In a unanimous ruling Tuesday, the Supreme Court held that Samsung will not have to pay $400 million to Apple after adapting aspects of the iPhone’s design into their own product, a decision many in the tech industry deemed a win for innovation.
A federal law mandates that any company found liable for violating a design patent on an “article of manufacture” must give its total profits to the patent’s owner. In this case, which began in 2012, Apple alleged that Samsung had infringed upon specific design elements of the iPhone to create its own smartphone, namely the black, rectangular build with round corners and 16 colorful icons on the front screen.
A jury found that Samsung’s design had infringed on that patent, and the circuit court upheld the ruling in Apple’s favor last year, awarding the entire $399 million Samsung made in profits from the phone to Apple. The case launched a debate about design patents in the modern era and the importance of design in addition to functions and capabilities.
While Apple and its supporters had argued that Samsung’s similar design would weaken protections of new creations, Samsung and its proponents said the laws would stifle innovation.
In its ruling last year, the appeals court noted that "an award of a defendant’s entire profits for design patent infringement makes no sense in the modern world," but that "those are policy arguments that should be directed to Congress."
The court added, "We are bound by what the statute says, irrespective of policy arguments that may be made against it."
But the Supreme Court disagreed.
Justice Sonia Sotomayor wrote for the court, saying that such “articles of manufacture” can be defined in two ways: the entire product marketed to consumers, like the phones, or just pieces of the product that infringe on the patent, like its design. In ruling that the “article of manufacture” is always the entire product and not its components, the lower court made a judgment in error, the nation’s highest court found.
“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,” Justice Sotomayor wrote. “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.”
The case was the first design patent issue presented to the court in more than a century, and many had come to believe that design patents as applied to an entire product were out of touch with modern innovation. They argued that the penalties, such as the nearly $400 million one levied against Samsung, could be disproportionate to the offense and make companies wary of innovation overlap.
While the court failed to determine whether the whole phone or parts of it constituted the “article of manufacture,” its ruling did overturn a large swath of patent law.
"No longer can a patent holder get all of the profits from the sales of a product infringing a design patent," said Case Collard, an intellectual property partner at Dorsey & Whitney, reported USA Today. "Instead, they may recover the profits attributable to the infringing feature."
The Supreme Court remanded the case to the appeals court to determine the size of the penalty Samsung should pay.