Can a patentee recoup lost profits?

Patent owners can recover lost profits when (1) there is a demand for a patented product, (2) an absence of acceptable and non-infringing alternatives, (3) the patent owner had the ability to manufacture and market to exploit the demand for the product, and (4) the patentee can establish the amount of profit he would have had to make but for the offending product. Mentor Graphics Corp. vs. EVE-USA, Inc., 851 F.3d 1275, 1285 (Fed. Cir. 2017) (citing Panduit Factors). An implicit threshold requirement of this legal framework is actually to be the entity making a profit on the patented product.

In Edgewell Personal Care Brands, LLC et al. vs. Munchkin, Inc., 18-cv-3005 (CD CA July 6, 2022), defendant Munchkin, LLC (“Munchkin”) sought summary judgment that plaintiff Edgewell Personal Care Brands, LLC (“Edgewell”) could not not recoup lost profits. Dekt. 574, 23. Edgewell’s lost profits theory was based on its sales to EPC, a subsidiary of Edgewell, as well as the profits that EPC lost in sales to retailers as a result of the alleged breach of Munchkin. Id., 25. The court found this theory unconvincing, stating that “a patentee cannot claim as damages the loss of profits of a related company.” Id., 26 (citing Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365, 1375 (Fed. Cir. 2015)).

While in rare cases a parent company can recoup lost profits from its subsidiary under an “inexorable flux” theory, that was not the case here. Inexorable flow is the theory that related plaintiffs can collectively recover damages for lost profits if profits are shown to inevitably flow from one entity to another. Acknowledging that the Federal Circuit did not rule out the possibility of recovering damages under this theory, the Court still rejected Edgwell’s attempt, stating that “the evidence does not show that the profits of EPC” go inexorably “to Edgewell”. Id., 26. Returning to the Panduit factors listed above, the court astutely asserted that there was also no evidence that “EPC would have purchased from Edgewell instead of defendant because EPC did not never bought any [products] of the defendant. » Identifier.

Before getting lost in the weeds of the various Panduit factors, it’s always important to step back and assess the flow of benefits between the entity that holds the patent and the entity that sells the incumbent products.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC All rights reserved.National Law Review, Volume XII, Number 213

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