The CAFC’s En Banc Review of EcoFactor

12.30.24

EcoFactor v. Google – Examining Damages Testimony in Patent Litigation

The Federal Circuit has granted en banc review to the panel decision in EcoFactor, Inc. v. Google LLC, choosing to review the admissibility of expert testimony on damages and the inquiry into when a separate license can be used to evaluate a reasonable royalty in a patent infringement lawsuit. The Court has set oral argument for March 13, 2025.

Background and Context

EcoFactor, a company specializing in smart thermostat technology, sued Google for patent infringement in the Western District of Texas. At trial, the jury found that Google infringed EcoFactor’s patent and awarded damages based on testimony from EcoFactor’s damages expert.

Google challenged the admissibility of this expert testimony, arguing that it did not meet the standards set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc. and Federal Rule of Evidence 702. These standards require that expert testimony be based on sufficient facts or data, be the product of reliable principles and methods, and that the expert has applied these principles and methods reliably to the facts of the case.

Key Issues and Court’s Analysis

The Federal Circuit panel analyzed whether the District Court properly adhered to Rule 702 and Daubert by allowing the damages expert’s testimony. In relevant part, the expert based the reasonable royalty rate on three other licenses by EcoFactor. Each license was for a collection of patents, only two of which included the patent in question. Further, the licenses were each for a lump sum payment, not a royalty.

The Court’s analysis scrutinized whether the licenses were properly comparable, whether the expert’s analysis properly accounted for the specific patent-in-question, and whether the expert’s analysis properly converted the lump sum to a royalty rate.

The Majority held that the expert properly considered the full context of these licenses and provided a reasoned analysis for discerning the specific value of the patent-in-question. Further, the Majority found sufficient evidence in the licenses to convert the lump sum into a royalty.

The Dissent, authored by Judge Prost, disagreed. Judge Prost argued that no proper (or reliable) evidence of record supported the expert’s royalty rate. The only evidence supporting the expert’s opinion was self-serving testimony from EcoFactor and “whereas” statements in the licenses where EcoFactor expressed its belief in the value of the patents. However, Judge Prost noted that the licenses contradicted both pieces of self-serving evidence. Specifically, the body of the licenses’ specifically stated that no royalty rate was contemplated. Judge Prost wrote that this evidence from the jointly drafted and binding portions of the license refuted an assertion that the “whereas” statements were proper evidence for supporting a royalty rate.

What’s Next?

The Federal Circuit has now granted en banc review to the case. The en banc review will further evaluate whether it is proper to allow an expert to testify on what a reasonable royalty for patent infringement would be using licenses that paid in a lump sum for a collection of patents. The Court issued a Notice of Hearing, setting oral argument for March 13, 2025.

Broader Impact

The EcoFactor v. Google decision, and the forthcoming en banc review, have significant implications for patent litigation, particularly in the realm of damages calculations. It underscores the importance of rigorous economic analysis and the careful selection of comparable licenses. For patent holders, this ruling provides guidance for presenting robust and defensible damages testimony. For defendants, it highlights the critical need to challenge the reliability and application of expert methodologies effectively.

For businesses, this ruling underscores the complexities of patent enforcement and the importance of strategic legal planning. These nuances for properly evaluating the damages of patent infringement can help businesses navigate potential disputes and protect their intellectual property effectively.

In conclusion, the EcoFactor v. Google decision is, and will continue to be, an important development in patent law, offering important insights into the admissibility of expert testimony on damages. Stay tuned as this case continues to develop.

{space}

Nathan North | Associate Attorney