On May 21, 2025, in an en banc decision, the U.S. Court of Appeals for the Federal Circuit vacated its earlier panel ruling and remanded the case of EcoFactor Inc. v. Google LLC for further proceedings.1 The court focused on the admissibility of a damages expert’s testimony, particularly concerning the use of comparable licenses to determine a reasonable royalty rate in a patent infringement action.
This decision emphasizes the importance of the district court’s gatekeeping function when analyzing the admissibility of expert testimony under Federal Rule of Evidence 702 and the Daubert standard in patent infringement cases. Because of the “complex, technical issues” involved in calculating patent damages, expert testimony plays a significant role in assisting the trier of fact. Therefore, it is critical that the court first ensures the reliability of a damages expert’s testimony.
BACKGROUND
EcoFactor Inc., a California-based energy management company, filed a patent infringement action against Google in 2020.2 The complaint alleged that Google’s Nest smart thermostats infringed on EcoFactor’s patent, U.S. Patent No. 8,738,327, relating to the operation of smart thermostats in computer-networked heating and cooling systems.3 Before trial, Google moved to exclude testimony from EcoFactor’s damages expert, arguing that it was unreliable, but the district court denied the motion.4 In 2022, a federal jury in the Western District of Texas sided with EcoFactor, awarding over $20 million in damages.5 Google filed a motion for a new trial on damages arguing that EcoFactor’s expert should have been excluded.6 The district court again denied Google’s motion.7 Google appealed the decision, but a three-judge panel of the Federal Circuit upheld the jury’s verdict in 2024.8 However, the Federal Circuit granted rehearing en banc to reconsider the admissibility of the damages expert’s testimony, specifically addressing whether the district court adhered to Federal Rule of Evidence 702 and the Daubert standard.9
THE FEDERAL CIRCUIT’S EN BANC DECISION
In its 8-2 en banc decision, the Federal Circuit vacated the panel’s earlier ruling and remanded the case for further proceedings.10 The court focused on whether the district court had properly applied Rule 702 and Daubert in admitting the damages expert’s testimony. In doing so, the en banc court evaluated whether the expert’s methodology for calculating a reasonable royalty rate was reliable and based on sufficient facts or data.
EcoFactor’s damages expert employed the hypothetical negation or “willing licensor-willing licensee” framework in order to estimate a reasonably royalty rate of $X per unit.11 “A critical consideration in this analysis is the amount that the alleged infringer would agree to pay as a willing licensee.”12 EcoFactor’s expert relied on three prior licensing agreements between EcoFactor and third-parties to derive his reasonably royalty rate, representing that the agreements indicated the three third-parties agreed to pay $X per rate as licensees.13 In reality, the agreements were lump-sum agreements, which only demonstrated EcoFactor’s “unilateral belief that $X constitutes a reasonable royalty,” which EcoFactor would have accepted as a willing licensor.14
The court found that the “plain language” of each of the licensing agreements “provid[ed] no indication that the licensees agreed to pay the $X rate or shared EcoFactor’s belief that $X constituted a reasonable royalty,” and “therefore, do not, individually or in combination, provide support for [EcoFactor’s expert’s] testimony . . . .”15 The only other evidence upon which the expert relied was the testimony of EcoFactor’s CEO.16 But the CEO’s testimony likewise did not indicate that the third-party licensees agreed to pay a royalty rate of $X per unit.17 In other words, EcoFactor’s expert incorrectly calculated a reasonably royalty rate under the hypothetical negotiation analysis.
The court reasoned that because it was “ensur[ing] that there [were] sufficient facts or data for [EcoFactor’s expert’s] testimony,” it was within its “gatekeeping function”18 in concluding that the expert’s testimony did not adhere to the Daubert standard and that the district court’s decision to admit the testimony was “undoubtedly prejudicial.”19 The en banc court therefore reversed the district court’s denial of Google’s motion for a new trial and remanded for a new trial on damages.20
DISSENTING OPINIONS
Circuit Judges Reyna and Stark concurred in part and dissented in part.21 The judges dissented for two reasons.22 First, the judges believed that the court focused too heavily on interpreting the licensing agreements, “sua sponte transform[ing] this case into one of contract interpretation.”23 And in doing so, “depriv[ed] EcoFactor of notice and an opportunity to be heard,” and “avoid[ed] what this appeal [was] really about, i.e., the extent to which district courts have discretion to decide fact-based questions of admissibility under Rule 702 and Daubert.”24 Second, the judges believed that the court “fail[ed] to conduct any meaningful harmful error analysis” as it “excuse[d] Google for its failure” to prove that EcoFactor’s expert’s opinion affected its substantial rights, a “well established burden under Fifth Circuit law.”25
Lastly, the judges noted that the court’s opinion should be interpreted narrowly.26 The “decision only governs where an expert’s testimony is undoubtedly contrary to a critical fact upon which the expert relies” and is otherwise inapplicable in a “vast majority of patent cases, where the relevant evidence the experts are considering can support competing conclusions . . . .”27
CONCLUSION
The Federal Circuit’s en banc opinion in EcoFactor Inc v. Google LLC reinforces the foundational principle that expert testimony must be grounded in reliable facts and methodologies. This opinion signals that district courts must closely examine whether evidence of comparable licenses truly reflects the value of the patented invention, potentially influencing how future patent holders structure licensing agreements and present damage claims.
1EcoFactor v. Google LLC, No. 2023-1101, slip. op. at 2 (Fed. Cir. 2025).
2Id. at 3.
3Id.
4Id.
5Id. at 3-4.
6Id.at 4.
7Id.
8Id.
9Id.
10Id. at 23.
11Id. at 10-11.
12Id. at 11.
13Id. at 12-15.
14The Federal Circuit assessed the meaning of the licensing agreements through principles of “contract interpretation.” Id. at 12-16.
15Id.
16Id. at 16-19.
17Id.
18Id. at 15.
19Id. at 21-22.
20Id. at 23-24.
21See EcoFactor v. Google LLC, No. 2023-1101, slip. op. at 2 (Fed. Cir. 2025) (Reyna, J., dissenting in part).
22Id.
23Id. at 7.
24Id. at 2, 7.
25Id. at 11-14.
26See EcoFactor v. Google LLC, No. 2023-1101, slip. op. at 2-3 (Fed. Cir. 2025) (Stark, J., dissenting in part) (emphasis in original).
27Id. (emphasis in original).
