The Federal Circuit continues to provide guidance on the scope of Rule 702 and the district court’s gatekeeping role in assessing the admissibility of expert testimony. In a recent precedential decision, the Federal Circuit emphasized the distinction between issues of admissibility and issues of weight and credibility in the context of patent damages, recognizing that “estimating a reasonable royalty ‘necessarily involves an element of approximation and uncertainty.’” Willis Electric Co. v. Polygroup Ltd., No. 2024-2118, 2026 WL 438657, at *7 (Fed. Cir. Feb. 17, 2026).
Background
This case involved Willis Electric Co., Ltd.’s (“Willis”) U.S. Patent 8,454,186 (the “’186 patent”), which is directed to pre-lit artificial trees with separable, modular trunk portions that are mechanically and electrically connectable to each other, providing electricity to the tree’s attached lights at any rotational orientation. In contrast to the prior art, the ’186 patent purportedly teaches a single, integrated connection in which assembling the trunk portions establishes the mechanical and electrical connections simultaneously. Willis sells “One Plug” trees and sued Polygroup for selling allegedly infringing “Quick Set” line of pre-lit trees.
The jury found infringement and awarded $42.5 million in damages. Polygroup moved for judgment as a matter of law on obviousness and for a new trial on damages, arguing that the opinions of Willis’s damages expert should have been excluded under Federal Rule of Evidence 702 and Daubert. The district court denied both motions, and the Federal Circuit affirmed.
Federal Circuit Decision
The Federal Circuit addressed the two independent methods employed by Willis’ damages expert, Michele Riley. The first method, an income approach apportioned to the asserted claim, analyzed profit premiums of the One Plug Trees and the Quick Set Trees to arrive at a reasonable royalty range of $4.30-$20. The second method, a market approach, evaluated comparable licenses to arrive at a reasonable royalty range of $2-$5. Combining these two analyses, Riley arrived at a reasonable royalty rate of $2-$20. Applying the Georgia-Pacific factors, Riley ultimately concluded that $5 reasonable royalty was warranted. Polygroup argued that each approach was applied unreliably to the facts of the case.
Income Approach
Under the income approach, with respect to the profit premiums associated with the One Plug trees, Polygroup argued that Riley’s analysis did not adequately separate out the patented feature from other alleged high-end features commanding their own profit premiums. The Federal Circuit held that this challenge went to weight, not admissibility. Riley took into account the fact that certain non-One Plug Trees also had premium features by averaging prices across product lines when comparing profit margins for One Plug Trees with and without the patented feature. Noting that “Rule 702 does not require a damages expert to account for every conceivable variation among products nor does it demand exactness in an area necessarily involving ‘approximation and uncertainty’” (id. at 10), the Federal Circuit held that whether Riley’s averaging was appropriate was a cross-examination issue.
The Federal Circuit also rejected Polygroup’s argument that Riley’s income approach directed to Quick Set Trees was unreliable because she relied on quoted prices rather than realized revenues or profit margins, to calculate an average incremental profit margin for the trees. Because Polygroup did not track transaction-level costs in a manner that would enable Riley to calculate actual profit margins for the Quick Set Trees, the Federal Circuit held that it was reasonable for Riley to rely on available pricing information as a proxy for profitability. Whether doing so was appropriate is a fact question for the jury, not a grounds for exclusion.
Market Approach
Similarly, the Federal Circuit rejected Polygroup’s challenges to Riley’s market-based method. Polygroup argued that the five licenses Riley relied on were not comparable; only one license included rights to the ’186 patent and the remaining agreements were either new-product or concept development agreements or agreements that reflect a continuation of existing commercial relationships.
The Federal Circuit held that the district court did not abuse its discretion in concluding that Riley’s approach was reliable although the district court noted “some doubts about the comparability of the licenses.” In particular, the Federal Circuit noted that while Riley provided some explanation as to why she viewed certain licenses as comparable, Polygroup did not cross-examine Riley or otherwise attempted to show other additional patents affected the royalty rates reflected in the license covering the ’186 patent. The Federal Circuit agreed with the district court that “[t]he degree of comparability between license agreements and the hypothetical negotiation is a factual issue best resolved by the jury.” Id. at 14. The Federal Circuit distinguished EcoFactor, Inc. v. Google LLC, 137 F.4th 1333 (Fed. Cir. 2025) where the court “held expert testimony unreliable because it was predicated on an inaccurate characterization of the licenses (i.e., that the licensees in that case had agreed upon the rate),” meaning that the evidence was “contrary to a critical fact upon which the expert relied.” Willis Electric Co., 2026 WL 438657, at *14. “The dispute here, in contrast, is one of fact over which reasonable minds can differ.” Id.
Georgia-Pacific Analysis
Lastly, the Federal Circuit rejected Polygroup’s argument that Riley’s Georgia-Pacific analysis could not support her $5-per-tree royalty because it was “purely qualitative.” Polygroup, relying on Jiaxing Super Lighting Electric Appliance, Co. v. CH Lighting Technology Co., 146 F.4th 1098 (Fed. Cir. 2025), argued that the effect of each Georgia-Pacific factor on the rate must be quantified. The Federal Circuit disagreed, noting that neither Rule 702 nor its precedent imposes such a rule as the Georgia-Pacific analysis necessarily permits qualitative analysis. Indeed, multiple Georgia-Pacific factors such as the parties’ commercial relationship, the advantages of the patented invention over the prior art, and the character of the patented embodiment, do not led themselves to mathematical precision. Willis Electric Co., 2026 WL 438657, at *16. It is sufficient for an expert to identify the factors considered, explain their directional effect on the royalty and anchor that analysis to an apportioned quantitative range. Id. Any challenge to this analysis would be through cross-examination, not exclusion. Id.