The Apple May Not Fall Far from the Fashion Industry

Edited by Catherine Holland

In 2011, Apple sued Samsung alleging among other things that various portions of Samsung smartphone products infringed claims of certain design patents owned by Apple (Apple Inc. v. Samsung Electronics Co., Ltd.). In 2012, the jury found that Samsung infringed on several of Apple’s patents and awarded Apple 1.1 billion in damages.  The damages were subsequently reduced to $400 million on appeal.

Samsung then appealed to the U.S. Supreme Court. In its appeal, Samsung argued that its liability for damages should be calculated using only the portion of the profit tied to the specific patented design aspect. Apple argued that it was entitled to damages based upon the profits Samsung earned by selling the product, even if the infringing components comprised a small part of the final product.

On December 6, 2016, the Court sided with Samsung, throwing out the $400 million damages award by the appeals court, and holding that damages awards for design patent infringement need not be based upon the total profit for the entire product, but instead, may be calculated based upon the profits for a specific component of the product. (Samsung Electronics Co., LTD., et al v. Apple Inc.)

As part of the analysis, the Court noted first that companies liable for infringing a design patent on an article of manufacture are liable for their total profits. Under 35 U.S.C. § 289, 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.”

The Court defined “article of manufacture” as “an article made by hand or machine [that can] encompass either a product sold to a consumer or a component of that product.” Thus, according to the Court, the term “article of manufacture” is broad enough to encompass both a product sold to a consumer as well as a component of that product.”

The Court’s holding now requires a recalculation of damages from Samsung’s design patent infringement based upon a calculation of the profits from the infringing components and not merely the profits from the final product.

This case may have a ripple effect in the fashion industry. The threat of a design patent infringement lawsuit should continue to be a deterrent for manufacturers of direct knock offs.  In cases where the infringing article combines both protected design elements and unprotected fashion elements, however, this new framework for calculating damages may substantially reduce the damage award.