Intellectual Property Law

New Matter Spring 2015, Volume 40, Number 1

Sins of Omission: Panduit’s Overreach in Patent Model Jury instructions

ROBERT W. PAYNE Hoge, Fenton, Jones & Appel, Inc.

It is generally an article of faith that to obtain an award of lost profits in patent infringement cases, a patentee plaintiff has the burden of proving a double negative. it must prove the non-existence of non-infringing substitutes. This is the teaching gleaned and consistently applied—or misapplied—from the Panduit case.1 This burden effectively "cuts off" entitlement to lost profits awards in many business-to-business patent cases,2 forcing plaintiffs to fall back on smaller reasonable royalty awards.

But that burden does not, or should not, always apply. Major model patent jury instructions contribute to the problem. While their treatment of Panduit leads to only minor concerns, they do not clearly set out the occasions in which the Panduit analysis, including the requirement to prove the double negative, does not apply. These sins of omission have a critical impact on obtaining—or seeking to obtain—lost profits in patent cases. While commentators decry the significant cost of patent litigation brought by patent trolls in obtaining "unwarranted" royalty awards, few focus on the impact of devalued lost profits claims in purely business-to-business disputes.

Case law, policy, and logic mandate that those addressing patent lost profits recognize at the forefront at least three important exceptions. Those exceptions are:

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