Eight Telling Quotes from Apple v. Samsung Oral Arguments

So it finally comes to this. After five years of litigation, a dozen appeals to the Federal Circuit, and close to 1 Million tweets, the Apple v. Samsung case goes before the Supreme Court today for oral arguments. The sole issue being decided on appeal is whether an infringer's profits should be apportioned under 35 U.S.C. § 289. Or, as Samsung poses the question - "Where a design patent is applied to only a component of a product, should an award of infringer’s profits be limited to those profits attributable to the component?"

We're lucky to be reporting live from the Supreme Court today as the Supreme Court hears its first design patent case in over 100 years.  For this initial post, we'll be focusing on some of the more telling questions (and answers) from the justices during the hearing.   Continue reading after the jump for some of the more noteworthy quotes and our reaction.

Before we get to the quotes, though, we'd like briefly give our take on an issue likely to rear its ugly head today.  Recently, much of the discussion surrounding this case has turned to the question of "what constitutes an 'article of manufacture?'" However, this question appears to be a red herring, in our opinion. § 289 states that "whoever ... applies the patented design ... to any article of manufacture ... shall be liable to the owner to the extent of his total profit."  The reference to an "article of manufacture" in this passage merely defines infringement (i.e. applying a patented design to an article of manufacture).  It has no role in defining the scope of the remedy, which uses language exceedingly clear - "total profits."  Whatever an "article of manufacture" is or isn't, that question plays no role in the amount of profits disgorged.  Once infringement is determined, there is only one, unambiguous remedy under § 289.

Unfortunately, it looks like the Court largely disagrees, based on the below questions from the Justices (which are quoted as closely as possible, but somewhat paraphrased):

"Wouldn't one option here be to allow for a de minimis exception to the total profits rule?" ~ Justice Kennedy

Good idea justice Kennedy!  § 289 was intended to be the codification of an equitable remedy.  Rather than undoing what Congress deliberately chose to do by outlawing apportionment, just create an exception to the total profits rule for de minimis infringement (e.g. the cup holder in the car scenario) under the Court's inherent equitable powers.

"A consumer could see the article of manufacture as being just the shell [of a VW Bug for example], but your expert never opined on this point."  ~ Justice Sotomayor

There was a great deal of discussion about the VW Bug design and how a jury would determine whether the article of manufacture there was just the outer shell or the whole car.  The Justices seemed to be attacking the sufficiency of Samsung's evidence, even under its own proposed standards, and may be angling to deny the appeal due to waiver of their arguments below.  Let's hope.

"If we determined that the 'article of manufacture' in any case is just a component, how would we determine the profits on that component?"  ~ Justice Ginsberg

All sides seemed to have conceded that total profits should be limited to the profits for the article to which the design was applied and that the "article" could be less than the entire thing sold. But nobody had a good model for how to determine attributable profits once a jury makes that threshold determination.   The Solicitor General seemed to suggest that attributable profits should simply be determined by calculating the components' proportional share of the costs of the profits and then assuming that the same proportion of profits would be attributable to that component.  Since most designs are part of the exterior or housing for most products, such an interpretation has the potential to destroy Section 289.

"Aren't these tests getting close to apportionment?  Once you identify 'the article' how is this any different from apportionment?" ~ Justice Kennedy

Bingo!  Justice Kennedy seems to be the only Justice who understood where Judge Ko was coming from in her decisions below.  No matter what you want to call this new "article to which the design is applied" argument, it's really just apportionment in disguise.  Judge Koh was right to deny Samsung's repeated attempts to apportion total profits, but sadly, it sounds like the Supreme Court is moving towards apportioning total profits, although I'm sure they will give it a really cute name and some nonsensical factors to thoroughly confuse juries.

"This is an easy case, isn't it?  I mean, how is the design applied to the chips on the interior of the phone?" ~ Justice Roberts.

Sigh. This is the fundamental problem with the "article to which the design was applied" argument. It is entirely based on notions of damages and causation, whereas 35 U.S.C. § 289 is purely an equitable remedy standing for the proposition that one cannot profit from a thing that infringes.  Samsung's phones were found to infringe.  Therefore, the total profits from the thing that infringed - the phone - is turned over.  Congress never intended judges or juries to determine what part of the thing infringed.  It is simply irrelevant.

"It would make logical sense to me that the Volkswagen body, not the innards are the article of manufacture" ~ Justice Sotomayor

I think the fundamental flaw in this type of reasoning is that it reads so much into Section 289 that simply is not there.  For example, the statute does not say that the design must be "applied to the entire article."  Again it simply defines infringement - applying a design to an article of manufacture - and then sets forth a remedy - total profits.  To quote Justice Roberts - "This is an easy case, isn't it?"

"What about the situation where the thing that makes the product distinctive doe not cost much to manufacture or develop, but that turns out to be why the product is so successful.  But the government says that should not come into the first part of the analysis (i.e. determining what the underlying article of manufacture is)?"  ~ Justice Kagan

The Court really struggled with how to determine what the underlying article to which the design has been applied even is.  The government takes the position that it is irrelevant whether the design was a driver of overall sales when making this factual determination.  The entire Court seemed to be grappling with so-called "nifty" designs.  However, this sort of confusion is the precise reason why Congress did away with apportionment in the first place.  We do not need Judges determining which designs are nifty and worthy of "total profits" vs. others that are simply a throw-away component.  That is the very reason for the black and white language of Section 289.

"The burden is always on the Plaintiff to prove damages."  - Counsel for Samsung 

I include this quote last, even though it is not from a Justice, because it underscores one of the biggest problems with the oral arguments today.  This is not a damages case.  It is a case about an equitable remedy, yet I do not believe the word "equity" was spoken at all today.  Unfortunately, the oral arguments in Apple v. Samsung suggests that Section 289 will be reinterpreted according to damages principles and much of Congress's intent will likely be lost.  I, for one, am holding out hope that Justice Kennedy can slam on the brakes before Section 289 is reinterpreted and that Justice Thomas (who asked no questions) has a good understanding for the equitable underpinnings of Section 289.

We will wait and see what the Court does with this case and will report back just as soon as a decision comes down.