Page 33 - Intellectual Property Disputes

Chapter 3

Lost Profits Damages

Lost Profits

Although articulated in various ways, one consistent theme in calculating infringement damages across
the different types of intellectual property is the entitlement of the owner to recover lost profits due to
the infringer’s conduct. The discussion in this section will address lost profits in the context of patents. fn
1

Lost profits are calculated based on the profits that the intellectual property owner would have made
from the sale of additional units but for the infringement. This statement is true even if some of the
components of the subject units were not covered by the intellectual property in suit. The measure of lost
profit damages can be based on a combination of elements, such as the following:

• Lost unit sales

• Lower unit sales prices

• Higher costs, such as increased production or marketing costs

• Lost sales on ancillary (convoyed fn 2 ) products that are typically sold with the infringed product

Availability of Lost Profits

To be entitled to lost profits, a plaintiff " . . . must demonstrate that there was reasonable probability
that, but for the infringement, it would have made infringer’s sales." fn 3 The patent owner must offer
proof demonstrating, to a reasonable probability, entitlement to lost profits but for the infringement. fn 4
In Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., the Federal Circuit stated that once the intellectual
property owner establishes the reasonableness of this inference, the burden shifts to the infringer to show
that the inference is unreasonable for some or all of the lost profits. fn 5

fn 1 Lost profits can be calculated for infringement of copyrights, trademarks, and other forms of intellectual property, as well. In
certain instances, the calculation of lost profits in other forms of intellectual property may employ certain elements of the approach to
calculating lost profits for patent infringement. Accordingly, while discussing lost profits in the context of patents, this section may
still refer to intellectual property generally because certain concepts may be applicable to other forms of intellectual property.

fn 2 See the section, "Cost of Goods Sold or Manufacturing Costs," in this chapter for a discussion of convoyed sales.

fn 3 State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577 (Fed. Cir. 1989), cert. denied, 493 U.S. 1022 (1990).

fn 4 King Instruments Corp. v. Perego, 65 F.3d 941, 952 (Fed. Cir. 1995).

fn 5 Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978).

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