AAPL Apple Inc

Samsung is expected to challenge a part of damages it is to pay in a patent dispute

By Brent Kendall 

WASHINGTON -- The Supreme Court on Tuesday appeared frustrated over how to resolve a high-stakes battle between Apple Inc. and Samsung Electronics Co., indicating it may not provide final resolution of how much money the South Korean electronics company owes for infringing patents on the iPhone's design.

Jurors found Samsung liable for patent infringement in 2012 and the company was ordered to pay about $930 million in damages. The high court, which heard an hour of oral arguments, gave Samsung the opportunity to challenge a $399 million portion of that award. That sum amounted to the company's total profits on 11 smartphone models that jurors found to infringe Apple's design.

The high court took the case to decide whether a company can be required to pay all of its profits on products that infringe someone else's patented design, or whether infringement damages should be limited only to the portion of profits specifically attributable to the design of a device.

As the morning session unfolded, justices across the bench suggested that neither Apple nor Samsung had argued for an approach that would better help jurors decide the appropriate compensation to patent holders when someone copies their distinct designs.

"It seems to me neither side gives us an instruction to work with," Justice Anthony Kennedy said. "If I were a juror, I wouldn't know what to do."

Samsung argued an all-profits rule is unfair when applied to complex, multicomponent products like smartphones. It says consumers bought its phones for other features that had nothing to do with a particular part of the phone's design.

"A smartphone is smart because it contains hundreds of thousands of the technologies that make it work," said Samsung lawyer Kathleen Sullivan. A 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," she said.

Apple says it spent billions of dollars developing the iPhone, whose success was directly tied to its distinctive look. Lawyer Seth Waxman, arguing for Apple, said Samsung faced "a crisis of design" and followed an internal directive "to create something like the iPhone" so it would stop losing sales.

Mr. Waxman argued that collecting total profit in this case made sense because Apple's central design couldn't be separated from the phone like a component part.

Apple and Samsung didn't appear to disagree deeply on the type of legal rules that should govern damages for design patents. Instead, their clash was mostly about how those rules should apply to the specific facts of their smartphone litigation.

The justices made clear they were less concerned with that issue, suggesting they will come up with new rules and then give lower court judges the first opportunity to apply them to the iPhone fight.

"We have a hard-enough question trying to figure out what the standard is," Justice Stephen Breyer said. "Now, why can't we just ask the lower courts to listen to your arguments and theirs, and work it out?"

If the Supreme Court does follow that approach, it would introduce new uncertainty to Apple's ability to collect the $399 million.

For all the money involved, the case is likely to have little impact on smartphone consumers. Despite court losses to Apple, Samsung has been able to continue selling phones and has moved on to newer models.

The Supreme Court has regularly intervened in patent cases in recent years, but those cases involved so-called utility patents, which are the more common type of patent that covers how an invention works as opposed to its ornamental look.

The high court hasn't taken up the issue of design-patent damages since the 1880s, when in a series of cases involving carpet designs it awarded only nominal damages for patent infringement. Congress responded by making changes to federal patent law that rejected the Supreme Court's decision and allowed the collection of total profits for design-patent infringement.

The Obama administration participated in Tuesday's argument and took a middle-ground position. Justice Department lawyer Brian Fletcher said a monetary damages rule that automatically awarded total profits for an entire product had the potential to overcompensate patent holders in some circumstances. Mr. Fletcher said both Samsung and Apple seemed to agree on this basic point.

The Supreme Court's decision is expected by June 2017.

Write to Brent Kendall at brent.kendall@wsj.com

(END) Dow Jones Newswires

October 12, 2016 02:53 ET (06:53 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.