Nike, Inc. v. Wal-Mart Stores, Inc., WAL-MART

• Decision Date: 12 March 1998
• Docket Number: No. 97-1173,WAL-MART,97-1173
• Citation: 46 USPQ2d 1001,138 F.3d 1437
• Parties: NIKE, INC., Plaintiff-Appellee, v.STORES, INC. and Hawe Yue, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1437

138 F.3d 1437

46 U.S.P.Q.2d 1001

NIKE, INC., Plaintiff-Appellee, v. WAL-MART STORES, INC. and Hawe Yue, Inc., Defendants-Appellants.

No. 97-1173.

United States Court of Appeals Federal Circuit.

March 12, 1998.

Mark T. Banner, Banner & Witcoff, Ltd., Chicago, IL, argued for plaintiff-appellee.

With him on brief were Christopher J. Renk and Robert S. Katz, Washington, DC, of counsel Patricia E. Hong and James A. Niegowski, Washington, DC.

William D. Coston, Venable, Baetjer, Howard & Civiletti, LLP, Washington, DC, argued for defendants-appellants. With him on brief E. Brendan Magrab and James R. Burdett. Of counsel was William L. Jaeger, Townsend and Townsend and Crew, LLP, San Francisco, CA.

Before MAYER, Chief Judge, ^* NEWMAN and PLAGER, Circuit Judges.

PAULINE NEWMAN, Circuit Judge.

Wal-Mart Stores, Inc., and Hawe Yue, Inc. appeal the judgment of the United States District Court for the Eastern District of Virginia, ¹ concerning United States Design Patent No. 348,765 (the D'765 patent), owned by Nike, Inc. The court held the patent valid and infringed, and awarded the infringers' profits to the patentee in accordance with 35 U.S.C. § 289. The appellants do not appeal the rulings of validity and infringement, but raise issues of patent marking, notice, the measure of compensation, and accounting.

We reverse the district court's holding that the marking statute does not apply when remedy for infringement is obtained under 35 U.S.C. § 289, and remand for findings concerning Nike's compliance with the marking statute. The court's accounting methodology is affirmed.

BACKGROUND

The D'765 patent is for Nike's "Air Mada Mid" model athletic shoe design, illustrated as:

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The D'765 patent was applied for on October 13, 1993, and issued on July 19, 1994 upon Nike's expedited prosecution. Nike introduced these shoes into the marketplace in April 1994. Significant numbers of shoes had already been manufactured and sold, or were already in the distribution chain, at the time of patent issuance; these shoes were unmarked with the patent number. Nike implemented marking procedures after patent issuance.

Hawe Yue imported copies of the Air Mada Mid design shoes starting in April 1995, and Wal-Mart's first retail sales were in May 1995. On January 18, 1996 Nike filed suit in the Eastern District of Virginia. The appellants' position is that the presence in § 287(a). Patentees ... may give notice to the public that the same is patented, either by fixing thereon the word 'patent' or the abbreviation 'pat.', together with the number of the patent, or when, from the character of the article, this can not be done, by affixing to it, or to the package wherein one or more of them is contained, a label containing a like notice. In the event of a failure to so 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. Filing of an action for infringement shall constitute such notice.

the marketplace and the sale of unmarked shoes before and after Nike's asserted marking precludes Nike's recovery for any infringement that occurred before suit was filed, citing the marking statute, 35 U.S.C. § 287(a):

The district court held that the marking statute applies when the requested remedy is "damages," e.g., the remedy provided for in the general damages provision, 35 U.S.C. § 284:

§ 284. Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty....

However, the court held that the marking statute does not apply to limit recovery of the infringer's profit, an alternate remedy for design patent infringement, codified at 35 U.S.C. § 289:

§ 289. Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

Although the parties disputed factual issues of marking, as well as the legal effect of the existence of unmarked shoes, the district court found it unnecessary to resolve these issues. Holding that marking is not required by statute when recovery of the infringer's profit is sought under § 289, the district court awarded Nike the appellants' profits for all of the infringing sales. Wal-Mart and Hawe Yue appeal this ruling, contending that Nike's sale of unmarked shoes precludes any recovery for infringement, however measured, before suit was filed. Nike responds that the district court correctly held that § 287(a) does not apply. Alternatively, Nike states that its marking procedures complied with § 287(a).

I MARKING

The district court considered the provision in § 287(a) that "[i]n the event of a failure to mark, no damages shall be recovered by the patentee in any action for infringement." The court held that the provision is unambiguous, and cited the "longstanding distinction in patent law between damages and profits," quoting Braun Inc. v. Dynamics Corp. of America, 975 F.2d 815, 824, 24 USPQ2d 1121, 1128 (Fed.Cir.1992) (holding that the treble damages provision of § 284 does not apply to recovery of profits under § 289). The district court held that the distinction between damages and profits requires that the marking statute with its limitation on "damages" does not apply to a recovery of the infringer's "profit" under § 289.

The appellants challenge this statutory interpretation. They contend that "damages" is used in § 287(a) in its general and ordinary meaning of money recovered from a wrongdoer, however the recovery is measured. Nike responds that the historical distinction between profits and damages supports and indeed requires the district court's ruling. Nike proposes that since these statutory Although a statute clear on its face does not warrant resort to history, inquiry is proper to determine whether ambiguity has invaded an apparently clear text. Cf. Mansell v. Mansell, 490 U.S. 581, 592, 109 S.Ct. 2023, 2030, 104 L.Ed.2d 675 (1989) (requiring "clear evidence that reading the language literally would thwart the obvious purposes of the Act"); Trans Alaska Pipeline Rate Cases, 436 U.S. 631, 643, 98 S.Ct. 2053, 2061, 56 L.Ed.2d 591 (1978). Our inquiry into the parallel but separate evolutions of the marking statute and the remedies statutes has led us to an interpretation that departs from the plain words of the statute. We conclude that the term "damages" as it appears in the marking statute is not limited to the recovery at law from which it arose, but includes recovery measured by the infringer's profits, and continues to be so used although such recovery is now limited to design patent infringement. The statutory history establishes that the marking requirement has always applied, and continues to apply, to both recovery of the infringer's profit under § 289, and recovery of damages, however measured, under § 284.

provisions are unambiguous no further inquiry is warranted.

A Damages and Profits

The first patent statutes reflect the separation of law and equity, carried over from the English common law of patents. The Patent Acts of 1790, 1793, and 1800 provided the remedy of damages in an action at law "on the case," the Act of 1790 providing that the infringer should pay "such damages as shall be assessed by a jury," the Act of 1793 awarding threefold the patentee's sale or licensing price, and the Act of 1800 awarding "a sum equal to three times the actual damage sustained by such patentee." See Act of 1790, 1 Stat. 111; Act of 1793, 1 Stat. 318; Act of 1800, 2 Stat. 37.

The equitable remedy of injunction in patent cases was authorized in 1819. By the Patent Act of 1836 a patentee could recover compensatory damages in an action at law (the "actual damages sustained by the plaintiff, not exceeding three times the amount thereof"), or when an injunction was sought the patentee could recover the infringer's profit. See Act of 1836, 5 Stat. 117; Stevens v. Gladding, 58 U.S. (17 How.) 447, 455, 15 L.Ed. 155 (1854) ("The right to an account for profits is incident to the right to an injunction, in copy and patent right cases.") Thus the patentee could elect to proceed in equity and recover the infringer's profits, or to proceed in law and recover "as damages, compensation for the pecuniary injury he suffered by the infringement." Birdsall v. Coolidge, 93 U.S. (3 Otto) 64, 68-69, 23 L.Ed. 802 (1876). However, the patentee was required to choose between these paths of recovery. In Birdsall the Supreme Court described the difficulties in obtaining just monetary recovery in equity suits, writing that "manifest injustice was done to the complainant in equity suits," 93 U.S. (3 Otto) at 69, reflecting accounting and related difficulties. As remedy, the Act of 1870 authorized the court in equity to award both the infringer's profits and compensatory damages:

§ 55 ... [T]he court shall have power, upon bill in equity filed by any party aggrieved, ... to prevent the violation of any right secured by patent, ... and upon a decree being rendered in any such case for an infringement, the claimant shall be entitled to recover, in addition to the profits to be...