Lost profits damages

A damages theory in patent infringement cases that seeks to recover the patent owner's actual lost sales or margin caused by the infringement, rather than a royalty construct. Lost profits require the plaintiff to demonstrate it would have made the infringing sales but for the infringement — satisfying demand, absence of acceptable noninfringing alternatives, capability to meet demand, and proof of lost profits amount (the Panduit test). Because lost profits can substantially exceed reasonable royalty damages in cases where the patent owner actively competes with the infringer, they represent a significant upside driver in funded cases. However, they require the plaintiff to be a practicing entity with traceable lost sales, limiting their availability in PAE or portfolio monetization contexts.

Funders treat a viable lost-profits theory as a material upside driver over a royalty-only case, but only after confirming the plaintiff can clear the Panduit factors — particularly absence of acceptable non-infringing alternatives — since a theory that collapses under those elements reverts to a much smaller royalty-only recovery. Underwriting therefore models both outcomes explicitly: a base case built on reasonable-royalty exposure and a credited upside case contingent on the plaintiff's market-share and but-for-sales evidence surviving expert challenge.