Page 15 - Calculating Lost Profits

 the defendant’s behavior was the proximate cause of the economic harm claimed as damages.

The burdens described previously rest with the plaintiff, as opposed to the plaintiff’s damages expert.
The requirements associated with proving causation vary between disputes and the type of analysis per-
formed. For example, a claim for lost profits from patent infringement may require proof that the in-
fringement caused customers to not make purchases from the plaintiff, whereas a reasonable royalty as a
measure of damages for the same patent infringement would typically not require proof to avail a rea-
sonable royalty measure of damages. fn 3 In general, however, there are two alternative causation re-
quirements placed on the plaintiff:

 But-for causation. Whether, absent the defendant’s conduct, the economic harm would have oc-
curred. fn 4

 Substantial factor test. Whether the alleged wrongful act was a substantial factor in the plaintiff’s
loss. fn 5

A plaintiff’s damages expert may be asked to assume causation for the purposes of his or her work in
situations in which other evidence or expert testimony may be offered on this topic. In other cases, the
scope of a plaintiff’s expert testimony may address or relate to causation directly or indirectly. fn 6 In ei-
ther situation, it is generally in the client’s interest for the damages expert, whether working on behalf of
the plaintiff or defendant, to understand the evidence about causation. In this context, it is generally use-
ful for the expert to understand how the plaintiff claims the alleged wrongful conduct caused the damag-
es. Similarly, it is useful to understand if and why the defendant claims the wrongful conduct did not
cause the damages, and whether the practitioner can perform analysis or investigation that can test and
support an answer to these questions. The pursuit and analysis of such data may illuminate causation
considerations, including the need to introduce evidence to support (or disprove) the claims, as well as
other factors that may have influenced the purported lost sales. The damages expert should take care to
offer an opinion on causation only when such an opinion is within the professional expertise of the ex-
pert and adequately supported by the evidence. For example, it may be appropriate for an expert to testi-
fy about market analysis, research, sales trends, customer reviews, and internal company communica-
tions that address the question of what factors influence sales, including the alleged wrongful conduct.
But it is often beyond a practitioner’s expertise to opine on the summary issue of causation, with an ex-
pert opinion that the damages in question were caused by the alleged wrongful act or acts.

fn 3 Per the Patent Act (35 U.S. Code § 284 - Damages), "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 for the use made of the invention by the
infringer, together with interest and costs as fixed by the court."

fn 4 See, for example, Judicial Council of California Civil Jury Instructions (2017 edition), § 430. Causation: Substantial Factor, quot-
ing State Dept. of State Hospitals v. Superior Court (2015) 61 Cal.4th 339, 354, "We have recognized that proximate cause has two
aspects." . . . "One is cause in fact. An act is a cause in fact if it is a necessary antecedent of an event." . . . "This is sometimes referred
to as ‘but-for’ causation." (available at www.justia.com/trials-litigation/docs/caci/400/430/, accessed January 3, 2019)

fn 5 See, for example, Judicial Council of California Civil Jury Instructions (2017 edition), § 430. Causation: Substantial Factor, "A
substantial factor in causing harm is a factor that a reasonable person would consider to have contributed to the harm. It must be more
than a remote or trivial factor. It does not have to be the only cause of the harm."

fn 6 In some instances, a practitioner may directly opine on causation, but this would typically be when the issue was specifically re-
lated to accounting or related issues, such as whether an accounting entry caused a breach of a loan covenant.

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