Lost Profits Damages in Patent Litigation

Summary

This practice note discusses legal and strategic considerations of recovering lost profits damages for patent infringement. The Patent Act guarantees a successful infringement plaintiff, "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty". 35 U.S.C. § 284 (2012). Thus, the statute provides two avenues for plaintiffs to seek damages for patent infringement: a reasonable royalty, and/or lost profits—and these theories may be pursued in tandem. It is quite common for defendants to seek damages based on a reasonable royalty, particularly for nonpracticing entity (NPE) plaintiffs. However, a patentee who competes with an accused infringer in the market for a patented product will invariably seek lost profits for at least some of the infringing sales—and such damages are potentially greater than a "reasonable royalty." A lost profits inquiry is quite fact-intensive, and getting a handle on the full scope of the issues involved at an early ...