EcoFactor v. Google, En Banc: The Damages Expert Just Got Harder

The Federal Circuit, sitting en banc, vacated a $20 million patent damages verdict on May 21, 2025 in EcoFactor, Inc. v. Google LLC, 137 F.4th 1333 (Fed. Cir. 2025) (en banc). By an 8-2 vote, the court held that the damages expert's reliance on three lump-sum settlement licenses to establish a per-unit royalty rate was, in its words, "untethered from the licenses and unsupported by the evidence on which [the expert] relied." The licenses' operative provisions expressly disclaimed that the lump sums reflected a per-unit royalty. The expert's reading rested on unilateral whereas recitals and on a related-party witness's testimony that the lump sums had been calculated by multiplying a per-unit rate by projected unit volumes. The court held that reading did not satisfy Rule 702.

The decision tightens the comparable-license analysis at the front end and changes how damages reports should treat lump-sum settlement licenses going forward.

The panel decision

On June 3, 2024, a divided panel of the Federal Circuit affirmed the damages verdict over Google's challenge to the expert's methodology. The panel majority reasoned that the comparable-license analysis was sufficiently tied to the settlement agreements and that the disputes about whether the licenses set a per-unit rate went to weight rather than admissibility. Judge Prost dissented on this exact issue. EcoFactor, Inc. v. Google LLC, 104 F.4th 243 (Fed. Cir. 2024).

The full court took the case en banc to address whether the panel's posture was consistent with Rule 702 and with the comparable-license doctrine the Federal Circuit had developed in cases including LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 (Fed. Cir. 2012). The grant of rehearing en banc was itself a signal that the comparable-license bar would tighten. 115 F.4th 1380 (Fed. Cir. 2024).

The en banc rationale

Each of the three EcoFactor licenses (with Daikin, Schneider, and Johnson Controls) paid a lump sum. The operative provisions of two of those licenses expressly stated that the payments "are not based upon sales and do not reflect or constitute a royalty." The expert nevertheless treated each license as evidence of a bargained-for per-unit rate. He relied on the licenses' "whereas" recitals (in which EcoFactor unilaterally stated that the lump sum was calculated using a per-unit rate) and on testimony from EcoFactor's CEO that the lump sums had been built up by multiplying a per-unit rate by projected unit volumes.

The en banc court held that this reading was not admissible evidence of what the parties had agreed to. Contract interpretation is a question of law, which the court reviewed de novo. The operative text of the agreements did not support a per-unit reading; the whereas recitals were unilateral; and the sales-data foundation for the multiplication theory was not in the record. Where the expert's methodology rests on an inference about a bargained-for rate that the agreements themselves do not support, the testimony is "untethered" from the comparable licenses and is inadmissible under Rule 702.

The court did not hold that lump-sum settlement licenses are categorically inadmissible as comparables. The holding is narrower. A lump-sum license cannot be treated as evidence of a per-unit royalty rate unless the agreement itself, or admissible evidence of the parties' shared intent, supports that reading.

The new bar for comparable-license analysis

Post-EcoFactor, a damages expert who relies on a settlement license has to do one of three things to support a per-unit conclusion. The expert can rely only on per-unit comparables, leaving lump-sum settlements out of the running-royalty analysis. The expert can offer the comparable licenses as lump-sum evidence supporting a lump-sum damages theory, without converting to a per-unit rate. Or the expert can argue a per-unit reading of a lump-sum license only where the agreement's operative text supports it, or where there is admissible evidence from the licensing parties (not just one side) that the lump sum was negotiated against an underlying per-unit rate and volume forecast.

The third path is narrow and demanding. In most settlement licenses, the operative text does not endorse a per-unit reading, and unilateral whereas recitals will not bridge the gap. That is the gap EcoFactor closes.

The decision also has implications for portfolio-license analysis. A portfolio settlement that covers multiple patents and pays a lump sum presents a related problem: the expert has to do both per-unit work and per-patent apportionment, and both have to be supported by admissible evidence. The court did not reach the portfolio question directly, but the reasoning extends.

Open questions

The decision leaves at least three open questions for the next round of damages cases.

The first is what counts as admissible evidence of the licensing parties' shared intent on a per-unit rate. Internal forecasts, deposition testimony from negotiators on both sides, and Georgia-Pacific-style hypothetical-negotiation evidence are all candidates, and the post-EcoFactor record will clarify which combinations the trial courts find sufficient.

The second is how the decision interacts with the en banc court's broader comparable-license doctrine. EcoFactor reads on its terms as a sharpening of the existing standard rather than a departure from it. But the en banc holding is more demanding than some prior panel applications, and the doctrinal alignment will be worked out in the lower courts.

The third is the treatment of running-royalty licenses that include lump-sum minimum or paid-up components. Hybrid licenses sit between the two structures, and a damages expert will have to address whether the running-royalty component or the lump-sum component is the comparable.

Implications for retention and report drafting

For damages experts retained in cases relying on settlement licenses as comparables, the report's methodology section now has to do affirmative work on the per-unit reading. The expert should identify the agreement language that supports the reading, identify the contemporaneous evidence that the parties negotiated against a unit volume, and explain why the lump sum reflects an underlying per-unit bargain rather than a settlement of litigation.

For retaining counsel, the diligence question on a candidate damages expert is now sharper. The expert's prior reports relying on lump-sum comparables are the right diligence target. A witness whose track record includes per-unit conclusions drawn from lump-sum licenses without operative-text support is not a witness who survives under the en banc standard.