Federal Circuit Affirmed Jury’s Lost Profit Awards in Apple v. Samsung Patent Litigation

Apple Inc. v. Samsung Electronics Co., Ltd, et al., 786 F.3d 983 (2015)
United States Court of Appeals, Federal Circuit: Decided May 18, 2015

On appeal from a final judgment of the U.S. District Court for the Northern District of California, the Federal Circuit affirmed the jury’s finding that Samsung infringed Apple’s design and utility patents and then affirmed the damages awarded by the jury for the infringements, but reversed the jury’s finding and damages awarded for diluting Apple’s trade dresses on the grounds they are not protectable. The Federal Circuit found that Apple’s registered and unregistered trade dresses were “functional” under the factors applied by the Ninth Circuit in Disc Golf Ass’n v. Champion Discs, Inc., 158 F.3d 1002 (9th Cir. 1998) and therefore could not be protected under Ninth Circuit law. The Federal Circuit vacated the damages for trade dress dilution.

The damages awarded by the jury for Samsung’s infringement of Apple’s design patents – which were affirmed by the Federal Circuit – were based on the entire profits that Samsung earned on its infringing smartphones. On appeal, Samsung argued that the damages should have been limited to profits attributable to the infringement because of “basic causation principles” – Samsung contended that Apple failed to establish that the infringements caused any Samsung sales or profits. The Federal Circuit, however, rejected Samsung’s argument and held that the clear statutory language of 35 U.S.C. § 289 prevents courts from adopting a “causation” rule, as urged by Samsung, but rather explicitly requires “that an infringer ‘shall be liable to the owner to the extent of [the infringer’s] total profit.’” The Federal Circuit distinguished the case from a Second Circuit decision (Bush & Lane Piano Co. v. Becker Bros., 222 F. 902 (2d Cir. 1915)) cited by Samsung where the Second Circuit permitted an award of an infringer’s profits from the patented design of a piano case, but not the profits from the sale of the entire piano. The Federal Circuit reasoned that, unlike a piano and a piano case, the “innards of Samsung’s smartphones were not sold separately from their shells as distinct articles of manufacture”.

For Samsung’s infringement of Apple’s utility patents – which were also affirmed by the Federal Circuit – the jury found that, for certain Samsung phones found to infringe Apple’s utility patents, lost profits was an appropriate measure of damages since there were no reasonable non-infringing substitutes offered by Samsung in the marketplace. For the other Samsung phones found to infringe Apple’s utility patents, the jury awarded Apple a reasonable royalty for the infringement. The jury’s determination of the appropriate measure of damages was based on the Federal Circuit’s decision in Grain Processing Corp. v. Am. Maize-Prods., 185 F.3d 1341 (Fed. Cir. 1999) providing that the “patentee must ‘take[] into account any alternatives available to the infringer’” and that “’market sales of an acceptable non-infringing substitute often suffice alone to defeat a case for lost profits.’”

Had Samsung retained different financial experts to write an expert report and provide expert witness testimony, Samsung might have been able to convince the trier of fact that Samsung’s infringement, did not, indeed, cause Apple any lost sales or lost profits.

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