T-Mobile, Inc v. KAIFI LLC, Appeal No. 2025-1006 (Fed. Cir. Aug. 28, 2026)

In our Case of the Week, the Federal Circuit concluded that it lacked subject-matter jurisdiction to decide an appeal concerning breach of a patent settlement agreement—despite both parties arguing the Court had jurisdiction—and transferred the case to the Court of Appeals for the Fifth Circuit.  The parties’ dispute concerned interpretation of a contract provision conditioning a payment on whether certain patent claims “survived” an ex parte reexamination.

Under a “Settlement and Patent License Agreement” executed by the parties in January 2022 concerning U.S. Patent No. 6,922,728, T-Mobile was granted a license to the ‘728 patent, agreed to make an initial upfront payment for the license, and agreed to make an additional payment contingent on “any Asserted Claim suriv[ing]” T-Mobile’s then-pending ex parte reexamination.  The Patent Office thereafter issued a Reexamination Certificate confirming multiple claims as patentable without amendment.  T-Mobile made the first payment but not the second, and instead brought a declaratory judgment action for a determination that none of the asserted claims “survived” the EPR.  KAIFI counterclaimed for breach of contract, seeking to recover the second payment.  The district court granted summary judgment to KAIFI on its counterclaims, and T-Mobile appealed.

In concluding that it lacked subject-matter jurisdiction, the Court explained that jurisdiction extends “only to those cases in which a well-pleaded complaint establishes either (1) that federal patent law creates the cause of action or (2) that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law.”  The Court analyzed the “special and small” second category under a four-part test articulated in Gunn v. Minton, 568 U.S. 251 (2013) for federal jurisdiction, which considers whether the relevant federal issue is (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.  For a declaratory judgment action, the Court looks to the “character of the threatened action, not of the defense,” and examines the declaratory defendant’s hypothetical well-pleaded complaint.

Here, that “complaint” was KAIFI’s counterclaim: breach of contract. In asserting jurisdiction, T-Mobile claimed that a reading of the term “survives” within the Settlement Agreement implicated patent-law issues and required investigation into KAIFI’s underlying arguments and alleged inequitable conduct during the EPR – i.e. that the disputed interpretation of “survives” necessarily raised a substantial patent-law issue capable of resolution by the Federal Circuit. KAIFI, for its part, argued that the term has a “special patent-law meaning,” also requiring resolution by the Federal Circuit.  The Court disagreed on both fronts. First, it noted that simply reviewing the Reexamination Certificate provided one possible resolution of KAIFI’s breach of contract claim; therefore, a federal issue was not necessarily raised.  Second, it stated that neither the text of the Settlement Agreement nor the extrinsic evidence pointed to by T-Mobile supported T-Mobile’s proposed understanding of the term “survives.”  Further, KAIFI’s argument that the term “survives” has a special patent law meaning was unpersuasive; none of the Federal Circuit’s prior cases had ever assigned a particularized meaning to the term beyond its ordinary dictionary definition.

Because interpretation of the term “survives,” and the breach of contract complaint in general, did not necessarily require resolution of underlying patent-law issues, the first Gunn requirement was not satisfied.  The Court could have stopped there, but further noted that the third Gunn requirement (that the issue be “substantial”) was also not satisfied.  It noted that there was no dispositive federal law issue present; resolution of the issues in dispute would not control other cases; resolution of the case would not undermine the uniformity of patent law (the touchstone for substantiality); and the government had no direct interest in the contract dispute.

Because at least the first and third Gunn requirements were not satisfied, the Court determined it did not need to reach the second and fourth requirements to conclude it lacked subject-matter jurisdiction, and transferred the case to the Fifth Circuit Court of Appeals.  The opinion can be found here.

By Julia M. Davis

ALSO THIS WEEK

AML IP, LLC v. Bath & Body Works Direct, Inc. et al., Appeal No. 2025-1280 (Fed. Cir. Aug. 28, 2026)

Following dismissal of appellant AML’s infringement claims under both Rule 12(b)(3) for improper venue and Rule 12(b)(6) for patent ineligibility under 35 U.S.C. § 101, the Federal Circuit affirmed.  AML did not contest the merits of either decision, but instead argued that the E.D. Tex. court erred by considering the Rule 12(b)(6) ground after it determined venue was improper, such that the dismissal on that ground should be vacated.  The reviewing panel disagreed.

Analyzing the issue under Fifth Circuit law, the Court explained that unlike subject-matter jurisdiction—which circumscribes a court’s power to act in absolute terms—personal jurisdiction and venue are “personal privileges of the defendant” that “may be waived by the parties.”  The panel was unpersuaded by AML’s case law that venue motions should take “top priority,” which implicated concerns around forcing the defendant to litigate in an improper venue, or permitting a transferee court to determine merits issues.  Here, the Rule 12(b)(6) issue was decided in AML’s own choice of venue, and neither party had argued below that the case should be transferred instead of dismissed.  The Federal Circuit found nothing to prohibit the district court’s deciding the Rule 12 motions on both grounds presented, and that certain considerations even favored the approach, which would have avoided piecemeal appeals had AML contested the merits.

The panel was also unmoved by AML’s argument that the lower court’s determination of patent ineligibility under § 101 lacked preclusive effect because it was unnecessary to the lower court’s judgement.  While that may well have been the case, the Court declined to give “what is essentially an advisory opinion,” since “the precise preclusive effect of the judgement… will necessarily have to be decided in any later action that may be brought.”  (Cleaned up.)  Accordingly, the Federal Circuit affirmed the lower court’s decision.  The opinion can be found here.

By Jason A. Wrubleski

This article summarizes aspects of the law and does not constitute legal advice. For legal advice with regard to your situation, you should contact an attorney.