An expert may not read a per-unit rate into lump-sum licenses whose text says the licensees never agreed to it

EcoFactor, Inc. v. Google LLC, 137 F.4th 1333 (Fed. Cir. May 21, 2025) (en banc) (Moore, C.J., joined by Lourie, Dyk, Prost, Taranto, Chen, Hughes and Stoll, JJ.; Reyna, J., and Stark, J., each concurring in part and dissenting in part), No. 2023-1101, reversing the denial of a new trial on damages by the United States District Court for the Western District of Texas, No. 6:20-cv-00075-ADA

EcoFactor sued Google in the Western District of Texas, alleging that Nest thermostats infringed United States Patent No. 8,738,327 on networked smart thermostats. EcoFactor's damages expert testified that three lump-sum settlement licenses, with Daikin, Schneider and Johnson Controls, showed the licensees had agreed to a per-unit royalty, redacted as $X; the jury found claim 5 infringed and awarded $20,019,300. Each license recited that EcoFactor agreed to the payment based on what EcoFactor "believes is a reasonable royalty calculation" of $X per unit. The Daikin and Schneider licenses also stated that the lump sum "is not based upon sales and does not reflect or constitute a royalty," and the Schneider recital added that nothing in it was agreement by Schneider that the rate was reasonable. The en banc court, in an opinion by Chief Judge Moore for eight judges, held that the district court abused its discretion under Federal Rule of Evidence 702 because the expert's premise that the licensees agreed to pay $X per unit was not based on sufficient facts or data. The recitals stated EcoFactor's unilateral belief; they could show what EcoFactor would accept as a willing licensor, not what the licensees agreed to pay. The error was prejudicial; the court ordered a new trial on damages and reinstated the panel's other rulings. Judges Reyna and Stark dissented in part.

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