The Availability of Noninfringing Alternatives from a Lost Profits Perspective

In a new paper in BRG Review, Stuart Miller and Krishnan Ramadas write about Federal Circuit and district court opinions and provide insight into how the availability of an identified noninfringing alternative can be effectively evaluated.

Abstract

In patent infringement litigation, plaintiffs may, where appropriate, seek to recover lost profits. Defendants may argue that the plaintiff’s lost profits claim lacks basis due to the presence of noninfringing alternatives. In some cases, a noninfringing alternative could have been offered by the defendant in lieu of the alleged infringing product, or may have been otherwise available on the market. In evaluating the merits of a noninfringing alternative, two factors courts have addressed are acceptability and availability. While acceptability of a noninfringing alternative has received significant attention from practitioners and courts, the issue of availability has received comparatively less attention. In this paper, we review various Federal Circuit and district court opinions addressing availability. These opinions provide insight into how the availability of an identified noninfringing alternative can be effectively evaluated.

Introduction

Plaintiffs in patent infringement litigation who practice the asserted patents may seek an award of lost profits and/or reasonable royalties. In instances where lost profits may be appropriate to consider, plaintiffs may attempt to “prove up” lost profits through consideration of the four Panduit factors, the second of which addresses whether there are viable, noninfringing alternatives. As the Federal Circuit has observed, “a rational would-be infringer is likely to offer an acceptable, noninfringing alternative, if available, to compete with the patent owner rather than leave the market altogether.”

The presence of noninfringing alternatives could undermine a patent holder’s claim for lost profits, because consumers might purchase these noninfringing alternatives instead of the patent holder’s product(s) in the absence of the accused product. In a lost profits context, two pillars establish a noninfringing alternative: (1) acceptability to potential consumers and (2) availability. As was addressed in Sherwin-Williams, failure to demonstrate availability can undermine a defendant’s proposed noninfringing alternative. Here we consider how the concept of “availability” (from the producer’s perspective) has been adjudicated in the context of lost profits claims.

While there is no bright-line test of availability, several guiding principles are informative in determining whether a noninfringing alternative is available to an accused infringer. As we will address in this article, a demonstration of availability may be more likely if the alternative was on the market or could have been commercialized readily during the accounting period.