A parts-against-the-whole battle

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A parts-against-the-whole battle

The epic patent infringement battle between Apple and Samsung will go to the U.S. Supreme Court. The court announced Monday that, sometime in the term that begins in October, it will consider the $548 million in damages Samsung paid to Apple last year after the U.S. Court of Appeals for the Federal Circuit lowered the jury’s original $1 billion-plus verdict. Without reading too much into the tea leaves, it seems highly likely that the court took the case in order to change the law of damages in patent infringement suits.

At issue is how much one side should get in damages when the other has infringed its patent rights. Under the so-called entire-profits rule used by the Federal Circuit, damages are determined by asking how much the infringer has made from sales of the product to which the infringed patent contributed. That meant the jury was told to determine how much profit Samsung made from sales of phones that included features that infringed on Apple patents.

Samsung wants a new, different rule to apply, one that would be much more friendly to patent infringers. According to Samsung’s argument, federal law should be read to require damages based on profits that are attributable to the infringing components, not the whole product. That would require the jury to make a much more subtle judgment.

In seeking a hearing from the Supreme Court, Samsung acknowledged that it wants a change from the existing Federal Circuit precedent. But in a line that should become a cert-petition classic, it insisted that the interpretation of the entire-profits rule needed to be updated, because “the law of the smartphone cannot follow reflexively from the law of the spoon.”

The fact that the court agrees to hear a case doesn’t always hint at the outcome, because most cases arise from a split of authority among circuit courts of appeal. Multiple outcomes are therefore inherently plausible.

But it’s different when the court takes a case from the Federal Circuit, which has near-exclusive appellate jurisdiction over patent cases. There’s almost never a split with the Federal Circuit, because other courts don’t get to weigh in.

As I’ve mentioned before, the court has an ongoing give-and-take with the Federal Circuit when it comes to patent law. The appeals court sees itself as master of the subject, with better technical knowledge and a deeper understanding of the issues. But the Supreme Court also will take Federal Circuit cases to keep the lower court in its place. In this instance, a grant strongly implies the probability of a reversal.

With Justice Antonin Scalia gone and Justice Samuel Alito recused, there are only seven justices sitting on this case. It takes four to grant cert — even when the court isn’t at full strength. Four votes here is, unusually, enough votes to win outright.
So what’s the right result? That’s a tricky question. Assume the statute is ambiguous. (Most are or can be read to be.) What’s the right policy rule for damages?

On the one hand, Samsung’s view sounds logical. An infringing spoon is an integrated product, so the entire-profits rule may once have made sense.

But a smartphone has dozens, even hundreds, of features and aspects. It seems intuitive that three patent infringements — the number the jury found — shouldn’t make Samsung hand over all its profits from sales of those phones.

Yet Apple has a powerful counterargument. Sure, the design patents were by nature somewhat only parts of the iPhone — the colorful graphic interface of 16 icons, the ornamental design of a rectangle with curved corners, and the bezel on the rim.

But what Samsung really did, according to Apple, was to capture the look and feel of the iPhone, which was protected by piecemeal patents. In other words, an iPhone is as integrated a product as a spoon.

From the user’s perspective, that isn’t crazy. As a user, certain features of the phone may dictate my purchasing choice. But then I pick a whole phone to buy; the features can’t be disaggregated from the products by me, the user.

Indeed, Apple’s genius has much to do with the very integration its products achieve. A legal rule that disaggregates features for purposes of damages is thus a kind of invitation to selective infringement.

Then there’s the question of how easy Samsung’s proposed rule would be to administer. How exactly can a jury determine which features of a product make it the one that people choose? Would survey data answer the question properly?

I tend to doubt it. Our ability to say why we make a complicated consumer decision seems quite disjunct from why we actually make it. Otherwise, advertising would be a boring matter of reciting features, instead of being the sophisticated, mind-altering game of subjective associations in which Apple’s advertising excels.

The upshot is that while the court has signaled that it wants to revisit the entire-profits rule, the justices might conceivably change their minds after reading the briefs in the case. The justices use smartphones themselves, as we know from the court’s 2014 decision that a smartphone can’t be searched without a warrant. Their own opinions are going to matter. Does anyone know if they use Apple or Samsung phones? The lawyers will want to find out, if they can.

*The author, a Bloomberg View columnist, is a professor of constitutional and international law at Harvard University and the author of six books, most recently “Cool War: The Future of Global Competition.”

Noah Feldman
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