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US court backs Samsung on Apple patent case award

The US Supreme Court has thrown out a $399m patent damages award against Samsung to Apple, in a unanimous verdict in favour of the Korean electronics group.

The five-year-old case between the two smartphone market leaders could now continue for much longer, after the justices ordered the lower Federal Circuit court of appeals to reconsider the basis upon which the damages were originally calculated. 

While the decision does not change the original verdict in 2012 that Samsung copied the iPhone’s designs with its Galaxy smartphones, it could alter the amount it owes to Apple. 

Legal experts said that the ruling will make it much more difficult to determine how much a patent infringer must pay in cases that involve complex products, such as smartphones.

“It is possible that we will enter into years of turmoil over the proper tests for calculating damages for infringement of a design patent,” said Rick McKenna, intellectual property lawyer at law firm Foley & Lardner. 

October’s oral arguments marked the first time in more than a century that a design patent had been heard at the Supreme Court. At issue was a 129-year-old ruling by the US Congress that “it is the design that sells the article”. 

Samsung’s appeal asked the Supreme Court whether it was right to award damages for the entire profits of a smartphone if only a handful of patents, out of the thousands that make up such a complex product, were infringed. 

A California jury in 2012 awarded Apple $400m in damages after ruling Samsung infringed the iPhone’s design patents, as part of what was originally a $1bn award. Apple’s patents covered the iPhone’s black rectangular face with rounded corners and its grid of colourful app icons, designs which have since become familiar across the smartphone industry.

The Federal Circuit had upheld the California court’s original decision, because consumers cannot buy the individual components of a smartphone, only the finished product.

Appealing to the Supreme Court, Samsung argued that the sweeping damages award could stifle competition, diminish innovation and encourage abuse of the intellectual property system by so-called “patent trolls”. Other leading tech companies including Alphabet and Facebook supported Samsung’s case. 

Apple enlisted dozens of star designers, including Lord Norman Foster and Calvin Klein, who said that overturning that ruling would undermine the value of their intellectual property. 

The Supreme Court on Tuesday said it agreed with Samsung, “because the term ‘article of manufacture’ is broad enough to embrace both a product sold to a consumer and a component of that product”. 

However, the court’s decision did not finally resolve the issue because neither Apple nor Samsung provided “adequate briefing” about whether in this particular case, the “relevant article of manufacture” is the smartphone itself or a particular component of the device. 

“Unfortunately, the Court did not give lower courts any guidance as to how to determine whether the ‘article of manufacture’ in any given case is the product sold to consumers or a component,” said Mark McKenna, a law professor specialising in intellectual property at the University of Notre Dame. “Presumably it has something to do with the nature of the design patent claim, but the Court did not make that clear.”

“The question before the Supreme Court was how to calculate the amount Samsung should pay for their copying,” Apple said. “Our case has always been about Samsung’s blatant copying of our ideas, and that was never in dispute. We will continue to protect the years of hard work that has made iPhone the world’s most innovative and beloved product. We remain optimistic that the lower courts will again send a powerful signal that stealing isn’t right.”

Via FT