35 U.S.C. § 284 provides that “the court shall award [the patent owner] damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the invention by the infringer.” “A patent owner, having prevailed on liability, may receive a reasonable royalty or lost profits, but not both for the same infringing units.” Asetek Danmark A/S v. CMI USA. “One useful, but non-exclusive method to establish the patentee’s entitlement to lost profits is the Panduit test.” Mentor Graphics Corp. v. EVE-USA. “Under the Panduit test, a patentee is entitled to lost profit damages if it can establish four things: (1) demand for the patented product; (2) absence of acceptable non-infringing alternatives; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit it would have made.” Id. (citing Panduit v. Stahlin). This post will cover Federal Circuit cases in which the court either excluded or vacated the totality or a portion of the lost profit award.
| Case | Outcome | Issue | Notes |
| Presidio Components, Inc. v. Am. Technical Ceramics Corp., 875 F.3d 1369 (Fed. Cir. 2017) | Lost profits reversed | Acceptable noninfringing alternatives | The district court erred in analyzing whether a non-infringing alternative would be acceptable compared to the patentee’s product. Undisputed evidence showed that a non-infringing alternative was less expensive than the patentee’s product, and may have had better performance. Moreover the patentee failed to show that this alternative was not an available substitute. |
| Smithkline Diagnostics v. Helena Lab, 926 F.2d 1161 (Fed. Cir. 1991) | Exclusion of lost profits affirmed | Acceptable noninfringing alternatives | (1) The district court did not clearly err in finding that plaintiff was not entitled to lost profits under Panduit. The record showed that there were acceptable, non-infringing substitutes, and that the market was not a two supplier market. (2) Moreover, plaintiff failed to prove its manufacturing capacity, and the court found plaintiff’s expected profit margin to be incredible. |
| Pall Corp. v. Micron Separations, Inc., 66 F.3d 1211 (Fed. Cir. 1995) | Exclusion of lost profits affirmed | Amount of lost profits | After Plaintiff settled with another party, the district court correctly held that the newly licensee’s presence in the marketplace could not be ignored, and limited the award of lost profits to the share of Defendant’s sales that Plaintiff would reasonably have made. For the sales after the license with the third party, the court viewed Plaintiff as a hypothetical willing licensor, and accordingly assessed damages as a royalty. |
| Transmatic, Inc. v. Gulton Industries, Inc., 53 F.3d 1268 (Fed. Cir. 1995) | Lost profits vacated and remanded | Amount of lost profits | The district court did not adequately explain why Defendant’s asserted adjustments to Plaintiff’s calculated lost profits are factually incorrect or otherwise unsupported by the evidence. For example, Defendant argued that Plaintiff used inflated prices to calculate lost sales, resulting in the lost profits being overstated. |
| Atlantic Thermoplastics Co., v. Faytex Corp., 970 F.2d 834 (Fed. Cir. 1992) | Lost profits determination remanded | Amount of lost profits | The district court erred in calculating lost profits by failing to properly apply a market share approach. This case does not involve a two-supplier market which would justify the assumption that the patent owner would have made all the infringer’s sales. The district court, on remand, will recalculate appropriate damages using a permissible market share approach, assuming market share analysis is appropriate, if the patent is determined to be valid. |
| Beatrice Foods v. New England Printing, 899 F.2d 1171 (Fed. Cir. 1990) | Lost profits vacated | Amount of lost profits | The district court erred in equating Defendant’s gross sales with Plaintiff’s lost profits damages. On remand, the court will determine plaintiff’s damages on the basis of lost profits not gross sales. |
| Oiness v. Walgreen Company, 88 F.3d 1025 (Fed. Cir. 1996) | Lost profits vacated and reversed | Amount of lost profits; future lost profits | (1) The lost profits determination for actual sales is vacated because Plaintiff’s purported evidence was mere speculation and guess work. In light of the failure of Plaintiff to present proof of lost profits, the record contains no better evidence of Walgreen’s actual sales. Because this evidence is the only reliable record of actual sales, the Federal Circuit vacated and remanded to the trial court with instructions to order judgment in a specific amount. Should Plaintiff refuse to accept the reduction of its award, Plaintiff would be entitled to a new trial on damages. (2) Because Plaintiff’s projections of lost profits rested on faulty assumptions and a lack of reliable economic testimony relevant to the various markets, the record did not support the jury’s award of projected lost profits. |
| Westerngeco L.L.C. v. Ion Geophysical Corp., 2013-1527 (Fed. Cir. Jan. 11, 2019) | Lost profits determination remanded | But-for causation | Case remanded for the district court to consider whether a new trial on lost profits is required. There is a question as to whether the entirety of the lost profits could be supported by infringement of any one of the patent claims. |
| Water Technologies Corp. v. Calco, Ltd., 850 F.2d 660 (Fed. Cir. 1988) | Lost profits vacated | But-for causation | There was no finding that plaintiff would have made sales but-for Defendant’s sales. Plaintiff did not have to prove causation as a certainty, but it was required to show a reasonable probability that it would have made the sales involving Defendant’s infringing products. Not only did the district court award lost profits without such evidence, it made specific findings which tend to negate any possible assertion that Plaintiff would have made such sales absent Defendant’s sales. |
| Depuy Spine, Inc. v. Medtronic Sofamor Danek, 567 F.3d 1314 (Fed. Cir. 2009) | Lost profits reversed | Convoyed sales | Because it is undisputed that plainitff’s unpatented pull-through products neither compete nor function with its patented devices and were sold only by virtue of plaintiff’s business relationships, plaintiff was not legally entitled to recover lost profits on those unpatented products. A patentee may recover lost profits on unpatented components sold with a patented item, a convoyed sale, if both the patented and unpatented products together were considered to be components of a single assembly or parts of a complete machine, or they together constituted a functional unit. |
| AMERICAN SEATING v. USSC GROUP, 514 F.3d 1262 (Fed. Cir. 2008) | Exclusion of lost profits affirmed | Convoyed sales | The district court was correct to set aside the verdict for convoyed sales because the record evidence, viewed in the light most favorable to plaintiff, was insufficient as a matter of law for the jury to find that the patented system and unpatented components were part of a single functional unit. A functional relationship does not exist when independently operating patented and unpatented products are purchased as a package solely because of customer demand. |
| Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365 (Fed. Cir. 2015) | Lost profits vacated | Convoyed sales; third parties | (1) Certain items sold by patentee did not form a basis for convoyed sales recoverable as lost profits. Lost profits liability does not extend to items that have essentially no functional relationship to the patented invention and that may have been sold with an infringing device only as a matter of convenience or business advantage. (2) Plaintiff could not recover profits lost by companies to which it may have licensed the patented invention. Lost profits must come from the lost sales of a product or service the patentee itself was selling. (3) Plaintiff could not recover post-hoc payments by related companies as lost profits because these payments do not distinguish what part is attributed to the patented products, as opposed to unrelated transactions. |
| Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538 (Fed. Cir. 1995) | Lost profits vacated | Entire market value rule; convoyed sales | Plaintiff was not entitled to recover lost profits for sales of unpatented components sold with the patented product. Although the unpatented components and patented product may have been used together, they did not function together to achieve one result and each could effectively have been used independently of each other. The unpatented components were merely items sold together with the patented product for convenience and business advantage. The entire market value rule applies only in situations in which the patented and unpatented components are analogous to a single functioning unit. |
| King Instrument Corp. v. Otari Corp., 767 F.2d 853 (Fed. Cir. 1985) | Lost profits vacated | Entire market value rule; convoyed sales | The district court erred in finding that plaintiff would have made the sale of non-infringing spare parts but for Defendant’s infringing sales. The record did not show that the availability of these spare parts was critical to the uniqueness of the patented product. The controlling touchstone in determining whether to include the non-patented spare part in a damage award is whether the patentee can normally anticipate the sale of the non-patented component together with the sale of the patented components. |
| WesternGeco L.L.C. v. ION Geophysical Corp., 791 F.3d 1340 (Fed. Cir. 2015) | Lost profits reversed | Foreign lost profits | Plaintiff cannot recover lost profits resulting from its failure to win foreign service contracts, the failure of which allegedly resulted from Defendant’s supplying infringing products to Plaintiff’s competitors. Plaintiff is not entitled under United States patent law to lost profits from the foreign uses of its patented invention. |
| Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711 F.3d 1348 (Fed. Cir. 2013) | Lost profits vacated | Foreign lost profits | Plaintiff may not recover an award of damages for sales consummated in foreign markets, regardless of any connection to infringing activity in the United States. The entirely extraterritorial production, use, or sale of an invention patented in the United States is an independent, intervening act that, under almost all circumstances, cuts off the chain of causation initiated by an act of domestic infringement. |
| Shockley v. Arcan, Inc., 248 F.3d 1349 (Fed. Cir. 2001) | Lost profits vacated | Future lost profits | Because the jury’s future lost profit award was based on evidence derived from speculative assumptions, it runs counter to the great weight of record evidence and cannot stand. A patentee may supply adequate evidence to enable the factfinder to responsibly estimate future losses based on sound economic models and evidence, not pure guesswork. |
| Brooktree Corp. v. Advanced Micro Devices, 977 F.2d 1555 (Fed. Cir. 1993) | Exclusion of lost profits affirmed | Future lost profits | The district court did not err in finding the projected lost profits evidence too speculative. The record showed uncertainties of future pricing, future competition, and future markets, especially given the fast-moving field. Moreover, plaintiff did not adequately show proof of future losses. |
| Promega Corp. v. Life Techs. Corp., 875 F.3d 651 (Fed. Cir. 2017) | Denial of lost profits affirmed | Infringing sales | The district court did not clearly err in finding that plaintiff waived a damages theory based on the subset of the worldwide sales for lost profits. With only an aggregate sales number for all products combined, the jury had no evidence upon which it could award damages based on a subset of the worldwide sales. Plaintiff took an all-or-nothing approach to damages, electing to attempt to prove only the fact of damages, as opposed to any particular amount of damages. Because there was insufficient evidence to show that all worldwide sales infringed, plaintiff could not seek lost profits. |
| Siemens Med. Sol. v. Saint-Gobain Ceramics, 637 F.3d 1269 (Fed. Cir. 2011) | Reduction of lost profits affirmed | Infringing sales | The district court did not abuse its discretion in reducing the jury’s damages award regarding lost profits on 18 additional products. Although the evidence shows that 79 infringing products, there was only proof of sale of 61 of the products prior to the expiration of the patent. |
| DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) | Exclusion of lost profits affirmed | Infringing sales | The district court’s exclusion of plaintiff’s damages expert testimony is not abuse of discretion. Plaintiff contended that defendant used sales of the infringing product to “steal” a third party contract, with the intent to later replace the infringing product with its non-infringing alternative. Plaintiff cannot be awarded lost profit damages based upon any sale by the defendant of the noninfringing alternative. Moreover, the trial court found the expert testimony lacking in sound economic principle. |
| Ferguson Beauregard/Logic Controls v. Mega Systems, LLC, 350 F.3d 1327 (Fed. Cir. 2003) | Lost profits vacated | Infringing sales | The district court based its lost profits award on evidence of sales of a device embodying features in addition to those present in the infringed patent, namely, those features attributable to another not infringed patent. The district court therefore failed to distinguish the allocation of profits that would have been made “but for” the infringement with the profits that could fairly be allocated to customer demand related to the features embodying the not infringed patent. To recover lost profits damages for patent infringement, a patentee must show that it would have received the additional profits but for the infringement. |
| Vulcan Engineering Co. v. Fata Aluminium, Inc., 278 F.3d 1366 (Fed. Cir. 2002) | Exclusion of lost profits affirmed | Infringing sales | Plaintiff is not entitled to damages for certain products in view of its license to a third party. Plaintiff’s grant of an express license “to have [certain products] made by [Defendant]” is not consistent with the assertion of damages against Defendant for infringement by those products. |
| Standard Havens Products v. Gencor Indus, 953 F.2d 1360 (Fed. Cir. 1992) | Lost profits vacated | Infringing sales | Lost profits vacated because the damage award included three noninfringing sales by Defendant and one sale to a foreign customer. The award must be reduced to account only for the sales that resulted in infringement. |
| Kearns v. Chrysler Corp., 32 F.3d 1541 (Fed. Cir. 1994) | Exclusion of lost profits affirmed | Manufacturing and marketing capabilities | The district court did not err in granting summary judgment precluding lost profits. Plaintiff failed to prove that under Panduit, it possessed the capability to manufacture and market the patented product to meet the demand. Plaintiff’s plans were tentative, speculative and contingent. |
| Wechsler v. Macke, 486 F.3d 1286 (Fed. Cir. 2007) | Lost profits reversed | Manufacturing and marketing capabilities; but-for causation | The record shows that, despite his later success manufacturing and marketing a product, Wechsler lacked the capability to manufacture his device during the period of infringement. Moreover, no evidence supports the contention that the defendant’s infringing sales preempted subsequent sales by plaintiff and/or eroded the market price plaintiff was able to charge for his product. |
| Engineered Products Co. v. Donaldson Company, Inc., 147 Fed. Appx. 979 (Fed. Cir. 2005) | Lost profits reversed | Price erosion | The evidence is too speculative to support recovery for price erosion damages. Plaintiff’s theory was that defendant’s infringing bid forced plaintiff to lower its bid to subsequent third parties. However, plaintiff did not submit sufficient evidence showing that the lowered bids were communicated between the third parties. To prove price erosion damages, a plaintiff must show that but for infringement, it would have sold its product at higher prices. |
| Crystal Semicond. v. Tritech Microelec, 246 F.3d 1336 (Fed. Cir. 2001) | Exclusion of lost profits affirmed | Price erosion | The district court correctly denied plaintiff’s price erosion damages for lack of adequate record support. Plaintiff did not sufficiently show that a price increase for its produce would have allowed the product to remain in the same market. Plaintiff needed to show economic evidence of the resulting market for the higher priced product to recover price erosion damages. |
| Minco, Inc. v. Combustion Engineering, Inc., 95 F.3d 1109 (Fed. Cir. 1996) | Exclusion of lost profits affirmed | Price erosion | The district court did not clearly err in finding that infringement did not cause Plaintiff’s price decreases during the infringement period. The evidence permits the inference that market forces other infringement influenced the price of the product. Moreover, the record suggests that Plaintiff was the market leader in cutting prices. And the record lacks probative economic evidence that consumers would have tolerated higher prices. To prove price erosion damages, a patentee must show that, but for the infringement, it would have been able to charge higher prices. |
| Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008) | Exclusion of lost profits affirmed | Third parties | Patentee is not entitled to lost profits from its subsidiary because the arrangement with the subsidiary was a licensing arrangement, rather than an arrangement where profits flowed inexorably from the subsidiary to the parent. A patent holder is not entitled to recover under a lost profits theory as a result of sales lost by a related corporation, absent a showing that the patent holder itself had lost profits. |
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