IN THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF TEXAS 

WACO DIVISION 

ECOFACTOR, INC., 

Plaintiff, 

v.

ECOBEE, INC., 

Defendant.

Case No.: 6:20-cv-00078-ADA 

JURY TRIAL DEMANDED 

RESTRICTED – ATTORNEYS’ EYES 

ONLY 

FILED UNDER SEAL 

ECOBEE’S CORRECTED DAUBERT MOTION TO EXCLUDE THE 

DAMAGES OPINIONS OF MR. DAVID KENNEDY 

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TABLE OF CONTENTS 

TABLE OF AUTHORITIES .......................................................................................................... ii

I. LEGAL STANDARD. ............................................................................................................ 2

II. BACKGROUND: MR. KENNEDY’S DAMAGES OPINION. ............................................. 3

III. MR. KENNEDY’S OPINION RELIES ON A FAULTY ASSUMPTION OF A $5.16 

ESTABLISHED ROYALTY AND FAILS TO ACCOUNT FOR THE NONCOMPARABILITY OF THE SETTLEMENT AGREEMENTS. ................................................. 5

A. Mr. Kennedy’s finding of an “established royalty” is unreliable, unproven, and not tied to 

the facts of the case. .................................................................................................................... 6

1. Mr. Kennedy did not, and cannot, verify that the $5.16 rate was ever applied. ............... 6

2. Mr. Kennedy ignores evidence that does not support his position. ................................ 11

B. Mr. Kennedy’s opinions are also unreliable because he has not shown that the EF 

Settlement Agreements are economically comparable licenses. ............................................... 12

1. Mr. Kennedy does not meaningfully account for the EF Settlement Agreements being 

litigation settlements. ............................................................................................................. 14

2. Mr. Kennedy does not meaningfully account for the EF Settlement Agreements being 

worldwide licenses for EcoFactor’s entire patent portfolio. .................................................. 17

IV. CONCLUSION .................................................................................................................. 19

 

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TABLE OF AUTHORITIES 

Page(s) 

Cases

AVM Techs., LLC v. Intel Corp., 

927 F. Supp. 2d 139 (D. Del. 2013) .......................................................................................... 16 

Baltimore Aircoil Co. v SPX Cooling Tech. Inc., 

Civ. No. CCB-13-2053, 2016 WL 4426681 (D. Md. Aug. 22, 2016) ...................................... 16 

Bank of N.Y. Mellon Tr. Co., N.A. v. Solstice ABS CBO II, Ltd., 

910 F. Supp. 2d 629 (S.D.N.Y. 2012) ....................................................................................... 12 

DataQuill Ltd. v. High Tech Computer Corp., 

887 F. Supp. 2d 999 (S.D. Cal. 2011) ....................................................................................... 13 

Ericsson, Inc. v. D-Link Systems, 

773 F.3d 1201 (Fed. Cir. 2014) ................................................................................................. 18 

Evans v. Jeff D., 

475 U.S. 717 (1986) .................................................................................................................. 14 

Exmark Manufacturing Co., Inc. v. Briggs & Stratton Power Products Group, 

879 F.3d 1332 (Fed. Cir. 2018) ................................................................................................. 10 

Fail-Safe, L.L.C. v. A.O. Smith Corp., 

744 F. Supp. 2d 870 (E.D. Wis. 2010) ...................................................................................... 12 

Gen. Elec. Co. v. Joiner, 

522 U.S. 136 (1997) ................................................................................................................ 2, 3 

Hanson v. Alpine Valley Ski Area, Inc., 

718 F.2d 1075 (Fed. Cir. 1983) ............................................................................................. 6, 14 

In re Bextra and Celebrex Marketing Sales Practices and Product Liability Litigation, 

524 F. Supp. 2d 1166 (N.D. Cal. 2007) .................................................................................... 12 

Info-Hold v. Muzak LLC, 

No. 1:11-CV-283, 2013 WL 4482442 (S.D. Ohio Aug. 20, 2013) ........................................... 10 

Johnson v. Arkema, Inc., 

685 F.3d 452 (5th Cir. 2012) ....................................................................................................... 2 

LaserDynamics, Inc. v. Quanta Computer, Inc., 

694 F. 3d 51 (Fed. Cir. 2012) .............................................................................................. 13, 14 

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LaserDynamics, Inc. v. Quanta Computer, Inc., 

2011 WL 7563818 (E.D. Tex. Jan. 7, 2011) ............................................................................. 18 

Lucent Techs. Inc. v. Gateway, Inc.,

580 F.3d 1301 (Fed. Cir. 2009) ....................................................................................... 9, 11, 13 

MLC Intellectual Property, LLC v. Micron Tech. Inc., 

10 F. 4th 1358 (Fed. Cir. 2021) ................................................................................................... 9 

Mondis Tech. Ltd v. LG Elecs., Inc., 

407 F. Supp. 3d 482 (D.N.J. 2019) ........................................................................................... 18 

Omega Patents, LLC v. CalAmp Corp., 

13 F.4th 1361 (Fed. Cir. 2021) .................................................................................................. 18 

Pavo Solutions LLC v. Kingston Technology Co., Inc., 

No. 8:14-CV-01352-JLS-KES, 2019 WL 8138163 (C.D. Cal. Nov. 20, 2019) ......................... 9 

Plexxikon Inc. v. Novartis Pharmaceuticals Corp., 

4:17-cv-04405-HSG, 2021 WL 97544 (N.D. Cal. Jan. 12, 2021) ............................................ 14 

Prism Techs. LLC v. Sprint Spectrum L.P., 

849 F.3d 1360 (Fed. Cir. 2017) ................................................................................................. 15 

Trell v. Marlee Electronics Corp., 

912 F.2d 1443 (Fed. Cir. 1990) ................................................................................................... 6 

U.S. v. Whitfield, 

590 F.3d 325 (5th Cir. 2009) ....................................................................................................... 2 

US Salt, Inc. v. Broken Arrow, Inc., 

563 F.3d 687 (8th Cir. 2009) ..................................................................................................... 10 

Wi-Lan Inc. v. Alcatel-Lucent USA Inc., 

2013 WL 10404065 (E.D. Tex. Jun. 28, 2013) ......................................................................... 19 

Worldtech Systems, Inc. v. Integrated Networks Solutions, Inc.

609 F.3d 1308 (Fed. Cir. 2010) ......................................................................................... 8, 9, 13 

Zimmer Surgical, Inc. v. Stryker Corp., 

365 F. Supp. 3d 466 (D. Del. 2019) .................................................................................... 16, 17 

Rules

Fed. R. Evid. 702 .................................................................................................................. 1, 2, 19

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EcoFactor’s damages expert, Mr. David Kennedy, seeks to offer unreliable damages 

opinions based on an unsupported “established royalty.” According to Mr. Kennedy, EcoFactor 

has an “established royalty” for licensing of the asserted patents and similar technology of $5.16 

per unit. This is supposedly the “minimum” EcoFactor would accept in license, and it is the rate 

ultimately opined by Mr. Kennedy as the reasonable royalty rate that should govern here. No 

documentary or mathematical evidence, however, supports the $5.16 per unit figure or supports 

the notion of an “established royalty.” 

While three litigation settlement agreements summarily state—in a wherefore clause at 

the start of the agreement—that EcoFactor unilaterally “believes” the settlement is based on a 

rate of $5.16 per unit, the settlement agreements themselves are lump sum payments in amounts 

far less than what EcoFactor seeks here. They do not recite unit sales, and EcoFactor has offered 

no evidence of unit sales. Mr. Kennedy admitted in deposition that the “established royalty” was 

based entirely on the ipse dixit of EcoFactor. Even worse, EcoFactor has relied on privilege and 

otherwise hid any information regarding how it internally arrived at the so-called $5.16 

calculation. 

Mr. Kennedy took no steps to verify mathematically that $5.16 per unit was a rate ever 

utilized in any EcoFactor license. At the same time, Mr. Kennedy ignored evidence, including 

statements in the settlement agreements themselves, that $5.16 per unit was not an agreed upon 

royalty rate nor was it the basis of the settlements. For example, one of the agreements expressly 

states its lump-sum amount “is not based upon sales and does not reflect or constitute a royalty.” 

In short, Mr. Kennedy’s opinions regarding the “established royalty” and the conclusions he 

draws from this erroneous starting point lack foundation, are unreliable, and must be excluded 

under Rule 702. 

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Mr. Kennedy’s opinion should also be excluded because he fails to meaningfully account 

for the economic differences of EcoFactor’s allegedly comparable licenses. Mr. Kennedy all but 

ignores key differences of the licenses that would not be present during a hypothetical 

negotiation. As one example, the licenses are litigation settlements, settling multiple litigations 

in different forums, where many different patents were asserted against the licensees. The 

licenses are also worldwide licenses for EcoFactor’s entire patent portfolio (constituting 

approximately 40 issued patents), rather than U.S. licenses for the two patents asserted here. 

Although these licenses may have been properly used as a datapoint, taking into account the 

relevant differences, Mr. Kennedy did not do that. Instead, Mr. Kennedy provides some 

superficial recognition to some of the differences but then wholly accepts the licenses’ alleged 

$5.16 royalty rate without adjustment. Therefore, Mr. Kennedy’s opinions must also be 

excluded under Rule 702. 

I. LEGAL STANDARD. 

An expert witness may offer opinion testimony only if (a) the expert’s scientific, 

technical, or other specialized knowledge will help the trier of fact to understand the evidence or 

determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony 

is the product of reliable principles and methods; and (d) the expert has reliably applied the 

principles and methods to the facts of the case. Fed. R. Evid. 702. “The reliability prong [of 

Daubert] mandates that expert opinion be grounded in the methods and procedures of science 

and . . . be more than unsupported speculation or subjective belief.” Johnson v. Arkema, Inc., 685 

F.3d 452, 459 (5th Cir. 2012) (internal quotation omitted)). Expert testimony should be excluded 

where it amounts to speculation. See U.S. v. Whitfield, 590 F.3d 325, 362 (5th Cir. 2009). Any 

data that the expert relies upon must be tied to the facts of the case by more than the expert’s ipse 

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Each EF Settlement Agreement contains a worldwide license to EcoFactor’s entire patent 

portfolio, which Mr. Kennedy testified contains a number of patents “somewhere in the high 

30s.” Ex. B at 85:22–86:1. In Mr. Kennedy’s view, however, the patents that are called out in 

the exhibits to the Agreements—the patents that EcoFactor was asserting against the licensees—

“were the focus of the deal[s].” See Ex. A at ¶¶ 308–309. Mr. Kennedy does not compare the 

value of the patents at issue in this case against the value of the dozens of other patents included 

in the agreements—which, notably, include patents that EcoFactor is asserting against ecobee in 

other litigations (including in this Courthouse). See EcoFactor v. ecobee, No. 6:21-cv-00428 

(W.D.T.X.). 

The EF Settlement Agreements all require the licensees “make a non-refundable, onetime, lump-sum payment by wire transfer to EcoFactor” in amounts of 

 There is no other monetary consideration mentioned 

in the Agreements. None of the Agreements contain any past or projected sales information for 

any product. Yet Mr. Kennedy still opines that “each of [the EF Settlement Agreements] 

indicated that the dollar per-unit royalty rate that the parties relied on to calculate the lump sum 

was $5.16.” Ex. A at ¶ 305. Mr. Kennedy also states that he understood that 

per a conversation he 

had with Shayan Habib, EcoFactor’s CEO. Id. at ¶ 231. 

In his report, Mr. Kennedy did not conduct an apportionment analysis to distinguish the 

technology disclosed in the patents asserted here from other technology or features in ecobee’s 

accused products, which was confirmed at his deposition. See Ex. B at 124:3–24. Instead, Mr. 

Kennedy solely relied on the EF Settlement Agreements for a “comparable license” approach 

which, in Mr. Kennedy’s view, “gets to a minimum value for the patented features that are 

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common between the different companies and the different licensees.” Id. Although Mr. 

Kennedy does discuss the Georgia-Pacific factors for calculating a reasonable royalty, he mainly 

relies on factor 1—“the royalties received by the patentee for the licensing of the patent in suit, 

proving or tending to prove an established royalty”—to determine that the patent-in-suit demand 

the same $5.16 royalty described in the EF Settlement Agreements. See Ex. A ¶¶ 228–234, 304 

(“In my opinion, the most relevant information that the parties would have considered during the 

Hypothetical Negotiation would have been the royalty rate that EcoFactor established for the 

Patented Technology.”). Mr. Kennedy does not adjust the $5.16 royalty rate based on any of the 

Georgia-Pacific factors, even though he opines that there are factors that have either upward or 

downward effect on the royalty resulting from the hypothetical negotiation. Ex. A. ¶¶ 228–316. 

III. MR. KENNEDY’S OPINION RELIES ON A FAULTY ASSUMPTION OF A $5.16 

ESTABLISHED ROYALTY AND FAILS TO ACCOUNT FOR THE NONCOMPARABILITY OF THE SETTLEMENT AGREEMENTS. 

Mr. Kennedy’s damages opinions are based on the faulty assumption that $5.16 per unit 

is an established royalty for the two patents in suit. In Mr. Kennedy’s view, he did not have to 

apportion that rate to the usage and importance of the ecobee accused features themselves. Ex. B 

at 85:22–86:1. Instead, Mr. Kennedy is entirely reliant on the EF Settlement Agreements as 

showing an established royalty, which, per Mr. Kennedy, apportions the accused features 

because of similarities of the accused technologies. Id. Indeed, Mr. Kennedy does not provide 

for any alternative analysis besides his “comparable license” approach. 

Mr. Kennedy’s comparable license approach should be excluded for two distinct reasons. 

First, Mr. Kennedy does not show that EcoFactor’s allegedly “established royalty” was 

“established” at all. That is, there is no evidence that any licensee actually applied any rate, let 

alone $5.16, to arrive at the lump sums found in the EF Settlement Agreements. Second, Mr. 

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Kennedy fails to show that the EF Settlement Agreements are economically comparable to the 

license that would result from the hypothetical negotiation. 

A. Mr. Kennedy’s finding of an “established royalty” is unreliable, unproven, and not 

tied to the facts of the case. 

Mr. Kennedy’s opinions are unreliable because the $5.16 per unit royalty rate cannot be 

an “established royalty” for a reasonable royalty analysis. There is no proof—anywhere in the 

record—that the $5.16 was applied to the lump sum amounts in the EF Settlement Agreements or 

in any other agreement. Mr. Kennedy’s only support that the rate was applied to any actual or 

projected sales is the EF Settlement Agreements themselves, a conversation he had with Mr. 

Habib, and one EcoFactor email to mentioning, but not applying, the rate. Ex. A ¶ 181, 

n.167. This support proves nothing—and certainly does not demonstrate the existence of an 

“established” royalty rate. The EF Settlement Agreements contain no sales data. Mr. Habib’s 

testimony makes clear that he also did not know whether the rate was applied, instead deferring 

that knowledge, if it exists, to EcoFactor’s litigation counsel who negotiated those agreements. 

And a review of the negotiation-related emails, one of which Mr. Kennedy relies on, does not fill 

any information gaps. Instead, the emails, many of which Mr. Kennedy ignores, show that the 

lump-sum amounts in the EF Settlement Agreements were agreed to after conventional back and 

forth negotiation unrelated to sales information. 

1. Mr. Kennedy did not, and cannot, show that the EF Settlement Agreements 

support a $5.16 rate. 

“[F]or a royalty to be established, it ‘must be paid by such a number of persons as to 

indicate a general acquiescence in its reasonableness by those who have occasion to use the 

invention.’” Trell v. Marlee Electronics Corp., 912 F.2d 1443, 1446 (Fed. Cir. 1990) (quoting 

Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078 (Fed Cir. 1983)). Here, there is no 

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evidence that a $5.16 royalty has ever been “paid” by anyone. For instance, at his deposition, 

Mr. Kennedy confirmed that he has never seen any EF Settlement Agreement-related past or 

projected sales data: 

Q. I believe you testified earlier that you did not do the math to 

calculate the number of unit sales, actual or projected unit sales, by 

the $5.16. Is that true of each of these three license agreements? 

You did not do the math to make that calculation? 

A. Yeah, I did not have the information to be able to do that math. 

Ex. B at 107:24–108. Mr. Kennedy went on to testify that he had asked EcoFactor for such sales 

information, but “there was not specific documentation related to that.” Id. at 108:7–19. 

 In lieu of relying on any EcoFactor licensee sales data, Mr. Kennedy simply takes 

EcoFactor’s word that the rate was applied. For the and agreements, Mr. 

Kennedy relies on testimony and a conversation with Mr. Habib to opine that “[t]he lump-sum 

royalty was derived by applying a per-unit royalty calculation of $5.16 to [licensee’s] past and 

projected sales of products accused of infringement in the Litigation.” See Ex. A. at ¶181 & n. 

167 ); ¶ 186 & fn. 9 ( ). Mr. Kennedy has a similar opinion for the 

Agreement but does not rely Mr. Habib’s testimony or any conversations. Id. ¶ 192. Mr. 

Kennedy also often refers to the $5.16 per unit rate as “

” Ex. A ¶¶ 

231, 301. In his deposition, Mr. Kennedy admitted that he did not know how Mr. Habib came up 

with the rate, but trusted that it was based on some sort of “calculation”: 

 Q. Where did Mr. Habib come up with the notion that he wouldn’t 

take less than $5.16? 

 A. Yeah. I don’t know, other than him believing that was a fair 

rate, and I don’t know the history behind that and his rate card and how it 

developed over time, just that he arrived at that number by the time he 

negotiated with these three parties. 

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 But it does seem like a number that was – had some type of 

calculation or movement between numbers to get to it just because it’s not 

a round number . . . . 

 Ex. B at 101:9–21. As shown above, Mr. Kennedy made no effort to determine how the 

$5.16 per unit rate was determined. Mr. Habib’s testimony does not help with the rate’s origin. 

He testified that EcoFactor believed the $5.16 per unit was a reasonable royalty based on 

“discussion that we had with our experts” and EcoFactor’s counsel, as well as reviewing the 

patents themselves. Ex. F at 292:20–293:13. When asked what documents “reflect the 

reasonable royalty analysis,” Mr. Habib referred to “[t]he patents themselves, confidential 

information or privileged information” as well as “assessment from experts.” Id. at 293:23–

294:13. Mr. Habib could not name the expert that helped with this alleged royalty analysis. Id. at 

296:9–14. Therefore, ecobee has no way of knowing whether the $5.16 was determined based 

on a sound methodology, or if it was just made up by Mr. Habib and his attorneys. 

Mr. Habib’s testimony also does not provide any assurances that the $5.16 per unit rate 

has ever been applied to any sales. For each EF Settlement Agreement, Mr. Habib testified that 

he was not privy to any licensee past or projected sales information and that EcoFactor did not 

maintain any non-privileged documents reflecting EcoFactor’s reasonable royalty calculation of 

$5.16. See Ex. F at 295:6–12 & 296:9–297:4 ; 328:13–329:2 331:21–332:7 

). To the extent anyone associated with EcoFactor had any licensee sales information, Mr. 

Habib testified that such information would have been provided to “counsel.” Id. 

Per the Federal Circuit, Mr. Kennedy’s lack of any mathematical analysis or calculations 

to verify that the $5.16 was used makes his opinion regarding the rate unreliable for the purposes 

of demonstrating an established royalty. For instance, in Worldtech Systems, Inc. v. Integrated 

Networks Solutions, Inc., the Federal Circuit rejected a plaintiff’s use of two lump-sum license 

agreements because “[n]either license describe[d] how the parties calculated each lump sum, 

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licensees’ intended products, or how many products each licensee expected to produce.” 609 

F.3d 1308, 1320 (Fed. Cir. 2010). Without this additional data, the Court found that “the 

licenses offered the jury ‘little more than a recitation of royalty numbers.’” Id. (citing Lucent 

Techs. Inc. v. Gateway, Inc., 580 F.3d 1301, 1327 (Fed. Cir. 2009)). Similarly, in MLC 

Intellectual Property, LLC v. Micron Tech. Inc., the Federal Circuit affirmed a court’s exclusion 

of testimony because the expert “did not provide mathematical analysis to derive the 0.25% 

royalty rate from the lump-sum payments in the [allegedly comparable] licenses.” 10 F. 4th 1358, 

1368 (Fed. Cir. 2021). As such, the Federal Circuit affirmed that “the district court could 

reasonably determine that those licenses cannot support testimony that the lump-sum payments 

were, in fact, based on that royalty rate.” Id.; see also Pavo Solutions LLC v. Kingston 

Technology Co., Inc., No. 8:14-CV-01352-JLS-KES, 2019 WL 8138163, at *5 (C.D. Cal. Nov. 

20, 2019) (excluding expert opinion where the expert had “not demonstrated how the lump sums 

extracted from [license] agreements could be accurately converted to a royalty rate”). 

 Here, per his testimony and expert report, Mr. Kennedy intends to testify at trial that the 

lump-sum amounts in the EF Settlement Agreements were calculated by applying a $5.16 royalty 

rate to the licensees’ past and projected sales. But as discussed above, neither Mr. Kennedy, nor 

Mr. Habib, nor EcoFactor have come forward with any evidence of that calculation for any of the 

Agreements and, like the experts in Worldtech Systems, MLC Intellectual Property, and Pavo, 

Mr. Kennedy has not done any analysis to derive that rate. To the extent any information about 

past or projected sales exists, it has not been produced and appears to rest solely with 

EcoFactor’s litigation counsel, based on the counsel’s emails and Mr. Habib’s testimony.3

 

3 Defendants requested the Court order EcoFactor to produce such sales information, to the 

extent it exists, at an Oct. 18, 2021 discovery hearing. As a result, the Court ordered that 

EcoFactor “provide information supporting the 5.16 royalty rate to the Defendants by Friday,” 

October 22. ECF No. 81. That Friday, EcoFactor confirmed “that it has already produced, and 

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Even if Mr. Habib or EcoFactor’s counsel were reliable sources of information as to the 

$5.16 per-unit rate, an expert may not rely upon a party’s or an attorney’s statements without 

independent analysis. In Info-Hold v. Muzak LLC, No. 1:11-CV-283, 2013 WL 4482442, at *5 

(S.D. Ohio Aug. 20, 2013), rev’d in part on other grounds, 783 F.3d 1365 (Fed. Cir. 2015), for 

example, the court rejected testimony of an expert who had “relie[d], without verification, on 

Plaintiff’s employees and Plaintiff's counsel for information crucial to his opinions.” As the 

court explained, “[a]ll of [the expert’s] knowledge regarding convoyed sales [had been] derived 

from employees of Plaintiff,” and the expert had simply accepted that all of the “Defendant’s 

revenues were driven by demand for the [accused products],” “because he [had been] told to 

make this assumption by [] counsel.” Id., at *5. Because the expert “did not independently 

verify anything that Plaintiff’s CEO or Plaintiff’s counsel told him,” his opinion was unreliable. 

Id. Here, because Mr. Kennedy took EcoFactor’s statements at face value without verifying 

those statements, his opinion is unreliable. US Salt, Inc. v. Broken Arrow, Inc., 563 F.3d 687, 

691 (8th Cir. 2009) (affirming district court’s exclusion of “expert testimony because he relied 

almost exclusively on [the CEO’s] speculative estimates without any independent verification”). 

Since there is no evidence that the rate was ever applied, and there is no analysis of how 

the $5.16 rate was determined, Mr. Kennedy is effectively using a rate that is “plucked . . . out of 

nowhere.” Exmark Manufacturing Co., Inc. v. Briggs & Stratton Power Products Group, 879 

F.3d 1332, 1351 (Fed. Cir. 2018) (“It is not enough for an expert to simply assert that a particular 

royalty rate is reasonable in light of the evidence without tying the proposed rate to that 

evidence.”). Thus, because Mr. Kennedy’s testimony regarding these licenses amounts to “little 

more than a recitation of royalty numbers,” Mr. Kennedy’s opinions must be excluded. Lucent 

is not withholding, the non-privileged information supporting Mr. Kennedy’s proposed $5.16 

royalty rate.” Ex. G (email from Aichele to Porto). 

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Techs. Inc., 580 F.3d at 1329. 

2. Mr. Kennedy ignores evidence that does not support his position. 

Mr. Kennedy also fails to consider real world evidence tending to show that the $5.16 per 

unit rate was not actually applied to any past or projected sales. Rather than being tied to sales 

data, the lump-sum amounts appear to be the result of run-of-the-mill negotiations between the 

parties. For example, in EcoFactor-produced emails, counsel offered to settle 

its cases, which EcoFactor countered by proposing either (1) a payment, plus an ongoing 

royalty of $5.16 per unit, or (2) a one-time lump-sum of . Ex. H (ECODCT_0229377). 

Per the Agreement, the parties eventually landed on a lump-sum payment of , 

but there is no correspondence related to any sales data, and there is no correspondence showing 

whether Daikin agreed to the $5.16 per unit royalty, as opposed to some other one-time lumpsum arrangement, like what EcoFactor originally proposed. 

Mr. Kennedy also ignores similar evidence from the negotiations. For 

, in view of some now-redacted sales information, EcoFactor offered a lump-sum 

license of without mentioning the $5.16 per-unit royalty. Ex. I (ECODCT_0229572). 

Later in the negotiation, moved from while EcoFactor “moved from 

 with no discussion of the $5.16 per unit royalty or any sales information. Ex. J 

(ECODCT_0229549). Indeed, initially rejected the $5.16 per unit language in the first 

draft of the settlement agreement (Ex. K (ECODCT_0229603-05)) only to eventually agree to 

include it with language clarifying that “nothing in this clause should be interpreted as agreement 

by that $5.16 per unit is a reasonable royalty” (Ex. L (ECODCT_0229518-19)). 

Mr. Kennedy also ignores that two of the agreements, , explicitly 

state that the $5.16 royalty was not applied to any licensee sales. Ex. C at 1; Ex. D § 3.1. When 

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pressed about this at his deposition, Mr. Kennedy could only speculate that the language was 

there “to make sure that this rate can’t be just taken out of the agreement and used in another 

matter as something that was a determined reasonably royalty.” Ex. B at 100:12–23. 

Perplexingly, Mr. Kennedy does just that here: he used EcoFactor’s $5.16 royalty with no 

context and applied it to this separate matter. Mr. Kennedy cannot selectively disregard portions 

of the license agreements while fully adopting other clauses to form his opinion. Therefore, Mr. 

Kennedy’s failure to address any evidence tending to undermine his “litigation-created 

conclusion” of $5.16 as a per-unit royalty renders his opinion unreliable. See In re Bextra and 

Celebrex Marketing Sales Practices and Product Liability Litigation, 524 F. Supp. 2d 1166, 

1184 (N.D. Cal. 2007) (rejecting as unreliable opinion where “[the expert] reaches his opinion by 

first identifying his conclusion . . . and then cherry-picking observational studies that support his 

conclusion and rejecting or ignoring the great weight of the evidence that contradicts his 

conclusion.”); Bank of N.Y. Mellon Tr. Co., N.A. v. Solstice ABS CBO II, Ltd., 910 F. Supp. 2d 

629, 648 (S.D.N.Y. 2012) (excluding damages calculation based on expert’s “faulty assumption” 

that contradicted contractual terms); Fail-Safe, L.L.C. v. A.O. Smith Corp., 744 F. Supp. 2d 870, 

889 (E.D. Wis. 2010) (rejecting expert opinion where “it is readily apparent that [the expert] all 

but ‘cherry picked’ the data he wanted to use”). 

B. Mr. Kennedy’s opinions are also unreliable because he has not shown that the EF 

Settlement Agreements are economically comparable licenses. 

Mr. Kennedy’s damages opinions should be independently excluded because the EF 

Settlement Agreements are not economically comparable to the ecobee license that would have 

resulted from the hypothetical negotiation.4

 The licenses are not economically comparable 

4

 ecobee also contends that the EF Settlement Agreements are not technically comparable to the 

hypothetical negotiation and reserves the right to pursue that defense at trial. For the purposes of 

this motion, ecobee is only challenging Mr. Kennedy’s failure to account for the economic 

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because Mr. Kennedy does not meaningfully account for the fact that (1) the EF Settlement 

Agreements are litigation settlements, as opposed to licenses entered in during the normal course 

of business; and (2) the EF Settlement Agreements are worldwide licenses for EcoFactor’s entire 

portfolio, as opposed to a U.S. license for the patents-in-suit. Indeed, Mr. Kennedy himself 

admits that “[e]ach of [the] important differences between worldwide, convenience, portfolio 

licenses and the Hypothetical License demonstrate the importance of identifying truly 

comparable licenses and why it would be inappropriate, from an economic perspective, to use 

actual licenses, without significant adjustments, to predict the expected royalty outcome of the 

Hypothetical Negotiation.” Ex. A ¶ 175. As discussed below, Mr. Kennedy ultimately fails to 

make such “significant adjustments” to account for these differences. Thus, Mr. Kennedy’s 

license analysis should be excluded. 

It is improper to “rely on license agreements that were radically different from the 

hypothetical agreement under consideration to determine a reasonable royalty.” Lucent Techs., 

580 F.3d at 1316 (internal quotation marks omitted). “[C]omparisons of past patent licenses to 

the infringement must account for the technological and economic differences between 

them.” Worldtech Sys., Inc., 609 F.3d 1308 at 1320 (internal quotation marks omitted). “When 

relying on licenses to prove a reasonable royalty, alleging a loose or vague comparability 

between different technologies or licenses does not suffice.” LaserDynamics, Inc. v. Quanta 

Computer, Inc., 694 F. 3d 51, 79 (Fed. Cir. 2012). “The testimony of a damages expert in 

a patent suit who relies on non-comparable licenses in reaching his royalty rate should be 

excluded.” DataQuill Ltd. v. High Tech Computer Corp., 887 F. Supp. 2d 999, 1022 (S.D. Cal. 

2011). 

differences of the licenses. 

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1. Mr. Kennedy does not meaningfully account for the EF Settlement 

Agreements being litigation settlements. 

Mr. Kennedys’ opinions should be excluded because he does not account for the EF 

Settlement Agreements being entered into under the threat of, and during, litigation. Although 

not barred, Federal Circuit precedent is hostile toward using litigation settlement agreements in 

proving a reasonable royalty. See LaserDynamics, 694 F.3d at 77–78 (“The notion that license 

fees that are tainted by the coercive environment of patent litigation are unsuitable to prove a 

reasonable royalty is a logical extension of Georgia–Pacific, the premise of which assumes a 

voluntary agreement will be reached between a willing licensor and a willing licensee....”). As 

such, the Federal Circuit has “cautioned [district courts] to consider the license in its proper 

context within the hypothetical negotiation framework to ensure that the reasonable royalty rate 

reflects ‘the economic demand for the claimed technology.’” Id. at 77. For settlements 

generally, the Supreme Court has explained the normal settlement calculus for litigants: “Most 

defendants are unlikely to settle unless the cost of the predicted judgment, discounted by its 

probability, plus the transaction costs of further litigation, are greater than the cost of the 

settlement package.” Evans v. Jeff D., 475 U.S. 717, 734 (1986); see also Hanson, 718 F.2d at 

1078–79 (noting that litigation settlement offers and licenses “should not be considered evidence 

of an established royalty since license fees negotiated in the face of a threat of high litigation 

costs may be strongly influenced by a desire to avoid full litigation.”) (quotations omitted). 

Thus, “settlement licenses are treated much like other licenses, requiring the proponent of the 

license to establish sufficient comparability while accounting for any differences.” Plexxikon 

Inc. v. Novartis Pharmaceuticals Corp., 4:17-cv-04405-HSG, 2021 WL 97544 at *6 (N.D. Cal. 

Jan. 12, 2021). 

Mr. Kennedy more or less disposes of the fact that the EF Settlement Agreements are 

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settlement agreements in one sentence. He opines, without citing anything, that the EF 

Settlement Agreements “reflected a discount due to the fact that the licensees disputed 

infringement and validity, unlike the circumstances of the Hypothetical Negotiation.” Ex. A ¶ 

313. Mr. Kennedy does not provide any background information about the litigations preceding 

the agreements (like the amount of damages asserted, the number of parties, the litigation 

forums, or whether there were counterclaims asserted) or the overall context of the settlements. 

For example, Mr. Kennedy does not describe, let alone adjust for, whether the litigation 

agreements were entered into early in the litigations, where uncertainty and the threat of high 

litigation costs is highest. See Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d 1360, 1370 

(Fed. Cir. 2017). Rather, Mr. Kennedy presents his brief “discount” theory and opines that the 

same $5.16 rate is appropriate here. 

These omissions matter because there is again real-world evidence, which is ignored by 

Mr. Kennedy, showing that the EF Settlement agreements were entered into amid the threat of 

litigation expenses—particularly during the onset of the COVID-19 pandemic—as opposed to 

accounting for any value of the patents. Indeed, EcoFactor’s own documents show that when 

 contacted EcoFactor for settlement, counsel stated that 

 Ex. M (ECODCT_0229328). Likewise, counsel 

noted that its initial 

 and 

 Ex. N 

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(ECODCT_0229450). Emails from show that its settlement was driven by ITC 

investigation-related issues, including that no longer imported its accused 

products into the United States. Ex. O (ECODCT_0229532). ended up executing a 

settlement agreement rather than referencing any value 

of EcoFactor’s alleged inventions. Ex. P (ECODCT_0229535). 

Mr. Kennedy does not mention these EcoFactor settlement negotiation documents or 

adjust his royalty to account for the EF Settlement Agreements being licenses to end litigation. 

Moreover, none of the documents mention any EcoFactor “discount,” Mr. Kennedy’s only 

opinion related to litigation settlement. While there is no outright bar to referring to litigation 

settlements as data points in a Georgia-Pacific analysis, that is not what Mr. Kennedy does here. 

Rather, Mr. Kennedy wholly accepts the rates set forth in the settlement agreements, with no 

adjustment, and does not give any reliable reason for doing so. Therefore, Mr. Kennedy’s 

opinions that the EF Settlement Agreements are “comparable licenses” should be excluded 

because Mr. Kennedy has not even attempted to adjust for the settlement nature of the licenses, 

or provide any background on the litigations, which is fatal to his economic comparability 

analysis. See, e.g., AVM Techs., LLC v. Intel Corp., 927 F. Supp. 2d 139, 143–44 (D. Del. 2013) 

(excluding expert opinion as “completely speculative without, at a minimum, some analysis of 

the litigation that led to the settlement”); Baltimore Aircoil Co. v SPX Cooling Tech. Inc., Civ. 

No. CCB-13-2053, 2016 WL 4426681 at *24 (D. Md. Aug. 22, 2016) (“For a settlement 

agreement to meet this minimum threshold of relevance, the expert must provide some analysis 

on the litigation underlying the agreement. Without this analysis, the factfinder cannot accurately 

assess comparability.”) (emphasis in original); Zimmer Surgical, Inc. v. Stryker Corp., 365 F. 

Supp. 3d 466, 496 (D. Del. 2019) (excluding testimony where “[expert] engages in no analysis of 

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the underlying litigation and how it may have affected the royalty rate”). 

2. Mr. Kennedy does not meaningfully account for the EF Settlement 

Agreements being worldwide licenses for EcoFactor’s entire patent 

portfolio. 

Mr. Kennedy’s opinions should also be excluded because he does not meaningfully 

account for the EF Settlement Agreements being worldwide licenses for EcoFactor’s entire 

patent portfolio. In his report, Mr. Kennedy states that “in the case of a Hypothetical Negotiation 

for patent damages purposes, only U.S. patents are at issue and only infringing activities in the 

U.S. are licensed.” Ex. A ¶ 174. He also notes that “the Hypothetical License in this case is only 

for the Patents in Suit,” as opposed to a portfolio license. Id. ¶ 168 see also ¶ 175. Instead of 

adjusting the rate or performing an analysis to account for those factors here, Mr. Kennedy only 

relies on EcoFactor’s licensing policy, which is, per Mr. Kennedy’s conversations with Mr. 

Habib, that Ex. A ¶ 

310; see also ¶ 305. 

Mr. Kennedy cannot rely on EcoFactor’s (or Mr. Habib’s) licensing policy in place of an 

analysis that accounts for the economic differences of his allegedly comparable licenses. As 

discussed, based on his conversation with Mr. Habib, and in an attempt to account for the fact 

that mostly different EcoFactor patents were asserted against the EF Settlement Agreement 

licensees5

, Mr. Kennedy concludes 

 Ex. A ¶¶ 309 & 306 n. 283. 

5

 Mr. Kennedy plots all the different patents asserted against at ¶ 306 

of his Report (Ex. A). Notably, none of the patents-in-suit here—the ‘382 and ‘327—were 

asserted against . 

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Using this approach, Mr. Kennedy fails to “account for . . . distinguishing facts when 

invoking [the EF Settlement Agreements] to value the patented invention.” Omega Patents, LLC 

v. CalAmp Corp., 13 F.4th 1361, 1380 (Fed. Cir. 2021). That includes accounting for the 

portfolio nature of the license. It is not enough to “state that [the] patents cover [similar] 

technology.” LaserDynamics, Inc. v. Quanta Computer, Inc., 2011 WL 7563818 at *3 (E.D. 

Tex. Jan. 7, 2011). Further, the Federal Circuit has rejected experts replying on such a “one price 

for all” licensing policy, like what Mr. Kennedy relies on here, to establish a reasonable royalty. 

Omega Patents, 13 F.4th at 1379. This is because such a theory “would permit [a patent owner] 

to obtain a particular royalty rate merely by relying on its internal ‘policy’ without regard to 

comparability” and “improperly permit [a patent owner] to hide behind its generic licensing 

arrangement to avoid the task of apportionment.” Id. And at least one Court has found that 

relying on such a “threshold licensing” (i.e., using a single rate for access to technology) violates 

the Federal Circuit’s apportionment requirement because “a license which is designed so that the 

underlying patents have no incremental value cannot at the same time be evidence of ‘the 

incremental value that the patented invention adds to the end product.’” Mondis Tech. Ltd v. LG 

Elecs., Inc., 407 F. Supp. 3d 482, 493 (D.N.J. 2019), appeal dismissed sub nom. Mondis Tech. 

Ltd. v. LG Elecs. Inc., 6 F.4th 1379 (Fed. Cir. 2021) (citing Ericsson, Inc. v. D-Link Systems, 773 

F.3d 1201, 1226 (Fed. Cir. 2014)).

Mr. Kennedy also opines, again citing only a conversation with Mr. Habib, that “the 

royalty EcoFactor receives is derived from those patents EcoFactor believes are infringed by the 

licensee” and “little to no value is assigned to other patents that may be included in the license.” 

Ex. A ¶ 232. But again, EcoFactor emails that Mr. Kennedy does not address show EcoFactor 

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believed that there was at least a difference between “a fully paid up license to . . . 

asserted patents” and “a fully paid up license to all EcoFactor patents.” Ex. Q 

(ECODCT_0229387) (

). It makes no sense for Mr. Kennedy to opine that “the seven 

patents that EcoFactor asserted in litigation against were the focus of that negotiation and 

the determination of the agreed royalty,” when clearly EcoFactor did not view the asserted 

patents and its portfolio that way in at least case. Ex. A ¶ 308; see also id. Mr. 

Kennedy’s failure to consider that fact or apportion the $5.16 rate at all to account for such 

differences is fatal to his opinion. 

Therefore, since Mr. Kennedy “does no apportionment to account for the differences 

between the worldwide portfolio licenses and a license to the patents-in-suit for U.S. sales of 

[ecobee’s] accused products,” Mr. Kennedy’s opinions relying the licenses should be excluded. 

Wi-Lan Inc. v. Alcatel-Lucent USA Inc., 2013 WL 10404065 at *3–4 (E.D. Tex. Jun. 28, 2013) 

(finding an expert’s mere “consideration of all the evidence is a poor substitute for the required 

analysis that parses an alleged infringer’s profits for patented versus unpatented features”). 

IV. CONCLUSION

For the reasons stated above, Mr. Kennedy’s reliance on the EF Settlement agreements to

opine that $5.16 per unit is a reasonable royalty in this case should be excluded. Since Mr. 

Kennedy does not provide any alternative damages opinions besides applying the $5.16 rate to 

arrive at a lump sum award, all of Mr. Kennedy’s damages opinions should be excluded under 

Rule 702. 

The undersigned hereby certifies the parties have complied with the LR CV-7(g) meet 

and confer requirement. Plaintiff, through its counsel, is opposed to this motion.

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Dated: November 19, 2021 Respectfully submitted, 

/s/ Ryan B. Hauer 

Rudolph A. Telscher, Jr. 

Missouri Bar No. 41072* 

rudy.telscher@huschblackwell.com 

Kara R. Fussner 

Missouri Bar No. 54656* 

kara.fussner@huschblackwell.com 

Daisy Manning 

Missouri Bar No. 62134* 

daisy.manning@huschblackwell.com 

HUSCH BLACKWELL LLP 

190 Carondelet Plaza, Suite 600 

St. Louis, MO 63105 

314.480.1500 Telephone 

314.480.1505 Facsimile 

Ryan B. Hauer 

Illinois Bar No.6320758* 

ryan.hauer@huschblackwell.com 

HUSCH BLACKWELL LLP 

120 South Riverside Plaza, Suite 2200 

Chicago, IL 60606 

312.655.1500 Telephone 

312.655.1501 Facsimile 

*Admitted Pro Hac Vice

Jennifer P. Ainsworth 

WILSON, ROBERTSON & CORNELIUS, P.C. 

909 ESE Loop 323, Suite 400 

Tyler, Texas 75701 

(903) 509-5000 Main

(903) 509-5001 Direct

(903) 509-5092 Fax

Email: jainsworth@wilsonlawfirm.com

Manny J. Caixeiro 

VENABLE, LLP 

2049 Century Park East, Suite 2300 

Los Angeles, CA 90067 

310-229-9900

Fax: 310-229-9901

Email: MJCaixeiro@venable.com

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Timothy J. Carroll 

Vivian Sandoval 

Steve M. Lubezny 

VENABLE LLP 

227 West Monroe Street, Suite 3950 

Chicago, IL 60606 

312-820-3400 

Fax: 312-820-3401 

Email: tjcarroll@venable.com 

vsandoval@venable.com 

smlubezny@venable.com 

Attorneys for Defendant ecobee, Inc.

 

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CERTIFICATE OF SERVICE 

 I hereby certify that on this 19th day of November 2021, I caused the foregoing to be 

filed under seal electronically with the Clerk of Court and to be served via email upon all counsel 

of record. 

 /s/ Ryan B. Hauer 

HB: 4889-8677-4532.3

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