En Banc Court Scraps $20M Judgment Based on Inadmissible Expert Testimony on Damages

In EcoFactor, Inc. v. Google LLC, No. 2023-1101 (Fed. Cir. May 21, 2025), the en banc Federal Circuit held 8-2 that a district court abused its discretion when admitting the testimony of EcoFactor’s damages expert and remanded for a new trial on damages.^[1]

At trial, EcoFactor’s damages expert calculated a royalty rate based on lump sum settlement agreements. The Federal Circuit held that this was insufficiently supported by reliable methodology or sufficient facts and should have been excluded under Federal Rule of Evidence 702(b) and Daubert. The Court found the expert’s testimony unreliable because it calculated a reasonable royalty rate from three lump sum settlement license agreements without (i) express agreement to the rate or (ii) evidence showing the lump sum calculation was based on a royalty rate or relevant sales data.

To decide the issue, the Court engaged in contract interpretation, a question of law reviewed de novo. The Court found that two prior licenses “expressly disavow[ed]” a rate, stating the lump sum “is not based upon sales and does not reflect or constitute a royalty.” The Court emphasized that the third license only stated that the licensee, EcoFactor, believed the rate to be a reasonable royalty without indicating agreement between the parties. The Court also found no evidence supported the testimony of patent owner’s CEO that the lump sum payment in the licenses were based on sales data, making it insufficient to support the expert’s opinion.

The Court held that “[w]here, as here, the relevant evidence is contrary to a critical fact upon which the expert relied, the district court fails to fulfill its responsibility as gatekeeper by allowing the expert to testify at trial.” 

Judges Reyna and Stark both dissented-in-part and joined each other’s opinions.^[2]

Judge Reyna’s dissent criticized the majority for deciding the case under theories of contract interpretation, when this issue was not briefed. He also argued for limitations on judicial gatekeeping, contending the majority’s approach to Rule 702 and Daubert “rais[ed] the bar for admissibility,” which could encourage exclusion of damages experts and lead to more retrials and uncertainty in patent litigation. He emphasized that the credibility of and the weight to give expert testimony are generally matters for the jury, and experts should only be excluded when the methodology is clearly unreliable. Judge Reyna contended EcoFactor’s expert provided a reasonable basis for his calculation, and cross-examination and rebuttal were the proper means to challenge this evidence, not exclusion.

Judge Stark’s dissent emphasized the narrowness of the majority’s holding, applying only where expert testimony is “undoubtedly contrary to a critical fact.” He argued that the jury—not the judge or appellate court—should decide which version of the facts to credit, and courts should not exclude expert testimony simply because the underlying facts are in dispute. And Judge Stark believed there was sufficient evidence in the record to support the expert’s opinion, and the majority was wrong to dismiss this evidence, which he contended invaded the province of the jury. While Judge Stark raised concerns about the level of detail the district court provided for its ruling on admissibility, he argued a remand for further explanation, not a new trial, was the proper remedy.

Endnotes

^[1]  The Supreme Court denied Ecofactor’s subsequent petition for certiorari.

^[2]  The dissents-in-part concurred with the majority on reinstating portions of the earlier panel opinion on issues other than damages.