How much is infringement worth? Supreme Court clarifies.

Patents offer protection and a violation can result in a monetary award - but how much is sufficient?

Innovations are important in the tech world. These innovations result in the new, more advanced tech devices that we have come to rely on. The devices we wait in line for or log on to watch the release and submit an order.

Many entrepreneurs protect these innovations with patents. Sometimes, competitors attempt to infringe on these protections. These attempts can result in a lawsuit that, if found to be in violation of the patent protections, can result in monetary awards to the company that held the protections.

But how much of an award is sufficient? This is the question that the Supreme Court of the United States (SCOTUS) sought to clarify in the recent smartphone battle between Apple and Samsung.

What were the patent infringement allegations?

The case, Samsung Electronics Co., Ltd., et al. v. Apple Inc. , goes back to 2011. At that time, Apple sued Samsung on allegations that smartphones released by Samsung were in violation of three of Apple's design patents. The patents were connected to the release of Apples' first-generation iPhone. The patents provided protection to the "articles of manufacture, specifically protecting the use of a black rectangular front face with rounded corners, another added protection to the raised rim and the third to the use of a black screen with colorful icons.

Samsung released a series of phones that were similar to the iPhone. Apple sued and the jury found in favor of Apple, stating many of these phones did infringe on the patents.

What can other entrepreneurs learn from this case?

It may not be a case of David versus Goliath; in fact, it is more of a Goliath versus Goliath - but however massive the two parties, entrepreneurs can learn from their mistakes. Three important takeaways that apply regardless of the scope of a business venture include:

  • Patents are powerful. It is important to point out that the dispute did not revolve around whether or not the patent provided Apple with protection. The patent was upheld. Samsung was found to violate the protections and was required to pay for this violation.
  • The penalty can be steep. Instead, the issue focused on what penalty was appropriate. The rule of law states that the penalty in this situation was for the infringer to be held liable "to the extent of his total profit." This led the court to initially hold that Samsung owed Apple all profits connected to the smartphones at issue. That totaled almost $400 million in damages.
  • The importance of legal counsel. Samsung's legal counsel was able to navigate the intricacies of the law and craft an argument to counter this holding. Samsung contended that the legal term "article of manufacture" used to define what is protected by the patent did not apply to the entire phone, but to the specific areas protected by the patent. As such, the award should not be profits from the entire phone but instead a portion of the phone relative to the specific parts subject to the infringement.

Ultimately, SCOTUS agreed with Samsung and found that the award was too high. The case was sent back to lower courts to determine a more appropriate amount taking into account the fact that the patent protects the specific features, not the entire phone.