The Federal Circuit has reversed a trial court’s denial of post-trial judgment as a matter of law (JMOL) on damages awarded by a jury, finding that expert testimony on a proposed per-unit royalty wasn’t supported by existing license agreements.
The case is EcoFactor, Inc. v. Google LLC.
As the Federal Circuit explained, EcoFactor owns U.S. Patent No. 8,738,327, which relates to the operation of smart thermostats in computer-networked heating and cooling systems.
In 2020, EcoFactor sued Google, alleging Google’s Nest thermostats infringed claims of the ’327 patent, among other patents.
Google moved for summary judgment that all asserted claims of the ’327 patent were directed to patent-ineligible subject matter under 35 U.S.C. § 101 and were therefore invalid, but the district court denied the motion.
Google also moved to exclude testimony from EcoFactor’s damages expert that $X (the amount was redacted) was an established royalty for the patented technology as unsupported by reliable methodology or sufficient facts. The district court also denied the motion.
The jury found that Google infringed the patent at issue and awarded $20,019,300 in lump-sum damages.
Again, Google tried to have the expert evidence excluded, and again the trial court denied the motion.
Google appealed.
A panel of the Federal Circuit affirmed the trial court’s denial of a new trial on the damages issue, and Google petitioned for rehearing en banc (i.e., by all the judges on the Federal Circuit court).
The case attracted considerable attention, and in addition to the parties’ briefs, it received twenty-one amicus (friend of the court) briefs from interested parties.
The court noted that to estimate a reasonable royalty in this case, the expert’s damages opinion employed the hypothetical negotiation or “willing licensor-willing licensee” framework, which “attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began.”
The court recognized that “As a general matter, this is a sound approach, well supported in our precedent.”
The court also noted that
Actual licenses to the patented technology are highly probative as to what constitutes a reasonable royalty for those patent rights because such actual licenses most clearly reflect the economic value of the patented technology in the marketplace.
The expert had considered lump-sum licenses between EcoFactor and three licensees: Daikin, Schneider, and Johnson.
These licenses had language like the following:
WHEREAS, EcoFactor represents that it has agreed to the payment set forth in this Agreement based on what EcoFactor believes is a reasonable royalty calculation of $[X] per-unit for estimated past and Johnson Control’s projected future sales of products accused of infringement in the Litigation.
However, the court found that the plain language of the licenses did not provide a basis for the expert to opine that the parties agreed to an $X per unit rate in agreeing to the lump-sum payment amounts.
For example, said the court:
the “whereas” recital of the Johnson license indicates EcoFactor’s representation of its unilateral belief that $X constitutes a reasonable royalty and does not provide a basis for [the expert] to testify that Johnson agreed to the $X rate.
According to the court,
The “whereas” recital of each license provides no indication that the licensees agreed to pay the $X rate or shared EcoFactor’s belief that $X constituted a reasonable royalty. The licenses therefore do not, individually or in combination, provide support for [the expert’s] testimony that the licensees agreed to pay the $X rate or that the licensees agreed that $X was a reasonable royalty.
Also, noted the court, “unlike the disputes settled by the Daikin and Schneider licenses, the litigation settled by the Johnson license did not involve assertion of the ’327 patent.”
The court considered other damages evidence and concluded that the district court abused its discretion by denying Google’s motion for a new trial on damages. It reversed the district court’s denial of Google’s motion for a new trial and remanded for a new trial on damages.
Just like the haiku above, we like to keep our posts short and sweet. Hopefully, you found this bite-sized information helpful. If you would like more information, please do not hesitate to contact us here: https://aeonlaw.com/contact-us/.
