The Supreme Court Narrows the Cost of Copying Apple's iPhone, but it's the Lower Court that will determine by how much
Apple legal scored a win on October 7 when the court ruled that Samsung intentionally infringed Apple's patents and ordered the lower court to consider increasing the judgement. Then on October 11, the Supreme Court heard arguments over the iPhone design and whether an infringing company had to pay a portion of the entire iPhone or just a single component. Justice Sotomayor had noted during the day that the design of the iPhone might have driven a sale. On October 12, the Supreme Court noted that the court would create new design patent rules for the lower court, not rule on the case. Even though it's been historically proven that the design of the iPhone drove record breaking sales because a smartphone no longer presented consumers with complicated button ridden interfaces – Justice Sotomayor decided that while important, design infringement penalties had to be limited to just a component and not the entire phone or device. So today, Samsung legal scored a win against Apple.
According to USA Today, "The Supreme Court ruled Tuesday that Samsung's violation of Apple's smartphone design patents may involve only a component, rather than the entire product — a decision that means Samsung might not have to pay penalties reaching into the hundreds of millions of dollars.
The unanimous decision from Justice Sonia Sotomayor was a much-needed victory for Samsung, beset with problems ranging from smartphones that burst into flames to washers with exploding tops. It initially faced nearly $1 billion in penalties, later reduced to $548 million, for imitating elements of the iPhone's design. Nearly $400 million is at stake in the current dispute.
The justices reasoned that the patent infringement could affect just a component of the phones, such as their appearance, rather than all their capabilities. During oral argument in October, Chief Justice John Roberts had noted Samsung did not infringe on "all the chips and wires."
"The term 'article of manufacture' is broad enough to embrace both a product sold to a consumer and a component of that product whether sold separately or not," Sotomayor wrote.
Samsung of course is still guilty of patent infringement, that doesn't change. The only thing that changes is the formula calculated for the infringement. The lower court will now have to decide what the judgement should be for that 'component' of design.
If the judgment is seen as too weak, then it'll be open season on any innovative design a tech company comes up with. If too weak, copycats like Samsung will have a license to steal a design quickly to gain market share knowing that the penalty for infringing will just be built into the price of the product. Without a great design, the chips and wires, as Justice John Roberts framed it in his opinion, wouldn't have been sold at all. So a great design or the right design can drive a sale of the entire profit making device. On that front, the design should carry a substantial penalty.
For now, we'll have to be patient to see what the lower court decides the worth of a design is. If the judgement is fair, then both sides win. On flip side, if the court lowballs the value of design, especially the iPhone because it was a ground breaking design for its time, then it'll be open season on winning designs worldwide and the court will have ended up hurting US tech companies who actually lead in industrial design arena to differentiate their products from the copycats. Will Industrial design matter or will the lobbying by copycats win the day? That's what it could all come down to.