On May 21, 2025, the United States Court of Appeals for the Federal Circuit, sitting en banc, reversed a $20 million damages award against Google LLC in a patent infringement dispute with EcoFactor, Inc. EcoFactor, Inc. v. Google LLC, No. 2023-1101 (Fed. Cir. May 21, 2025). The Court held that the district court abused its discretion in admitting the testimony of EcoFactor’s damages expert, David Kennedy, and remanded the case for a new trial on damages. The central issue was whether Mr. Kennedy’s testimony satisfied the admissibility requirements under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Court found that it did not.
EcoFactor sued Google in the Western District of Texas in January 2020, alleging that Google’s Nest thermostats infringed multiple patents, including U.S. Patent No. 8,738,327, which relates to smart thermostat operation within computer-networked heating and cooling systems. Slip Op. at 3. During pretrial proceedings, Google sought to exclude the testimony of Mr. Kennedy under Federal Rule of Evidence 702 and Daubert, arguing that Mr. Kennedy’s damages analysis—based on an asserted $X per-unit royalty—was not grounded in reliable methodology or sufficient data. Id. The district court denied this motion. Id.
At trial, Mr. Kennedy testified that a $X per-unit royalty was appropriate, and the jury ultimately awarded EcoFactor a lump-sum damages amount of $20,019,300. Id. at 3-4. Google filed a motion for judgment as a matter of law (JMOL) on noninfringement and sought a new trial on damages, contending that Mr. Kennedy’s opinion lacked reliability. Both motions were denied by the district court. Id. at 4.
A panel of the Federal Circuit initially affirmed the district court’s denial of JMOL. Id. On the damages issue, the panel also affirmed the district court, but with a partial dissent. Id. Google then petitioned for en banc rehearing on whether Mr. Kennedy’s testimony satisfied Rule 702 and Daubert. Id. The Federal Circuit granted en banc review limited to that question and heard oral argument on March 13, 2025. Id. at 4-5.
Majority Opinion
The Court first examined whether three prior license agreements between EcoFactor and Daikin Industries, Schneider Electric, and Johnson Controls supported Mr. Kennedy’s opinion that those licensees had agreed to a $X per-unit royalty rate. The Court concluded they did not. Id. at 12.
Each agreement included a “whereas” clause reciting that EcoFactor believed a $X per-unit royalty was a reasonable basis for the lump-sum payments. Id. at 12-14. Mr. Kennedy interpreted these clauses to mean that the licensees agreed to pay a $X royalty rate. The operative provisions of the Daikin and Schneider agreements, however, expressly disclaimed that the lump sums were based on sales or constituted royalties. Id. at 13-14. The Court found this language directly contradicted Mr. Kennedy’s interpretation, stating, “the license itself therefore directly contradicts any claim that the lump sum is based upon any particular royalty rate or even that it is based upon sales volume.” Id. at 13.
The Court emphasized that while these licenses may reflect EcoFactor’s belief as a willing licensor, they did not demonstrate agreement by the licensees to the asserted rate. “The ‘whereas’ recital of each license provides no indication that the licensees agreed to pay the $X rate or shared EcoFactor’s belief that $X constituted a reasonable royalty,” the Court wrote. Id. at 15.
As to the Johnson license, it mirrored the Daikin agreement in its recitals. Id. at 14. The $X royalty rate did not appear anywhere else in the Johnson license. Id.
The Court held that the “whereas” clauses in the three agreements merely reflected EcoFactor’s unilateral beliefs and did not demonstrate mutual agreement on a $X rate. Id. at 16. Therefore, the three licenses, individually or collectively, could not provide a reliable basis for the expert’s opinion that they reflected industry acceptance of the asserted royalty. Id.
Additionally, Mr. Kennedy relied on the testimony of EcoFactor’s CEO, Shayan Habib, who claimed that the lump-sum amounts were calculated by applying the $X rate to the licensees’ estimated sales. Id. at 16-17. Mr. Habib, however, admitted that he had no access to the licensees’ sales data, and there was no documentation substantiating the sales estimates or the royalty derivation. Id. at 17. Mr. Habib admitted that he derived the $X figure from his general industry experience, but provided no documentation or data showing how the licensees’ sales volumes were estimated or factored into the lump-sum amounts. Id. at 17-18. The Court noted, “[Habib’s] testimony amounts to an unsupported assertion from an interested party. His testimony cannot provide a sufficient factual basis for Mr. Kennedy to provide a reliable opinion.” Id. at 18.
Furthermore, the Court rejected arguments raised in dissent that non-attorney advisors might have had access to the relevant sales data. Id. The record, however, contained no evidence to support such claims, and the district court had explicitly barred EcoFactor’s expert from relying on that type of undocumented advisor input. Id. At trial, an attempt by Mr. Habib to suggest that confidential financial information had been shared with EcoFactor’s counsel was stricken from the record. Id. at 19.
Accordingly, the Court concluded that Mr. Habib’s testimony did not provide a sufficient factual basis under Rule 702 to support Mr. Kennedy’s opinion that prior licensees had agreed to pay a $X per-unit royalty.
The Court concluded that Mr. Kennedy lacked a sufficient factual foundation for his testimony under Rule 702. The Court emphasized that the core premise of Mr. Kennedy’s opinion—that EcoFactor’s three prior licensees agreed to pay a $X per-unit royalty—was not supported by reliable evidence. Id. at 20. The Court rejected the notion that Mr. Kennedy’s opinion could be salvaged by the presence of competing interpretations or approximations, noting that this was not a case involving reasonable estimation within a hypothetical negotiation. Id. at 21. Rather, it concerned a concrete factual assertion—whether prior licensees agreed to a specific royalty rate—that Mr. Kennedy treated as fact without sufficient support. Id.
Because this unsupported premise was central to Mr. Kennedy’s damages calculation, the Court held that his testimony was inadmissible and that the district court abused its discretion by allowing it. Id. at 22. The Court further determined that the admission of this testimony was prejudicial and not harmless, as it likely influenced the jury’s damages award. Id.
Ruling
The Federal Circuit reversed the district court’s denial of Google’s motion for a new trial on damages, concluding that Mr. Kennedy’s testimony was inadmissible under Rule 702. The Court found that the testimony rested on a factual premise—licensee agreement to a $X royalty rate—that was not supported by sufficient facts or data. The matter was remanded for a new trial on damages. The Court reinstated prior rulings denying Google’s appeal of JMOL on noninfringement and the district court’s denial of summary judgment.
Dissent
Judge Reyna, joined by Judge Stark, dissented in part from the Court’s en banc decision to reverse the district court’s denial of Google’s motion for a new trial on damages. Id. at 25. The dissent argued that the majority improperly reframed the issue before the Court and erroneously supplanted the fact-finding role of the jury in violation of Rule 702 and Daubert standards.
Judge Reyna objected to the majority’s shift in focus from the question on appeal—whether the district court adhered to Federal Rule of Evidence 702 and Daubert—to a contract interpretation analysis. Id. at 26. He emphasized that the majority had ordered briefing solely on the admissibility of the expert’s damages testimony under Rule 702, not on the meaning of the license agreements. Id. at 25-26. By unilaterally converting the case into one about contract law, Reyna argued, the majority deprived EcoFactor of notice and the opportunity to respond appropriately. Id. at 26.
Judge Reyna maintained that Mr. Kennedy had a sufficient factual basis for his testimony, which was supported by: (1) three license agreements containing recitals referencing a $X per-unit rate; (2) testimony from Mr. Habib, who stated that the lump sums were calculated using a $X rate and were based on his industry experience and advisor input, and (3) unchallenged market share data used by Mr. Kennedy to cross-check the lump sums against relative sales volumes. Id. at 27-29. According to Reyna, this evidence was enough to meet Rule 702’s “sufficient facts or data” requirement and at least created a legitimate dispute for the jury to weigh. Id. at 30. Judge Reyna stressed that expert testimony under Rule 702 does not require the factual basis to be undisputed or dispositive. Id. He emphasized that conflicting factual views are for the jury to resolve, not for the judge to exclude under Rule 702. Id. Citing Fifth Circuit law, he reiterated that trial courts are afforded broad discretion in evaluating expert admissibility and that appellate courts should not reverse unless the ruling is “manifestly erroneous.” Id.
Judge Reyna criticized the majority for shifting the focus of the en banc proceeding from Rule 702 and Daubert to an unbriefed theory of contract interpretation. Id. at 31. Judge Reyna emphasized that the Court had granted en banc review for a limited purpose: to assess whether the district court properly applied Daubert and Rule 702 in admitting EcoFactor’s damages expert testimony regarding a per-unit royalty rate. Id. The majority, however, recharacterized the case as one involving the legal interpretation of license agreements—a shift that, in Reyna’s view, circumvented the proper legal question. Id. at 32. As a result, EcoFactor was not given fair notice or an opportunity to respond. Id. at 31.
Judge Reyna also criticized the majority for improperly dismissing or ignoring evidence in the record that independently supported Mr. Kennedy’s opinion, particularly testimony from Mr. Habib and undisputed market share data. Id. at 32. Judge Reyna argued that the majority engaged in improper credibility determinations by rejecting Mr. Habib’s testimony as “unsupported,” despite the fact that it was admitted without objection and based on personal knowledge. Id. It was not the Court’s role, he argued, to determine which version of the facts to believe. Id. at 33. Judge Reyna also faulted the majority for ignoring Mr. Kennedy’s use of undisputed market share data, which could reasonably support the inference that the lump-sum license amounts were consistent with a $X per-unit rate. Id. at 33-34.
Judge Reyna further objected to the majority’s decision to exclude all of EcoFactor’s damages expert’s testimony rather than limiting its exclusion to the portion addressing prior licensees’ agreement to the $X royalty rate. Id. at 34. He emphasized that the majority’s critique centered solely on a narrow aspect of Mr. Kennedy’s analysis—specifically, Georgia-Pacific factor one, which considers royalties received under prior licenses for the same patent. Id. Even if the majority were correct that Mr. Kennedy’s interpretation of those licenses was flawed, Reyna argued that his broader testimony addressed many other Georgia-Pacific factors and that the majority failed to explain why Mr. Kennedy’s testimony needed to be excluded in its entirety. Id.
Judge Reyna also contended that even if the admission of Mr. Kennedy’s testimony were erroneous, Google makes no meaningful showing as to how Mr. Kennedy’s opinion that $X was a reasonable royalty rate affected its substantial rights. Id. at 35. The record contained duplicative testimony from Mr. Habib about the $X rate and its basis, and all three license agreements were admitted into evidence without redaction. Id. at 35-36. Judge Reyna noted that the jury’s award was lower than what EcoFactor sought, suggesting that the jury discounted Mr. Kennedy’s analysis. Id. at 37. He criticized the majority for conducting no meaningful harmless-error review and for disregarding Fifth Circuit precedent requiring such analysis before vacating a jury verdict. Id. at 38.
Judge Stark, joined by Judge Reyna, dissented in part from the Court’s en banc decision to reverse the district court’s denial of Google’s motion for a new trial on damages. Id. at 39. While he agreed with portions of the majority opinion—namely, affirming the district court’s denial of Google’s motions for summary judgment and for judgment as a matter of law, and affirming the en banc Court’s procedural validity—he took issue with the majority’s handling of Rule 702, its interpretation of the evidentiary record, and its chosen remedy. Id. at 40. He also warned that the decision could be read to require trial courts to resolve factual disputes under the guise of determining admissibility, contrary to Rule 702. Id. at 40.
Judge Stark agreed in principle that expert opinions cannot be admitted when based on facts that are unquestionably unsupported by the record. Id. at 41. But he disagreed that this case met that standard. Id. In his view, the vast majority of patent cases, where the relevant evidence the experts are considering can support competing conclusions, the Majority Opinion is inapplicable. Id.
Judge Stark expressed concern that the majority’s opinion could be misread as encouraging trial courts to resolve factual disputes under the guise of assessing expert admissibility under Rule 702. Id. He emphasized that the majority concluded the district court abused its discretion by allowing Mr. Kennedy to testify to an opinion “that rested on disputed facts,” a position Stark argued undermines the jury’s role. Id.
Stark reiterated that when experts rely on “conflicting sets of facts,” it is not for the trial court to resolve those disputes. Id. at 42. He also referenced the 2000 and 2023 Advisory Committee Notes to Rule 702, both of which affirm that the presence of contested facts does not make an expert opinion inadmissible. Id.
Judge Stark pointed out that a reasonable jury could have found that the licensees agreed to pay lump-sum settlements calculated using the $X rate, based on language in the license agreements and testimony from Mr. Habib. Id. at 43. He noted, for instance, that the Schneider agreement’s disclaimer—stating Schneider did not agree the $X rate was reasonable—could be interpreted as acknowledging the use of that rate while disputing its fairness. Id. He also noted that Mr. Habib testified, without objection, that he believed the lump sums were derived from applying the $X rate, based in part on advice from non-attorney advisors who had access to confidential sales data. Id.
Judge Stark emphasized that the jury could have reasonably credited that interpretation. Id. at 45. Thus, in his view, the existence of competing interpretations meant the issue should have been left to the jury. Id. He concluded that “the parties’ dispute over whether EcoFactor’s licensees actually agreed to an $X rate does not make Mr. Kennedy’s testimony inadmissible,” and the district court did not abdicate its gatekeeping function by allowing it. Id.
Finally, Judge Stark addressed the district court’s failure to provide a detailed rationale for admitting Mr. Kennedy’s expert testimony. Id. at 46. While he acknowledged that the trial court’s lack of explanation “makes our reviewing function unnecessarily difficult,” he disagreed with the majority’s conclusion that this constituted an abuse of discretion warranting reversal. Id. at 47. He pointed out that neither the Fifth Circuit nor the Third Circuit cases cited by the majority require an appellate court to reverse a trial court’s decision solely because it lacked explanation. Id. He further observed that in similar situations, other appellate courts have remanded for further explanation or clarification, rather than ordering a new trial. Id. Judge Stark concluded that even if the district court’s limited explanation were deemed an abuse of discretion, the appropriate remedy would have been to vacate and remand for a more complete gatekeeping analysis—not to mandate a new jury trial on damages. Id. at 48.
Conclusion and Commentary
The Federal Circuit’s en banc decision signals that trial judges must rigorously scrutinize the factual foundations of expert damages testimony before allowing it to reach the jury. The ruling is poised to recalibrate how courts assess expert opinions, particularly when those opinions derive per-unit royalty rates from lump-sum settlements.
The opinion reinforces that Rule 702 imposes substantive gatekeeping duties. Trial courts cannot defer admissibility questions to juries under the guise of assessing weight or credibility when the underlying factual basis is lacking. As the Court emphasized, expert testimony untethered from sufficient facts or data is inadmissible—no matter how plausible it may seem in theory.
In practice, the decision will likely heighten scrutiny of damages models built on prior licenses—especially lump-sum agreements that lack explicit per-unit royalty terms, encourage accused infringers to mount more robust Daubert challenges to damages experts, and prompt patent owners and their counsel to develop more rigorous evidentiary support through fact discovery and third-party licensing documentation.
Though the outcome turned on the specific content of three license agreements and the testimony of a single expert, the broader message is that damages experts must ground their opinions in verifiable data, and district courts must affirmatively enforce that standard at the admissibility stage.
