Background
KAIFI accused T-Mobile of infringing a patent covering Wi-Fi calling technology. While an ex parte reexamination—an administrative process in which the U.S. Patent and Trademark Office takes a second look at an issued patent—was pending, the companies settled. T-Mobile made an initial payment and promised another payment if any asserted patent claim “survives the EPR.” The agreement also barred T-Mobile from challenging the patent’s validity or enforceability.
The Patent Office later confirmed several asserted claims as patentable without amendment. T-Mobile nevertheless refused the contingent payment. It argued that the claims had not truly “survived” because KAIFI allegedly changed its claim-construction position during reexamination and withheld inconsistent positions from the agency. The Eastern District of Texas read the agreement more simply: confirmed claims survived. It entered summary judgment for KAIFI and ordered T-Mobile to pay.
The Court’s Holding
The Federal Circuit did not decide who had the better reading of the settlement. It held that it lacked appellate jurisdiction and transferred the appeal to the Fifth Circuit. Federal Circuit jurisdiction covers cases arising under federal patent law, including a narrow class of state-law claims that necessarily raise a disputed and substantial patent question. KAIFI’s breach-of-contract claim did not fit that category.
Judge Chen’s opinion explained that the dispute could be resolved without deciding prosecution disclaimer, inequitable conduct, infringement, validity, or enforceability. A court could consult the reexamination certificate and give “survives” its ordinary meaning: claims that the Patent Office confirmed as patentable continued to exist. T-Mobile’s more patent-intensive theories were possible defenses, not unavoidable elements of KAIFI’s contract claim. The agreement’s text also did not suggest that “survives” required a separate inquiry into whether KAIFI preserved its earlier infringement theory.
The embedded patent issues were not substantial to the federal system as a whole, either. The dispute was fact-bound, concerned a private contract, would not control numerous other cases, and involved a patent that had already expired. Future contracting parties can avoid the same uncertainty by defining precisely what event triggers payment. Because diversity jurisdiction supported the district-court case, the regional Fifth Circuit—not the specialized Federal Circuit—was the proper appellate court.
Key Takeaways
- A patent’s presence in the background does not automatically create Federal Circuit appellate jurisdiction.
- A state-law contract claim must necessarily require resolution of a substantial patent-law issue; an optional patent-based defense is not enough.
- Settlement agreements should define whether a claim “survives” based on confirmation, amendment, enforceability, claim scope, or some other objective event.
- Parties cannot create subject-matter jurisdiction by agreement, concession, or their preferred characterization of the dispute.
Why It Matters
Patent settlements often tie payments to later Patent Office outcomes. This decision shows why the triggering language deserves the same care as the royalty amount. Words that seem intuitive during negotiations can produce expensive litigation when one side later tries to import prosecution history, claim scope, or alleged misconduct into a straightforward payment condition.
The ruling also reinforces a jurisdictional boundary: regional circuits can decide contract disputes involving patents when patent law is not an indispensable and systemically important part of the claim. For businesses, that boundary affects appellate venue, controlling precedent, litigation strategy, and the time and cost of an appeal.
Full Opinion
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