US Supreme Court Civil Cases of Interest-October Term 2016

So far this October Term 2016, the U.S. Supreme Court has issued two decisions in civil cases, both on December 6.

First, in State Farm Fire & Casualty Co. v. United States ex rel. Rigsby, the Court considered “the proper remedy when there is a violation of the False Claims Act (FCA) requirement that certain complaints must be sealed for a limited time period,” as required by 31 U.S.C. § 3730(b)(2). The FCA has “qui tam enforcement provisions” that allow a private party to bring an FCA action on behalf of the U.S. Government to recover treble damages from any person who knowingly presents “a false or fraudulent claim for payment or approval” to the Government. When such a party (known as a “relator”) files a complaint, it “shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.” In this case, the relator’s attorney — the notorious Dickie Scruggs, who later pled guilty to bribing two state-court judges and served six years in federal prison — violated the seal requirement by surreptitiously disclosing the existence of the complaint to journalists.

In a unanimous opinion, the Court rejected the defendant State Farm’s argument that any violation of the seal requirement necessarily requires the complaint to be dismissed with prejudice. Observing that several other provisions of the FCA do mandate dismissal, and that the requirement is part of an enforcement mechanism meant to encourage private enforcement of the FCA, the Court found mandatory dismissal to be inconsistent with the text, structure, and purpose of the statute. The Court committed the appropriate sanction for violation of the seal requirement to the discretion of the district courts. The Court had no hesitation in affirming the decision of the district court in this case that dismissal was not warranted given “the questionable conduct” of Scruggs and the concomitant blamelessness of the relators themselves.

Second, in Samsung Electronics Co. v. Apple Inc., the Court addressed — but did not resolve — the long-running dispute over Samsung’s infringement of Apple’s patented design for the iPhone. There are three design patents at issue in that dispute, covering (1) “a black rectangular front face with rounded corners”; (2) “a rectangular front face with rounded corners and a raised rim”; and (3) “a grid of 16 colorful icons on a black screen.” Those seemingly generic and (to my mind) pedestrian designs were the basis for a jury’s award of $399 million to Apple, a figure intended to capture “the entire profit Samsung made from its sales of the infringing smartphones.” The statutory basis for that award was 35 U.S.C. § 289, which provides that whoever sells “any article of manufacture to which [a patented design] has been applied shall be liable to the owner to the extent of his total profit.”

At issue in the Supreme Court was the interpretation of the phrase “article of manufacture.” In particular, the question was “whether, in the case of a multi-component product, the relevant ‘article of manufacture’ must always be the end product sold to the consumer or whether it can also be a component of that product,” e.g., just the screen or the case of a smartphone. “Under the former interpretation, a patent holder will always be entitled to the infringer’s total profit from the end product. Under the latter interpretation, a patent holder will sometimes be entitled to the infringer’s total profit from a component of the end product.” In a unanimous and conclusory opinion, the Court chose the latter based on the “text,” i.e., that the term “ ‘[a]rticle of manufacture’ has a broad meaning.”

The Court declined, however, to “resolve whether, for each of the design patents at issue here, the relevant article of manufacture is the smartphone, or a particular smartphone component.” The Court further declined even “to set out a test for identifying the relevant article of manufacture at the first step of the § 289 damages inquiry.” It gave both of these tasks to the Court of Appeals for the Federal Circuit on remand. We can thus expect the battle between and Samsung and Apple to continue for no short time.