Panduit Corp. v. Stahlin Bros. Fibre Works, Inc.

Summary

The Sixth Circuit addresses damages for infringement of a patent covering electrical wiring duct. The court affirms the denial of lost profits but holds that the 2.5% reasonable royalty was improperly determined, particularly because the district court relied on an erroneous finding concerning acceptable noninfringing substitutes. The case is remanded for redetermination of the reasonable royalty.

Holdings

1. A patent owner seeking lost profits on sales made by an infringer must prove demand for the patented product, the absence of acceptable noninfringing substitutes, manufacturing and marketing capability, and the amount of profit the owner would have made. Panduit failed to prove the amount of profit because its evidence did not adequately account for fixed costs.
2. Panduit was not entitled to damages for profits allegedly lost because of Stahlin's price reduction where the factfinder determined that the price reduction increased Panduit's sales volume and produced a net increase in Panduit's profits.
3. When actual damages such as lost profits cannot be proved, the patent owner is entitled to at least a reasonable royalty under 35 U.S.C. § 284. A post-infringement reasonable royalty cannot be determined as though the parties had engaged in an ordinary voluntary license negotiation before infringement.
4. An acceptable noninfringing substitute must be a product that customers would have been willing to buy in place of the infringing product during the relevant period, with the inquiry focused on the date infringement began. A later ability to switch customers to another product does not establish that an acceptable substitute was then available.

Questions Presented

1. Whether Panduit proved entitlement to lost profits on sales it allegedly would have made absent infringement.
2. Whether Panduit was entitled to damages for profits allegedly lost because Stahlin reduced its prices.
3. Whether the district court correctly determined a reasonable royalty of 2.5% under 35 U.S.C. § 284.
4. Whether the absence of acceptable noninfringing substitutes and other economic factors required reconsideration of the reasonable royalty.

Disposition

reversed_and_remanded