Federal Circuit Declines Jurisdiction Over Patent Settlement Dispute
The court ruled that a state-law contract claim arising from a patent settlement does not create federal jurisdiction unless resolving it necessarily requires deciding a substantial question of patent law.
The US Court of Appeals for the Federal Circuit ruled it lacked jurisdiction over an appeal involving a patent settlement agreement, transferring the case to the Fifth Circuit. The dispute arose after T-Mobile declined to make a contingent payment to KAIFI LLC, arguing the patent claims at issue did not ‘survive’ reexamination in a way that preserved the original infringement theory. The court applied the Supreme Court’s Gunn v. Minton test, finding that KAIFI's state-law breach of contract claim did not necessarily require resolving a substantial patent-law issue. The term ‘survives’ could be interpreted under ordinary contract principles without delving into complex patent claim construction. This decision reinforces that the Federal Circuit’s jurisdiction is limited and does not automatically extend to all disputes related to patents. For corporate counsel and patent litigators, this highlights the importance of precise language in settlement agreements. It also serves as a crucial reminder that disputes over such agreements may be resolved in regional circuit courts, which have less patent-specific expertise, impacting litigation strategy and risk assessment. The appeal will now proceed in the Fifth Circuit.