I don't think you'll find much documentation of common knives being made with damascus in the Old West.That being said the steel was being produced in that era, and was being used.There is evidence of damascus rifle and shotgun barrels.There are a few items in Flayderman's "The Bowie Knife" , one in the Army and Navy Journal April 27,1867 stating the Bowie "excellent material, true damascus was never better".That could be taken several ways but it shows that folks knew about the steel, and another historian in the book states that "since no one can provide the formula for the Bowie knife we should investigate what is known of the Syrian blades."
Was it common in the Old West, absolutely not, was it used,IMO absolutely.Dave