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EFF Urges Supreme Court To Throw Out $399 Million Damage Award Against Samsung in Apple Smartphone Patent Case

June 7, 2016

EFF Urges Supreme Court To Throw Out $399 Million Damage Award Against Samsung in Apple Smartphone Patent Case

‘Total Profits’ Damage Awards For Infringing Design Patents Are Excessive, Unfair

Washington, D.C.—The Electronic Frontier Foundation (EFF) asked the U.S. Supreme Court today to reverse a ruling that required Samsung to pay Apple all the profits it earned from smartphones that infringed three basic design patents owned by the iPhone maker.

The $399-million damage award against Samsung, upheld by the United States Court of Appeals for the Federal Circuit in the Apple v. Samsung patent lawsuit, should be thrown out, EFF told the court in an amicus brief filed today with Public Knowledge and The R Street Institute. Forcing defendants to give up 100% of their profits for infringing designs that may only marginally contribute to a product’s overall look and functionality will encourage frivolous lawsuits and lead to excessive damage awards that will raise prices for consumers and deter innovation.

The smartphone design patents at issue in the case include a black rectangular front face with round corners, another for a similar face with a rim and a colorful grid of 16 icons.

"The patent system is supposed to offer fair reward for inventors, not excessive, unfair compensation that threatens our access to technology,” said Vera Ranieri, EFF Staff Attorney. "Such massive windfalls for patent holders will encourage more frivolous lawsuits."

A jury in 2012 held that Samsung’s phones infringed Apple’s utility and design patents; Apple was originally granted $1.05 billion in damages—that amount was later reduced. Samsung appealed to the Federal Circuit, which interpreted, wrongly EFF asserts, that under the Patent Act patent owners are entitled to the entire profit from products that use the patented design. Samsung, EFF, and other technology companies and public interest groups sought and won Supreme Court review of the case.

A more balanced alternative to the improper "winner takes all" approach adopted by the Federal Circuit would be to base damages on how much the infringing designs contributed to the overall value of the smartphones Samsung sold, EFF said.

If the Federal Circuit’s decision is allowed to stand it will create incentives for more design patent lawsuits to flood the courts. Any product or technology that may infringe on a design patent—regardless of whether the infringed design contributes just 1% of the value of a complex product and or whether the patent was intentionally infringed—could trigger the “total profit” rule and allow the patent holder claim 100% of all the profits from the product.

"The Federal Circuit’s reading of the Patent Act was flawed, and we’re asking the Supreme Court to adopt an interpretation that more appropriately balances the interests of patent holders, the industry, and the public," said Ranieri. "There’s good reason to believe that the Federal Circuit’s interpretation will create a cottage industry of abusive patent lawsuits that will enrich clever lawyers at the expense of the public."

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