Samsung Gets New Shot At Trimming $400M Apple IP Award
Share us on: By Kyle Jahner
Law360, Washington (October 23, 2017, 5:26 PM EDT) -- A California federal court Sunday granted Samsung Electronics Co. Ltd. a new trial on a $400 million award to Apple over infringed smartphone design patents, and picked a new test to calculate damages after the U.S. Supreme Court nixed its logic in the first design patent case to reach the high court in more than 120 years.
The new damages trial formally gives Samsung a chance to cleave off part of the award. Last year’s Supreme Court decision found that while Section 289 of the Patent Act entitled Apple to all profits from the “article of manufacture,” that may refer to all profits from the entire final product or, critically, may just refer to profits from a component of the product — which could be significantly less.
District Judge Lucy H. Koh determined a new trial was needed. She eschewed proposals from both companies on what test should be used to calculate damages, choosing a four-part test floated by the solicitor general in an amicus brief. It considers the scope of the patented design, its relative prominence in the product, whether it’s conceptually distinct from the whole, and the physical relationship between the design and the rest of the product.
“For the purposes of the instant case, the court finds that the four factors proposed by the United States best embody the relevant inquiry, and so the court adopts these four factors as the test for determining the relevant article of manufacture for the purpose of [the relevant statute],” Koh’s decision said. “Each factor helps the factfinder think through whether the patented design has been applied to the product as a whole or merely a part of the product.”
A trial court granted Apple a $930 million award from Samsung for design patent, utility patent and trade dress infringement claims in 2014 — adjusted from an original $1.05 billion jury verdict in 2012 — before Samsung challenged the $400 million design patent award. The trial court and Federal Circuit relied on an 1887 statute that said a design patent infringer was liable for all profits of any resulting “article of manufacture,” but the Supreme Court unanimously reversed in December 2016 based on its definition of the phrase.
After setting a June 2018 trial date, Judge Koh heard arguments on proposed criteria to determine the relevant “article of manufacture.” Both companies had said that if the court rejected their own proposals, the solicitor general’s test would be acceptable, and Judge Koh said that test jibed with the only other jury instructions on Section 289 since the Supreme Court ruling.
Samsung had contended that an “article” excludes any component of a product that isn’t covered by the patent. But Judge Koh said that standard could never allow damages equal to the entirety of a multicomponent product’s profits, despite the high court explicitly leaving that possibility open, rendering Samsung’s idea overly restrictive.
Apple’s suggestion, meanwhile, lacked consideration of the scope of the patent, and Judge Koh said that, according to the statute, “the scope of the design patent must be a central consideration for the factfinder when determining the relevant article of manufacture.” She also rejected the final part of Apple’s four-part test because infringer’s intent “finds no support in the statute.”
The sides also sparred over both the burden of persuasion — i.e., who loses if evidence is closely balanced — and burden of production — the obligation to come forward with particular evidence. Judge Koh found that the patent-holding plaintiff, Apple in this case, has the burden of persuasion throughout. But the burden of production would start with Apple and, if met, shift to Samsung to provide evidence of an alternative definition of an “article” or profit calculations. The logic of such a burden shift is that the defendant may have product information or data allocating profits that the plaintiff may lack.
Apple had argued both burdens should shift once it established an article and profit damages, but Judge Koh said she found no indication Congress intended to ever shift the burden of persuasion, adding that placing that burden on the plaintiff aligns with utility patent damage law.
She also rejected Samsung’s effort to prevent burden-shifting on production because it was not explicitly allowed in the law, noting that the Federal Circuit has called for such a shift in areas of the law without an explicit statute.
The case centered on design patents for a black rectangular front face of a phone with rounded corners, a rectangular front face of a phone with rounded corners and a raised rim, and a grid of 16 colorful icons on a black screen.
The patents-in-suit are U.S. Patent Numbers D593,087; D604,305; and D618,677.
Apple is represented by William Lee, Mark Fleming, Lauren Fletcher, Eric Fletcher, Sarah Frazier, Steven Horn and Seth Waxman of WilmerHale and Harold McElhinny, Erik Olson, Nathan Sabri and Christopher Robinson of Morrison & Foerster LLP.
Samsung is represented by Kathleen Sullivan, William Adams, David Cooper, Cleland Welton II, Michael Zeller, B. Dylan Proctor, Victoria Maroulis and Brett Arnold of Quinn Emanuel Urquhart & Sullivan LLP.
The case is Apple Inc. v. Samsung Electronics Co. Ltd. et al., case number 5:11-cv-01846, in the U.S. District Court for the Northern District of California.
--Additional reporting by Dorothy Atkins and Matthew Bultman. Editing by Marygrace Murphy.
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