The US Court of Appeals for the Federal Circuit concluded that it lacked appellate jurisdiction over a contract dispute arising from a patent settlement agreement because resolving the dispute did not necessarily require deciding a substantial question of patent law. The Court transferred the appeal to the Fifth Circuit. T-Mobile US, Inc. v. KAIFI LLC, Case No. 25-1006 (Fed. Cir. Aug. 28, 2026) (Taranto, Schall, Chen, JJ.)
KAIFI sued T-Mobile in the US District Court for the Eastern District of Texas, alleging infringement of a patent directed to Wi-Fi calling technology. T-Mobile subsequently requested ex parte reexamination (EPR) of the patent. While the EPR remained pending, the parties settled the infringement action.
Under the settlement agreement, T-Mobile received a license to the patent, made an initial payment, and agreed to make an additional contingent payment if any “Asserted Claim survives the EPR.” The agreement defined the asserted claims as the patent claims KAIFI had accused T-Mobile of infringing and included a covenant by T-Mobile not to challenge the validity or enforceability of the licensed patents. Texas law governed the agreement.
The United States Patent & Trademark Office (USPTO) later issued a Reexamination Certificate confirming the patentability of multiple asserted claims without amendment. T-Mobile nevertheless declined to make the contingent payment and filed a declaratory judgment action. T-Mobile argued that a claim “survived” reexamination only if it retained sufficient scope to support KAIFI’s previously asserted infringement theory. T-Mobile also asserted frustration of purpose and lack of mutual assent. KAIFI counterclaimed for breach of contract.
The district court granted summary judgment for KAIFI, concluding that the settlement agreement was unambiguous and that an asserted claim “survives” an EPR if the USPTO confirms the claim as patentable in the Reexamination Certificate. The court ordered T-Mobile to make the additional payment under the agreement. T-Mobile appealed to the Federal Circuit.
The Federal Circuit independently considered its jurisdiction under 28 USC § 1295(a)(1). Because KAIFI’s breach of contract claim arose under state law, Federal Circuit jurisdiction depended on whether the claim fell within the “special and small category” of state-law claims satisfying the Supreme Court’s four-part test of Gunn v. Minton (2013). That test assesses whether a federal issue is:
- Necessarily raised;
- Actually disputed;
- Substantial; and
- Capable of resolution in federal court without disrupting the federal-state balance.
The Federal Circuit concluded that the first Gunn requirement was not satisfied because KAIFI could prevail on its contract claim without resolving any patent-law issue. One permissible interpretation of “survives the EPR” was its ordinary meaning, which is that an asserted claim survives when the USPTO confirms its patentability rather than cancels it. That interpretation required only consideration of the agreement and the Reexamination Certificate, not resolution of claim construction, prosecution disclaimer, inequitable conduct, or another issue of substantive patent law.
The Federal Circuit rejected T-Mobile’s argument that determining whether the claims “survived” necessarily required analyzing whether KAIFI altered the scope of the claims through positions taken during reexamination. The Court explained that T-Mobile’s theory was not dictated by the settlement agreement and would effectively substitute “litigated infringement claims” for the agreement’s defined term “Asserted Claims.”
The Federal Circuit likewise rejected the argument that “survives” the EPR had a specialized patent-law meaning. Although Federal Circuit decisions have referred to patent claims as having “survived” reexamination or inter partes review, the Court explained that those decisions merely used the word in its ordinary sense to describe claims that had not been held unpatentable. Thus, patent law was not a necessary element of KAIFI’s breach of contract claim.
The Federal Circuit also found that the third Gunn requirement (substantiality) was not satisfied. The Court found no dispositive federal law issue whose resolution would control numerous other cases or otherwise be important to the federal system. Instead, the dispute was fact-bound and situation-specific, concerning the interpretation of a private settlement agreement governed by Texas law. The government also had no direct interest in the dispute, and the asserted patent had expired with no other litigation involving it still pending.
The Federal Circuit distinguished a case where interpretation of a settlement agreement necessarily required resolving whether an accused product infringed particular patent claims. Here, by contrast, KAIFI’s breach of contract theory could succeed without deciding any underlying issue of infringement, claim scope, or patent enforceability.
Because the dispute did not necessarily raise a substantial patent-law issue, the Federal Circuit concluded that it lacked appellate jurisdiction and transferred the appeal to the Fifth Circuit.
Practice note: A dispute arising from a patent settlement agreement does not necessarily fall within Federal Circuit jurisdiction merely because interpreting the agreement may implicate patent-law concepts. Federal Circuit jurisdiction requires that a substantial patent-law issue be a necessary element of the claim, not simply one possible theory for resolving a state-law contract dispute.
