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Y O U N G L A W Y E R S J O U R N A L
44
SEPTEMBER 2016
Understanding Patent Damages:
The Basics
By Lindsey G. Fisher and Kevin T. McElroy
A
vailable remedies for intellectual
property owners vary by intellec-
tual property type. Monetary relief
for patent damages generally falls into two
categories: actual damages and reasonable
royalty damages. Section 284 of Title 35
provides guidance to practitioners when
calculating patent damages:
“Upon finding for the claimant the
court shall award the claimant dam-
ages 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.” 35
U.S.C. § 284.
Section 284 suggests that a “reasonable
royalty” calculation exists as a floor to
damages. The most common calculation of
actual damages takes the form of lost prof-
its. Lost profits may be an available remedy
to a patent holder who demonstrates
that it would have made additional sales
in the absence of infringement, whereas
reasonable royalty damages are available
to everyone.
Lost Profit Damages
In order to recover lost profits damages,
the patent holder needs to demonstrate
that it would have made additional sales
“but for” a defendant’s infringement.
State
Industries v. Mor-Flo Industries, Inc.
, 883
F.2d 1573, 1577 (Fed. Cir. 1989). The
Court of Appeals for the Sixth Circuit set
forth a four-pronged test to determine if
a patentee can receive lost profits (
Panduit
Corp. v. Stahlin Bros. FiberWorks, Inc.
, 575
F.2d 1152 (6th Cir. 1978)), which is often
referred to as the
Panduit Factors.
The four
Panduit
Factors are:
• Demand for the patented product or
service;
• Absence of acceptable noninfringing
substitutes;
• Manufacturing and marketing capabil-