United States Court of Appeals 

for the Federal Circuit ______________________

INSPIRED DEVELOPMENT GROUP, LLC, A 

FLORIDA LIMITED LIABILITY COMPANY,

Plaintiff/Counterclaim Defendant-Appellant

MITCHELL PRINE, INDIVIDUALLY,

Counterclaim Defendant

v.

INSPIRED PRODUCTS GROUP, LLC, A 

CALIFORNIA LIMITED LIABILITY COMPANY, 

DBA KIDSEMBRACE, LLC,

Defendant/Counterclaimant-Appellee

______________________

2018-1616

______________________

Appeal from the United States District Court for the 

Southern District of Florida in No. 9:16-cv-80076-RLR, 

Judge Robin L. Rosenberg.

______________________

Decided: September 18, 2019

______________________

STEVEN L. BRANNOCK, Brannock & Humphries, Tampa, 

FL, argued for plaintiff/counterclaim defendant-appellant. 

Also represented by JOSEPH T. EAGLETON. 

 THOMAS A. DYE, Cozen O’Connor, West Palm Beach, 

FL, argued for defendant/counterclaimant-appellee. Also 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

GROUP, LLC

2

represented by JAMES A. GALE, ARTHUR ROBERT WEAVER, 

Miami, FL. 

______________________

Before PROST, Chief Judge, NEWMAN and STOLL,

Circuit Judges.

PROST, Chief Judge.

Appellant Inspired Development Group, LLC (“Inspired Development”) sued Appellee Inspired Products 

Group, LLC, d/b/a KidsEmbrace, LLC (“KidsEmbrace”) for 

breach of contract and other related state law claims in federal district court on the basis of diversity jurisdiction under 28 U.S.C. § 1332(a). The district court granted 

summary judgment in KidsEmbrace’s favor on certain 

claims and Inspired Development appealed to the U.S. 

Court of Appeals for the Eleventh Circuit. After the Eleventh Circuit discovered that diversity jurisdiction did not 

exist, the district court concluded on remand that it retained jurisdiction over the suit based on federal question

jurisdiction. The Eleventh Circuit transferred the case to 

this court to determine whether the parties’ claims “aris[e]

under” the patent laws pursuant to 28 U.S.C. § 1338(a). 

For the reasons below, we vacate and remand for dismissal 

of the lawsuit for lack of jurisdiction. 

BACKGROUND

I

This case arose as a business dispute. After developing 

children’s car seat designs in the shape of cartoon and 

comic book characters, Mitchell Prine formed Inspired Development. Inspired Dev. Grp. v. Inspired Prods. Grp., No. 

9:16-CV-80076, 2017 WL 411997, at *1 (S.D. Fla. Jan. 31, 

2017). Mr. Prine obtained several patents for the safety 

seats. Id. The first design patent issued as U.S. Design 

Patent No. D524,559, which incorporated a representation 

of Batman into the car seat. J.A. 2667–72.
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GROUP, LLC

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Inspired Development held the patents as assignee. 

Inspired Dev. Grp., 2017 WL 411997, at *1. With the help 

of some investors, Mr. Prine then formed a second company, KidsEmbrace, to manufacture and sell the car seats.

Id. Mr. Prine acted as CEO of KidsEmbrace. Id. at *2.

In 2007, the two companies entered into an Exclusive 

Patent Licensing Agreement (“Agreement”), which granted 

KidsEmbrace an exclusive license to practice the patents 

to commercialize the car seats in exchange for certain royalties. Id. at *1.

In 2009, a third company entered the picture. 

KidsEmbrace sought additional investment from a 

Bulgarian corporation named Boliari, EAD (“Boliari”). Id. 

at *2. As a condition of its investment, Boliari made both 

Inspired Development and KidsEmbrace execute a Binding 

Letter of Agreement (“Binding Letter”). Id. The Binding 

Letter required Inspired Development to transfer the 

patent rights to KidsEmbrace in the event KidsEmbrace 

was acquired. In exchange, Inspired Development would 

receive a minimum royalty payment. Id. 

Shortly after the deal with Boliari was struck, Mr. 

Prine was removed as CEO of KidsEmbrace. Id. 

Subsequently, KidsEmbrace began questioning the value 

of licensing Inspired Development’s patents. Id.

Eventually, KidsEmbrace unilaterally terminated the 

Agreement. Id. Inspired Development believed it was 

owed outstanding royalties under the Agreement and a 

lump-sum payment under the Binding Letter. Id. 

II

In 2016, Inspired Development filed suit against 

KidsEmbrace in the U.S. District Court for the Southern 

District of Florida, alleging breach of contract and other 

equitable state law claims. 

Count I of the complaint alleged that KidsEmbrace 

breached the written terms of the Agreement. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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J.A. 98 ¶¶ 34–35 (alleging Section 2 of Agreement required 

“the greater of $100,000 or one percent (1%)” of yearly “net

sales” as well as late fees, which KidsEmbrace failed to pay 

in the fourth quarter of 2012 and all of 2013). Count II 

alleged breach of the Binding Letter. J.A. 99 ¶¶ 39–41 (alleging Section 5 of Binding Letter required “a minimum of 

$3,000,000 in total royalties during the duration of the

Agreement,” which KidsEmbrace refused to pay after “unjustifiably and unilaterally” terminating the Agreement). 

Count III pled a claim for unjust enrichment in the alternative to the breach of contract claims. Id. ¶ 43 (“As an 

alternative to Counts I and II (Breaches of the Agreement 

and Binding Letter, respectively), Plaintiff brings a cause 

of action against Defendant for unjust enrichment.”).

Count IV pled promissory estoppel. J.A. 100 ¶¶ 50–52. 

In response, KidsEmbrace asserted counterclaims, 

which included breach of contract, fraud, negligent misrepresentation, restitution, and breach of fiduciary duty.

Both parties relied on diversity to establish subject 

matter jurisdiction over their respective claims. 

See 28 U.S.C. § 1332(a). 

On summary judgment, the claim for breach of the 

Agreement (Count I) survived, see Inspired Dev. Grp., 2017 

WL 411997, at *3–5, but was later settled. The rest of the 

case was resolved entirely on state law grounds under Florida contract law. Inspired Development lost on its claim 

for breach of the Binding Letter (Count II), id. at *8, and 

equitable claims of unjust enrichment (Count III), id. at *9,

and promissory estoppel (Count IV), id. Inspired Development appealed to the Eleventh Circuit. 

On appeal, the Eleventh Circuit spotted a potentially 

fatal problem with the case: diversity of citizenship might

not exist. As the Eleventh Circuit explained, “to allege the 

citizenship of a limited liability company, a party must 

identify all the members of the limited liability company, 

and list the citizenship of each member.” Jurisdiction 
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GROUP, LLC

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Question, Inspired Dev. Grp. v. Inspired Prods. Grp., No. 

17-11072 (11th Cir. Mar. 23, 2017) (discussing Mallory & 

Evans Contractors & Eng’rs, LLC v. Tuskegee Univ., 663 

F.3d 1304, 1305 (11th Cir. 2011)). Neither party had done 

so in their pleadings. The Eleventh Circuit issued a “Jurisdictional Question,” finding that “the relevant pleadings 

did not sufficiently allege the citizenship of any party, as 

necessary to establish the district court’s subject matter jurisdiction over the relevant claims in the first instance.” Id. 

The Eleventh Circuit’s concerns were well founded. After a closer examination of their respective members, the 

parties “admitted that they are not diverse.” Limited Remand, Inspired Dev. Grp. v. Inspired Prods. Grp., No. 17-

11072 (11th Cir. June 6, 2017); see also 28 U.S.C. 

§ 1332(a)(1) (requiring an amount in controversy exceeding 

$75,000 and a claim between citizens of different states).

At this point, cut loose from its jurisdictional moorings, the 

dispute appeared to be headed for dismissal.1 But the case 

did not end there. 

KidsEmbrace attempted to anchor jurisdiction on a 

different basis. KidsEmbrace argued for “the first time on 

appeal that federal subject matter jurisdiction exists”

because the case presented a federal question. J.A. 2550. 

The Eleventh Circuit remanded to let the district court 

answer that question in the first instance. 

Before the district court, Inspired Development 

opposed the new jurisdictional theory. It argued that 

because there was no diversity of citizenship and it only 

alleged state law claims, the case no longer belonged in 

federal court. KidsEmbrace framed the state law breach of 

contract and equitable claims in the complaint as “arising 

 

1 Inspired Development filed suit in Florida state 

court on similar claims. Inspired Dev. Grp. v. Inspired 

Prods. Grp., No. 2017-CA-004490 (Fla. 15th Jud. Cir.).
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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under” federal patent law rather than state law.

KidsEmbrace also argued its state law counterclaims—

which it had already voluntarily dismissed from the suit—

provided a basis for staying in federal court. 

The district court accepted KidsEmbrace’s arguments, 

concluding it retained jurisdiction over this breach of contract action. See Order on Subject Matter Jurisdiction at 

9, Inspired Dev. Grp. v. Inspired Prods. Grp., No. 9:16-CV80076 (S.D. Fla. Dec. 4, 2017) (concluding district court had 

“subject matter jurisdiction over this action pursuant to 28 

U.S.C. § 1338(a)”). The case then returned to the Eleventh 

Circuit for review of that decision. 

On appeal, however, the Eleventh Circuit revisited 

KidsEmbrace’s motion to transfer the appeal to this court. 

In “the interests of justice and judicial economy,” the Eleventh Circuit granted KidsEmbrace’s motion to transfer,

“expressly leav[ing] the question of whether federal subject 

matter jurisdiction exists under 28 U.S.C. § 1338(a) to be 

resolved by the Federal Circuit.” Inspired Dev. Grp. v. Inspired Prods. Grp., No. 17-11072, 2018 WL 1282412, at *1 

(11th Cir. Feb. 22, 2018). 

We have jurisdiction to decide whether the district 

court had subject matter jurisdiction pursuant to 28 U.S.C. 

§ 1338(a). NeuroRepair, Inc. v. The Nath Law Grp., 781 

F.3d 1340, 1342 (Fed. Cir. 2015). 

DISCUSSION

I

“Subject matter jurisdiction is a question of law that we 

review de novo.” Litecubes, LLC v. N. Light Prods., Inc., 

523 F.3d 1353, 1360 (Fed. Cir. 2008); see also Sec. & Exch. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

GROUP, LLC

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Comm’n v. Mutual Benefits Corp., 408 F.3d 737, 741 (11th 

Cir. 2005) (same).2

“‘Federal courts are courts of limited jurisdiction,’ possessing ‘only that power authorized by Constitution and 

statute.’” Gunn v. Minton, 568 U.S. 251, 256 (2013) (quoting Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 

375, 377 (1994)). “Federal courts may hear only those cases 

over which they have subject matter jurisdiction.” Semiconductor Energy Lab. Co. v. Nagata, 706 F.3d 1365, 1368 

(Fed. Cir. 2013). Subject matter jurisdiction “may be based 

upon either diversity of citizenship or federal question jurisdiction.” Id. at 1369. 

“Where, as here, [the parties] do not claim diversity of 

citizenship, there must be federal question jurisdiction.” 

ExcelStor Tech., Inc. v. Papst Licensing GmbH & Co. KG, 

541 F.3d 1373, 1375 (Fed. Cir. 2008). By statute, federal 

district courts are authorized to exercise original jurisdiction in civil actions “arising under the Constitution, laws, 

or treaties of the United States.” 28 U.S.C. § 1331. “Federal courts have exclusive jurisdiction over cases ‘arising 

under any Act of Congress relating to patents.’” Gunn, 568 

U.S. at 253 (quoting 28 U.S.C. § 1338(a)). 

 

2 At oral argument, the parties briefly explored 

whether we might review this jurisdictional issue under a 

“plausibility” standard as was used in Christianson v. Colt 

Industries Operating Corp., 486 U.S. 800, 819 (1988). 

See, e.g., Oral Arg. at 14:09–15:02, 33:51–34:41, No. 2018-

1616, http://www.cafc.uscourts.gov/oral-argument-recordings. Christianson applied that standard to questions of 

“transfer” between federal courts pursuant to 28 U.S.C. 

§ 1631. Id. (“[If] the transferee court can find the transfer 

decision plausible, its jurisdictional inquiry is at an end.”). 

The Eleventh Circuit’s transfer decision is not being challenged here. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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For statutory purposes, a case will “arise under” federal law in two ways. Id. at 257. First, the case qualifies 

if federal law “creates the cause of action asserted.” Id. 

This category accounts for the “vast bulk of suits” arising 

under federal law. Id. 

Second, even if the claim “finds its origins in state rather than federal law,” the Supreme Court has identified a 

“special and small category” of cases that nonetheless arise 

under federal law. Id. at 258. For this second “slim category,” we apply the four-part Gunn test. Id. (applying test 

articulated in Grable & Sons Metal Prods., Inc. v. Darue 

Eng’g & Mfg., 545 U.S. 308, 314 (2005), to 28 U.S.C. 

§ 1338(a)). If the Gunn test is met, then federal question 

jurisdiction is proper “because there is a ‘serious federal interest in claiming the advantages thought to be inherent in 

a federal forum,’ which can be vindicated without disrupting Congress’s intended division of labor between state and 

federal courts.” Id. (quoting Grable, 545 U.S. at 313–14).

A

With regard to the first category, no claims here allege

a cause of action created by federal patent law. KidsEmbrace cannot dispute this fact. This is a state law contract 

case for past due royalties. See Wawrzynski v. H.J. Heinz 

Co., 728 F.3d 1374, 1380 (Fed. Cir. 2013) (“Breach of implied contract and unjust enrichment are state law 

counts.”). 

Nonetheless, KidsEmbrace contends that Count III 

was intended to be a “thinly disguised patent infringement 

claim” simply “masquerading” as a claim for unjust enrichment. Appellee’s Br. 27. KidsEmbrace’s arguments mischaracterize the pleadings. Count III pled a fallback 

theory of relief sounding in quasi-contract in the event the 

written contract was deemed unenforceable or not controlling. J.A. 99 ¶ 43; see also Diamond “S” Dev. Corp. v. Mercantile Bank, 989 So. 2d 696, 697 (Fla. Dist. Ct. App. 2008) 

(“Florida courts have held that a plaintiff cannot pursue a 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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quasi-contract claim for unjust enrichment if an express 

contract exists concerning the same subject matter.”).

Count III cannot therefore reasonably be viewed as a freestanding claim for patent infringement. Rather, it was a 

conditional claim for equitable relief under Florida law.

Accordingly, KidsEmbrace’s attempt to imply that Inspired 

Development engineered a claim for patent infringement 

under an alternative theory for unjust enrichment—which 

would only be available if the written agreements were unenforceable—rings hollow. There is simply no support for 

KidsEmbrace’s position.3 

This matter does not fall into the first category of traditional “arising under” cases under 28 U.S.C. § 1338(a). 

B

Consequently, the central question becomes whether 

this matter falls within the second category. We turn to 

the four-part Gunn test to answer that question. Under 

 

3 Though we reach this conclusion based on our review of the pleadings in the complaint, we note that the 

district court’s decision on summary judgment below is entirely consistent with our analysis. Indeed, the demise of 

Count III under Florida law echoes our own view of this 

claim as seeking traditional state law relief. As the district 

court concluded, Inspired Development “has not pled its 

unjust enrichment claim as a claim in addition to the matters addressed by contract in this case.” Inspired Dev. Grp., 

2017 WL 411997, at *8. Instead, it “expressly pled Count 

III as being in the alternative to Count I and Count II.” Id. 

Because the contracts in Counts I and II were deemed enforceable and controlling, Count III was precluded. Id. (citing Florida law). In the end, the district court determined 

that Count III stated an alternative equitable remedy, 

which so closely mirrored Counts I and II that it was barred 

in light of the written contracts. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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Gunn, federal jurisdiction over a state law claim will lie if 

“a 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.” Gunn, 568 U.S. at 258. All 

four elements must be satisfied. Id. Because the parties 

focused the majority of their dispute on Count III for unjust 

enrichment, we center our discussion on that claim and 

then address the other claims and counterclaims in due 

course. 

1

We begin with the first requirement of Gunn, which 

asks whether a federal issue is “necessarily raised.” “[A]

patent law issue will be necessarily raised only if it is a 

necessary element of one of the well-pleaded claims.” NeuroRepair, 781 F.3d at 1344. Here, a patent law issue was 

not necessarily raised in Count III. 

Under Florida law, the “elements of a cause of action 

for unjust enrichment are: (1) plaintiff has conferred [a]

benefit on the defendant, who has knowledge thereof; 

(2) defendant voluntarily accepts and retains the benefit 

conferred; and (3) the circumstances are such that it would 

be inequitable for the defendant to retain the benefit without paying the value thereof to the plaintiff.” Peoples Nat’l 

Bank of Commerce v. First Union Nat’l Bank of Fla., 667 

So. 2d 876, 879 (Fla. Dist. Ct. App. 1996) (quoting Hillman 

Const. Corp. v. Wainer, 636 So. 2d 576, 577 (Fla. Dist. Ct. 

App. 1994)).

To meet these elements, Inspired Development’s 

allegations hinge on showing that it conferred a benefit on 

KidsEmbrace in the form of an exclusive license, that 

KidsEmbrace knew of and benefited from this license, and 

that principles of equity require KidsEmbrace to pay for 

the benefit. According to the complaint:
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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45. Plaintiff conferred a benefit on Defendant by 

licensing and allowing Defendant to use its utility 

and design Patents in the manufacturing and sale 

of the KidsEmbraceTM “Human Form” cartoon-andsuperhero-themed children’s safety seats.

46. Defendant had knowledge of the benefit conferred and voluntarily accepted and retained the 

benefit conferred.

J.A. 100 ¶¶ 45–46 (emphases added); see also J.A. 96 ¶ 25 

(“By the end of 2010, Defendant, through the use of 

Plaintiffs licensed Patents, began selling the ‘Human 

Form’ children’s car safety seat . . . .”). By these 

allegations, one way Inspired Development could prove 

that KidsEmbrace “accepted and retained” a benefit at 

Inspired Development’s expense was to show that 

KidsEmbrace used one or more of Inspired Development’s 

“utility and design Patents” in the car seats it 

manufactured and sold. Thus, Inspired Development’s 

unjust enrichment claim potentially raises a question of 

patent law regarding infringement. 

Demonstrating infringement, however, is not the only 

way that Inspired Development could succeed on its claim. 

It is often the case that a licensee, and in particular an 

exclusive licensee, benefits from the grant of a license 

regardless of whether or not an infringing product is 

actually created. For example, if a product is possibly but 

not certainly infringing, an entity may procure a license in 

order to avoid uncertainty and litigation. The benefit in 

this case is the entity’s ability to invest or have others 

invest in its products with greater confidence, as well as 

the avoidance of costs and fees associated with suit. As for 

an exclusive license, the entity also gains the benefit of 

ensuring that no other entity has the ability to create 

competing products that practice the patents at issue. 

Thus, Inspired Development could succeed on its claim by 

showing that by conferring the license on KidsEmbrace, 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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KidsEmbrace avoided litigation, acquired investment it 

may not have otherwise, or succeeded in preventing 

competition for a certain length of time. In this way, 

Inspired Development need not demonstrate that 

KidsEmbrace actually practiced the licensed patents, and 

the question of infringement is not a “necessary element” 

of the claim.4

2

Though not a necessary element of the claim for unjust 

enrichment, we note that the issue of whether 

KidsEmbrace used the patents is “actually disputed” here

under the second Gunn requirement. KidsEmbrace denied 

it manufactured or sold products within the scope of the 

patents in an infringing manner. See J.A. 96–97 ¶ 25,

127 ¶ 25. 

3

We now turn to the third Gunn requirement, requiring

a “substantial” federal issue. Even if the state law claim

here “necessarily raised” an issue of patent law that was 

“actually disputed,” “the federal issue in this case is not 

substantial in the relevant sense.” Gunn, 568 U.S. at 260.

In KidsEmbrace’s view, the issue was substantial because patent infringement was “the gravamen of Inspired 

Development’s unjust enrichment claim.” Appellee’s 

Br. 32. But KidsEmbrace’s argument misses the mark. To 

meet the substantiality requirement under Gunn, “it is not 

 

4 The terms of the written contract also align with 

this view. According to the pleadings, KidsEmbrace owed 

a minimum payment ($100,000) each year under the 

Agreement—regardless of whether any products were 

made or sold that practiced the patents. See J.A. 98 ¶ 34. 

KidsEmbrace allegedly failed to make this minimum payment in 2012 and 2013. Id. ¶ 35.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true 

when the state claim ‘necessarily raise[s]’ a disputed federal issue, as Grable separately requires.” Gunn, 568 U.S. 

at 260. Instead, the touchstone for “substantiality” is 

whether allowing state courts to resolve the case would undermine “the development of a uniform body of [patent] 

law.” Vermont v. MPHJ Tech. Invs., LLC, 803 F.3d 635, 

646 (Fed. Cir. 2015) (quoting Gunn, 568 U.S. at 261). 

Therefore, we consider “the importance of the issue to the 

federal system as a whole.” Gunn, 568 U.S. at 260. 

Adopting our sister circuit’s framework, we recently

concluded that the Supreme Court had identified three factors that inform this substantiality inquiry. NeuroRepair, 

781 F.3d at 1345 (citing MDS (Can.), Inc. v. Rad Source 

Techs., Inc., 720 F.3d 833, 842 (11th Cir. 2013)). A “substantial federal issue is more likely to be present” if:

a) “a pure issue of [federal] law is dispositive of the 

case,” 

b) “the court’s resolution of the issue will control numerous other cases,” 

c) “[t]he Government . . . has a direct interest in the 

availability of a federal forum to vindicate its own 

administrative action.” 

Id. (alterations in original) (citations omitted) (internal 

quotation marks omitted). Applying these factors to the 

present claims at issue, each confirms that there is no “substantial” issue of federal patent law. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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a

With regard to the first NeuroRepair factor, the patent 

infringement issue here is not dispositive of whether 

Inspired Development is entitled to relief. As discussed, 

Inspired Development could prevail on its unjust 

enrichment claim without showing KidsEmbrace’s 

products actually infringed. Furthermore, “the present 

matter involves a question of federal law, at most, as only 

one of several elements needed to prevail.” Id. at 1346.

Inspired Development also has to prove that KidsEmbrace 

had knowledge of the benefit. Moreover, Inspired 

Development cannot prevail on Count III as a matter of law 

if the written contracts are valid and controlling under 

state law.5 Thus, the first factor cuts against 

substantiality.

b

Turning to the second NeuroRepair factor, a state

court’s resolution of the issue here will not control “numerous other cases.” KidsEmbrace contends that a state 

court’s decision on infringement or invalidity could create 

conflicting rulings for other infringement cases in federal 

court. But we already rejected a similar argument in NeuroRepair. There, appellees argued that if a state court 

 

5 The record below mirrors our conclusion. As discussed, the district court disposed of Inspired Development’s claims based solely on state law grounds. Count III

failed on the basis that Florida law does not recognize 

claims for unjust enrichment if an “express contract” is already in place between the parties concerning the subject 

matter. Inspired Dev. Grp., 2017 WL 411997, at *8. Count 

IV failed for the same reason. Id. at *9. Count II failed 

because the contractual provision did not apply to KidsEmbrace and a condition precedent was not satisfied. Id. at 

*5–8 (applying Florida law). 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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adjudicated the case, “a third-party infringer could conceivably be found liable for infringing a patent that its own 

state court previously found to be unpatentable.” Id. at 

1346. Here, as there, this “argument is unpersuasive.” Id.

“If a federal court finds a defendant liable for infringing a 

valid patent notwithstanding a prior state court determination of invalidity, it is self-evident the state court decision did not ‘control’ the later federal court case.” Id. 

Nonetheless, KidsEmbrace insists that this court has 

“frequently” and “consistently” held that contract claims 

raising issues of infringement or validity must arise under 

federal law as they can conflict with other suits. Appellee’s 

Br. 32, 39. Yet throughout its briefing, KidsEmbrace almost exclusively cites to our decision in Jang v. Boston Scientific Corp., 767 F.3d 1334 (2014), for support.6 On its 

facts, however, Jang is distinguishable. 

Although we need not decide whether Jang’s reasoning 

would apply to a state-court suit involving Jang’s facts,

Jang’s reasoning is worlds away from the supposed statefederal conflict here. The analysis in Jang took place entirely between federal courts. In Jang, diversity jurisdiction was undisputed. Id. at 1338. Plaintiff’s breach of 

contract case proceeded in district court. On appeal, the 

issue in Jang was whether the regional circuit or the Federal Circuit had appellate jurisdiction. Id.

That tension between federal courts of appeal controlled our analysis of Gunn’s third element in Jang. The

 

6 Though Jang analyzed appellate jurisdiction under 

§ 1295(a)(1), we have applied the Gunn test to analyze 

cases “arising under” both 28 U.S.C. § 1338(a) and 

28 U.S.C. § 1295(a)(1). See Vermont, 803 F.3d at 646 (“This 

court has since applied the Gunn test to assess “arising under” jurisdiction under § 1295(a)(1).”). Thus, we consider 

Jang here. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

GROUP, LLC

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specific procedural posture—involving competing federal

circuits—created an issue with particular “importance” to 

“the federal system as a whole.” Gunn, 568 U.S. at 260. 

Analyzing whether the federal patent law issues were “substantial” enough to confer jurisdiction on the Federal Circuit over the regional circuit, the panel reasoned: 

Permitting regional circuits to adjudicate questions of patent validity, for example, could result in 

inconsistent judgments between a regional circuit 

and the Federal Circuit, resulting in serious uncertainty for parties facing similar infringement 

charges before district courts within that regional 

circuit. Maintaining Federal Circuit jurisdiction 

over such contractual disputes to avoid such conflicting rulings is important to “the federal system 

as a whole” and not merely “to the particular parties in the immediate suit.”

Jang, 767 F.3d at 1338 (quoting Gunn, 568 U.S. at 260)

(emphasis added). Thus, the reasoning in Jang turned on 

the system-wide conflict that could arise in the federal 

courts if regional circuits reached different conclusions 

about validity. Id. Given the “serious uncertainty” of 

whether a district court would follow its regional circuit or 

the federal circuit, such conflicts raised “substantial” concerns for the federal system. Id. 

The risk of such conflict from state courts here is remote. First, a state court cannot invalidate patents.7 See 

Gunn, 568 U.S. at 264 (state court decision “will not even 

affect the validity of [the] patent”). Second, a state court’s 

determination of patent validity does not have precedential 

effect on a district court. Id. at 261–62. Third, as in Gunn, 

 

7 KidsEmbrace notes that it raised certain invalidity

and ownership issues as affirmative defenses related to Inspired Development’s contract claims. Appellee’s Br. 21. 
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS 

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KidsEmbrace “has not identified any case finding . . . preclusive effect based on a state court decision” regarding infringement or validity. Id. at 263. Finally, “even assuming 

that a state court’s case-within-a-case adjudication may be 

preclusive under some circumstances, the result would be 

limited to the parties and patents that had been before the 

state court. Such ‘fact-bound and situation-specific’ effects 

are not sufficient to establish federal arising under jurisdiction.” Id. (quoting Empire Healthchoice Assurance, Inc. 

v. McVeigh, 547 U.S. 677, 701 (2006)). 

KidsEmbrace also argues that Gunn is limited to malpractice claims, which involve only “backward-looking” or 

“hypothetical” questions of how patent infringement 

should have been litigated differently by counsel. Appellee’s Br. 37–38. In KidsEmbrace’s view, a state court’s decision on invalidity outside the context of such backwardlooking claims will no longer be hypothetical. In turn, KidsEmbrace reads Gunn to say that these decisions will conflict with federal law, creating confusion over which 

precedent to follow. 

We disagree. Gunn suggests just the opposite. In 

Gunn, the causation element of the malpractice claim required a “case within a case” analysis of an experimental 

use exception to invalidity. Gunn, 568 U.S. at 259. Here, 

if we accept KidsEmbrace’s view that this case raises an 

embedded patent issue, the unjust enrichment case would 

involve a “case within a case” analysis of patent infringement. The benefit conferred was that KidsEmbrace was 

“allow[ed] . . . to use” the patents for past sales of KidsEmbrace car seat products in 2012 and 2013, J.A. 100 ¶ 45, 

which in KidsEmbrace’s view requires an assessment of 

whether those products would have been covered by the 

claims. But there is little to suggest that a state court’s 

hypothetical analysis of infringement for the specific products in this quasi-contract claim will affect uniformity in 

patent law. “Congress ensured such uniformity by vesting 

exclusive jurisdiction over actual patent cases in the 
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federal district courts . . . . In resolving the nonhypothetical patent questions those cases present, the federal courts 

are of course not bound by state court case-within-a-case 

patent rulings.” Gunn, 568 U.S. at 261–62; see also, 781 

F.3d at 1349. 

Furthermore, this case does not present a novel question of patent law that could impact other cases. Even if it 

did, Gunn casts doubt on the idea that this would often rise 

to the level of a “substantial” federal issue. “As for more 

novel questions of patent law that may arise for the first 

time in a state court ‘case within a case,’ they will at some 

point be decided by a federal court in the context of an actual patent case, with review in the Federal Circuit.” 

Gunn, 568 U.S. at 262. “If the question arises frequently, 

it will soon be resolved within the federal system, laying to 

rest any contrary state court precedent; if it does not arise 

frequently, it is unlikely to implicate substantial federal interests.” Id. Certainly, Gunn leaves open the possibility 

that state court actions with embedded patent issues can 

raise issues of substantial importance to the federal system. But it suggests that state courts can faithfully apply 

federal precedent to embedded issues of basic infringement 

and invalidity in a particular case and that a broader effect 

on federal patent law is required before a state law claim 

is taken out of the hands of a state court. 

Regardless, KidsEmbrace gets Gunn backwards. Gunn

did not hold that the “substantial” requirement applies 

only to hypothetical malpractice claims. Rather, Gunn

held that most malpractice claims will fail to meet that requirement. See Gunn, 568 U.S. at 258 (“[W]e are comfortable concluding that state legal malpractice claims based 

on underlying patent matters will rarely, if ever, arise under federal patent law . . . .”). In doing so, the Supreme 

Court underscored the importance of the “substantial” issue inquiry as a freestanding part of Grable’s analysis in 

any case. Gunn reiterated that the federal issue must be 

“substantial” if it is to confer federal question jurisdiction. 
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The “resolution of a patent issue” may be “vitally important” to the particular parties here. Id. at 263. “But 

something more, demonstrating that the question is significant to the federal system as a whole, is needed.” Id. at 

264. As in Gunn, that “is missing here.” Id. Without more, 

this claim for unjust enrichment does not raise a “substantial” issue. 

The other precedent raised by the parties—and discussed in Jang—does not unsettle our conclusion. See, e.g.,

Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., 

715 F.3d 1329 (Fed. Cir. 2013); Hunter Douglas, Inc. v. 

Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), 

overruled on other grounds by Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999). 

For example, Forrester simply confirms that purely 

“backward-looking” or “hypothetical” patent issues are insubstantial. It does not hold that all future-looking or nonhypothetical issues are substantial to the federal system. 

Thus, Forrester is consistent with Gunn. See Forrester, 715 

F.3d at 1335 (“Here, as in Gunn, the potential for conflict 

is purely ‘hypothetical.’”). Indeed, far from proclaiming a 

broad categorical rule for what was sufficient to satisfy 

“arising under” jurisdiction, Forrester held that the allegations at issue failed to raise a substantial issue. Id. at 1336 

(concluding “patent law issues are not ‘substantial in the 

relevant sense’ under Gunn” (quoting Gunn, 568 U.S. at

260)). 

Moreover, to the extent that Forrester and Hunter 

Douglas discussed claims that might raise a substantial issue, the allegations involved fundamentally different 

claims. Forrester concerned claims for business disparagement (e.g., suits alleging false or inaccurate statements 

about patent rights). Id. at 1334. In Forrester, we noted

that “[i]n the past,” we have “concluded that similar state 

law claims premised on allegedly false statements about 

patents raised a substantial question of federal patent 
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law.” Id. “Similarly in Hunter Douglas . . ., the plaintiff 

asserted a claim for ‘injurious falsehood’ on the theory that 

the defendant falsely claimed to ‘hold exclusive rights to 

make or sell window shades covered by one or more’ patents.” Id. (quoting Hunter Douglas, 153 F.3d at 1329). 

We stated that cases involving disparagement claims, 

such as Hunter Douglas, “may well have survived the Supreme Court’s decision in Gunn.” Id. But to the extent 

they do, we explained precisely why these specific claims 

could create “inconsistent judgments between state and 

federal courts” of a nature that would generate future “conflict.” Id. at 1334–35. “For example, a federal court could 

conclude that certain conduct constituted infringement of 

a patent while a state court addressing the same infringement question could conclude that the accusation of infringement was false and the patentee could be enjoined 

from making future public claims about the full scope of its 

patent as construed in federal court.” Id. at 1334 (emphasis added). Due to the nature of the allegations and the 

remedies sought, the state and federal courts could both 

have an impact on patentees’ ability to assert the full scope 

of their rights in the future. Given this tension, we suggested that the federal issue would be “substantial” due to 

the potential for future conflict. Id. 

As pled, the claim for unjust enrichment here does not 

carry with it the same potential to generate future conflict. 

KidsEmbrace makes no effort to explain how the claim for 

past damages against a single defendant under a quasicontract theory could tie up future proceedings in the same 

way as a state court’s injunction or an award of damages 

for disparagement would impact a patentee’s ability to publicly assert the full scope of its patent as discussed in Forrester for disparagement claims. The pleadings here 

simply do not go far enough to generate the type of tension 

between state and federal proceedings found in Forrester

or Hunter Douglas for future suits. 
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At bottom, KidsEmbrace ignores the limited nature of 

the claim. As pled, this claim is about a particular 

relationship. Mr. Prine and his company had a business 

arrangement with their manufacturer. Mr. Prine licensed

the intellectual property of his company to that 

manufacturer in exchange for certain royalties. The 

relationship was formalized in a set of contracts. Mr. 

Prine’s company asserted the contracts to enforce those 

rights. In case the contracts did not hold up, Mr. Prine’s 

company pled an equitable claim in the alternative to 

prevent a benefit from flowing to the manufacturer without 

just compensation. The subject matter of the benefit was 

the ability to use certain patents. But the unjust 

enrichment pled here fundamentally depends on the 

existence of the relationship between the parties. 

Therefore, KidsEmbrace’s suggestion that Inspired Development—or other litigants—could replicate this claim 

and sue any other competitor or third-party is unpersuasive. See Appellee’s Br. 29. Had Inspired Development

tried to plead unjust enrichment or some other equitable 

claim in such a way (i.e., without any existing relationship), this might raise greater concerns for the federal system.8 

In sum, a state court’s decision on Inspired Development’s alternative quasi-contract claim based on its business relationship with the defendant here will not control 

“numerous other cases.” Thus, this factor also confirms the 

issue here is not “substantial” under Gunn. 

 

8 At that point, though labeled as an “unjust enrichment” action, the claim would look like little more than a 

patent infringement claim against a third-party infringer 

pled in disguise to avoid federal jurisdiction. But that is 

not the case before us.
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c

Turning to the third NeuroRepair factor, here the government has no direct interest in this contract dispute between private parties. Given the “fact-bound” nature of the 

embedded patent law issues in this suit, the “government 

interest in having any single case of patent infringement 

heard in a federal forum is limited.” MDS, 720 F.3d at 842. 

Thus, this third factor also militates against treating the 

issue as substantial. 

On balance, all three NeuroRepair factors confirm that

this case does not rise to the level of presenting a “substantial” federal issue. Though these factors are not exhaustive, KidsEmbrace offers no other meaningful reason why 

the issue in this case is substantial. Given that Gunn’s 

substantiality factor is not satisfied, Inspired Development’s unjust enrichment claim as pled in this case cannot 

“aris[e] under” federal patent law under 28 U.S.C. 

§ 1338(a). 

4

Finally, we assess the fourth requirement of Gunn. In 

doing so, we consider whether exercising federal jurisdiction would upset the “balance of federal and state judicial 

responsibilities.” Grable, 545 U.S. at 314. Under these circumstances, it would. 

As discussed, KidsEmbrace invites us to essentially ignore Gunn’s clear requirements and read Jang to say that 

any breach of contract claim or related equitable claim involving a patent license agreement must “arise under” the 

patent laws. The consequences of accepting this invitation 

for the state-federal balance are clear. Any time such a 

state law claim “necessarily raises” an embedded patent infringement or invalidity question, federal question jurisdiction would lie. Many state law claims involve such 

embedded questions. “To hold that all questions of patent 

infringement are substantial questions of federal law for 
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the purposes of federal patent jurisdiction would sweep a 

number of state-law claims into federal court.” MDS, 720 

F.3d at 843 (concluding breach of contract claim did not 

satisfy fourth Gunn requirement).

Therefore, finding a federal question here merely because this contract implicates a run-of-the-mill question of 

infringement or validity would undoubtedly impact the 

wider balance between state and federal courts. Indeed, a 

plaintiff could create a federal jurisdictional hook to avoid

state court in any case involving almost any state law claim 

by doing little more than pleading allegations that involve 

an embedded infringement or validity analysis. Clearly, 

such gamesmanship in non-diversity actions would upset 

the balance between state and federal courts. Accordingly, 

“courts considering alleged violations of a variety of state 

laws have declined to find federal question jurisdiction notwithstanding the presence of an underlying issue of patent 

law.” NeuroRepair, 781 F.3d at 1348 (collecting cases). 

For the reasons above, we reverse the district court 

based on this fourth element of Gunn as well. 

II

KidsEmbrace’s remaining arguments in favor of jurisdiction are unavailing. First, KidsEmbrace argues that 

Counts I and II regarding breach of contract might also 

confer jurisdiction. Second, KidsEmbrace argues its voluntarily dismissed state law counterclaims also create “arising under” jurisdiction.9

With regard to Counts I and II, KidsEmbrace tries to 

fashion these state law claims into a jurisdictional hook. 

For similar reasons, that effort fails. KidsEmbrace spends 

pages of its brief arguing how these claims necessarily 

 

9 KidsEmbrace does not meaningfully argue that 

Count IV furnishes a basis for jurisdiction. 
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require resolution of basic patent issues. See, e.g., Appellee’s Br. 36–41. But once again, there is no indication these 

claims rise to the level of substantial federal issues as required by Gunn. Indeed, KidsEmbrace rehashes the 

flawed arguments it already advanced under Jang and

Hunter Douglas, advocating once more that we essentially 

collapse the third requirement (“substantial”) into the first

requirement (“necessarily raised”) under Gunn. This effort 

is equally unsuccessful. We are not persuaded that Counts 

I and II meet either the third or fourth requirements in 

Gunn. 

With regard to KidsEmbrace’s counterclaims, these 

former allegations do not provide an independent basis for 

federal question jurisdiction either. As an initial matter, 

KidsEmbrace concedes it did not raise any actual patent 

counterclaims (e.g., a declaratory judgment of invalidity or 

non-infringement). Instead, KidsEmbrace’s counterclaims 

include only state claims based on the contracts between 

the parties. The counterclaims alleged breach of contract, 

fraud, negligent misrepresentation, restitution, and breach 

of fiduciary duty for false contractual warranties in the 

Agreement, which resulted in KidsEmbrace paying “royalties on invalid and otherwise valueless patents.” J.A. 141–

43. In KidsEmbrace’s view, these counterclaims raise substantial questions of embedded inventorship and validity 

that meet all of Gunn’s requirements. We disagree for at 

least two separate reasons. 

First, even if these claims did raise embedded patent 

issues, they still fail to meet the third and fourth requirements of the Gunn test. In particular, nothing in the allegations here shows that these claims will affect future suits 

in the federal system. Each of KidsEmbrace’s counterclaim 

pleadings are based on the warranties made between the 

parties when entering the specific contractual relationship 

set out in the Agreement. See, e.g., J.A. 141–43 ¶¶ 31, 37, 

48. Based on the relief pled, KidsEmbrace’s counterclaims 

only expressly seek damages for the royalties it paid under 
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the Agreement, see, e.g., J.A. 142–43 ¶¶ 35, 41, 46, not an 

injunction on “future public claims” about the scope of the 

patent as in Forrester. Without more, there is little indication that the patentee would be enjoined from patent rights 

otherwise impacted in future suits in federal court unrelated to the contracts here. Sweeping these state law contract counterclaims as specifically pled here into federal 

court would upset the state-federal balance. 

Second, KidsEmbrace voluntarily dismissed its counterclaims. “We have repeatedly held that an amendment 

to the complaint that dismisses the patent law claims without prejudice, as here, deprives this court of jurisdiction 

over the case.” Krauser v. BioHorizons, Inc., 753 F.3d 1263, 

1268–69 (Fed. Cir. 2014) (emphasis added). Indeed, in 

Krauser, we found that “after Krauser’s withdrawal without prejudice of his inventorship claims, the Second 

Amended Complaint did not contain any claims which depended ‘on resolution of a substantial question of federal 

patent law.’” Id. (quoting Christianson, 486 U.S. at 809). 

Here, KidsEmbrace does not dispute that it has dismissed 

its counterclaims without prejudice. See also Gronholz v. 

Sears, Roebuck & Co., 836 F.2d 515, 518 (Fed. Cir. 1987) 

(“[D]ismissal of the patent claim constituted an amendment of his complaint. That amendment left a complaint 

which consisted of a single, non-patent claim for unfair 

competition. Applying the well-pleaded complaint rule to 

the complaint then remaining, we determine that the present suit does not ‘arise under’ the patent laws for jurisdictional purposes.”). 

We have considered KidsEmbrace’s remaining arguments and find them unpersuasive. 
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CONCLUSION

Because the district court lacked subject matter jurisdiction, we vacate the district court’s judgment and remand 

for dismissal. 

VACATED AND REMANDED

COSTS

The parties shall bear their own costs.