Federal Circuit holds satisfaction of Panduit factors satisfies apportionment requirement

The patentee sued defendants in the District of Oregon for patent infringement. The jury awarded the patentee $36 million in lost profits. On appeal, the Federal Circuit reversed the district court on issues of (1) assignor estoppel; (2) indefiniteness; (3) willful infringement; (4) written description; and (5) claim preclusion, and affirmed the district court on issues of (1) infringement; (2) damages; and (3) patent eligibility. 

With regard to damages, the patentee argued at trial that it was entitled to obtain lost profit damages because they would have made additional sales but for defendant’s infringing product. In its appeal, the defendant argued that the damage award should be vacated because the district court did not apportion the lost profits. The Federal Circuit affirmed the district court and held “when the Panduit factors are met, they incorporate into their very analysis the value properly attributed to the patented feature.” 

In reaching its holding, the Federal Circuit acknowledged “damages under Panduit are not easy to prove.” The court explained the relationship between the two Panduit factors: “The first factor—demand for the patented product—considers demand for the product as a whole. The second factor—the absence of non-infringing alternatives—considers demand for particular limitations or features of the claimed invention. Together, requiring patentees to prove demand for the product as a whole and the absence of non-infringing alternatives ties lost profit damages to specific claim limitations and ensures that damages are commensurate with the value of the patented features.”

The Federal Circuit further discussed the second factor, the absence of acceptable non-infringing alternatives, which “often proves the most difficult obstacle for patent holders.” The court explained: “Under this factor, if there is a non-infringing alternative which any given purchaser would have found acceptable and bought, then the patentee cannot obtain lost profits for that particular sale. For example, if the customer would have bought the infringing product without the patented feature or with a different, non-infringing alternative to the patented feature, then the patentee cannot establish entitlement to lost profits for that particular sale. And this determination is made on a customer-by-customer basis. For this reason, it is quite common to see damage awards where, as in this case, the patentee proves entitlement to lost profits for some of its sales, but not others.”