Wednesday, August 30, 2017

District Court Mulls Design Patent Damages – Apple v. Samsung on Remand

Editor's Note:  The following guest post was authored by Thomas P. McNulty, Counsel at Lando & Anastasi LLP.  

In last year’s Samsung v. Apple decision, the Supreme Court held that the “article of manufacture” for which total profits are awarded upon a finding of design patent infringement may be either “a product sold to a consumer [or] a component of that product.”  The Supreme Court declined to establish the test for identifying the article of manufacture, instead remanding for consideration by the court below.

Given that the Supreme Court substantially changed the interpretation of damages under 35 U.S.C. § 289, it would seem clear that a new damages trial would be required. Nothing in litigation, however, is so simple. Instead, upon remand, the district court considered the parties positions on whether a new trial is warranted.  In the meantime, we will examine the procedural questions addressed by the district court in connection with its order requesting further briefing.

Apple first argued that Samsung had waived its right to a new trial on damages by failing to properly and timely object to the exclusion of its “article of manufacture” theory. This argument seemed strange, given that Samsung had appealed the damages decision to the Federal Circuit and then to the Supreme Court – wouldn’t Apple have waived its waiver argument by not having raised it above? In any event, the district court found that Samsung had raised its article of manufacture theory in its trial brief and again in a motion for judgment as a matter of law and had objected to the court’s refusal to instruct the jury on its damages theory. In light of this, the district court determined that Samsung had not waived its right to seek a new trial.

The court next considered whether the instructions that it actually gave the jury were sufficiently out of tune with the Supreme Court’s decision on damages as to constitute legal error. At trial, the court had instructed the jury:
If you find infringement by any Samsung defendant and do not find Apple's design patents are invalid, you may award Apple that Samsung defendant's total profit attributable to the infringing products. The “total profit” of Samsung Electronics Company, Samsung Electronics America and/or Samsung Telecommunications America means the entire profit on the sale of the article to which the patented design is applied, and not just the portion of profit attributable to the design or ornamental aspects covered by the patent… If you find infringement by any Samsung defendant, Apple is entitled to all profit earned by that defendant on sales of articles that infringe Apple's design patents.
The district court determined that this instruction failed to adequately inform the jury that it could award damages based on a product sold to a consumer or a component of that product,” and instead would direct a jury to find that the article of manufacture and complete product are the same. The court further found that Samsung’s proposed instruction, stating that “the article to which Apple's design was applied may be the same as or different from Samsung's devices as sold because devices offered for sale may incorporate a single article of manufacture or several articles of manufacture,” would have corrected this error, and concluded that the jury instruction did constitute legal error.

Apple next argued that a new trial is not necessary because no evidence was presented as to Samsung’s profits on an article of manufacture that was less than the whole Samsung phone, meaning that Samsung could not prove lower profits than those awarded at the first trial. Apple acknowledged that, as the patentee, it bears the burden of proving damages, but contended that the burden of proving damages once the article of manufacture was found to be less than the full product was not clear. Here, the district court noted that, if Samsung bore the burden of proving its profits on less than a full phone, the refusal to provide Samsung’s proposed instruction might have been acceptable because Samsung might have been unable to point to evidence of such damages. In other words, if Samsung was required to prove profits on less than the full phone, the legal error in the jury instructions might have been harmless, because the evidence did not allow Samsung to prove lower damages.

The district court deferred on deciding whether a new trial is warranted, and instead requested additional briefing on the following issues:
  1. the proper test for identifying the article of manufacture;
  2. whether the identification of an article of manufacture a factual question, a legal question, or a mixed question of law and fact;
  3. allocation of the burden of proving the relevant article of manufacture; and
  4. allocation of the burden of proving total profits on the article of manufacture. 
Briefing on these issues is to be completed by the end of September, with a hearing scheduled for October 12, 2017.  

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