In a closely watched en banc decision issued on May 21, 2025, the Federal Circuit reversed the district court’s denial of a new trial on damages in EcoFactor, Inc. v. Google LLC, No. 2023-1101. The court held that the trial court abused its discretion by admitting expert damages testimony that was not based on sufficient facts or data, in violation of Federal Rule of Evidence 702 and Daubert. While the Federal Circuit reinstated the prior panel’s decision on non-damages issues, its en banc ruling significantly clarifies and tightens the standard for admissibility of expert testimony in patent damages cases.
Background
EcoFactor sued Google in the Western District of Texas, alleging that Google’s Nest thermostats infringed U.S. Patent No. 8,738,327. The jury found infringement and awarded a $20 million lump-sum damages award based on testimony from EcoFactor’s expert, David Kennedy. Kennedy opined that comparable licenses supported a reasonable royalty of $X per unit and that Google should pay damages on that basis.
Google challenged the admissibility of Kennedy’s opinion under Daubert, arguing that his damages theory was not based on sufficient facts or reliable methodology. A panel of the Federal Circuit affirmed the district court (with Judge Prost dissenting in part), but the court subsequently granted rehearing en banc to consider whether the trial court complied with Rule 702 and Daubert in admitting Kennedy’s per-unit damages theory.
The En Banc Holding
Chief Judge Moore, writing for the majority, reversed the district court and ordered a new trial on damages. The court held that Kennedy’s opinion was inadmissible under Rule 702(b) because it relied on an unsupported factual premise: that three prior licensees (Daikin, Schneider, and Johnson Controls) agreed to a $X per-unit royalty in lump-sum settlements with EcoFactor.
The court emphasized that Rule 702, especially after its 2023 amendment, requires trial courts to determine whether expert opinions rest on sufficient facts and whether those facts support the conclusions the expert seeks to offer. The court clarified that the judicial gatekeeping function under Daubert is not limited to methodology but extends to whether the factual basis itself is adequately supported by the record.
Why Kennedy’s Testimony Was Excluded
Kennedy relied on three license agreements to support his conclusion that a $X per-unit royalty had been accepted by other companies in the market. But the court found:
- The license agreements expressly stated that the lump sums were not based on unit sales and did not reflect a royalty.
- The “whereas” clauses recited only EcoFactor’s belief about the $X royalty and did not reflect any agreement or shared understanding with the licensees.
- Kennedy’s testimony that prior licensees paid $X per unit was not supported by the contracts or any underlying sales data.
Moreover, EcoFactor’s CEO, Shayan Habib, testified that he lacked access to sales data from the licensees and based his understanding of the lump sums on generalized knowledge of the industry and advice from undisclosed advisors. The court found this insufficient to support Kennedy’s expert conclusions.
Because Kennedy’s opinion that others paid $X per unit was central to his damages analysis, and because the jury may have relied on that opinion in reaching its verdict, the error was not harmless.
The Role of the 2023 Amendment to Rule 702
A key part of the opinion is its reliance on the 2023 amendment to Rule 702, which clarified that courts must determine whether it is “more likely than not” that the proffered expert testimony meets the requirements of the rule. Importantly, the amendment emphasizes that questions of sufficiency of the facts or data are questions of admissibility, not weight. The court explicitly criticized the trend among some trial courts to defer these issues to cross-examination or jury consideration, reaffirming that trial judges must exclude opinions that extend beyond what the expert’s basis and methodology can reliably support.
Interaction with Appellate Review Standards
Although not the primary focus of the decision, the ruling has prompted commentary (including from Patently-O) about the Federal Circuit’s application of de novo review to what is ostensibly a discretionary evidentiary ruling. While the court couches its holding as a classic abuse-of-discretion review, its willingness to re-interpret the license agreements and witness testimony may suggest a more searching, fact-driven analysis than the deferential standard traditionally implies.
Charles Gideon Korrell believes that this raises the question of whether the Federal Circuit is re-calibrating its approach to evidentiary rulings in damages cases, especially where expert conclusions turn on contract interpretation or disputed factual premises.
Reinforcing Precedent on Licensing and Reasonable Royalties
The decision is rooted in long-standing precedent regarding the use of license agreements in reasonable royalty calculations:
- LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012) – cautioning ahttps://medium.com/@gideonkorrellgainst using settlement agreements unless they are sufficiently comparable.
- Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009) – requiring a clear linkage between the royalty and the patented feature.
- Apple Inc. v. Motorola, Inc., 757 F.3d 1286 (Fed. Cir. 2014) – emphasizing the importance of Daubert gatekeeping in complex patent damages.
EcoFactor builds on this line of cases by reinforcing that a reasonable royalty analysis must be grounded in actual, verifiable facts and that experts cannot rely on implied or asserted beliefs absent factual substantiation.
Broader Implications: Is the Remedies Remedy Now Complete?
Charles Gideon Korrell sees that the Federal Circuit’s en banc ruling sends a clear message: damages experts must tie their opinions to the factual record in a way that satisfies Rule 702’s admissibility standard—not just survive cross-examination. This decision may mark the culmination of a doctrinal tightening that began over a decade ago.
If LaserDynamics began the process and Apple v. Motorola accelerated it, the en banc EcoFactor ruling may indeed represent the near-completion of the “remedies remedy”—a recalibration of how courts scrutinize damages theories in patent litigation.
Experts must now be prepared not only to explain their methodologies but also to demonstrate a verifiable factual foundation for the inputs to their calculations. When the basis for a per-unit royalty is a prior license, courts will require clear evidence that the license actually reflects such a royalty—not just that a party believes it does.
Final Thoughts
While the decision is nominally about one expert’s flawed opinion, Charles Gideon Korrell believes that it carries broader implications for how trial courts are expected to apply Rule 702. The Federal Circuit has reinforced that trial judges must actively police the admissibility of expert testimony, particularly in patent damages cases where technical complexity and legal ambiguity often converge.
Going forward, Charles Gideon Korrell believes that litigants should expect closer scrutiny of any damages theory that relies on settlement agreements or implied royalty rates—and should be ready to defend the factual integrity of those theories from the outset.
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