No Sea Change in Patent Damages – For Now

A recent decision by the U.S. Court of Appeals for the Federal Circuit is unlikely to have the broad impact on patent damages many were expecting, but should cause damages experts to be more cautious when relying solely on contract language that contradicts what the parties agreed to do. 

On May 21, 2025, the Federal Circuit issued a rare en banc decision in EcoFactor, Inc. v. Google LLC, reversing the district court’s denial of Google’s motion for a new trial on damages. In an 8-2 decision, the court held that the district court erred in admitting EcoFactor’s damages expert's testimony under Federal Rule of Evidence 702.

The majority found the expert’s opinion unreliable because it contradicted unambiguous language in the very license agreements relied on by that expert. While the expert claimed that Google and EcoFactor would have agreed to a $[X] per-unit royalty, the licenses he relied on were lump-sum agreements. To justify the per-unit rate, the expert cited “Whereas” clauses stating that the lump-sum was calculated by multiplying $[X] by estimated infringing sales. However, the agreements reflected only EcoFactor’s unilateral belief, not mutual agreement, in that calculation, rendering the opinion factually unsupported.

The Federal Circuit ruled this contradiction made the testimony inadmissible under the Daubert standard, emphasizing the district court's gatekeeping role under Rule 702. The Federal Circuit further found that no other evidence supported the lump-sum-to-royalty conversion other than “an unsupported assertion” from EcoFactor’s CEO, which the court determined lacked evidentiary support. 

Key Takeaways

1. Limited Broader Impact — For Now:
Despite initial expectations, including those based on the 2023 amendment to Rule 702 and the question presented en banc, the decision is unlikely to overhaul patent damages law. The majority focused narrowly on the facts rather than setting broad precedent under Rule 702. As Judges Reyna and Stark's dissent observed, the ruling’s impact may be confined to similar factual patterns.

2. Watch Contract Language Relied on by Experts:
Patentees must ensure damages experts do not offer opinions that contradict clear language in licensing agreements. District courts may interpret contracts to evaluate expert reliability moving forward.

3. Draft Licenses Carefully:
To use lump-sum licenses in future litigation, patentees may need to include language indicating mutual agreement on how the lump sum reflects a royalty rate. Without such language, experts must accurately characterize the license terms and avoid overstating the parties' intent.

4. Support the Math:
Patentees must provide concrete evidence, such as sales data, market share data, or credible witness testimony, to support any lump-sum-to-royalty conversion. In EcoFactor, the court rejected the expert’s reliance on the CEO’s unsupported assertion, emphasizing that speculation cannot substitute for data. 

5. Defense Strategy:
Accused infringers will likely use EcoFactor to challenge damages experts under Daubert, particularly where opinions rely on contested or ambiguous contract interpretations or the obvious misinterpretation of data. As Judge Stark cautioned, accused infringers will undoubtedly push the boundaries of the decision to attack patentee damages opinions under Daubert, asking district courts to decide fact disputes that should be resolved by the jury.