Every damages calculation in commercial litigation rests on a single animating question: what would the plaintiff's financial position have looked like if the defendant had never done anything wrong? That hypothetical — the world that might have been — must be compared against the world that actually is. The gap between them is the measure of recovery.
This is the core logic of the "with and without" method, sometimes called the "but-for" method, one of the most important frameworks in modern damages law. It appears, under various names and in various forms, across antitrust, patent, contract, and tort litigation.
This article explains what the method is, how it relates to similar approaches, which cases have accepted it, and where courts draw the line when expert analyses overreach.
What Is the "With and Without" Method?
The method constructs two parallel scenarios and measures the distance between them:
The "but-for" world — what the plaintiff's financial performance would have looked like if the defendant had not committed the wrongful act (the world "without" the breach, infringement, or anticompetitive conduct).
The "actual" world — what happened to the plaintiff's financial performance as a result of the wrongful conduct (the world "with" the harm).
The damages figure is the difference between the two. Where the damages reflect future losses, that resulting amount is typically discounted to present value, though not every analysis requires discounting — historical past losses, for instance, are often not discounted.
The method operates across multiple causes of action, including antitrust violations, patent infringement, breach of contract, and tort, though courts apply it with different degrees of rigor and scrutiny depending on the practice area.
Relationship to the "Before and After" Method
The with and without method is conceptually linked to — but analytically distinct from — the before and after method, one of the most commonly recognized approaches in lost profits litigation.
The before-and-after method reconstructs the but-for world by looking at how the plaintiff performed during a period prior to (or after) the harmful conduct, then comparing that benchmark period to the period during which the defendant's conduct caused harm. The "before" period serves as a stand-in for the world without the wrongdoing; the "during" or "after" period reflects the world with it.
A pure with and without analysis is broader: rather than relying solely on the plaintiff's own historical data, it may use economic modeling, industry projections, or regression analysis to construct a hypothetical but-for world. This makes it especially valuable when no clean benchmark period exists — for example, when a new business has no meaningful financial history prior to the harm, or when the defendant's conduct pervaded the entire period for which records exist.
In practice, the two approaches often overlap. Damages experts commonly construct a two-scenario comparison — estimating the plaintiff's expected economic performance in the but-for world and comparing it to actual performance — drawing on pre-harm history, comparable company data, or market modeling as the situation requires.
The Legal Foundation: But-For Causation
The with and without method is grounded in the law's fundamental causation framework. In many commercial damages cases, causation is analyzed through the familiar but-for test: the defendant's wrongful act was a cause of the plaintiff's injury if, absent that act, the injury would not have occurred. That inquiry gives rise to the but-for world that sits at the center of nearly every lost profits analysis.
It is worth noting that the but-for test is not the only causation standard available to courts. Depending on the jurisdiction and the type of claim, courts may apply a substantial factor test, a proximate cause analysis, or, in some contexts, a motivating factor standard. But in commercial damages litigation, the but-for framework is by far the most commonly applied.
In contract cases, the goal is expectation damages: restoring the non-breaching party to the economic position it would have occupied had the agreement been honored. This "benefit of the bargain" principle requires a direct comparison between the but-for position (what the plaintiff would have earned under the contract) and the actual position (what the plaintiff earned after the breach).
In patent infringement, the Federal Circuit has confirmed that the same logic applies. As the court explained in Mentor Graphics Corp. v. EVE-USA Inc. (discussed below), compensatory damages under the Patent Act share a common objective with damages in contract and tort: putting the injured party in the position it would have occupied absent the wrongful conduct.
Key Cases Accepting the "With and Without" Method
Bigelow v. RKO Radio Pictures, Inc., 327 U.S. 251 (1946)
The Supreme Court's decision in Bigelow remains the foundational American authority on the comparative damages approach. The plaintiffs operated an independent movie theater in Chicago and claimed that a distribution conspiracy — orchestrated by the defendant studios — denied them access to first-run films, depressing their revenues for five years.
At trial, the plaintiffs introduced two damages estimates. The first compared their theater's earnings during the conspiracy period against those of a rival theater that benefited from the conspiracy (the yardstick method). The second compared the plaintiffs' own pre-conspiracy revenues to their revenues during the conspiracy period (the before-and-after method). The jury returned a verdict for approximately $120,000, trebled under the Clayton Act.
The Seventh Circuit threw out the verdict as too speculative, reasoning that no one could know what the plaintiffs' earnings would have been absent the conspiracy. The US Supreme Court reversed. The Court endorsed the principle, long established in American law, that uncertainty created by a defendant's wrongful conduct should not relieve that defendant of liability — the risk of imprecision falls on the wrongdoer, not the victim. The damages award did not need to be mathematically exact; a just and reasonable estimate grounded in the evidence was sufficient.
Bigelow confirmed that plaintiffs may use yardstick or before-and-after estimates, and that courts should not demand impossible precision in reconstructing the but-for world when the defendant's own conduct is what made precision impossible.
Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (1931)
Fifteen years before Bigelow, the Supreme Court confronted a similar issue in a Sherman Act case involving the alleged monopolization of the vegetable parchment market. The district court accepted a jury verdict of $65,000 based on lost profits; the circuit court reversed. The Supreme Court reinstated the award, emphasizing that uncertainty about the precise amount of damages should not bar recovery where the defendant's misconduct made that uncertainty inevitable. The decision established an important policy rationale underlying the with and without method: defendants who create evidentiary uncertainty through their own wrongdoing cannot exploit that uncertainty as a shield against damages.
Mentor Graphics Corp. v. EVE-USA Inc., No. 15-1470 (Fed. Cir. 2017)
In this patent infringement case, the Federal Circuit articulated the compensatory damages standard with notable clarity. The court explained that the goal of lost profit damages is to place the patentee in the same position it would have occupied had the infringement never occurred — a direct expression of the with and without principle applied to patent law. The court further noted that this standard is consistent across areas of law, including torts and contract disputes, reflecting the broader coherence of the but-for framework.
The case also addressed a proposed apportionment framework that would have required patentees to isolate damages to the specific inventive contribution of the patented features. The Federal Circuit rejected that approach, finding that the existing Panduit framework (discussed next) already ensures that lost profit damages are appropriately tied to the infringing conduct.
Panduit Corp. v. Stahlin Bros. Fibre Works, 575 F.2d 1152 (6th Cir. 1978)
Panduit established the four-factor test that operationalizes but-for causation in patent lost-profits cases. To recover lost profits, a patentee must demonstrate: (1) demand for the patented product; (2) absence of acceptable non-infringing alternatives; (3) the patentee's manufacturing and marketing capacity to exploit that demand; and (4) the amount of profit the patentee would have made. A showing under all four factors permits a court to infer that the claimed lost profits were in fact caused by the infringement.
The Panduit framework is not the with and without method itself — it is a structured evidentiary test for establishing the causation element that underpins the method. By requiring proof that there were no acceptable substitutes and that the patentee had the capacity to make the disputed sales, Panduit disciplines the hypothetical that the but-for analysis must construct.
Texas Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276 (Tex. 1994)
State courts have applied the same principles in contract and tort contexts. In Texas Instruments, the Texas Supreme Court held that the reasonable certainty standard for lost profits should focus on the nature of the commercial activity at issue, not merely on whether the business was established or new. When a plaintiff can demonstrate a reasonable basis for expecting profits — through the experience of those running the enterprise, the characteristics of the relevant market, and the nature of the business — a damages award is permissible even without a lengthy operating history. The decision pushed back against rigid rules that would categorically deny recovery to new ventures simply because they lacked a pre-harm track record.
Where Courts Reject or Limit the Method
Courts regularly accept the with and without framework in principle while rejecting particular applications of it. The most common grounds for rejection fall into four categories.
Speculative Projections
Lost profits that are remote, speculative, or hypothetical — and therefore incapable of being established with reasonable certainty — are not recoverable. Courts have repeatedly rejected expert analyses that treat optimistic assumptions as established facts.
In one frequently cited example, an appellate court reversed a lost profits award, finding that the expert had used a single year of sales growth to project a multi-year upward trend, had measured damages on gross rather than net profits by failing to deduct officer compensation, and had applied a recovery period tied to the length of the plaintiff's lease rather than to any demonstrated likelihood of future profits. The court characterized this as speculation dressed in the language of financial analysis — a fundamental failure of the with and without method.
Similarly, courts have cautioned that lost profits damages must be limited to actual losses. Damage awards that would place a plaintiff in a dramatically better position than the evidence supports — often described in judicial opinions as transforming an ordinary enterprise into an implausibly flourishing one through unsupported modeling assumptions — will not survive appeal.
Failure to Control for External Factors
Perhaps the most significant technical vulnerability in a with and without analysis is the failure to isolate the defendant's conduct as the cause of the financial gap between the two worlds. An expert who attributes the entire difference between the but-for and actual scenarios to the defendant's wrongdoing, without examining whether other forces — recession, new competition, changes in consumer demand, management decisions — contributed to the plaintiff's losses, will face serious challenge.
Courts and opposing experts frequently argue that a comparative analysis can support a finding of damages "only if other possible causes are examined and eliminated." Where an expert's model attributes all of a plaintiff's financial decline to the defendant without accounting for market-wide trends or independent business decisions, courts have excluded the testimony or substantially reduced the award.
The Daubert Standard and Expert Exclusion
U.S. Federal courts evaluate the admissibility of expert damages testimony under the framework established by the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and codified in Federal Rule of Evidence 702. To be admissible, expert testimony must be (1) offered by a qualified expert, (2) based on sufficient facts or data, (3) the product of reliable principles and methods, and (4) the result of a reliable application of those principles and methods to the facts of the case.
The Daubert framework has become a primary battleground for challenging with and without analyses. Courts have excluded expert testimony where the expert named a recognized methodology but applied it inconsistently, relied on unverified assumptions, ignored contrary evidence without explanation, or offered conclusions that were not connected to the record by any traceable reasoning. Courts are particularly alert to what might be called methodological drift — an expert who invokes the with and without or before-and-after method by name but whose actual analysis does not follow the discipline that those methods require.
(Click here to read my post on the admissibility of expert opinion evidence.)
New Businesses and Missing Benchmark Data
The with and without method functions best when the plaintiff has an established financial track record that can serve as the foundation for the but-for world. Where that history is absent — as with startup companies or businesses that were disrupted before achieving stability — the method faces inherent constraints.
Courts have traditionally been skeptical of lost profits claims from new ventures, on the theory that future profits are too speculative when the enterprise has not yet demonstrated sustained commercial viability. While courts in many jurisdictions have moved away from a categorical prohibition on new-business lost profits, the required showing remains demanding. The focus shifts to whether there is an independent, reliable basis — such as executed contracts, confirmed orders, or a demonstrable market — from which to construct the but-for world without relying primarily on hope.
RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., [2004] B.C.J. No. 2337
This Canadian case illustrates a related pitfall: a with and without analysis that ignores inconvenient post-breach realities. After nearly all of the investment advisers at one of RBC's branch offices defected to Merrill Lynch, RBC's damages expert estimated the decline in branch value as of the date of the breach — effectively freezing the analysis at that point. The problem was that financial markets deteriorated sharply in the months following the breach due to the collapse of technology sector valuations. The court rejected the expert's methodology because ignoring those market conditions produced a result that bore little relationship to what RBC would actually have earned had the advisers stayed.
The lesson the case teaches is not limited to business valuation methodology. Any with and without analysis must engage honestly with real-world conditions that would have existed in both the actual and the but-for world. Selectively modeling the but-for world to exclude unfavorable market forces will not survive judicial scrutiny.
The Method Across Practice Areas
Antitrust
Antitrust litigation gave birth to much of the American case law on comparative damages analysis. Courts have long recognized the before-and-after and yardstick methods as the principal tools for establishing what the relevant market would have looked like absent anticompetitive conduct. Because antitrust defendants often suppress the very evidence needed to reconstruct the but-for world, courts are relatively forgiving of imprecision — Bigelow established that the defendant bears the risk of the uncertainty its own conduct created.
Where data permit, courts and economists have increasingly moved toward regression analysis, which can isolate the effect of the anticompetitive conduct by controlling for other variables. Courts in some jurisdictions have suggested that experts are expected to use regression analysis when the data support it, as it is considered a more rigorous implementation of the comparative approach than simple before-and-after comparisons.
Patent Infringement
In patent cases, the lost profits inquiry is structured around the Panduit framework, which is explicitly designed to test whether the but-for causal link between infringement and lost sales is credibly established. When a patentee cannot satisfy Panduit's requirements, courts award at least a reasonable royalty as a floor. The reasonable royalty analysis uses a hypothetical negotiation framework — asking what license fee the parties would have agreed upon, just before infringement began, in a willing-licensor/willing-licensee negotiation — rather than a traditional lost-profits comparison. While the hypothetical negotiation shares certain conceptual features with the with and without method, it is a distinct methodology with its own evidentiary requirements.
Breach of Contract
Contract damages law has long recognized that where a breach has caused provable harm, courts should not deny recovery merely because the precise amount cannot be determined with exactness. The policy principle is straightforward: a party who violates a contract should not escape liability simply because its breach made it difficult or impossible to quantify the resulting loss. The with and without framework translates this principle into a working methodology by requiring the expert to model what performance under the contract would have produced and compare it to what the plaintiff actually received.
Courts apply foreseeability constraints in this context: consequential or indirect damages, including lost profits, are recoverable only if they were within the reasonable contemplation of the parties at the time of contracting. This limits how far the but-for world can be extended.
Tort
Tort cases present a more demanding evidentiary environment for the with and without method. Because lost profits in tort are viewed as potentially disproportionate to the harm caused by the defendant's conduct, courts generally require a stricter showing of reasonable certainty. The economic loss rule — which bars recovery for purely economic losses in negligence claims absent accompanying physical harm or property damage — further constrains the available remedies in many jurisdictions.
Practical Guidance for Litigators
A well-executed with and without analysis must satisfy several requirements to survive judicial scrutiny:
1. Isolate the defendant's conduct. The model must credibly attribute the difference between the two worlds to the wrongful act. Attributing all of a plaintiff's financial decline to the defendant, without examining whether independent causes contributed, is the single most common error in expert damages testimony.
2. Build on reliable data. The but-for world must be grounded in verifiable facts — confirmed contracts, actual market data, audited financial records. Projections built on unsupported assumptions will not survive a Daubert challenge.
3. Control for external variables. The analysis should account for macroeconomic conditions, competitive dynamics, and industry-level trends that would have affected the plaintiff's performance regardless of the defendant's conduct. Regression techniques are increasingly expected where the data permit.
4. Stay within the scope of the claim. Lost profits are recoverable only when they are directly and proximately caused by the defendant's wrongful act. Overreaching beyond what causation can support is both legally impermissible and strategically dangerous.
5. Engage qualified, disciplined experts. Expert testimony must satisfy the applicable admissibility standard such as Daubert in US federal court, or Frye in US state courts. Experts who stray outside their area of expertise, apply methods inconsistently, or fail to account for contradictory evidence risk exclusion at a critical moment in the litigation. My firm, Boschan Corp., offers especially deep expertise in intellectual property, media, and entertainment damages.
Conclusion
The "with and without" method is not a formula but a principle: that damages should equal the difference between the economic reality a plaintiff actually experienced and the economic reality it would have experienced had the defendant not acted wrongly. Courts from the Supreme Court in Bigelow to federal circuit courts to state tribunals across the country have affirmed this approach as the proper foundation for measuring compensatory damages.
The method's strength is also its vulnerability. Constructing a credible but-for world requires rigorous data, disciplined assumptions, and an honest accounting of all the forces — not just the defendant's wrongdoing — that shaped what actually happened. When those requirements are met, the with and without method provides a principled and defensible path to a damages figure. When they are not, courts are well-equipped to say so.
The lesson of decades of litigation is straightforward: the but-for world must earn its credibility through evidence, not assumption. Courts will not accept a hypothetical future built on wish rather than proof — no matter how sophisticated the model used to dress it up.
