Samsung v. Apple: When Is 'Total Profit' the Profit on the Whole Phone?

Samsung Electronics Co. v. Apple Inc., 580 U.S. 53 (2016), decided December 6, 2016 (No. 15-777), is the Supreme Court’s most important design-patent decision in more than a century — and the first time it had construed the design-patent damages statute, 35 U.S.C. § 289. A unanimous Court, in an opinion by Justice Sotomayor, held that the “article of manufacture” on which a § 289 total-profit award is calculated need not be the entire end product sold to consumers, but may be only a component of a multicomponent product. The ruling unsettled the assumption — worth hundreds of millions of dollars in this case — that infringing a phone’s design entitles the patentee to all the profit from the phone.

At a glance

• Case: Samsung Electronics Co. v. Apple Inc., 580 U.S. 53 (2016)
• Decided: December 6, 2016; Docket No. 15-777; opinion by Justice Sotomayor (unanimous, 8-0)
• Statute: 35 U.S.C. § 289 (infringer liable “to the extent of his total profit” on the “article of manufacture”)
• Holding: For a multicomponent product, the relevant “article of manufacture” under § 289 may be either the end product or just a component of it
• Disposition: Reversed the Federal Circuit and remanded; the Court declined to set the test for identifying the article of manufacture

The stakes: $399 million in total profit

The case grew out of the sprawling smartphone war between Apple and Samsung. A jury found that several Samsung smartphones infringed three of Apple’s design patents covering the look of the iPhone: a black rectangular front face with rounded corners, a similar front face with a surrounding bezel, and the colorful grid of icons arranged on a black screen. Because Samsung was found liable under § 289, Apple was awarded Samsung’s entire profit from the infringing phones — roughly $399 million.

That outcome flowed from a particular reading of the statute. Section 289 makes an infringer liable “to the extent of his total profit” on any “article of manufacture” to which the patented design has been applied. The Federal Circuit affirmed the full award, reasoning that the relevant article of manufacture had to be the smartphone as sold, because the individual components Samsung pointed to — the glass front face, for instance — were not separately sold to consumers. On that view, total profit meant total profit on the whole phone.

The textual question: what is an “article of manufacture”?

The Supreme Court framed the dispute as a two-step problem embedded in § 289. To award damages, a court must (1) identify the “article of manufacture” to which the infringed design was applied, and then (2) calculate the infringer’s total profit on that article. The case turned entirely on step one.

The Court’s analysis was a study in ordinary statutory meaning. An “article of manufacture,” it explained, is simply a thing made by hand or machine — a broad term that encompasses both a product sold to a consumer and a component of that product. Nothing in the word “article” or “manufacture” limits it to the finished item on a store shelf. The Court reinforced this reading with the rest of the Patent Act: the term “manufacture” in § 171, which authorizes design patents, has long been understood to reach components, and the design-patent examination practice itself permits claims to designs applied to portions of a product. If a design patent can claim the ornamental design of a single component, then the “article of manufacture” to which that design is “applied” can likewise be that component.

The Federal Circuit’s narrower rule — that the article must be the end product whenever the components are not sold separately — could not be squared with that text. The Supreme Court therefore reversed. Where a patented design is applied only to a component of a multicomponent product, an award of the infringer’s total profit on the entire product may overcompensate the patentee for a design that ornaments only a part.

What the Court left undecided

Having rejected the Federal Circuit’s rule, the Court conspicuously declined to announce its own. The parties and the United States, appearing as amicus, had offered a multi-factor test for identifying the relevant article of manufacture in a given case, but the Court found the record and briefing inadequate to adopt or refine any particular test. It remanded for the Federal Circuit to address, in the first instance, whether the relevant article of manufacture for each of Apple’s design patents was the whole smartphone or some component of it.

That deliberate restraint is the decision’s most-noted feature. Samsung tells us that “article of manufacture” can be a component; it does not tell us how to decide when it is. The result is a clear rule of statutory interpretation paired with an unresolved methodology — a combination that pushed the hardest work back down to the lower courts and, ultimately, to juries.

The aftermath: a four-factor framework on remand

On remand, the litigation supplied the test the Supreme Court withheld. Drawing on the government’s amicus submission, the district court adopted a four-factor inquiry for identifying the relevant article of manufacture: (1) the scope of the design claimed in the patent, including the drawings and written description; (2) the relative prominence of the design within the product as a whole; (3) whether the design is conceptually distinct from the product as a whole; and (4) the physical relationship between the patented design and the rest of the product, including whether the component can be separated. That framework, while not blessed by the Supreme Court, has become the practical reference point for post-Samsung design-patent damages disputes. The case between the parties ultimately settled before the framework produced a final appellate ruling on the merits.

Open questions

• No binding test. Because the Supreme Court declined to adopt a test and the case settled, no controlling appellate standard for identifying the article of manufacture has been established; the four-factor approach is influential but not mandated.
• Who bears the burden? Allocating the burden of proving the relevant article of manufacture — and the profit attributable to it — between patentee and infringer remains contested.
• Apportionment by another name? Section 289 was historically understood to reject the apportionment that governs utility-patent damages. Samsung reintroduces a component-level inquiry that resembles apportionment, raising the question of how far that resemblance goes.

Implications

• Total profit is no longer automatically the whole product. Defendants accused of infringing a design applied to one component can argue that § 289 profits should be measured on that component alone.
• Claim drafting shapes damages. How broadly or narrowly a design patent claims its article — whole product versus portion — now bears directly on the damages base, not just on infringement.
• The four-factor test is the working standard. Until an appellate court says otherwise, litigants should expect the article-of-manufacture question to be framed around the factors adopted on remand.
• Component-level proof matters. Both sides need evidence about the prominence, distinctness, and separability of the claimed design within the larger product.

Frequently asked questions

What does § 289 provide? Section 289 makes a design-patent infringer liable to the patent owner “to the extent of his total profit” on the article of manufacture to which the patented design has been applied — a remedy unique to design patents that, unlike utility-patent damages, does not on its face require apportionment.

Did Apple lose its damages award? The full $399 million award was reversed and the case remanded, but Apple did not lose on the merits of infringement. The Court held only that the damages base might be a component rather than the whole phone; the parties later settled.

How do courts now identify the “article of manufacture”? There is no Supreme Court test. On remand the district court adopted a four-factor inquiry — scope of the claimed design, its prominence, its conceptual distinctness, and its physical separability — which has become the de facto standard.

Authorities and sources

• Samsung Electronics Co. v. Apple Inc., 580 U.S. 53 (2016), slip opinion: Supreme Court (PDF)
• Full opinion and syllabus: Justia and Legal Information Institute
• Practitioner analysis of the remand and four-factor test: Mintz
• 35 U.S.C. § 289 (statutory text): Legal Information Institute