.

At this point, prevailing precedent held that the relevant "article of manufacture" for purposes of Section 289 was the entire infringing product and, therefore, that a victorious design patentee was always entitled to 100 percent of the infringer's profits from the sales of infringing products. In December 2016, the Supreme Court overruled that precedent and reversed the damages award provided by the jury. Samsung, 137 S. Ct. at 436. Explaining that an "article of manufacture" was "simply a thing made by hand or machine," the Court held that the relevant "article of manufacture" was not necessarily the entire infringing product, but instead could be one or more components of the product. Id. The Court illustrated how this analysis can turn on the particular facts at issue:

In the case of a design for a single-component product, such as a dinner plate, the product is the "article of manufacture" to which the design has been applied. In the case of a design for a multicomponent product, such as a kitchen oven, identifying the "article of manufacture" to which the design has been applied is a more difficult task.

Id. at 432.

The Court explained that a two-step process must be used to calculate Section 289 damages. Id. at 434. First, "identify the 'article of manufacture' to which the infringed design has been applied." Id. Second, "calculate the infringer's total profit made on that article of manufacture." Id. Significantly, however, the Court did not provide any substantive guidance about how to carry out either step; instead, it remanded the case for further development. Id. at 436. The Federal Circuit, in turn, remanded the case to the district court.

The Supreme Court's first step above is the tricky one—what is the best and most fair way to identify the appropriate "article of manufacture"? One possible standard for determining the relevant "article of manufacture" for Section 289 purposes was proposed by the United States Department of Justice ("DOJ") in an amicus brief it submitted to the Supreme Court in Samsung v. Apple.1 As explained below, several district courts have adopted the DOJ's test for determining the "article of manufacture," which has led to some interesting and perhaps unexpected outcomes in jury trials.

The DOJ specifically proposed a four-factor test for determining the "article of manufacture" under Section 289:

  • Factor 1: "[T]he scope of the design claimed in the plaintiff's patent, including the drawing[s] and written description, provides insights into which portions of the underlying product the design is intended to cover, and how the design relates to the product as a whole." DOJ Am. Br. at 27. Further, "the patent identifies [in its title and claim] the article of manufacture that the patentee views as the article to which the design is applied." Id. at 28 (citing Manual of Patent Examining Procedure § 1503.01). But a patent's title should not be considered conclusive. Id. For example, the inventor of a piano case design "should not be able to obtain profits on the piano as a whole simply by characterizing [the] invention as an 'ornamental design for a piano.'" Id.
  • Factor 2: "[T]he relative prominence of the design within the product as a whole." DOJ Am. Br. at 28. In this regard, the DOJ explained that "[i]f the design is a minor component of the product, like a latch on a refrigerator, or if the product has many other components unaffected by the design, that fact suggests that the 'article' should be the component embodying the design." Id. Alternatively, "if the design is a significant attribute of the entire product, affecting the appearance of the product as a whole, that fact might suggest that the 'article' should be the product." Id.
  • Factor 3: Whether the design is "conceptually distinct" from the product as a whole. DOJ Am. Br. at 28. For example, a book binding represents a "different concept" from the literary work it contains, such that "they are different articles." Id. at 29. According to the DOJ, "[i]f the product contains other components that embody conceptually distinct innovations, it may be appropriate to conclude that a component is the relevant article." Id.
  • Factor 4: The "physical relationship" between the accused design and the rest of the product. DOJ Am. Br. at 29. Per the DOJ, the relevant "article of manufacture" is likely a component when the design covers a component that "can physically separate from the product as a whole," "is manufactured separately from the rest of the product," or "can be sold separately." Id.

The DOJ also proposed that accused infringers should bear the burden to produce evidence that the relevant "article of manufacture" is less-than-all of the accused product. DOJ Am. Br. at 30-31. The Supreme Court acknowledged the DOJ's proposed test, but declined to address its merits because the parties had not briefed the issue. Samsung, 137 S. Ct. at 436.

At this point, no appellate court has blessed the DOJ's test or provided any guidance regarding how to apply it either in general or to any specific set of facts. Nevertheless, several district courts have generally adopted the DOJ's test and the results are eyeopening. For example, in the remand of the Samsung v. Apple/case, the district court decided to instruct the jury to apply the DOJ test (without much guidance as to how to do so.) The jury awarded Apple over $533 million in "total profits" derived from Samsung's infringing phones, more than $100 million more than the previous award. Several other district court cases similarly have decided to instruct the jury to apply the DOJ test on this "article of manufacture" issue. See Columbia Sportswear North America, Inc. v. Seirus Innovative Accessories, Inc. , No. 3:17-cv- 1781 (S.D. Cal.); Microsoft Corp. v. Corel Corp., et al. , No. 5:15-cv- 5836-EJD (N.D. Cal.).2 In all three cases, the juries awarded "total profits" amounting to 100 percent of the infringer's profits from its sales of the infringing products, at least in some form or another. We discuss each of these cases in more detail below.

Footnotes

1 A copy of the DOJ's amicus brief is available at: http://www.scotusblog. com/wp-content/uploads/2016/06/15-777npUnitedStates.pdf (last visited June 6, 2018).

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