On Tuesday, a years-long courtroom battle between Samsung and Apple — one that began way back in 2011, when Apple filed a patent lawsuit against the Seoul, South Korea-based electronics company for infringing on its iPhone’s iconic design — came to a suitably dramatic end. In a unanimous decision, the U.S. Supreme Court threw out the almost $400 million in damages Samsung had been ordered to pay Apple by a lower court.
At issue before the Court was how the damages were to be calculated. Samsung, which was ruled to have violated Apple’s design patents by a jury in 2012, initially found itself on the hook for the profits generated by each of the 11 patents determined to have to have infringed. Effectively, the company would have had to pay Apple a percentage of each sale. The justices disagreed, ruling that the company only needed to pay damages on the infringing components of those smartphones, rather than the smartphones themselves.
They were persuaded by the “text of the law,” The Hill reports. In delivering the Court’s majority opinion, Justice Sonia Sotomayor wrote that “article of manufacture” — the legal term that refers to both a product sold to a consumer and a component of said product — has a “broad meaning,” and that an “article” could refer to “a particular thing.” In Samsung’s case, an “article” could be an infringing smartphone’s appearance, for instance, or software feature.
The U.S. Court of Appeals for the Federal Circuit will now determine exact damages, but they’re likely to be far less than the hundreds of millions Samsung might have otherwise paid. The company faced $1 billion in penalties, a total representing all profits generated by the infringing smartphones. That fine was subsequently reduced to $548 million.
“We decline to lay out a test for the first step of the damages inquiry in the absence of adequate breifing by the parties,” Sotomayor said. “The Federal Circuit may address any remaining issues on remand.”
Recalling the design of the Volkswagen Beetle
To understand the line of questioning from the Supreme Court justices to the two firms’ attorneys, you need to take a look at the law and the argument in the case.
Design patents, as the name suggests, protect the unique look of a product. Utility patents protect the functional parts of a product. In the original 2012 case, Apple sued Samsung saying it copied various design patents of the iPhone. The jury ended up siding with Apple, agreeing that Samsung copied the black rectangle shape and rounded corners, the bezel, and a patent that covered the graphical layout of icons on the iPhone. The Korean giant was ordered to pay “total profits” of the phones in question.
“Whoever during the term of a patent for a design, without license of the owner, applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or 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 law states (emphasis ours).
Samsung, and many of its supporters, believe the reward for infringing a design patent should not involve the “total profits.” Since a smartphone is filled with thousands of patented components, infringing design patents should not amount to the total profit of the smartphone. Apple counters that the whole design sells the phone — removing the need to pay total profits would hamper legal protection for new products and design.
In recent court filings, Apple has said while “total profit” should mean that Samsung has to pay the total profit of a sale, “article of manufacturer” could mean specific features and not the whole product. The company said in court that significant financial damage would deter people from stealing designs of products.
One line of questioning that was prevalent throughout the hearing concerned how to identify the value of a design from the overall product, according to CNET.
“If I was a juror, I wouldn’t know what to do,” Justice Anthony Kennedy reportedly said. Justices were skeptical about Samsung’s argument, according to The Verge, as Justice Sonia Sotomayor suggested that the design of a phone “might drive the sale.”
The design of the original Volkswagen Beetle was brought up, as it features many components inside it. Justice Samuel Alito said design was important, but it isn’t the only driving force behind sales.
“Nobody buys a car, even a Beetle, just because they like the way it looks,” Justice Alito said, according to the Verge.
But while the car has to perform all the other functions cars are expected to do, Justice Elena Kagan said perhaps its design was indeed a primary motivator in sales.
In its brief, Samsung raised the point that if Apple wins, it would mean someone who infringes on the design of a “patented cupholder” may have to pay the entire profits on a car. It’s why Samsung wants “articles of manufacturing” to mean the specific components of a phone, rather than the whole phone itself.
“The infringement wasn’t found on the whole phone,” Samsung attorney Kathleen Sullivan said after the hearing. “It asserted three narrow patents. The patent doesn’t apply to the internals of the phone, so Apple doesn’t deserve profits on all of Samsung’s phone.”
She said awarding total profits for infringing design patents would “devalue” the other important patents in a smartphone, according to CNET. A device typically has about 250,000 patented features, Sullivan noted.
“We firmly believe that strong design patent protection spurs creativity and innovation,” said Noreen Krall, Apple’s chief litigation officer, after the hearing. “And that’s why we’ve defended ourselves against those who steal our ideas. Eleven times now, Samsung has been found guilty of intentionally and blatantly copying the iPhone. Every court at every level has agreed. We think that’s wrong and that it poses chilling risks to the future of design innovation.”
The Supreme Court has not ruled on a design patent case for more than a 100 years, so it is hard to see how this will play out. Suggestions were raised to send the case to lower courts, while the Supreme Court creates new rules on how damages for infringing design patents are awarded and judged.
A brief history
It all began six years ago in 2010, when the iPhone-maker warned Samsung that the Korean giant’s tablets and smartphones infringed on Apple patents. The company did not sue immediately because Samsung was a “trusted partner” — Apple spent billions of dollars on Samsung screens, processors, and other components.
Apple had already gone after another tech giant, HTC, in the same year. The two settled with a cross-licensing patent deal in 2012.
In October 2010, executives from Samsung and Apple meet and the latter suggests Samsung pay $30 per phone and $40 per tablet for infringing on design patents with the iPhone and iPad. Earlier in the year, HTC agreed to pay Microsoft $5 for every Android device ever sold. Apple’s suggestion was too high for Samsung and the company declined.
Apple sued Samsung the following year for “slavishly” copying the iPhone’s design. Samsung countersued for 3G patents, and filed claims in Germany, Japan, and South Korea.
The next six years involved Apple getting judges to ban Samsung devices in various countries including an iPhone and iPad sales ban in Germany that lasted a few hours, failed settlement talks, and even forcing Samsung and Google to scale back the universal search bar on the Galaxy Nexus and Galaxy S3. In the U.K., Apple also had to post a public apology that said Samsung did not copy its designs.
In 2012, however, a trial court verdict was reached in the U.S. The jury sided with Apple, awarding the U.S company $1 billion in damages. That did not stop the iPhone maker, as it quickly followed up with another lawsuit that targeted newer Samsung devices. In 2013, the judge that presided over the first case found that the damages Samsung had to pay were calculated incorrectly. Around $450 million of the $1 billion was invalidated and a retrial kicked off later in the year.
In another blow to Samsung, the retrial earned Apple an additional $290 million in damages, bringing the total Samsung has to pay to $929 million, a little short of the original $1 billion victory. Samsung immediately appealed the decision. In December 2015, Samsung agreed to pay $548 million to Apple.
That amount was based off total profits made by Samsung — and this is where the Supreme Court comes in.
Who’s with Apple
More than a hundred designers and educators support Apple. They are industry professionals and have provided product design services to companies such as Apple, AT&T, Calvin Klein, Coca-Cola, Ford, General Electric, General Motors, Hewlett-Packard, Google, IBM, the New York Stock Exchange, NASA, Samsung, and more.
Some other notable names include Raymond Riley, executive creative director at Microsoft, Bruce Claxton, the former senior director of design at Motorola Solutions, Calvin Klein, the founder of the fashion brand, Sohrab Vossoughi, a former senior industrial designer at HP, and others.
Who’s with Samsung
A host of Silicon Valley companies are rooting for Samsung, including Google, Facebook, eBay, Dell, HP, Newegg, Vizio, and a smaller coalition of other tech firms. Non-profits like the Electronic Frontier Foundation also support the South Korean giant, as do 50 intellectual property professors from universities like Stanford, Georgetown, Notre Dame, and more.
What happens after?
Samsung’s win sets a precedent that could affect other design cases. And depending on the lower court’s decision, it could mean Samsung owes less money to Apple.
If Apple were to have won, Samsung would’ve had to pay up, and there likely would have been more trials related to other design patent cases between the two.
The decision won’t impact consumers, but it will affect how future design patent disputes are handled.
Article originally published in October 2016. Updated on 12-6-2016 by Kyle Wiggers: Added news of Supreme Court’s decision to toss damages.