Court tackles Panduit's role in lost profits calculation

Roll-Rite, LLC v. Shur-Co, LLC, 2014 U.S. Dist. LEXIS 73026 (May 29, 2014)

Most litigants in patent cases know that to show lost profits a patent owner must prove that there was a reasonable probability that, 'but for" the infringement, it would have made the infringing sales. To establish causation, in turn, the patent owner must "reconstruct the market" as it would have been absent the infringing product to determine what the patentee would have made.

But how does the Panduit test figure into a lost profits calculation? A recent Daubert case shows that litigants may be less clear on the interplay of causation, reconstructing the market, and satisfying the four factors of Panduit.

To support the plaintiff’s lost profits claim, its expert used Panduit to reconstruct the market and show causation and determined the plaintiff had a right to 100% of the defendant’s sales of its infringing product. The defendant claimed the testimony was inadmissible because the expert did not accurately reconstruct the market and also failed to meet several of the Panduit factors necessary to establish causation.

In assessing the expert testimony, the court first pointed out that the defendant “incorrectly separates the question of whether [the expert] reconstructed the hypothetical market from the question of whether the Panduit factors are satisfied.”

Find out how the court reframed the issue here.