Lost Profits and Disgorgement

Abstract

This book chapter addresses two types of monetary remedies for patent infringement: (1) recovery of the patentee’s lost profits and (2) disgorgement of the infringer’s profits. Both remedies make a comparison between what actually happened and a hypothetical “but for” world in which no infringement occurred. But the two remedies have substantially different objectives: lost profits are intended to compensate the patentee by restoring it to the position it would have occupied absent infringement, while disgorgement may serve other purposes, including deterrence, recapturing wrongful gains, and encouraging ex ante licensing of patented technology.

Part II addresses several key issues regarding lost profits awards, including the availability and standard of proof, the role of non-infringing alternatives, potential recovery for the sale of related but unpatented goods, whether and how to apportion lost profits awards for complex products, and potential recovery for other infringement-related harms. Part III describes the justifications for, and availability of, the disgorgement (accounting) remedy in major patent systems and, additionally, analyzes a number of questions related to calculating such awards. In both sections, we make recommendations and identify areas for further research.

Keywords: patent, infringement, remedies, lost profits, disgorgement, restitution, apportionment, price erosion, non-infringing alternatives, entire market value rule, convoyed sales, collateral sales, loss of goodwill, comparative patent law, China, Japan, EU, UK, Canada, Australia, France, Germany, India

JEL Classification: K00, K29, K33, O31, O34