The Panduit Test

The Panduit Test

Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 197 USPQ 726 (6th Cir.1978), articulated a four-factor test that has since been accepted as a useful, but non-exclusive, way for a patentee to prove entitlement to lost profits damages. See State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1577, 12 USPQ2d 1026, 1028 (Fed.Cir.1989), cert. denied, 493 U.S. 1022, 110 S.Ct. 725, 107 L.Ed.2d 744 (1990).

The Panduit test requires that a patentee establish:

(1) demand for the patented product;

(2) absence of acceptable non-infringing substitutes;

(3) manufacturing and marketing capability to exploit the demand;

(4) the amount of the profit it would have made. (Panduit, 575 F.2d at 1156, 197 USPQ at 730.)

A showing under Panduit permits a court to reasonably infer that the lost profits claimed were in fact caused by the infringing sales, thus establishing a patentee's prima facie case with respect to "but for" causation. Kaufman Co. v. Lantech, Inc., 926 F.2d 1136, 1141, 17 USPQ2d 1828, 1831 (Fed.Cir.1991).

A patentee need not negate every possibility that the purchaser might not have purchased a product other than its own, absent the infringement. Id.

The patentee need only show that there was a reasonable probability that the sales would have been made "but for" the infringement. Id.

When the patentee establishes the reasonableness of this inference, e.g., by satisfying the Panduit test, it has sustained the burden of proving entitlement to lost profits due to the infringing sales. Id. at 1141, 17 USPQ2d at 1832.

The burden then shifts to the infringer to show that the inference is unreasonable for some or all of the lost sales. Id.