Full Federal Circuit to Hear Google’s Patent Damages Appeal (1)

The Federal Circuit will convene in a rare en banc sitting to decide a Google LLC’s appeal of a $20 million patent damages award that the company claims is based on bad evidence.

The court announced in a Wednesday order it would revisit a split panel decision from June in an appeal brought by Google, which is challenging EcoFactor Inc.'s use of a trio of prior patent license agreements negotiated with other thermostat makers to justify a $20 million verdict for infringement by Google Nest products.

A phalanx of tech companies and business associations had urged the full US Court of Appeals for the Federal Circuit to review the panel decision. Amicus briefs were filed by Apple Inc., Intel Corp., Tesla Inc., and Red Hat Inc., among others.

Ryan Vacca, a law professor at the University of Missouri who recently published an article on the court’s willingness to take cases en banc, celebrated the grant. “Any time the court is willing to go en banc and address a major issue that’s confounding stakeholders, that’s a positive development,” he said.

“Either they’ll resolve it, or it’ll split and it’ll be a fractured opinion that attracts Supreme Court review,” Vacca said. “Either way, it’s good.”

Judge Jimmie V. Reyna authored the majority opinion affirming EcoFactor’s win and rejecting arguments from Google that EcoFactor’s expert witness on damages, David Kennedy, arrived arbitrarily at a per-unit royalty rate applied to each sale of infringing Nest thermostats. “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,” Reyna wrote in the precedential opinion joined by Judge Alan D. Lourie.

Judge Sharon Prost dissented, saying the majority opinion “at best muddles our precedent” on apportioning damages, “and at worst contradicts it.” Prost took particular issue with the fact that the US District Court for the Western District of Texas had allowed EcoFactor to present through its damages expert “self-serving” statements taken from the earlier license agreements, and that the license agreements covered a large number of patents but were used to calculate a per-thermostat royalty rate based on Google’s infringement of a single patent.

In its rehearing order, the court directed Google and EcoFactor to file new briefs limited to whether the district court adhered to evidentiary rules barring presentation of unreliable expert witness testimony to juries. Google has 45 days to file its opening brief, and EcoFactor has 45 days to respond. An oral argument before the full bench is not yet set.

‘Widespread Concern’

The influx of amicus briefs “signaled to the court there’s widespread concern in the industry about the rule they’d adopted,” said Joe Matal, a former acting director of the US Patent and Trademark Office and a lawyer at Clear IP LLC who wrote one of the briefs on behalf of US-Made, an association of domestic manufacturers.

EcoFactor’s verdict was a relatively “low dollar one,” Matal said. “But the rule applied to the billion-dollar cases.”

The facts of the case and the expert-witness testimony were extreme, Matal argued. EcoFactor’s expert relied on license deals involving 30 patents to arrive at a per-unit royalty for Google’s infringement of a single patent.

That expert “had all sorts of rationales, based on his say-so, about how it’s normal for you to pay the same for one that you would for 30, but most people I know don’t like to pay 30 times as much for the same thing,” Matal said.

The Federal Circuit rarely hears patent cases en banc. Though it assembled as a group to decide a design patent case earlier this year, the court hasn’t done so in a utility patent case since 2018.

The court’s order granting en banc review notes that Judges Pauline Newman and Tiffany P. Cunningham didn’t participate in the decision to take the case. Newman is currently suspended from hearing cases.

Russ August & Kabat represents EcoFactor. Google is represented by Keker, Van Nest & Peters.

The case is EcoFactor, Inc. v. Google LLC, Fed. Cir., 23-1101, granting rehearing en banc 9/25/24.