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Federal Circuit Decisions Clarify Requirements for Lost Profits Damages

By William O. Kerr and Ronald Washington

In two recent decisions, the Court of Appeals for the Federal Circuit (“Federal Circuit”) elaborated on the standards to be used when considering whether to award lost profit damages to a patent owner who has successfully shown validity and infringement. Both decisions were released by the Federal Circuit on Dec. 4, 2003. (Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327 (Fed. Cir. 2003); and Utah Med. Prods., Inc. v. Graphic Controls Corp., 350 F.3d 1376 (Fed. Cir. 2003)). These cases should provide direction to patent owners, defendants, and their counsel when attempting to assert or defend against lost profits claims.

The decisions do not set new legal standards for lost profits damages awards. Instead, they clarify and restate the court's interpretation of the basic tenet of a successful lost profits claim: The patent owner must show with reasonable certainty that, but for the infringement, he or she would have made the portion of the infringer's historical sales on which the claim is based. Without a clear showing of the number of sales the patent owner would have made had the infringer not been in the market, any lost profits claim is at risk.

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