The Federal Circuit's first utility-patent en banc decision since 2018. Sitting en banc, the court held, 8-2, in an opinion by Chief Judge Moore, that the district court abused its discretion under Federal Rule of Evidence 702 by admitting a damages expert's per-unit royalty opinion that the underlying licenses did not support. Reliability is the judge's gatekeeping responsibility, distinct from the jury's role in weighing credibility; the court ordered a new trial on damages. The Supreme Court denied certiorari in October 2025.
EcoFactor, Inc. v. Google LLC, decided May 21st, 2025. The Federal Circuit, sitting en banc in a utility patent case for the first time since 2018, held, eight to two, in an opinion by Chief Judge Moore, that the district court abused its discretion under Federal Rule of Evidence 702 by admitting EcoFactor's damages expert's opinion that three lump-sum licenses established a per-unit royalty rate. The court ordered a new trial on damages. Here's the brief.
EcoFactor owns U.S. Patent No. 8,738,327, which relates to the operation of smart thermostats in computer-networked heating and cooling systems. In 2020, EcoFactor sued Google in the Western District of Texas, alleging that Google's Nest thermostats infringed.
To prove damages, EcoFactor's expert, David Kennedy, employed the hypothetical-negotiation framework and opined that Google would have agreed to pay a specific royalty per infringing unit — a figure the opinion redacts as X dollars. His principal support was three lump-sum settlement licenses between EcoFactor and Daikin, Schneider Electric, and Johnson Controls. Each contains a whereas recital saying EcoFactor represents that the payment is based on what EcoFactor believes is a reasonable royalty of X dollars per unit. Kennedy testified that the licensees had agreed to pay that rate, and that Google should pay the same rate as comparable licenses.
The district court denied Google's motion to exclude the testimony, without explanation. The jury found claim 5 infringed and awarded just over twenty million dollars. A Federal Circuit panel affirmed in June 2024, with Judge Prost dissenting in part on damages. The full court then granted rehearing en banc and vacated the panel opinion.
The en banc grant was deliberately narrow. The court limited briefing to a single question: the district court's adherence to Rule 702 and Daubert v. Merrell Dow Pharmaceuticals in allowing EcoFactor's damages expert to assign a per-unit royalty rate to the three licenses.
Rule 702 permits a qualified expert to give opinion testimony only if, among other requirements, the testimony is based on sufficient facts or data. Under Daubert, the trial judge plays a gatekeeping role, ensuring that expert testimony is not only relevant, but reliable. And the court stressed that admissibility and weight are different questions, answered by different actors.
Credibility belongs to the jury. Reliability under Rule 702 is, in the court's words, an essential prerequisite — and it is the judge's responsibility.
Applying that framework, the court held the licenses could not carry the expert's conclusion.
The court treated the licenses as unambiguous contracts and interpreted them de novo. Each whereas recital, it explained, recites only EcoFactor's unilateral belief that X dollars is a reasonable royalty — not any licensee's agreement to pay it. Two of the licenses say so expressly: their payment provisions state that the lump-sum amount is not based upon sales and does not reflect or constitute a royalty. The only other evidence Kennedy relied on was the testimony of EcoFactor's chief executive, Shayan Habib, who acknowledged that neither he nor anyone at EcoFactor had seen the licensees' sales data — the numbers needed to convert a lump sum into a per-unit rate. A fundamental premise of the expert's opinion was therefore not based on sufficient facts or data, as Rule 702(b) requires.
Because the error was prejudicial, the court reversed the denial of Google's new-trial motion and remanded for a new trial on damages, reinstating the panel's rulings on every other issue.
Judge Reyna, joined by Judge Stark, dissented in part, arguing the majority went beyond the limited en banc question by resolving the case on contract interpretation and failed to conduct any meaningful harmless-error analysis. Judge Stark, joined by Judge Reyna, also dissented in part, warning that the majority had resolved a factual dispute that belonged to the jury — while reading the holding narrowly.
EcoFactor is the Federal Circuit's first en banc decision in a utility patent case since 2018, and the full court used it to realign patent damages practice with Rule 702's text: gatekeeping applies with full force to damages experts, and comparable-license testimony must be grounded in what the licenses actually say. The court was careful about what it did not hold — reasonable-royalty analysis may still involve approximation, and the Georgia-Pacific framework remains, in the court's words, a sound approach. The Supreme Court denied cert on October 20th, 2025, leaving EcoFactor as the governing word on the question.
EcoFactor, Inc. v. Google LLC, 137 F.4th 1333, Federal Circuit, en banc, decided May 21st, 2025. I'm John Goodhue. Thanks for watching.
These videos are educational case briefs, not legal advice, and watching them does not create an attorney-client relationship with the presenter or the firm. Case law and its interpretation evolves, always check a decision's subsequent history. Do not rely on these case briefs, but read the case yourself or have your attorney read them. Videos are presented via an AI avatar and voice clone of John Goodhue, created with his participation and consent.