Ecofactor, Inc. v. Google LLC
U.S. Court of Appeals for the Federal Circuit
Ecofactor, Inc. v. Google LLC, 104 F.4th 243 (Fed. Cir. 2024)
Ecofactor, Inc. v. Google LLC
Opinion
Case: 23-1101 Document: 18 Page: 1 Filed: 06/03/2024
United States Court of Appeals
for the Federal Circuit
______________________
ECOFACTOR, INC.,
Plaintiff-Appellee
v.
GOOGLE LLC,
Defendant-Appellant
______________________
2023-1101
______________________
Appeal from the United States District Court for the
Western District of Texas in No. 6:20-cv-00075-ADA, Judge
Alan D. Albright.
______________________
Decided: June 03, 2024
______________________
BRIAN DAVID LEDAHL, Russ August & Kabat, Los Ange-
les, CA, argued for plaintiff-appellee. Also represented by
MINNA CHAN, KRISTOPHER DAVIS, MARC A. FENSTER, REZA
MIRZAIE, JAMES PICKENS.
ROBERT A. VAN NEST, Keker, Van Nest & Peters LLP,
San Francisco, CA, argued for defendant-appellant. Also
represented by KRISTIN ELIZABETH HUCEK, LEO L. LAM,
ROBERT ADAM LAURIDSEN, EUGENE M. PAIGE.
______________________
Before LOURIE, PROST, and REYNA, Circuit Judges.
Case: 23-1101 Document: 18 Page: 2 Filed: 06/03/2024
2 ECOFACTOR, INC. v. GOOGLE LLC
Opinion for the court filed by Circuit Judge REYNA.
Opinion dissenting-in-part filed by Circuit Judge PROST.
REYNA, Circuit Judge.
EcoFactor sued Google in the Western District of Texas
alleging patent infringement of U.S. Patent No. 8,738,327. After discovery and resolution of various motions, the case was heard by a jury. The jury found that Google infringed the asserted claim 5 of the ’327 patent and awarded dam- ages to EcoFactor. Google appeals three of the district court’s orders: the denial of Google’s motion for summary judgment that claim 5 of the ’327 patent was invalid under35 U.S.C. § 101
; the denial of Google’s motion for judgment
as a matter of law of non-infringement of the ’327 patent;
and the denial of Google’s motion for a new trial on dam-
ages. For the following reasons, we affirm.
BACKGROUND
A. U.S. Patent No. 8,738,327
U.S. Patent No. 8,738,327 (“’327 patent”) relates gen- erally to the operation of smart thermostats in computer- networked heating and cooling systems (“HVAC systems”). The primary recited purpose of the patent is to reduce strain on the electricity grid during a period of expected high demand through adjustments to the user’s thermostat settings that reduce the electricity consumed by the user’s HVAC system. ’327 patent at 1:21–27, 9:46–54. Claim 1 of the ’327 patent recites a system “for controlling the opera- tional status of an HVAC system” where “at least one ther- mostat [is] associated with a structure that receives temperature measurements from inside the structure.”Id.
at 9:26–31. Claim 1 includes an “estimation” limitation where “one or more servers receive inside temperatures from the thermostat and compare[] the inside tempera- tures of the structure and the outside temperatures over time to derive an estimation for the rate of change in inside temperature of the structure in response to outside Case: 23-1101 Document: 18 Page: 3 Filed: 06/03/2024 ECOFACTOR, INC. v. GOOGLE LLC 3 temperature.”Id.
at 9:38–45 (emphasis added). Claim 5 adds that “the estimation [limitation in claim 1] is a pre- diction about the future rate of change in temperature in- side the structure.”Id.
at 9:65–67.
B. Procedural History
EcoFactor, owner of the ’327 patent, sued Google for
patent infringement over Google’s smart thermostat prod-
ucts, particularly several Nest thermostats. 1 After discov-
ery, Google moved for summary judgment that certain
claims of the ’327 patent (including claim 5) were invalid
because they were directed to patent ineligible subject mat-
ter, an abstract idea, under 35 U.S.C. § 101. The district
court denied the motion. J.A. 5046.
The district court also denied Google’s Daubert motion
to exclude the opinion of EcoFactor’s damages expert, Mr.
Kennedy, rejecting Google’s argument that Mr. Kennedy’s
opinion was unreliable and therefore prejudicial.
J.A. 2254.
Following a six-day jury trial, the jury found that
Google infringed claim 5 of the ’327 patent and awarded
EcoFactor damages. J.A. 45–49. Google renewed its mo-
tion for judgment as a matter of law (“JMOL”) of non-in-
fringement of the ’327 patent, arguing that the accused
products do not measure, but rather, estimate the temper-
ature inside the structure and therefore cannot infringe.
Google also moved for a new trial on damages, arguing that
the opinion of EcoFactor’s damages expert, Mr. Kennedy,
was speculative and unreliable such that it should have
been excluded from trial. The district court denied both
motions from the bench. J.A. 6662; J.A. 6688.
1 Google acquired Nest Labs, Inc. prior to the under-
lying lawsuit.
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4 ECOFACTOR, INC. v. GOOGLE LLC
Google appeals. We have jurisdiction under
28 U.S.C. § 1295(a)(1).
DISCUSSION
Google raises three issues on appeal. 2 First, Google
contends the district court erred in denying Google’s mo-
tion for summary judgment that claim 5 of the ’327 patent
was directed to patent ineligible subject matter under
§ 101. Second, Google asserts the district court erred in
denying Google’s JMOL motion for non-infringement of the
’327 patent. Third, Google contends the district court erred
in denying Google’s motion for a new trial on damages be-
cause Mr. Kennedy’s damages opinion was based on unre-
liable methodology. We address each issue in turn.
I. Patent Eligibility
Google appeals the district court’s denial of summary
judgment that claim 5 of the ’327 patent was patent ineli-
gible under § 101.
Section 101 of the Patent Act provides that: “Whoever
invents or discovers any new and useful process, machine,
manufacture, or composition of matter, or any new and
useful improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this title.”
35 U.S.C. § 101. The Supreme Court has articulated a two- step test, commonly referred to as the “Alice” test, for ex- amining whether a patent claims patent-ineligible subject matter. Alice Corp. Pty. Ltd. v. CLS Bank Intern.,573 U.S. 2
This appeal was originally consolidated and in- cluded an original appeal by EcoFactor and cross-appeal by Google. The consolidated appeal contained other patents and issues. Prior to oral argument, the parties stipulated to the dismissal of the original appeal by EcoFactor, Appeal No. 22–1974, leaving only Google’s cross-appeal involving the ’327 patent. See Appeal No. 22–1974, ECF No. 59 at 7. Case: 23-1101 Document: 18 Page: 5 Filed: 06/03/2024 ECOFACTOR, INC. v. GOOGLE LLC 5 208, 217–18 (2014). At Alice step one, we review whether a claim is directed to a patent-ineligible concept, such as an abstract idea.Id.
At Alice step two, we review whether the claim recites elements sufficient to transform the abstract idea into a patent-eligible application.Id.
at 217–18, 221.
Prior to trial, Google filed a motion for summary judg-
ment, arguing that claim 5 of the ’327 patent (among oth-
ers) was invalid as directed to patent ineligible subject
matter under § 101. The district court reviewed the mo-
tion, relying on the Alice inquiry. The district court denied
the motion and submitted step two of the Alice inquiry to
the jury. J.A. 5046.
At trial, the verdict form asked whether Google met its
burden to prove by clear and convincing evidence that the
elements of claim 5 of the ’327 patent, when taken individ-
ually and as an ordered combination, involved activities or
technology that were well-understood, routine, or conven-
tional to a skilled artisan at the time of the invention.
J.A. 47. After hearing testimony and receiving evidence
from both parties, the jury answered “no” for claim 5 of the
’327 patent. J.A. 47. Google filed a post-trial JMOL motion
repeating its § 101 arguments, which the district court de-
nied.
Google now appeals the district court’s denial of sum-
mary judgment regarding patent ineligibility of claim 5 of
the ’327 patent, but we have held that a district court’s de-
nial of summary judgment is not appealable after a trial on
the merits. Syngenta Crop Prot., LLC v. Willowood, LLC,
944 F.3d 1344, 1364 n.7 (Fed. Cir. 2019) (citing Ortiz v. Jor- dan,562 U.S. 180
, 183–84 (2011)); see also 10 Wright and Miller, Federal Practice and Procedure § 2715 (4th ed.) (ex- plaining a denial from summary judgment is an order “from which no immediate appeal is available”). We have explained that an order denying summary judgment is “not a judgment” and “does not foreclose trial on the issues on which summary judgment was sought;” rather, it is Case: 23-1101 Document: 18 Page: 6 Filed: 06/03/2024 6 ECOFACTOR, INC. v. GOOGLE LLC “merely a judge’s determination that genuine issues of ma- terial fact exist.” Glaros v. H.H. Robertson Co.,797 F.2d 1564, 1573
(Fed. Cir. 1986) (reasoning that a denial of sum- mary judgment “does not settle or even tentatively decide anything about the merits of the claim” (citation omitted)). Denial of summary judgment decides only one thing—that the case should go to trial.Id.
At trial, the jury heard testimony from various wit-
nesses on whether the elements of claim 5 were well-un-
derstood, routine, or conventional. See, e.g., J.A. 5345–
5346 (209:20–210:6); J.A. 6373–6374 (1237:15–1238:19);
J.A. 6415–6416 (1279:1–1280:20); J.A. 6449–6451
(1313:17–1315:11). Google, however, appeals the order
denying summary judgment but not the jury verdict of in-
eligibility. As the Supreme Court has explained, “the full
record developed in court supersedes the record existing at
the time of the summary-judgment motion.” Ortiz, 562
U.S. at 184. Because trial on the merits of the § 101 issue
was held, the court’s denial of summary judgment is not
appealable.
II. Infringement
For infringement, the only limitation at issue is
claim 1’s recitation of a system for controlling the HVAC
system that includes a thermostat “that receives tempera-
ture measurements from inside the structure.” ’327 patent
at 9:26–31. Google alleges that because the accused ther-
mostat products are designed to be completely enclosed in
metal, plastic, and/or glass housings, they cannot directly
measure the surrounding ambient temperature “inside the
structure” like other thermostats. 3 Appellant Br. 41–44.
3 The parties agree that the term “ambient tempera-
ture” refers to the temperature surrounding a particular
thermostat, i.e., the temperature of the room or structure
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ECOFACTOR, INC. v. GOOGLE LLC 7
Google argues that its thermostats can only derive an esti-
mate of the ambient temperature by measuring only the
temperature within the thermostat housing itself, which is
not “inside the structure.” See id. As a result, Google ar-
gues that the jury’s verdict of infringement is unsupported
by substantial evidence.
We review the disposition of motions for JMOL under
the law of the regional circuit, here the Fifth Circuit. See
Energy Transp. Grp. Inc. v. William Demant Holding A/S,
697 F.3d 1342, 1350(Fed. Cir. 2012). The Fifth Circuit re- views de novo the grant or denial of a JMOL motion. Clear- Value, Inc. v. Pearl River Polymers, Inc.,668 F.3d 1340, 1343
(Fed. Cir. 2012). Under Fifth Circuit law, a jury’s ver- dict is upheld if supported by substantial evidence. Med. Care Am., Inc. v. Nat’l Union Fire Ins. Co.,341 F.3d 415, 420
(5th Cir. 2003).
We conclude that the jury’s infringement verdict is sup-
ported by substantial evidence. EcoFactor’s infringement
expert testified that the accused thermostat products meet
the claimed limitation because the thermostats measured
temperature of the structure and not just the temperature
within the thermostat housing. J.A. 5462–63
(326:20–327:6). EcoFactor’s expert supported his conclu-
sion with several forms of evidence. EcoFactor’s expert re-
lied on website guides maintained by Google for the benefit
of software engineers who develop applications for use with
Nest thermostats. One website page states that the Nest
thermostats measure the “[a]mbient temperature,” defined
as the “temperature measured near the thermostat”—not
just within the thermostat. J.A. 10429 (emphasis added).
Another website page explains that the temperature sen-
sors of certain Nest products measure ambient room tem-
perature. J.A. 10888. EcoFactor’s expert testified that this
in which the thermostat is placed. Appellant Br. 13, 43;
Appellee Br. 1, 9–10.
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8 ECOFACTOR, INC. v. GOOGLE LLC
evidence shows that the Nest thermostat “devices have
temperature measurements near the thermostat” that
measures the “inside temperature” of the structure and are
not limited to measuring temperature inside the thermo-
stat housing. J.A. 5453–55 (317:17–319:14). EcoFactor’s
expert cited Google’s source code for the accused products
and demonstrated where it described the function of the
accused products to measure the surrounding temperature.
J.A. 5456–60 (320:18–324:14).
Google’s experts conceded the substance of EcoFactor’s
evidence on cross-examination. Google’s non-infringement
expert agreed that, according to Google’s website pages, the
current ambient temperature in the room is measured by
the Nest thermostat’s internal sensors. J.A. 6154–55
(1018:9–1020:13). Another Google expert witness agreed
that the accused thermostat products contain temperature
sensors that measure the temperature inside customer
homes. J.A. 5945–46 (809:4–809:17).
The expert testimony from both parties, documentary
evidence, and source code information demonstrating that
the accused products measure temperature of the sur-
rounding structure (and not just the housing) is substantial
evidence. See In re Mouttet, 686 F.3d 1322, 1331 (Fed. Cir.
2012) (explaining substantial evidence is “relevant evi-
dence as a reasonable mind might accept as adequate to
support a conclusion”).
In conclusion, the jury’s infringement verdict that the
accused Nest thermostat products satisfy the claim lan-
guage of “receives temperature measurements from inside
the structure” is supported by substantial evidence.
III. Damages
Google argues that the district court abused its discre-
tion in denying its Rule 59 motion for a new trial on dam-
ages. Appellant Br. 30. According to Google, a new trial
on damages was warranted because the initial trial was
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ECOFACTOR, INC. v. GOOGLE LLC 9
unfair or marred by prejudicial error. Id. at 25; J.A. 6689
(91:4–8). The alleged error was the district court’s eviden-
tiary ruling that the opinion of EcoFactor’s damages ex-
pert, Mr. Kennedy, was admissible. Appellant Br. 25, 30.
Google argues that Mr. Kennedy’s damages opinion should
have been excluded from trial because it lacked any relia-
ble methodology or underlying calculations. Id. at 30.
Google also argues that Mr. Kennedy’s opinion should have
been excluded for lack of comparability and apportionment.
Id. at 34. We address each argument in turn.
We review the denial of a motion for a new trial under
regional circuit law. Wordtech Sys., Inc. v. Integrated Net-
works Sols., Inc., 609 F.3d 1308, 1312(Fed. Cir. 2010). The Fifth Circuit reviews a district court’s denial of a motion for a new trial for an abuse of discretion. Fornesa v. Fifth Third Mortg. Co.,897 F.3d 624, 627
(5th Cir. 2018). A new trial may be granted if the district court finds that “the ver- dict is against the weight of the evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed.” Seidman v. Am. Airlines, Inc.,923 F.2d 1134, 1140
(5th Cir. 1991) (citation omitted); Fed. R. Civ. P. 59. “Courts do not grant new trials unless it is rea- sonably clear that prejudicial error has crept into the rec- ord or that substantial justice has not been done, and the burden of showing harmful error rests on the party seeking the new trial.” Jordan v. Maxfield & Oberton Holdings, L.L.C.,977 F.3d 412, 417
(5th Cir. 2020) (citation omitted).
Here, Mr. Kennedy used the hypothetical negotiation
approach for calculating reasonable royalty damages under
35 U.S.C. § 284. This approach “necessarily involves an el- ement of approximation and uncertainty.” Lucent Techs., Inc. v. Gateway, Inc.,580 F.3d 1301, 1325
(Fed. Cir. 2009)
(citation omitted); see also generally 2 Janice M. Mueller,
Mueller on Patent Enforcement § 20.04(a) at 869–70 (rev.
ed. 2019). According to Mr. Kennedy, EcoFactor would
have entered the hypothetical negotiation with the
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10 ECOFACTOR, INC. v. GOOGLE LLC
expectation of receiving a royalty in the amount of $X 4 per
unit and would have requested that from Google.
J.A. 1277. Based on this $X rate, Mr. Kennedy calculated
his proposed damages amount of $Y 5. J.A. 5740
(604:14–17).
A.
Google argues that Mr. Kennedy’s damages model was
speculative and conclusory. Appellant Br. 31. Specifically,
Google argues that Mr. Kennedy’s proposed $X royalty rate
was “plucked . . . out of nowhere.” Id. at 34 (citation omit-
ted). We disagree.
“[W]hile all [damages] approximations involve some
degree of uncertainty, the admissibility inquiry centers on
whether the methodology employed is reliable.” Summit 6,
LLC v. Samsung Elecs. Co., 802 F.3d 1283, 1296(Fed. Cir. 2015). This includes whether a damages expert’s testi- mony is tied to the particular facts of the case. Virnetx, Inc. v. Cisco Sys., Inc.,767 F.3d 1308
, 1333–34 (Fed. Cir. 2014); Whitserve, LLC v. Comput. Packages, Inc.,694 F.3d 10, 30
(Fed. Cir. 2012); Lucent Techs.,580 F.3d at 1330
. Testi- mony is inadmissible when it is based only on speculation or guesswork, such that the jury is left to fill in the gaps when calculating a damages award. Whitserve, 694 F.3d at 30–33 (holding that testimony was conclusory and specula- tive when expert did not explain how lump sum amounts could be converted to a reasonable royalty rate); Wordtech,609 F.3d at 1320
(holding that expert’s reliance on two
4 The amount of the per-unit royalty rate is confiden-
tial business information subject to a protective order, and
as such, is not recited in this opinion.
5 The amount of EcoFactor’s proposed damages
award is confidential business information subject to a pro-
tective order, and as such, is not recited in this opinion.
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ECOFACTOR, INC. v. GOOGLE LLC 11
lump licenses was inappropriate when neither explained
how the lump-sum amounts were calculated).
Far from plucking the $X royalty rate from nowhere,
Mr. Kennedy based this rate on the following admissible
evidence: three license agreements and the testimony of
EcoFactor’s CEO, Mr. Habib. Turning first to the agree-
ments, Mr. Kennedy relied on three license agreements
EcoFactor entered into with third-party smart thermostat
manufacturers—the Schneider and Daikin licenses in
2020, and the Johnson license in 2021. J.A. 10389–399;
J.A. 10400–410; J.A. 10411–419. Each of these agreements
included the same $X royalty rate at issue here. Each li-
cense agreement provided in a whereas clause that the li-
censee would pay EcoFactor a lump sum amount “set forth
in this Agreement based on what EcoFactor believes is a
reasonable royalty calculation of [$X] per-unit for . . . esti-
mated past and [] projected future sales of products ac-
cused of infringement in the Litigation.” J.A. 10389
(emphasis added); J.A 10400; J.A. 10411. Thus, as Mr.
Kennedy testified at trial, the $X royalty rate was “specifi-
cally spelled out in the license agreement[s].” J.A. 5764
(628:2–3).
Mr. Kennedy then relied on the testimony of EcoFac-
tor’s CEO, Mr. Habib, who signed the three license agree-
ments on behalf of EcoFactor. J.A. 5794 (658:17–18);
J.A. 5666 (530:23–25); J.A. 5669 (533:6–8). Mr. Habib tes-
tified that he had seven years in the industry, an under-
standing of the market, and “what is reasonable for the
technologies that [EcoFactor] ha[s].” J.A. 5670
(534:22–25). He then testified that the lump sums con-
tained in each of the three license agreements were based
on the $X royalty rate. J.A. 5672, 536:17–18 (“[M]y under-
standing was that all of it is based on [$X] per infringing
unit.”). He testified that while he was shielded from the
licensees’ confidential sales information, he understood
that EcoFactor calculated each of the three licenses’ lump
sums using the $X royalty rate and the past and future
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12 ECOFACTOR, INC. v. GOOGLE LLC
projected sales for each licensee. J.A. 5798 (662:2–5); J.A.
5670 (534:4–10). He also testified that despite being
shielded from the licensees’ confidential sales numbers, he
believed, based on his understanding of the market, that
the lump sums reasonably reflected the licensees’ sales.
J.A. 5672 (536:14–24). According to Mr. Habib, there were
“large players” and high barriers to entry in the smart ther-
mostat and smart HVAC control industry, and the licen-
sees were “relatively new or more recent.” J.A. 5672
(536:19–24). Thus, “it ma[de] sense that their sale num-
bers would be low since they’d recently started.” J.A. 5672
(536:23–24). He testified that the $X royalty rate in each
of the three license agreements was accepted by the par-
ties. J.A. 5671 (535:5–11) (“So, you know, if three compa-
nies were willing to accept it, then yeah. That further
made it clear to me that it was a reasonable royalty rate
that was being accepted by counterparties.”).
Finally, in support of Mr. Kennedy’s proposed $X roy-
alty rate, EcoFactor introduced at trial an email chain be-
tween EcoFactor and Johnson concerning the $X royalty
rate. J.A. 10797–99; J.A. 6278 (1142:3–10). In the chain,
which was dated a few months before the parties signed the
license agreement, the parties discuss the $X royalty rate.
J.A. 10797–99. Johnson notes that “[w]e are applying the
[$X rate] to the time period” identified by EcoFactor.
J.A. 10798.
In light of the three license agreements, Mr. Habib’s
testimony, and the EcoFactor-Johnson email chain, we de-
termine that Mr. Kennedy’s damages opinion concerning
the $X royalty rate was sufficiently tied to the facts of the
case and thus admissible. See Finjan, Inc. v. Secure Com-
puting Corp., 626 F.3d 1197, 1212(Fed. Cir. 2010); C & F Packing Co., v. IBP, Inc.,224 F.3d 1296
, 1304–05 (Fed. Cir.
2000). And based on this context, the “jury was entitled to
hear the expert testimony” from Mr. Kennedy concerning
the $X royalty rate and “decide for itself what to accept or
reject.” Pavo Sols. LLC v. Kingston Tech. Co., 35 F.4th
Case: 23-1101 Document: 18 Page: 13 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 13
1367, 1379 (Fed. Cir. 2022) (citation omitted). That is ex-
actly what the jury did in this case. The jury heard Mr.
Kennedy’s testimony and Google’s extensive cross-exami-
nation concerning Mr. Kennedy’s understanding of the
three license agreements, his reliance on Mr. Habib’s testi-
mony, and testimony concerning the emails between Eco-
Factor and Johnson about the $X royalty rate. J.A.
5793–5812 (657:4–676:2); J.A. 5794 (658:17–18); J.A. 5667
(531:8–25); J.A. 5668–5670 (532:3–534:3); J.A. 6278–6280
(1142:6–1144:19). Ultimately, the jury returned a verdict
of $20,019,300, which represents significantly less than
Mr. Kennedy’s proposed damages amount of $Y that would
have resulted from applying the $X royalty rate to Google’s
past sales.
Google argues that Mr. Kennedy’s testimony is unreli-
able because there is no evidence that the parties to the
three license agreements actually applied the $X royalty
rate. To the contrary. First, the three admissible license
agreements each disclose that EcoFactor believed that the
lump sums in each license was “based on” the $X royalty
rate. Additionally, in its whereas clause, the Schneider li-
cense agreement, unlike the Johnson and Daikin agree-
ments, states that “nothing in this clause should be
interpreted as agreement by Schneider that [$X] per unit
is a reasonable royalty.” J.A. 10400. This clause, included
by Schneider, speaks to its belief that $X may not have been
reasonable but it does not speak to whether $X was actu-
ally applied in arriving at the lump sum. Arguably, this
provision, when read in context, could also mean that the
$X royalty rate was applied by EcoFactor and Schneider.
If Schneider did not believe that the $X royalty rate was
actually being applied, it could have said such in the agree-
ment. But Schneider did not. Finally, as noted above,
Johnson noted in an email chain with EcoFactor that it was
“applying” the $X royalty rate. How much weight should
be given to the provisions in the license agreements, includ-
ing whether they are “self-serving” as Google claims, and
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14 ECOFACTOR, INC. v. GOOGLE LLC
the EcoFactor-Johnson email is a question for the jury. See
Pavo, 35 F.4th at 1379; Finjan, 626 F.3d at 1212; C & F Packing,224 F.3d at 1304
. 6
To conclude, we determine that Mr. Kennedy’s opinion
concerning the $X royalty rate was sufficiently reliable for
admissibility purposes. For this reason, we hold that the
district court did not abuse its discretion in denying
Google’s motion for a new trial on damages.
B.
Google argues that Mr. Kennedy’s damages testimony
should have also been excluded from trial for a lack of com-
parability and apportionment. Appellant Br. 34. Google
does not dispute the technical comparability between the
three licenses and Mr. Kennedy’s hypothetically negotiated
agreement. Nor could it. Mr. Kennedy relied on the testi-
mony of EcoFactor’s technical expert, Mr. De la Iglesia, for
his opinion that the three license agreements were
6 The dissent relies on a statement in the body of the
of the Schneider and Daikin license agreements to support
its position that the parties did not apply the $X royalty
rate contained in these two license agreements’ whereas
clauses. See Dissent 3–6. This statement provides that the
agreed to lump sum “does not reflect or constitute a roy-
alty.” J.A. 10391; J.A. 10402. That the lump sum amount
is not a royalty does not mean the parties did not use the
$X royalty rate discussed in the agreements to arrive at the
lump sum amount. But even if we were to set aside these
two license agreements, the Johnson license agreement
alone would suffice. As Google’s own expert agreed at trial,
“just one” license agreement can be sufficient to support a
damages opinion. J.A. 6269 (1133:10–14). This assertion
comports with our damages precedent, which does not de-
mand “absolute precision” but may involve some degree of
approximation and uncertainty. Virnetx, 767 F.3d at 1328.
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ECOFACTOR, INC. v. GOOGLE LLC 15
technically comparable to the hypothetically negotiated li-
cense. J.A. 5578–5583 (442:22–447:2); J.A. 5763
(627:7–23); J.A. 5768 (632:7–19). Google’s experts did not
rebut Mr. De la Iglesia’s opinion on this issue at trial. J.A.
6268–6270 (1132:4–1134:5).
Rather, Google challenges Mr. Kennedy’s economic
comparability analysis of the three licenses and the hypo-
thetically negotiated agreement. Appellant Br. 36–37; Re-
ply Br. 9. According to Google, the three license
agreements were for EcoFactor’s entire patent portfolio
and Mr. Kennedy failed to account for the value of the ’327
patent within that portfolio. Appellant Br. 36. We disa-
gree.
Damages owed to the patentee must reflect the value
of only the patented improvement—called apportionment.
Omega Pats., LLC v. CalAmp Corp., 13 F.4th 1361, 1376(Fed. Cir. 2021). If a sufficiently comparable license is used for determining the appropriate reasonable royalty rate, further apportionment may not be required because the comparable license has built-in apportionment.Id. at 1377
. “Built-in apportionment effectively assumes that the negotiators of a comparable license settled on a royalty rate and royalty base combination embodying the value of the asserted patent.”Id.
(citation omitted). “For built-in ap- portionment to apply, the license must be sufficiently com- parable in that principles of apportionment were effectively baked into the purportedly comparable license.”Id.
(cita-
tion omitted). Part of this comparability analysis requires
an expert to account “for differences in the technologies and
economic circumstances of the contracting parties” to the
past licenses and to the hypothetical negotiation at issue.
Finjan, 626 F.3d at 1211–12.
The degree of comparability of license agreements is a
“factual issue[] best addressed by cross examination and
not by exclusion.” ActiveVideo Networks, Inc. v. Verizon
Commc’ns, Inc., 694 F.3d 1312, 1333(Fed. Cir. 2012); Bio- Case: 23-1101 Document: 18 Page: 16 Filed: 06/03/2024 16 ECOFACTOR, INC. v. GOOGLE LLC Rad Lab’ys, Inc. v. 10X Genomics Inc.,967 F.3d 1353
, 1373 (Fed. Cir. 2020); Ericsson, Inc. v. D-Link Sys., Inc.,773 F.3d 1201, 1227
(Fed. Cir. 2014); Finjan,626 F.3d at 1211
. For
example, in Bio-Rad, we concluded that there was no abuse
of discretion in allowing an expert to testify about three li-
censes, even though one of the licenses was ultimately not
proven to be technically comparable to the hypothetically
negotiated license. 967 F.3d at 1374 (holding that the “‘de-
gree of comparability’ was appropriately left for the jury to
decide”).
Here, Mr. Kennedy sufficiently showed, for purposes of
admissibility, that the three license agreements were eco-
nomically comparable to the hypothetically negotiated
agreement. Mr. Kennedy acknowledged that, based on Mr.
De la Iglesia’s unrebutted testimony, the Schneider and
Daikin licenses list seven technically comparable asserted
patents, including the ’327 patent at issue in the hypothet-
ically negotiated agreement. See J.A. 10398; J.A. 10409.
He also noted that the Johnson license did not list the ’327
patent as an asserted patent but listed four others that cov-
ered the same interrelated smart thermostat technologies.
J.A. 10411; J.A. 1276. Finally, Mr. Kennedy acknowledged
that the three licenses also covered patents in EcoFactor’s
portfolio that were not asserted in the underlying litigation
facing Johnson, Schneider, and Daikin. J.A. 10398;
J.A. 10409; J.A. 10411; J.A. 1275–76.
Mr. Kennedy accounted for such differences. Mr. Ken-
nedy testified that in arriving at the $X royalty rate in a
hypothetical negotiation, Google would argue that the
three license agreements included EcoFactor’s portfolio,
not just the ’327 patent, and thus the $X royalty rate
should be decreased. J.A. 5767 (631:19–23). Mr. Kennedy
then provided that the three license agreements reflect a
settlement and thus the $X royalty rate reflects a risk that
that EcoFactor’s patents would be found not infringed or
invalid. J.A. 1276. According to Mr. Kennedy, this consid-
eration would not be present at the hypothetical
Case: 23-1101 Document: 18 Page: 17 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 17
negotiation between EcoFactor and Google, since the as-
sumption is that the ’327 patent was infringed and valid.
J.A. 1276. As a result, this point would place upward pres-
sure on the negotiated rate.
The three licenses aside, Mr. Kennedy separately
grounded his apportionment opinion on underlying inter-
nal profit and survey data from Google. Mr. Kennedy tes-
tified that, based on underlying customer surveys from
Google and based on EcoFactor’s technical expert’s testi-
mony, the infringed technology at issue in this case at-
tributed to Z% 7 of the profits for the infringed products.
J.A. 5755–5758 (619:16–622:13); J.A. 5775–5777
(639:22–641:7). Based on this data, Mr. Kennedy calcu-
lated the amount of profit per unit that could be attributed
to the ’327 patent, which was more than double the $X roy-
alty rate. J.A. 5755–5758 (619:16–622:13). According to
Mr. Kennedy, this would also place upward pressure on the
negotiated rate at the hypothetical negotiation. J.A. 5780
(644:6–7) (“And that’s EcoFactor’s response, saying it
should actually be a lot higher.”). Mr. Kennedy thus con-
cluded that the $X royalty rate “would be a very reasonable
and conservative first offer.” J.A. 5779 (643: 17–18). This
testimony is additional evidence for the jury to consider
and weigh when calculating a damages award. C & F Pack-
ing, 224 F.3d at 1304; ResQNet.com, Inc., v. Lansa, Inc.,594 F.3d 860, 869
(Fed. Cir. 2010) (“At all times, the dam-
ages inquiry must concentrate on compensation for the eco-
nomic harm caused by infringement of the claimed
invention.”).
Based on this evidence, we conclude that the district
court did not abuse its discretion in declining to grant a
new trial on damages. Mr. Kennedy’s damages opinion
7 The percentage amount is confidential business in-
formation subject to a protective order, and as such, is not
recited in this opinion.
Case: 23-1101 Document: 18 Page: 18 Filed: 06/03/2024
18 ECOFACTOR, INC. v. GOOGLE LLC
relied on sufficiently comparable licenses and his opinion
sufficiently apportioned the value of the ’327 patent for the
issue to be presented to the jury.
Supporting our conclusion is ActiveVideo. There, the
damages expert relied on an agreement that included the
patents at issue and other software services without any
alleged attempt to “disaggregate the value of the patent li-
cense from the value of the services.” 694 F.3d at 1333 (ci-
tation omitted). We held that there was no error in failing
to exclude the expert’s testimony because the degree of
comparability and “any failure on the part of [the] expert
to control for certain variables are factual issues best ad-
dressed by cross examination and not by exclusion.” Id.
Here, Mr. Kennedy went further than the ActiveVideo ex-
pert by sufficiently accounting for the economic differences
between the patents in the three license agreements (as-
serted and non-asserted) and the hypothetically negotiated
agreement. And like in ActiveVideo, if there were any fail-
ures to control for certain variables in comparability, these
factual issues were for the jury to decide. Id.
Contrary to Google’s position, our case law does not
compel a contrary result. In Omega, we remanded for a
new trial where the expert “merely identified . . . differ-
ences” between the patents in the licenses and the patents
in the hypothetical negotiation and did not distinguish
such facts. 13 F.4th at 1380–81. In Apple, two of the three
license agreements relied on by the expert did not list the
subject patent all, and the third license listed the subject
patent as a non-asserted patent in a long list of “hundreds
of Non-Asserted patents.” Apple Inc. v. Wi-LAN Inc., 25
F.4th 960, 973(Fed. Cir. 2022). We determined that there was no record evidence supporting the expert’s assumption that the subject patent was a “key patent” in these three licenses.Id.
Unlike in Omega and Apple, here we have two of the
three licenses at issue explicitly listing the ’327 patent as
Case: 23-1101 Document: 18 Page: 19 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 19
an “asserted patent.” J.A. 10398; J.A. 10409. Additionally,
Mr. Kennedy addressed and distinguished the remaining
patents discussed in the license agreements. He testified
that at the hypothetical negotiation, Google would empha-
size the downward pressure that these patents would have
on the $X royalty rate. Mr. Kennedy then testified that
EcoFactor would note upward pressure on the $X royalty
rate by assuming that the ’327 patent was valid and in-
fringed. And, unlike in these cases, Mr. Kennedy sepa-
rately rooted his apportionment analysis on underlying
internal profit and survey data from Google. As previously
noted, based on this data, Mr. Kennedy was able to deter-
mine that the $X royalty rate was a conservative amount
attributable to the ’327 patent.
Google loses sight of the issue on appeal and the appli-
cable standard of review. Our focus is on the admissibility
of Mr. Kennedy’s damages testimony, and we assess the
district court’s determination of this issue under the highly
deferential abuse of discretion standard. “Credibility de-
terminations, the weighing of the evidence, and the draw-
ing of legitimate inferences from the facts” are jury
functions, not those of a trial judge, and certainly not of an
appellate judge. Reeves v. Sanderson Plumbing Prods.,
Inc., 530 U.S. 133, 150 (2000) (citation omitted). If the
standard for admissibility is raised too high, then the trial
judge no longer acts as a gatekeeper but assumes the role
of the jury.
Based on the record before us, we conclude that the dis-
trict court did not abuse its discretion when it denied
Google’s motion for a new trial. Google has not shown that
the district court’s decision to admit Mr. Kennedy’s dam-
ages opinion resulted in prejudicial error or a substantial
injustice requiring a new trial on damages.
CONCLUSION
We have considered Google’s remaining arguments and
find them unpersuasive. We reject Google’s attempt to
Case: 23-1101 Document: 18 Page: 20 Filed: 06/03/2024
20 ECOFACTOR, INC. v. GOOGLE LLC
appeal the district court’s denial of summary judgment.
We affirm the district court’s post-trial denials of Google’s
motion for JMOL of non-infringement and Google’s motion
for a new trial on damages.
AFFIRMED
COSTS
No costs.
Case: 23-1101 Document: 18 Page: 21 Filed: 06/03/2024
United States Court of Appeals
for the Federal Circuit
______________________
ECOFACTOR, INC.,
Plaintiff-Appellee
v.
GOOGLE LLC,
Defendant-Appellant
______________________
2023-1101
______________________
Appeal from the United States District Court for the
Western District of Texas in No. 6:20-cv-00075-ADA, Judge
Alan D. Albright.
______________________
PROST, Circuit Judge, dissenting-in-part.
In recent years, our court has made some progress in
clarifying important questions related to damages for pa-
tent infringement. Such clarifications relate to deriving a
reasonable royalty from a lump-sum license and requiring
the patentee to confine its damages to the value of the pa-
tented technology. Unfortunately, the majority opinion
here at best muddles our precedent and at worst contra-
dicts it. I therefore respectfully dissent from the decision
Case: 23-1101 Document: 18 Page: 22 Filed: 06/03/2024
2 ECOFACTOR, INC. v. GOOGLE LLC
to affirm the district court’s denial of Google’s motion for a
new trial. 1
Google argues that (1) Mr. Kennedy, EcoFactor’s dam-
ages expert, calculated an $X royalty rate 2 from the Schnei-
der, Daikin, and Johnson lump-sum licenses in an
unreliable way; and (2) the $X rate in any event did not
reflect the value of the ’327 patent (as distinct from that of
other patents covered by those licenses). Google is right on
both counts. The district court therefore, in my view,
abused its discretion by not granting a new damages trial
given Mr. Kennedy’s flawed testimony. 3
I
Mr. Kennedy’s $X rate rests on EcoFactor’s self-serv-
ing, unilateral “recitals” of its “beliefs” in the license agree-
ments. These recitals are not only directly refuted by two
of those same agreements; they also have no other support
(e.g., sales data or other background testimony) to back
them up. Our law does not allow damages to be so easily
manufactured.
When deriving reasonable royalties from lump-sum li-
censes, we have emphasized that “lump sum payments . . .
should not support running royalty rates without testi-
mony explaining how they apply to the facts of the case.”
1 I join the other aspects of the majority’s decision.
2 Because the specific per-unit royalty rate that Mr.
Kennedy uses has been designated confidential, I use $X to
refer to his rate.
3 When reviewing a district court’s exercise of discre-
tion on a critical, often-complicated evidentiary decision
such as a damages-expert Daubert, it usually helps to see
the court’s explanation for its decision. Here, at both the
Daubert stage and in the context of Google’s new-trial mo-
tion, the district court gave no explanation. J.A. 2254,
6687–89.
Case: 23-1101 Document: 18 Page: 23 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 3
Whitserve, LLC v. Comput. Packages, Inc., 694 F.3d 10, 30(Fed. Cir. 2012); see also Lucent Techs., Inc. v. Gateway, Inc.,580 F.3d 1301, 1330
(Fed. Cir. 2009) (requiring that “some basis for comparison must exist in the evidence pre- sented to the jury”). We have vacated damages awards where the derivation of a reasonable royalty from a lump sum was “incompatible with the . . . agreement as a whole,” MLC Intell. Prop., LLC v. Micron Tech., Inc.,10 F.4th 1358, 1368
(Fed. Cir. 2021), where there was no testimony ex- plaining how lump-sum “payments could be converted to a royalty rate,” Whitserve,694 F.3d at 30
, and where “[n]ei- ther license describe[d] how the parties calculated each lump sum,” Wordtech Sys., Inc. v. Integrated Network Sols., Inc.,609 F.3d 1308, 1320
(Fed. Cir. 2010). Mr. Kennedy’s
$X rate repeats the same fatal errors we identified in MLC,
Whitserve, and Wordtech. As in those cases, the licenses
here are for a lump-sum amount with no record evidence
supporting a calculation of a royalty rate.
Consider what these licenses do (and do not) say.
Starting with the Schneider license, one preliminary re-
cital states: “WHEREAS EcoFactor represents that it has
agreed to the payment set forth in this Agreement based
on what [it] believes is a reasonable royalty calculation of
[$X] per-unit for what it has estimated is past and pro-
jected future sales of products accused of infringement in
this Litigation.” J.A. 10400 (emphasis added). Yet the
body of the license (i.e., its substantive and agreed upon
terms and conditions)—which, unlike the recitals, reflects
the view of both parties—says that its lump-sum payment
“is not based upon sales and does not reflect or constitute a
royalty.” J.A. 10402 (emphasis added).
The Daikin and Johnson licenses both contain nearly
identical preliminary recitals about the $X rate.
J.A. 10389; J.A. 10411. As in the Schneider license, the
body of the Daikin license—which, again, reflects the view
of both parties—says that its lump-sum payment “is not
based upon sales and does not reflect or constitute a
Case: 23-1101 Document: 18 Page: 24 Filed: 06/03/2024
4 ECOFACTOR, INC. v. GOOGLE LLC
royalty.” J.A. 10391 (emphasis added). And while the
Johnson license lacks a similar refutation of the recital’s
“belief” (a belief that, again, was EcoFactor’s alone), it still
offers nothing more than the recital itself to support any
royalty rate.
These recitals became Mr. Kennedy’s $X rate.
J.A. 5764 (628:10–17); J.A. 5769 (633:9–18); J.A. 5772–73
(636:22–637:4). Mr. Kennedy also relied on the testimony
of EcoFactor’s CEO, Mr. Habib, as support for this rate.
J.A. 5794 (658:17–18). But Mr. Habib’s testimony does not
establish anything beyond his unsupported “understand-
ing” that these licenses used the $X royalty rate. See
J.A. 5668–69 (532:23–533:2). When asked during direct
examination about the basis for his “understanding,” Mr.
Habib testified that he was not allowed to see any underly-
ing financial information or sales data. J.A. 5670 (534:4–
14). Mr. Habib also explained his basis for believing that
the $X rate was a reasonable rate based on his understand-
ing of the market, J.A. 5672 (536:14–24), but his market-
based testimony provided no explanation for converting
from the lump-sum payments in these licenses to any roy-
alty rate, let alone the $X royalty rate. 4
On this record, it’s impossible to establish that these
lump-sum payments were calculated using any royalty
rate, let alone the specific $X rate. The self-serving recitals
reflect only EcoFactor’s transparent attempt to
4 The only other basis Mr. Habib offers is that the $X
royalty rate was EcoFactor’s baseline policy for licensing,
regardless of the number of patents. J.A. 5671 (535:12–
24). Understandably, neither the majority nor EcoFactor
rely on the baseline policy as a valid basis for Mr. Habib’s
understanding that the $X rate was used. See Omega
Pats., LLC v. CalAmp Corp., 13 F.4th 1361, 1379–80 (Fed. Cir. 2021) (concluding that a comparable license analysis using a baseline royalty rate policy is unreliable). Case: 23-1101 Document: 18 Page: 25 Filed: 06/03/2024 ECOFACTOR, INC. v. GOOGLE LLC 5 manufacture a royalty rate using its “belief.” EcoFactor even had to refute its “belief” by agreeing, in the Schneider and Daikin licenses, that the lump-sum payment is not a royalty. Mr. Kennedy’s assertion that the Schneider and Daikin licenses used the $X rate is “incompatible with the . . . agreement[s] as a whole.” MLC Intell. Prop.,10 F.4th at 1368
. And the Johnson license does not “describe how the parties calculated [the] lump sum.” Wordtech Sys.,609 F.3d at 1320
.
Mr. Kennedy cited nothing else showing that the $X
rate was actually used. He cited no documents, records,
sales data, or testimony showing any calculation of the
lump-sum payments or otherwise establishing that these
licenses used the $X rate. Mr. Habib’s testimony, relying
on no underlying data, likewise offers no support. EcoFac-
tor offered no testimony explaining how the lump-sum
“payments could be converted to a royalty rate.” Whitserve,
694 F.3d at 30.
At bottom, all we have are the recitals of one party’s
“beliefs” contradicted by mutually agreed upon contractual
language by both parties. That’s not enough under our law.
None of the majority’s responses on this issue with-
stand scrutiny. The majority first insists that the Schnei-
der and Daikin licenses do not disclaim the $X royalty rate.
It reasons, “[t]hat the lump sum amount is not a royalty
does not mean [that] the parties did not use the $X royalty
rate discussed in the agreements to arrive at the lump sum
amount.” Maj. 14 n.6 (emphasis in original). If the major-
ity’s point is that a lump sum is not itself a royalty, then
fair enough—no one disputes that truism. The issue here,
however, is whether the lump sum in these licenses reflects
the application of the $X royalty rate (or, in the majority’s
words, whether it was used “to arrive at the lump sum
amount”). And the majority cannot credibly claim that was
the case when the licenses themselves say that each lump-
sum payment “is not based upon sales and does not reflect
Case: 23-1101 Document: 18 Page: 26 Filed: 06/03/2024
6 ECOFACTOR, INC. v. GOOGLE LLC
or constitute a royalty.” J.A. 10391, 10402 (emphasis
added). I’m not sure how these licenses could more clearly
establish that the lump sums were not calculated using
royalties.
The majority next asserts that “the Johnson license
agreement alone would suffice.” Maj. 14 n.6. But the John-
son license contains no language describing how its lump-
sum payment was calculated, see Wordtech Sys., 609 F.3d
at 1320, and Mr. Kennedy offered no other basis from
which he could conclude that the Johnson license used the
$X rate.
The majority also cites an email chain that purportedly
concerns the use of the $X rate in the Johnson license. But
Mr. Kennedy never discussed this email; EcoFactor intro-
duced this email during the cross-examination of Google’s
expert. J.A. 6278 (1142:3–10). The question here is not
whether any document in the record supports the jury’s
damages award. We are instead asking whether Mr. Ken-
nedy’s testimony was so unreliable that it requires a new
trial. I can’t see how an email Mr. Kennedy never ad-
dressed supports the reliability of his analysis.
In the end, Mr. Kennedy conjured the $X rate from
nothing, and the majority’s treatment of his analysis can-
not be squared with our law or the facts.
II
Even if these licenses used the $X rate, Mr. Kennedy’s
analysis has another significant problem: the $X rate does
not reflect the ’327 patent’s value; rather, it includes the
value of other patents. Our law is clear that this basic fail-
ure requires a new trial.
“When relying on comparable licenses to prove a rea-
sonable royalty, we require a party to account for differ-
ences in the technologies and economic circumstances of
the contracting parties.” Apple Inc. v. Wi-LAN Inc., 25
F.4th 960, 971(Fed. Cir. 2022) (cleaned up). This Case: 23-1101 Document: 18 Page: 27 Filed: 06/03/2024 ECOFACTOR, INC. v. GOOGLE LLC 7 accounting, although not overly rigid and involving approx- imation, requires apportioning to just the value of patent(s) in the hypothetical negotiation. Omega Pats., LLC v. CalAmp Corp.,13 F.4th 1361
, 1380–81 (Fed. Cir. 2021). This apportionment must be tied to the facts of each case.Id.
at 1379–80.
The licenses here have a broad scope. Each license is
to “all patents and patent applications (along with patents
issuing thereon) . . . that are now, or ever come to be, as-
signed to, owned by, or controlled by EcoFactor.”
J.A. 10390; J.A. 10401; J.A. 10412. Because each license
reflects a settlement, they also list the patents asserted in
each underlying litigation. The Schneider and Daikin li-
censes list seven asserted patents, including the ’327 pa-
tent. J.A. 10398, 10409. The Johnson license lists four
asserted patents; none are the ’327 patent. J.A. 10411.
When calculating the ’327 patent’s value, Mr. Kennedy
relied on EcoFactor’s technical expert, Mr. de la Iglesia,
who compared the asserted patents in each license to the
’327 patent and concluded that the asserted patents and
the ’327 patent were technologically comparable. J.A.
5578–82 (442:14–446:10). But EcoFactor’s technical expert
didn’t discuss the remaining patents in each license—the
non-asserted patents in EcoFactor’s portfolio. 5 Rather, Mr.
Kennedy explained that since, “in the real world,” “the rest
of the patents are thrown in usually either for nothing or
very little additional value,” the presence of these non-as-
serted patents would place “downward pressure on the roy-
alty rate” in a hypothetical negotiation over the ’327
5 Although we don’t know the exact size of EcoFac-
tor’s portfolio, at least one document suggests that EcoFac-
tor’s portfolio is over three times larger than the seven
asserted patents in the Schneider and Daikin licenses.
Case: 23-1101 Document: 18 Page: 28 Filed: 06/03/2024
8 ECOFACTOR, INC. v. GOOGLE LLC
patent. J.A. 5767–68 (631:22–632:2); see also J.A. 5771–72
(635:19–636:3).
Mr. Kennedy’s opinion is “untethered to the facts of
this case.” Apple, 25 F.4th at 973. His generic testimony
about “the real world,” general industry practice, and
“downward pressure” does not account for the impact of
EcoFactor’s specific non-asserted patents, and we don’t
know whether any non-asserted patent in EcoFactor’s port-
folio covers the same technological areas as the asserted
patents. Mr. Kennedy did not ask the necessary question
under our law—what effect the specific non-asserted pa-
tents in EcoFactor’s portfolio would have on the hypothet-
ical negotiation. 6 Even worse, other evidence in the record
indicates that the specific non-asserted patents were not
considered at all. Mr. Habib testified that the remaining
patents in EcoFactor’s portfolio had no effect on the rate
used in these licenses because the $X rate was EcoFactor’s
baseline policy. J.A. 5671 (535:12–24).
In the end, Mr. Kennedy’s circumstance-agnostic anal-
ysis is insufficient under our law. Apple, 25 F.4th at 973(vacating a verdict where the same expert as in this case, Mr. Kennedy, testified that excluding the non-asserted pa- tents in a portfolio license would reduce the royalty rate by 25 percent as a matter of industry practice); Omega Pats.,13 F.4th at 1379
(vacating a verdict where the proposed $5.00 royalty rate was the same for any number of patents); MLC Intell. Prop.,10 F.4th at 1375
(vacating a verdict
6 It would not be difficult for EcoFactor to offer an
answer. For example, Mr. de la Iglesia could have deter-
mined that the non-asserted patents in the Schneider, Dai-
kin, and Johnson licenses have no technological overlap
with the ’327 patent and concluded that the non-asserted
patents added only nominal value to the license.
Case: 23-1101 Document: 18 Page: 29 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 9
where no evidence or explanation supported using the roy-
alty rate in a forty-one-patent license for a single patent).
The majority, in excusing Mr. Kennedy’s failure to
properly apportion, ignores our law’s requirements. It
merely states that Mr. Kennedy “acknowledged that the
three licenses also covered patents not in EcoFactor’s port-
folio.” Maj. 16. But the majority ignores the key fail-
ure—Mr. Kennedy failed to account for the impact of the
specific remaining patents in EcoFactor’s portfolio, other
than by referencing a generic “downward pressure.” Nei-
ther Mr. Kennedy nor Mr. de la Iglesia tied this “downward
pressure” to the specific non-asserted patents, and Mr.
Habib affirmatively testified that EcoFactor’s practice was
to use the same $X rate regardless of the number of pa-
tents. In these circumstances, I “fail to see how this pa-
tent/claim-independent approach accounts for
apportionment.” Omega Pats., 13 F.4th at 1379.
The majority also relies on ActiveVideo Networks, Inc.
v. Verizon Communications, Inc., 694 F.3d 1312(Fed. Cir. 2012), for its conclusion. But in ActiveVideo, we concluded that “disagreements . . . with the conclusions reached by ActiveVideo’s experts and the factual assumptions and con- siderations underlying those conclusions” were “factual is- sues best addressed by cross examination and not exclusion.”Id. at 1333
. Our conclusion presupposed that “the methodology is sound” and that “the evidence relied upon [is] sufficiently related to the case at hand.” i4i Ltd. P’Ship v. Microsoft Corp.,598 F.3d 831, 852
(Fed. Cir. 2010), aff’d,564 U.S. 91
(2011). As I explained above, that’s far from the case here. And to the extent the major- ity relies on one party’s characterization in ActiveVideo of the expert’s opinion as failing to “disaggregate the value of the patent license from the value of the services,” Maj. 18, we did not adopt that characterization of the expert’s opin- ion, see ActiveVideo, 694 F.3d at 1333. Additionally, any suggestion that disaggregating the value of the patented technology from the overall value of a license is not Case: 23-1101 Document: 18 Page: 30 Filed: 06/03/2024 10 ECOFACTOR, INC. v. GOOGLE LLC required is flatly inconsistent with our law and 140 years of Supreme Court precedent. See VirnetX, Inc. v. Cisco Sys., Inc.,767 F.3d 1308, 1326
(Fed. Cir. 2014) (“[A] pa- tentee ‘must in every case give evidence tending to sepa- rate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features.’” (quoting Garretson v. Clark,111 U.S. 120, 121
(1884))).
To establish a purportedly independent basis for Mr.
Kennedy’s conclusion, the majority asserts that he demon-
strated the reasonableness of his $X rate by analyzing
Google’s profits. Maj. 17. Mr. Kennedy determined what
profits on Google’s accused Nest thermostats came from
features that he maintained were attributable to the ’327
patent. He then split the profits between Google and Eco-
Factor, using the $X rate as a reasonable basis. See J.A.
5778 (642:13–17). His methodology isn’t reasonable. Ra-
ther than offering a cross-check, Mr. Kennedy’s circular
profit analysis begins and ends with the same “fundamen-
tally flawed premise”—the $X rate. Uniloc USA, Inc. v.
Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011).
Ultimately, the majority’s real concern is that, “[i]f the
standard for admissibility is raised too high, then the trial
judge no longer acts as the gatekeeper but assumes the role
of the jury.” Maj. 19. But we must pay close attention to
the reliability of the methodology underlying expert testi-
mony to ensure that the jury can fulfill its proper role as
the factfinder. See Gen. Elec. Co. v. Joiner, 522 U.S. 136,
142(1997) (emphasizing the district court’s “gatekeeper” role in “screening” expert testimony). As the Supreme Court has recognized, “the expert’s testimony often will rest upon an experience confessedly foreign in kind to the jury’s own.” Kumho Tire Co. v. Carmichael,526 U.S. 137, 149
(1999) (cleaned up). Thus, an “effort to assure that the specialized testimony is reliable and relevant can help the jury evaluate that foreign experience.”Id.
Our damages
law ensures that an expert asks the right questions. Many
Case: 23-1101 Document: 18 Page: 31 Filed: 06/03/2024
ECOFACTOR, INC. v. GOOGLE LLC 11
admissible answers to these questions are possible, and it
is those answers that are subject to the crucible of cross-
examination. Mr. Kennedy failed to ask the right ques-
tions at multiple junctures. The majority’s decision to over-
look the prejudicial impact of his unreliable testimony
abdicates its responsibility as a gatekeeper and contradicts
our precedent.
III
Mr. Kennedy’s analysis is unreliable. His $X rate has
no basis in the record, and his $X rate does not reflect the
’327 patent’s value alone but instead includes the value of
other patents. Mr. Kennedy’s testimony did not meet the
baseline standards of admissibility, and therefore the dis-
trict court abused its discretion by not granting a new trial
on damages. The majority’s conclusion otherwise departs
from our law. I respectfully dissent.
Reference
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