United States: The District Court Improperly Read Into The Claims A Limitation Not Required By The Intrinsic Evidence And Improperly Concluded That Expeditious Effort To Terminate Infringing Activities Excused Liability For Infringement

Judges: Mayer (author), Schall, Linn

[Appealed from C.D. Cal., Judge Cooper]

In DSW, Inc. v. Shoe Pavilion, Inc., No. 08-1085 (Fed. Cir. Aug. 19, 2008), the Federal Circuit vacated the district court's grant of SJ of no infringement, finding that the district court erred in construing the claims, and remanded. The Court also vacated the district court's grant of SJ with respect to damages, finding that the district court erred in concluding that an accused infringer's reasonable and good-faith efforts to bring its infringing activity to a timely end after notice equated to an immediate cessation that excused liability for infringement.

DSW, Inc. and DSW Shoe Warehouse, Inc. (collectively "DSW") own U.S. Patent No. 6,948,622 ("the '622 patent"), which is directed to a system and method for storing and displaying a large stock of footwear for customer self-service. DSW also owns U.S. Patent No. D 495,172 ("the '172 patent"), a design patent claiming an ornamental design for a combined product display and stacked product container separator. DSW notified Shoe Pavilion, Inc. ("Shoe Pavilion") that its shoe display design ("First Design") infringed the '622 and '172 patents. In response, Shoe Pavilion agreed to modify its display, and within seven months after receiving notice, removed all First Design displays from its stores and introduced a modified design ("New Design"). DSW then filed suit against Shoe Pavilion, alleging that the New Design infringed claims 4-6 of the '622 patent and that it was owed damages for infringement of the '622 and '172 patents by the First Design.

Shoe Pavilion moved for SJ that its New Design did not infringe and that it owed no damages for infringement by the First Design. The district court construed the claims and based on its construction, granted SJ of no infringement with respect to the New Design. Specifically, the parties' dispute turned on whether claims 4-6 of the '622 patent encompassed only methods of displaying and storing footwear that contain track and roller mechanisms connecting display modules to a support base ("the Track and Roller Limitation"). Though the Track and Roller Limitation is present in claims 1-3, it does not appear in claims 4-6. The district court nonetheless construed claims 4-6 to include a footwear display module with vertically disposed, horizontally moveable dividers coextensive with the Track and Roller Limitation of claims 1-3, and concluded that because Shoe Pavilion's New Design lacked such a feature, it did not infringe the '622 patent. With respect to damages, the district court found that DSW was not entitled to any damages as a matter of law, because immediately upon receipt of DSW's notice of infringement, Shoe Pavilion took reasonable steps and timely removed all of the infringing shoe displays. Relying on Wine Railway Appliance Co. v. Enterprise Railway Equipment, 297 U.S. 387 (1936), the district court granted SJ to Shoe Pavilion, stating that no damages for infringement are recoverable by a plaintiff unless the infringing activity continues after notice is provided to the infringer. DSW appealed.

On appeal, the Federal Circuit found that the district court improperly read the Track and Roller Limitation of claims 1-3 into claims 4-6. The Court reasoned that absent contravening evidence from the specification or prosecution history, plain and unambiguous claim language controls the construction analysis. It noted that although the language in claims 4-6 was broad, it was not ambiguous. In addition, the Court observed that nowhere did the prosecution history show an express disclaimer by DSW of a method of displaying footwear not involving the Track and Roller Limitation. The Court also determined that although the preferred embodiment included a rolling track mechanism, other embodiments did not. The Court added that when claim language is broader than the preferred embodiment, it is well settled that claims are not to be confined to that embodiment. Accordingly, the Court concluded that the district court improperly read into claims 4-6 a new limitation not required by the claim language, specification, or prosecution history; vacated the district court's grant of SJ of noninfringement; and remanded for a new determination of infringement.

With respect to the district court's SJ decision on damages based on Wine Railway, the Federal Circuit noted that Wine Railway provided no support for the district court's decision. The Court explained that while Wine Railway held that a patentee who failed to mark his patented article could only recover damages for infringement occurring after actual notice was provided to the infringer, the issue here was whether Shoe Pavilion was liable for infringement occurring subsequent to the receipt of actual notice. The Court observed that Wine Railway "flatly states that a patentee may indeed recover damages for infringement that continues after actual notice is provided." Slip op. at 10. It added that "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." Id. It concluded that the district court therefore erred in finding that Shoe Pavilion's reasonable and good-faith efforts to bring its infringing activity to a timely end after notice equated to an immediate cessation, and that, if the '622 and '172 patents are valid, damages are owed for the time period while Shoe Pavilion phased out its First Design. Accordingly, the Court vacated the district court's grant of SJ on damages and remanded.

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