Damages Tally Begin as Soon as Defendant is Given Notice of Infringement

DSW Shoe Warehouse v. Shoe Pavilion (Fed. Cir. 2008)

DSW holds a utility patent and a design patent on a shoe display system. In 2006, DSW notified off-brand competitor Shoe Pavilion that its displays were infringing. Wanting to avoid trouble, Shoe Pavilion took immediate action and removed the infringing displays. (Although immediately begun, the whole take-down process took seven months.) DSW was not satisfied that the replacement design avoided infringement and subsequently sued.

Damages and Notice: The case raises several issues, but here I will focus on damages. On summary judgment, the district court held that Shoe Pavilion owed no damages for infringement by the initial design because the defendant took immediate action to stop infringing. On appeal, the CAFC vacated that opinion.

The Patent Marking Statute limits damages that may be recovered by a patentee.

In the event of failure so to mark, no damages shall be recovered by the patentee in any action for infringement, except on proof that the infringer was notified of the infringement and continued to infringe thereafter, in which event damages may be recovered only for infringement occurring after such notice. 35 U.S.C. §287(a).

The Pre-1952 Patent Statute included a similar restriction on damages. That statute was interpreted by the Supreme Court in Wine Railway (1936). There, the court held that the recovery by patentee who failed to mark products covered by the patent would be limited to damages incurred after actual notice was provided to the infringer.

The policy behind this approach is to give some level of protection to innocent infringers. However, damages begin to accrue as soon as notice is given. Thus, in this case, Shoe Pavilion is liable for the damages that occurred during the seven-month take down process.

“Without 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.”

Vacated and remanded.

Notes:

  • The court also vacated based on an error of claim construction – finding that the claimed “track and roller” was not limited by the preferred embodiment found in the specification.

18 thoughts on “Damages Tally Begin as Soon as Defendant is Given Notice of Infringement

  1. Leopold

    “I’ve never heard of a situation where anyone successfully sued for liability under provisional rights, but I suppose it’s happened. Anyone?”

    I have not heard of any. But, given that the claims must be substantially the same at grant as in the published application, I doubt many would even try to invoke or notify as it is so rare now.

    “Now for something completely different” (tip of the bowler to Monty and his pythons) . . .

    Other Tactic – Not Patent law per se but equitable theory

    Estoppel – if there was a substantial reliance by the infringer that removal would be satisfactory based on patentee’s actions/statements AND the time frame was reasonable (which it probably was not), then that might have a shot – but I doubt it.

    Actual Notice – Damages – sound like the right decision based on facts

  2. Congratulations, Lionel. You may be the first person on Patently-O (and maybe the internet as a whole) to read another poster’s arguements and admit that they are wrong. How refreshing.

  3. Actually, you are correct with respect to strict liability and I was incorrect to reference intervening rights there was no reissue or re-exam or other trigger. I’m tired and have no real excuse.

  4. “However, the wording quoted above appears to imply that regardless of the actual inability to stop infringing on a dime, that damages should immediately begin accruing.”

    Imply? They didn’t just imply that – that’s what the statute says. It’s nothing new, and I cannot for the life of me understand why anyone would think otherwise. It does not matter whether or not the infringer is able to stop infringing immediately. Heck, had they patent owner marked, infringement damages would go all the way back to the date infringement first commenced (well, at least up to 6 years prior to the filing of the lawsuit).

    And where did you see that the parties “agree that 7 months was a reasonable time”? Certainly there is nothing in the CAFC opinion which says that. All the opinion says is that the the TRIAL COURT determined that the infringer took “reasonable steps and good faith efforts to bring its infringing activity to a timely end” once it was put on notice. That’s nice. But it’s completely irrelevant to whether or not the patent owner is entitled to damages for infringement during that 7 month period.

    “What about intervening rights?”
    What about them? We can discuss those too if you would like. But intervening rights have nothing whatsoever to do with this case. I have no clue what you could possibly be referring to.

  5. Infringement is based on strict liability not negligence so it really isn’t relevant what is reasonable. 7 months was quick enough to avoid enhanced damges.

    In cases where the marking statute doesn’t kick in, no notice is required for damages to accrue.

  6. My opinion is that “damages should immediately begin accruing.” This encourages manufacturers, sellers and users to try to learn of the patent rights of others and to immediately cease their infringing activities upon learning of another’s patent rights to minimize their damages.

  7. metoo and left coast,

    If the partes agreed that 7 months was a reasonable time, then why should they be penalized. What about intervening rights?

    If your argument is that they should have had the shelves down in 7 days, and the court also determined that, then fine. However, the wording quoted above appears to imply that regardless of the actual inability to stop infringing on a dime, that damages should immediately begin accruing.

  8. seven months! should have taken them seven (or maybe fourteen or twenty-one) days, don’t you think?

  9. I believe this is a bad opinion. Barring exceptional circumstances and unless there is evidence that a competitor was aware of a patent, there shouldn’t damages for a reasonable period required to stop infringing.

  10. “If a pending patent is published and we found someone is using the pending patent. Is it true that the ‘infringer’ is liable for damage from the date of notification if the patent is later granted?”

    Actually you should Google “provisional rights,” which is what you’re talking about. Intervening rights are sort of the flip side of provisional rights. Also see 35 USC 154(d).

    I’ve never heard of a situation where anyone successfully sued for liability under provisional rights, but I suppose it’s happened. Anyone?

  11. Yo, DC – I’m hoping to see a Patentlyo bits & bytes entry on the Wii patent infringement suit (and hopefully a link to the complaint and patent at issue). I’ve wasted way too many nonbillable hours on my Wii; maybe I was an infringer all this time?

  12. “If a pending patent is published and we found someone is using the pending patent. Is it true that the “infringer” is liable for damage from the date of notification if the patent is later granted?”

    Google “intervening rights.” A key issue will be the scope of the claims at the time you notified the patentee versus the scope of the claims at issuance.

  13. Question:

    If a pending patent is published and we found someone is using the pending patent. Is it true that the “infringer” is liable for damage from the date of notification if the patent is later granted?

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