United States: Apple v. Samsung: The Parties Weigh In On Next Steps

On Tuesday, December 6, 2017, the United States Supreme Court issued its first opinion in a design patent case in more than 120 years.  In the long-running smartphone saga between Apple and Samsung, the issue before the Supreme Court was the proper interpretation of a 35 U.S.C. § 289.  Under this statute, when an infringer is found to have applied a patented design to any "article of manufacture," that infringer is "liable to the [patent] owner to the extent of his total profit, but not less than $250[.]"

Relying on this statute, a jury awarded Apple $399 million in damages for Samsung's infringement of three of Apple's design patents, which are directed to the design and shape of the front face and bezel of smartphones, as well as arrangement of application icons on a screen.  On appeal, the Federal Circuit affirmed the jury verdict, identifying the entire Samsung smartphone, not its components, as the only permissible "article of manufacture" to be used for the purpose of calculating damages under § 289 because consumers could not purchase the components separately from the smartphone.

At the Supreme Court, the parties, including the Solicitor General, proposed different tests for the application of § 289 and calculation of profits. But, in a unanimous opinion, the Court made only a limited ruling that while the relevant "article of manufacture" may be the end-product as sold, it may also be only a component of that end-product.   Further, the Supreme Court broadly outlined two steps for a test under § 289:

(1) identify the "article of manufacture" to which the infringed design has been applied; and

(2) calculate the infringer's total profit made on that "article of manufacture."

But the Supreme Court declined to further develop a test for identifying the "article of manufacture" in general, or to specifically make a finding in this case, returning it to the Federal Circuit.

Under the Federal Circuit's Internal Operating Procedures (IOP 15), on remand from the Supreme Court, the Federal Circuit may, by majority vote of the active judges:

(i) retain the case (presumably with the en banc court);

(ii) refer the case to the original panel (or to the remaining judges and one or two newly selected judges); or

(iii) refer the case to a newly selected three-judge panel.

Here, Chief Judge Prost, Judge O'Malley, and Judge Chen—all still active judges— served on the original panel.  Apple Inc. v. Samsung Electronics, Co., 786 F.3d 983 (Fed. Cir. 2015).  Prior to Samsung's writ of certiorari, the en banc Federal Circuit denied Samsung's petition for rehearing.  Thus, it seems reasonably likely that the Federal Circuit would send the case back to the original panel.

Once this decision has been made, under IOP 15.3, the en banc court or the panel may require the parties to file statements on their positions regarding action to be taken by the court on remand.  The Court may also require additional briefs, schedule oral argument, summarily dispose of the case, remand to the trial court, or take any other action consistent with the opinion of the Supreme Court.

On January 12, 2017, the Federal Circuit issued an order reinstating the appeals and vacating the Court's prior judgment from 2015.  The parties have also filed statements, on their own accord, about next steps in the case.

On December 27, 2016, Apple filed a statement supporting continued panel review.  In its statement, Apple asked the panel to retain the case and affirm the district court's $399M judgment.  According to Apple, no further trial court proceedings are needed, because the identity of the relevant "article of manufacture" was never disputed at trial.  Moreover, Apple argues that based on the evidence presented, there was no basis on which the jury could have awarded infringer's profits on anything other than Samsung's entire phones. Because identification of the article of manufacture is a question of fact, and because, in Apple's view, Samsung failed to offer evidence supporting any other determination of "article of manufacture" other than the jury's conclusion that it should be the entire smartphone, the panel should affirm the jury's verdict.  Finally, Apple proposes that the panel could decide this case without further briefing, but suggests an abbreviated briefing schedule if the panel does not agree.  Apple reiterated many of these points in its reply statement, filed on January 18.

On January 12, Samsung filed a competing statement urging the Federal Circuit not to affirm the original award and instead to remand the case back to the district court.  In Samsung's view, the Supreme Court's ruling invalidates the premise underlying the jury's verdict and removes any basis for the $399M award.  As a result, Samsung argues that it is entitled to a new trial before a properly-instructed jury, and further that this trial should take place before the Federal Circuit resolves any "open legal issues" from the Supreme Court's decision.  Samsung argues that the Federal Circuit will have the benefit of an entire legal record before it.  In the event that the Federal Circuit does not remand, Samsung also requests briefing to explain its positions on how to define the relevant articles of manufacture, the methods to determine profits therefrom, who bears that burden of proof, and whether a judge or jury should resolve them.  On January 23, 2017, Samsung filed a reply arguing that Apple has forfeited its arguments for affirmance, having not raised them previously, and continuing to argue that the district court erred in refusing to give its proposed jury instruction about the distinction between the article of manufacture and the product.

In addition to the unsolicited statements and replies filed by each party thus far, both parties have proposed that if the Federal Circuit should not agree with its initial proposal (for affirmance or remand to the district court), then each party argues that it should be permitted to file the opening brief and reply brief, to advocate for its position and the opposing party should only be permitted a single brief.

In short, absent settlement, the case appears far from over.  The panel may agree with Apple (to affirm) or Samsung (to remand) or it may decide that it needs to consider the legal issues related to the test for identifying the "article of manufacture."  Unless the Court agrees with Apple, the case will eventually be passed back to the District Court for the Northern District of California to conduct a new damages trial.  At the new trial, the parties would be permitted to present evidence and arguments relevant to the new test (the Federal Circuit develops one) and render a verdict with a new damages award.  Given the history of this case, it is likely the losing party will then appeal to the Federal Circuit once again, and perhaps seek another review by the Supreme Court.

UPDATE: On February 7, 2017, the Federal Circuit rejected both sides' arguments and remanded this case to the district court for further proceedings. The Federal Circuit found that remand was appropriate because the district court is "better positioned to parse the record to evaluate the parties' competing arguments" about the jury instructions and determine if any additional proceedings, including a new damages trial, are needed.  The Court noted that the district court will "have the opportunity to set forth a test for identifying the relevant article of manufacture for the purposes of § 289, and to apply that test to this case."  The case now heads back to the Northern District of California.

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