TECH
10/11/2016 08:43 am ET Updated Oct 11, 2016

Supreme Court Seems Skeptical Samsung Should Pay Apple $400 Million Over iPhone Patent

The justices may allow a jury to recalculate how much the iPhone maker is really owed.
Will the Supreme Court let Apple eat up Samsung's entire profits from infringing models?
Dado Ruvic / Reuters
Will the Supreme Court let Apple eat up Samsung's entire profits from infringing models?

WASHINGTON ― Steve Jobs would’ve loved to see this day. Or maybe not.

The Supreme Court on Tuesday heard arguments in one chapter of the most contentious tech battle of the smartphone era — a patent dispute between between Apple and Samsung over the iPhone’s design, with nearly $400 million on the line.

The late Apple founder once said he was “willing to go thermonuclear” against those who stole his intellectual property, but the justices on Tuesday seemed skeptical of Apple’s end game in this particular case ― and may be willing to hand Samsung a partial victory that will let the dispute proceed in lower courts a while longer.

At issue in the case are three design patents that more or less control the iPhone’s curved exterior shell and its screen’s icon-based interface. A jury found Samsung violated those patents, and two juries separately concluded the company should pay Apple $399 million in damages.

Samsung Electronics' Galaxy S4, left, with Apple's iPhone 5.
Kim Hong-Ji/Reuters
Samsung Electronics' Galaxy S4, left, with Apple's iPhone 5.

That’s Samsung total profit from the sale of those models, and Apple urged the Supreme Court to rule that it’s entitled to all of it ― under a law that says that a design patent violator “shall be liable ... to the extent of his total profit.”

Chief Justice John Roberts was quick to draw a distinction that may undermine Apple’s position.

“It seems to me that the design is applied to the exterior case of the phone. It’s not applied to ... all the chips and wires,” he said. “So there shouldn’t be profits awarded based on the entire price of the phone.”

Apple’s main argument is that the law of design patents was written so as to impose full liability on the tech giant’s rival. But Samsung has countered that Apple is owed far less than what the jury found because the iPhone’s outer design and icon layout ― the design patents implicated in the case ― make up only a tiny fraction of a complex device.

“A smartphone is smart because it contains hundreds of thousands of the technologies that make it work,” said Kathleen Sullivan, Samsung’s lawyer before the high court. “A single design patent on the portion of the appearance of a phone should not entitle the design-patent holder to all the profit on the entire phone.”

A single design patent on the portion of the appearance of a phone should not entitle the design-patent holder to all the profit on the entire phone. Kathleen Sullivan, Samsung's lawyer before the Supreme Court

The justices appeared less concerned with the money Apple is owed than with issuing a bright-line rule that will guide similar design patent lawsuits in the future. In court filings, Samsung had presented them with a doom-and-gloom scenario where a ruling for Apple could open the door to big-money verdicts for even minor design infringements. 

In an exchange with Apple’s lawyer, Seth Waxman, Justice Stephen Breyer alluded to the need for a “rule of reason” ― a practical standard that will guide jurors on how to award just the right amount of damages to innovators who may lay claim to part, but not all, of a design.

“And so that kind of standard, with perhaps examples to explain it to the jury,” Breyer said, would mean that something like a wallpaper design would get its patent holder all the profits from the product itself. “A Rolls Royce thing on the hood? No, no, no. You don’t get all the profit from the car,” he added.

Cars, in fact, were front and center during the hour-long hearing. The Volkswagen Beetle had a starring role throughout the session, with lawyers and justices invoking its characteristic shape as the kind of thing that may inspire knockoff versions. Should knockoff-makers be liable only for copying the Beetle’s outer design, or for all their profits?

“This hypothetical is not helpful to me, because I can’t get over the thought that nobody buys a car, even a Beetle, just because they like the way it looks,” said a seemingly frustrated Justice Samuel Alito.

The federal government, which runs the U.S. Patent and Trademark Office, made a special appearance at the hearing but took no sides ― and, in essence, tried to get the justices to reach a compromise, convincing them to send the case back to a lower court so that jurors may apply whatever test the Supreme Court comes up with.

“We’re never going to be able to get to certainty, but on these sorts of profits questions and these sorts of remedies questions, a reasonable approximation is good enough, and it’s certainly better than awarding all or nothing,” said Brian Fletcher, an attorney with the U.S. Solicitor General’s Office.

A ruling in Samsung Electronics v. Apple, which began in 2011 in federal court, is expected sometime before next June.

This story has been updated with background and details from the hearing.

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