The Federal Circuit reversed a lost profits award in a patent infringement case, holding that the district court applied the wrong legal standard when it excluded evidence of noninfringing substitutes. The case provides guidance on when hypothetical design alternatives may reduce or eliminate lost profits damages.
The Inventist Case
In Inventist Inc. v. Ninebot Inc. (USA), No. 2024-1010 (Fed. Cir. Nov. 14, 2025), the court addressed whether an accused infringer may introduce evidence about modifications it could have made to avoid infringement, even though those modifications were never implemented or sold during the infringement period.
Inventist owns U.S. Patent No. 8,807,250, which claims an electrically powered self-balancing unicycle. The patent requires “leg contact surfaces” that protrude from the sides of the device and contact the user’s legs below the wheel’s axis of rotation. Inventist sued Ninebot for selling unicycles that infringed the patent.
The district court found that Ninebot’s first-generation unicycles infringed the patent. A jury awarded Inventist $835,220 in lost profits and $29,593 as a reasonable royalty. The Federal Circuit reversed the lost profits award and remanded for a new trial.
The District Court’s Error
The central dispute concerned whether Ninebot could introduce evidence about a simple modification to its first-generation unicycles that would have avoided infringement. Ninebot argued that removing pads from the lateral side cover would have made the design noninfringing, at a cost of less than $30 per device.
The district court excluded this evidence. It held that the potential redesign did not qualify as a noninfringing substitute because it was not “available for sale during the infringement period.”
The Federal Circuit held that this was error. The court explained that the proper approach requires a hypothetical reconstruction of the market as it would have developed without the infringing product.
The Panduit Test for Lost Profits
To recover lost profits, a patent owner must prove “but for” causation: that the patent owner would have made the claimed profits if the infringement had not occurred.
The standard framework comes from Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978). Under Panduit, the patent owner must prove:
- Demand for the patented product
- Absence of acceptable noninfringing substitutes
- Manufacturing and marketing capability to exploit the demand
- The amount of profit the patent owner would have made
The second factor—absence of acceptable noninfringing substitutes—was at issue in Inventist.
Market Reconstruction and Available Alternatives
The Federal Circuit reaffirmed the principle from Grain Processing Corp. v. American Maize-Products Co., 185 F.3d 1341 (Fed. Cir. 1999), that available alternatives may preclude lost profits damages even if they were not on the market during the infringement period.
The key question is whether the alternative was “readily available and acceptable to consumers.” An accused infringer may introduce evidence that it could have used a noninfringing alternative if the infringer shows the alternative was something it foreseeably would have undertaken.
This creates a dynamic model of market reconstruction. Rather than freezing the market as it existed, the analysis asks what would have happened if the accused infringer had acted differently.
Practical Implications
The decision places a burden on accused infringers to prove that noninfringing alternatives were available. The infringer must show more than theoretical possibility. Evidence must demonstrate that the alternative:
- Required no invention
- Was technically feasible with existing technology
- Could have been implemented with existing resources
- Would have been acceptable to consumers
Products that require substantial development time, testing, or capital investment may not qualify as available alternatives, even if they involve existing technology.
Strategic Considerations
For patent owners seeking lost profits, this decision highlights the importance of addressing potential design-arounds during litigation. Expert testimony should address whether proposed alternatives would have required invention, substantial development, or would have been unacceptable to consumers.
For accused infringers defending against lost profits claims, the decision confirms that evidence of feasible noninfringing alternatives may reduce or eliminate lost profits—even if those alternatives were never sold. However, the burden is substantial. Contemporaneous evidence that the alternative was actually contemplated during the infringement period strengthens the defense.
Conclusion
The Inventist decision clarifies that the second Panduit factor requires market reconstruction based on what would have happened absent the infringement. Noninfringing substitutes need not have been on sale if the accused infringer can prove they were readily available and would have been adopted.
The decision balances competing concerns: patent owners should recover the profits they lost due to infringement, but should not receive windfalls for sales they would not have made if lawful alternatives existed. The hypothetical nature of this inquiry makes lost profits outcomes fact-intensive and difficult to predict.
Justin Miller is a solo patent attorney. In 2025 he started his own law firm, Distinct Patent Law, after nearly 15 years of practice. His firm is located in Saint Petersburg Florida. He serves clients in Tampa Bay, and because patent law is federal, can file patent applications for clients all over the United States.