Fresh from the Bench

EcoFactor, Inc. v. Google LLC, Appeal No. 2023-1101 (Fed. Cir. May 21, 2025)‎

In its first en banc decision of the year, the Federal Circuit reversed a district court’s admission of expert ‎testimony concerning damages, holding it did not pass muster under Rule 702.  The Court concluded that the ‎expert’s testimony about a reasonable royalty rate was not sufficiently connected to three license agreements ‎he relied on.‎

We addressed this case as our Case of the Week when the three-judge panel issued its original decision in June ‎‎2024.  See here.  The case involves smart thermostats.  A jury found Google infringed and the patents at issue ‎were not invalid.  The jury also awarded a lump sum royalty of $20,019,300 following testimony from ‎EcoFactor’s damages expert that a reasonable royalty in past cases was $X.  The district court had denied ‎Google’s Daubert motion to exclude the testimony, in which Google argued that the expert’s opinion was ‎unsupported by reliable methodology or sufficient facts.  Google also filed a motion for JMOL, which was ‎denied.  A panel of the Federal Circuit affirmed.‎

The en banc court agreed to review solely Rule 702 issue: whether the district court erred by allowing ‎EcoFactor’s damages expert to testify that a reasonable royalty would have been $X.‎

The Court first considered the legal standard under Rule 702, and recent developments.  Specifically, in 2023, ‎Rule 702 was amended, and the Advisory Committee noted that “many courts have held that the critical ‎questions of the sufficiency of an expert’s basis, and the application of the expert’s methodology, are questions ‎of weight and not admissibility. These rulings are an incorrect application of Rules 702 and 104(a).”  Instead, the ‎Court explained that, “Determinations of admissibility, which fall within the gatekeeping role of the court, are ‎separate from determinations of weight and credibility, which are within the province of the jury in a jury case. . ‎‎. . While the credibility of an expert’s damages calculation is properly left to a jury, a determination of reliability ‎under Rule 702 is an essential prerequisite.”‎

With respect to the instant case, EcoFactor’s expert relied on the prototypical willing licensee-willing licensor ‎framework, which incorporates as a factor “[t]he royalties received by the patentee for the licensing of the ‎patent in suit, proving or tending to prove an established royalty.”  EcoFactor’s expert considered licenses ‎between EcoFactor and three licensees, and testified that those licenses all reflected an $X unit rate applied to ‎their sales.‎

However, each of the three licenses were lump sum licenses, and had language such as the following in their ‎preambles:‎

WHEREAS, Ecofactor represents that it has agreed to the payment set forth in this Agreement based on what ‎Ecofactor believes is a reasonable royalty calculation of $[X] per-unit for estimated past and Daikin’s projected ‎future sales of products accused of infringement in the Litigation.‎

At least one of the three licenses goes on to state in its operative payment provision that “[s]uch [a lump-sum] ‎amount is not based upon sales and does not reflect or constitute a royalty.”  The $X royalty rate in fact did not ‎appear anywhere else in any of the three license agreements.  ‎

The en banc Court held that, “To the extent Mr. Kennedy read this unambiguous license and opined that it ‎reflected Schneider’s agreement to the $X royalty rate, there are not sufficient facts or data to support this ‎opinion.”  While these license agreements stated what EcoFactor believed the licenses to be worth, which facts ‎may have been admissible, they were insufficient to support its expert’s testimony that prior licensees had ‎agreed to pay the $X royalty rate.  “The licenses, individually or in combination, do not support Mr. Kennedy’s ‎opinion that the licensees were paying the $X rate, agreed to pay the $X rate, or agreed that the $X rate was a ‎reasonable royalty.”‎

EcoFactor attempted to buttress its expert’s opinion with testimony from its CEO.  He had “testified that the ‎lump-sum payments for each of the three licenses was calculated by multiplying the licensee’s past and future ‎projected sales by the $X per unit rate.”  But  “When asked about the basis for his understanding of the lump-‎sum calculations, [he] testified that neither he nor anyone else at EcoFactor had been given access to sales data ‎for” the three licensees.  Accordingly, he had no personal knowledge that the lump sum royalties in those ‎licenses actually reflected the $X per unit rate.‎

Accordingly, the Court reversed.  The Court reinstated the panel’s opinion with respect to other issues.  The ‎Court also briefly addressed an argument raised by EcoFactor that the en banc panel was not properly ‎constituted because Judge Newman was excluded for disciplinary reasons.  The Court readily disposed of that ‎argument, citing its authority under the Judicial Conduct and Disability Act.‎

Judges Reyna and Stark both dissented from the Court’s analysis concerning the damages issues.‎

The Court’s opinion can be found here

By Nika Aldrich

Sigray, Inc. v. Carl Zeiss X-Ray Microscopy, Inc., Appeal No. 2023-2211 (Fed. Cir. May 23, 2025)‎

‎ In an appeal from a Patent Trial and Appeal Board decision declining to hold any of the asserted claims ‎of a patent unpatentable based on prior art, the Federal Circuit reversed and remanded.  Specifically, ‎Sigray challenged the Board’s determination that claims 1, 3, and 4 were not anticipated by a prior art ‎reference, and that claims 1-6 were not obvious in light of the prior art, either in combination with other ‎references or under a single reference theory.  The Court found the Board applied an incorrect claim ‎construction to claim 1 and thus never addressed anticipation under the correct claim construction. ‎‎“Reversal, rather than remand, is appropriate if on the evidence and arguments presented to the Board, ‎there is only one possible evidence-supported finding: that the Board’s determination when the correct ‎construction is employed, is not supported by substantial evidence.” (internal quotations omitted). The ‎Court further found that all the other disputed claims were dependent on claim 1. “When a dependent ‎claim and the independent claim it incorporates are not separately argued, precedent guides that absent ‎some effort at distinction, the claims rise or fall together.” The Court thus remanded to the Board to ‎determine whether claims 2, 5, and 6 would have been obvious in light of the opinion.‎

The opinion can be found here

By Julia Davis

Editors:

Nika Aldrich, IP Litigation Group Leader, Schwabe

Jason A. Wrubleski, Shareholder

Contributor:

Julia Davis, Associate