The U.S. Court of Appeals for the Federal Circuit recently concluded that a district court got it wrong on the issue of patent infringement damages. DSW Inc. v. Shoe Pavilion, Case No. 08-1085 (Fed. Cir., Aug. 19, 2008) (Mayer, J.).
DSW and Shoe Pavilion are large shoe retailers. DSW owns a patent with claims directed to a method and system (apparatus) for stocking and displaying footwear so that customers can select and try on shoes without salesperson assistance.
DSW used its patented display system in its own stores, but did not mark it with a patent number as 35 U.S.C. § 287(a) requires for recovering patent infringement damages. Instead, DSW provided notice of infringement by directly informing Shoe Pavilion, in May 2006, that the display design used in some of Shoe Pavilion's stores violated DSW's patent. Shoe Pavilion agreed to change the design of its potentially infringing shoe displays, to avoid DSW's infringement claims. Within seven months of DSW's notification of infringement, Shoe Pavilion had re-designed and replaced its allegedly infringing display systems.
Meanwhile, in October 2006, DSW filed a patent infringement lawsuit against Shoe Pavilion, claiming that even the redesigned display systems infringed DSW's patent. The district court did not agree and granted summary judgment that Shoe Pavilion's redesigned display systems did not infringe the patent.
The district court also granted summary judgment that DSW was not entitled to damages for Shoe Pavilion's use of its old display systems in the intervening period between DSW's May 2006 notification and Shoe Pavilion's implementation of the redesigned system, six or seven months later. Citing 1936 Supreme Court precedent of Wine Railway, the district court found that damages were not available as a matter of law because Shoe Pavilion took reasonable steps to remove all of its potentially infringing shoe displays in a timely manner upon receipt of DSW's notice of infringement.
On appeal, the Federal Circuit unequivocally rejected the district court's decision on damages for the intervening period, finding that the district court misapplied the Wine Railway standard. It stated, "Wine Railway provides no support for the trial court's summary judgment on damages." Instead, the Federal Circuit explained, "Wine Railway flatly states that a patentee may indeed recover damages for infringement that continues after actual notice is provided."
Putting to rest any doubt that an accused infringer's timeliness and diligence in accomplishing a design-around solution may stave off patent infringement damages, the Court stated, "[w]ithout a doubt, the law offers an infringer no exception to liability for the time it takes to terminate infringing activities, no matter how expeditious and reasonable its efforts." The Court ultimately held that if the patent is valid, then "damages are owed on the design for the 6-7 months of continued infringement while Shoe Pavilion phased out use of the displays in its stores."
Practice Note: Once a party is on notice that it is a potential infringer, it is not sufficient to merely design-around the asserted patent—no matter how quickly or diligently. What is key, in terms of cutting off damages, is that the alleged infringement must immediately stop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
