The highest US court began hearing arguments over damages the South Korean smartphone giant owes Apple for copying key design features of the iPhone.
The case, coming with Samsung facing a fresh but unrelated crisis as it halted production of a flagship handset for safety reasons, revolves around a $400 million award Samsung was ordered to pay.
But more critical to industry observers is whether the justices uphold a legal standard which requires the forfeiture of all profits for violating a patent on a single component or feature.
“A smartphone is smart because it contains hundreds of thousands of the technologies that make it work,” Samsung attorney Kathleen Sullivan argued before the eight justices.
“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.”
Apple lawyer Seth Waxman fired back that Samsung made a conscious decision to revive its fortunes by copying the iPhone.
“A design is not a component, a design is applied to a thing,” Waxman said.
Waxman contended that Samsung’s own documents showed that the South Korean giant acted to deal with “a crisis of design.”
“And the crisis of design was reflected, the documents show, in the telephone company saying, you have to create something like the iPhone, and a directive came out to create something like the iPhone so we can stop … losing sales,” he argued.The court debate moved from smartphones to automobiles, and the importance of design to the Volkswagen Beetle, for example.
Justice Sonia Sotomayor commented: “It may be that the (Beetle) body accounts for only 10 percent of the cost of the car, but 90 percent of the profits are attributable to the shape of the car.”
The case is among several in courts around the world between the two smartphone giants, but this case is likely to set an important precedent on design patents.Observers are watching to see how the court — which has not taken up a design patent case in more than a century — tips the balance between technological innovation and protecting intellectual property. A ruling is expected in several months.
The US Court of Appeals for the Federal Circuit upheld a $400 million verdict — part of a nearly billion-dollar award in Apple’s favor later reduced to $548 million — that found Samsung had copied the iPhone, including its distinctive front screen and graphical touchscreen interface.
The award — in accordance with a statute first adopted in 1887 and later affirmed by Congress in 1952 — requires patent violators to hand over their total profits even if the violation covers only one element of a product.Matt Levy of the Computer & Communications Industry Association said the debate suggested the justices were open to lowering the jury award.
“The damages statute for design patents was written to protect products like rugs, where the design was essentially the entire thing being sold,” Levy said in a blog post.
“Congress certainly didn’t intend to treat complex products as if only the outer appearance is what matters…. Based on what I heard, I think it’s very likely that the (justices) will modify the lower court’s decision.”
Silicon Valley v Designers
Samsung has won the backing of major Silicon Valley and other IT sector giants, including Google, Facebook, Dell and Hewlett-Packard, as well as a group of law professors.
Apple, for its part, got backing from big names in fashion and manufacturing, such as Calvin Klein and Adidas, and the American Intellectual Property Law Association, whose members — largely lawyers — represent owners and users of intellectual property.
An amicus brief filed on behalf of design professionals, researchers and academics said they have no financial interest in the case but argue on the basis of “fundamental principles of visual design.”
They cite precedents like the Coca-Cola bottle, which is an integral part of the value of the product, according to the brief.
Tuesday’s hearing was held before a short-handed panel of eight justices, with a ninth still missing since Antonin Scalia’s death in February.
The hearing takes place at a difficult time for Samsung, as it is struggling to contain a snowballing safety crisis that threatens to derail the powerhouse global brand.
It told customers worldwide on Monday to stop using Galaxy Note 7 smartphones, calling a halt to global sales and exchanges following complaints that its lithium-ion battery explodes while charging.