Federal Circuit Tightens Standards for Patent Damages Experts

In an en banc decision [1] in EcoFactor, Inc. v. Google LLC, No. 23-1101, — F.4th –, 2025 WL 1453149 (Fed. Cir. May 21, 2025) (en banc), the Federal Circuit undid a $20 million jury verdict, finding that EcoFactor’s damages expert’s opinion lacked the necessary factual basis for his testimony. Id. at *10. At trial, EcoFactor’s damages expert based his royalty calculation on EcoFactor’s lump-sum settlement agreements with Daikin, Schneider Electric, and Johnson Controls. He derived his per-unit royalty rate from the “whereas” clauses in those agreements, which each stated EcoFactor believed the lump sums reflected a specific rate. Id. at *5-6. But some of the same agreements contradicted that premise—for example, by stating the payment “does not reflect or constitute a royalty.” Id. at *6. And no agreements stated that the licensee (i.e., Daikin, Schneider Electric, or Johnson Controls) agreed to those rates. Google moved to exclude the expert’s opinion under Rule 702, but the district court allowed it.

On appeal, a divided three-judge panel affirmed the district court’s ruling. Id. at *1. But on rehearing en banc, the Federal Circuit reversed in an 8-2 decision, holding that the district court abused its discretion in admitting the expert’s opinion. The majority found the expert’s testimony unreliable because the agreements only showed EcoFactor’s view of the applicable royalty rates, not that both parties to the agreements had agreed to the asserted rates. Id. at *7. And while EcoFactor’s CEO testified that the lump sum amounts were based on that rate, neither he, nor anyone at EcoFactor, had access to the relevant sales data to support that rate. Id. at *8. In reversing the lower court, the majority emphasized that expert testimony must rest on “sufficient facts or data,” not just an expert’s say-so. Id. at *9.

Judges Reyna and Stark each dissented, arguing the majority improperly cast the case as a Rule 702 issue rather than one based on contractual interpretation. The dissents emphasized that EcoFactor’s CEO testified that, based on his experience, the rates were used to calculate the lump sums, and that market share data further supported the expert’s analysis. Id. at *12. Thus, there was sufficient evidence for the jury to reach its verdict and it wasn’t the court’s role to be the finder of fact. Id. at *16, 19. Judge Stark’s dissent also specifically worried that the majority’s opinion would lead lower courts “to invade the province of jurors and resolve fact disputes.” Id. at *17.

The en banc decision underscores that courts will closely scrutinize not just a damages expert’s opinions and reasoning, but the factual foundation on which those opinions are based. So going forward, experts must scrutinize their reports to ensure that they have provided sufficient facts to support their opinions. Here, the court closely examined the language of the license agreements and witness testimony, concluding they didn’t provide a sufficiently reliable basis for the expert’s reliance on them. In doing so, the court affirmed that an expert can’t rely solely on one party’s characterization of the facts—whether in testimony or in documents—without sufficient support.

The majority made clear that damages experts can continue to rely on statements in license agreements, like those EcoFactor’s expert cited. But in doing so, experts must provide a factual basis tied to how the experts use those statements. Notably, the majority opinion indicated that EcoFactor’s expert could have relied upon the language in the agreements to show the royalty rate EcoFactor would have accepted. Id. at *7. But it was improper for the expert to use that language to show what both parties had agreed to in the agreements.

So, going forward, if an expert intends to rely on similar language for his ultimate opinion, the expert must provide sufficient factual support for that reliance. And those facts must be tied to the purpose for which the expert is using them. For example, in the EcoFactor case, the expert could have quantified the units covered by the licenses or provided evidence that, during negotiations, the parties actually agreed to a per-unit rate in calculating the lump sum amount. Following this decision, expect to see more damages-related motions practice as well as deeper discovery by parties into license agreements—including from third parties—as litigants seek to meet the kind of factual rigor the Federal Circuit requires.

[1] En banc decisions are uncommon and are decided by all members of the appeals court as opposed to the typical three-judge panel. En banc decisions have the effect of being binding precedent all on cases in front of the appeals court going forward, as well as on the lower courts. For example, the EcoFactor v. Google decision would be binding on all district court patent infringement cases and any cases appealed to the Federal Circuit.