## United States Court of Appeals for the Federal Circuit

2009-1471

CLEARPLAY, INC., Plaintiff-Appellee,

v. MAX ABECASSIS and NISSIM CORP, Defendants-Appellants.

David L. Mortensen , Stoel Rives LLP, of Salt Lake City, Utah, argued for plaintiffappellee. With him on the brief was David J. Jordan . Of counsel on the brief was Thomas J. Meeks , Carlton Fields, of Miami, Florida. John C. Carey , Carey Rodriguez Greenberg & Paul , LLP, of Miami, Florida, argued for defendants-appellants. With him on the brief was Allison J. Cammack

. Appealed from: United States District Cour t for the Southern District of Florida Judge Paul C. Huck

## United States Court of Appeals for the Federal Circuit

2009-1471 CLEARPLAY, INC., Plaintiff-Appellee,

v. MAX ABECASSIS and NISSIM CORP., Defendants-Appellants.

Appeal from the United States District C ourt for the Southern District of Florida in case no. 07-CV-81170, Judge Paul C. Huck.

___________________________ DECIDED: April 21, 2010

___________________________

Before BRYSON, ARCHER, and PROST, Circuit Judges

. BRYSON, Circuit Judge

. Nissim Corp. and Max Abecassis (collect ively, “Nissim”) appeal a May 29, 2009,

order of the United States District Court for the Southern District of Florida granting a preliminary injunction to Clear Play, Inc. At the outset, this case requires us to determine whether we have appellate jurisd iction over the underlying action, which relates to a dispute stemming from the par ties’ patent license agreement. We hold that we lack jurisdiction over this appeal and theref ore transfer the case to the United States Court of Appeals for the Eleventh Circuit.2009-1471 2 I The license agreement, executed in December 2005, settled a patent infringement action that Nissim had brought against ClearPlay. Nissim had accused ClearPlay of infringing its patents relating to systems for filteri ng objectionable content from certain video media, such as DVDs. As part of their settlement of the lawsuit, the parties entered into a license agr eement that allowed ClearPlay to distribute its accused products upon payment of royalties to Nissim. Shortly after the settlement and license agreement were entered, howev er, Nissim claimed that ClearPlay had violated the terms of the agreement, and in June 2007 Ni ssim filed a motion to enforce the agreement. Nissim filed the motion in the same court in which the patent action had been brought. While that motion was pending, Nissim informed several retailers who were selling ClearPlay’s products that Clear Play’s devices were not licensed and that the retailers’ continuing sale of those pr oducts could constitute patent infringement. In response, ClearPlay brought this action in December 2007 in the same district court that had entertained the pat ent infringement acti on. Citing diversity of citizenship as a jurisdictional basis, ClearPlay accus ed Nissim of tortious interference with a contractual relationship, tortious interf erence with potential ad vantageous business relationships, breach of the license agreemen t, breach of the covenant of good faith and fair dealing, and violation of Florida’s Deceptive and Unfair Trade Practices Act. Meanwhile, in the patent case, the tria l court assigned to a special master the task of determining whether, as alleged by Nissim, ClearPlay had breached the license agreement. In early 2009, the special mast er recommended finding that ClearPlay had substantially complied with t he agreement and was not in breac h. The district court,2009-1471 3 having previously held that the license agreement was va lid and enforceable, adopted the special master’s recommendation on March 31, 2009, and dismissed Nissim’s motion for relief in the patent case. Nissim took an appeal from that decision. That appeal is now pending before a panel of this court as No. 2009-1327. Shortly after the district court’s or der denying Nissim’s motion, Nissim informed ClearPlay of its position that, notwithstanding the terms of the district court’s order, the

effect of the order was to terminate the license agreement. Nissim pointed to section 12.3 of the license agreement, wh ich provides that prior versions of the agreement “shall not be relied upon for interpretation of the terms and conditions herein.” Nissim’s theory was that the special ma ster had treated that provision as invalid or unenforceable by relying in part on the negotiating history of the agreement as an aid to interpreting the agreement’s terms. Nissim argued that, because the special master had relied on the parties’ negotiating history and the distri ct court had adopted the special master’s recommendation, the effect of the district court’s ruling was likewise to invalidate or deem unenforceable section 12.3 of the agr eement. Nissim then pointed to section 12.5 of the agreement, which pr ovides that each of the terms of the agreement is material and that if any term is “deemed invalid, illegal or unenforceable” and is not amended by agreement of the parties, the license agreement shall terminate 60 days “following such term or provision becom ing or being deemed invalid, illegal, or unenforceable.” That provisi on was triggered, according to Nissim, even though the district court had explicitly held that the agreement was still valid and in effect. As a consequence, Nissim advised Clear Play that it would regard the license agreement as terminated as of May 30, 2009, 60 days after the district court’s decision.2009-1471 4 On May 22, 2009, ClearPlay sought a preliminary injuncti on in its state law action seeking to bar Nissim from breaching the license agreement by denying its validity and enforceability. The district court agreed with ClearPlay that Nissim was wrong to interpret the court’s March 31 order as e ffectively terminating the license agreement. Instead, the court held that the agreement was valid a nd that ClearPlay was in substantial compliance with its terms. The court then entered a pr eliminary injunction against Nissim, ordering that neither Nissim nor its agents shall “suggest or state to potential retailers, purchasers, or manufacturers of ClearPlay’s produc ts that this Court

has held that the License Agreement between ClearPlay and Nissim is terminated pursuant to Section 12.5 of t he License Agreement.” Nissim took this appeal from the district court’s preliminary injunction order. ClearPlay first argues that this court lacks jurisdiction over the appeal and that the appeal belongs, instead, in the Eleventh Circui t. On the jurisdictional issue, Nissim responds that this court has jurisdiction over the appeal because the dispute between the parties necessarily raises issues of patent law. As to the merits, ClearPlay argues that the trial court corre ctly held that the agreement had not been terminated and that the court properly entered a preliminary injunction against Nissim to bar it from making contrary representations about the court’s ruling to ClearPlay’s business part ners. For its part, Nissim reasserts its argument that the district court, despite stating that the lic ense agreement remained valid and in force, actually precipitated t he termination of the agreement by the way it resolved the dispute over the issue of breach. Nissim also contends that it was an

abuse of discretion for the district cour t to issue the preliminary injunction.2009-1471 5 II We agree with ClearPlay that we lack jurisdiction over this appeal, and we order that the appeal be transferred to the Eleventh Circuit. This court’s jurisdiction over appeals from decisions of United States district courts is based on 28 U.S.C. § 1295(a). Secti on 1295(a)(1) provides that this court has jurisdiction over an appeal from a final decision of a district court “if the jurisdiction of that court was based, in whole or in part, on section 1338” of title 28. Section 1338, in turn, gives district courts orig inal jurisdiction of “any civil action arising under any Act of Congress relating to patents.” 28 U.S.C. § 1338(a).

In Christianson v. Colt Industries Operating Corp. , 486 U.S. 800 (1988), the Supreme Court addressed in detail the meaning of the term “arising under” in the

context of section 1338. The Court stated that in order to demonstrate that a case is one “arising under” patent law, the plaintiff must “set up some right, title or interest under the patent laws, or at least make it appear that some right or privilege will be defeated by one construction, or sustained by t he opposite construction of these laws.”

Id. at 807-08, quoting Pratt v. Paris Gas Light & Coke Co. , 168 U.S. 255, 259 (1897). Following its precedents under other jurisdictional statutes containi ng similar language, the Court explained that sect ion 1338 jurisdiction extends only to those cases in which a well- pleaded complaint establishes either [1] that federal patent law creates t he cause of action or [2] that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent la w, in that patent law is a necessary element of one of the well-pleaded claims.

Christianson , 486 U.S. at 809.2009-1471 6 Significantly, the Court expl ained that, to establish section 1338 jurisdiction, it is not necessarily sufficient “t hat a well-pleaded claim alleges a single theory under which resolution of a patent-law question is essential. ” 486 U.S. at 810. If there are “‘reasons completely unrelated to the provisions and purposes of [the patent laws] why the [plaintiff] may or may not be entitled to the re lief it seeks’ . . . then the claim does not

‘arise under’ those laws.” Id. Thus, the Court concluded, “a claim supported by alternative theories in the complaint may not form the basis for § 1338(a) jurisdiction unless patent law is essential to each of those theories.” Id. We have consistently applied those governing principles to dete rmine whether particular claims, including state law claims, can be said to arise under section 1338. See, e.g. , Davis v. Brouse McDowell, L.P.A. , 596 F.3d 1355, 1359-62 (Fed. Cir. 2010); Thompson v. Microsoft Corp. , 471 F.3d 1288, 1291-92 (Fed. Cir. 2006); Uroplasty, Inc. v. Advanced Uroscience, Inc. , 239 F.3d 1277, 1279-80 (Fed. Cir. 2001); Hunter Douglas, Inc. v. Harmonic Design, Inc. 153 F.3d 1318, 1325, 1328-29 (Fed. Cir. 1998). The first part of the Christianson test is plainly not sa tisfied in this case. ClearPlay’s second amended complaint, wh ich was before the court when the preliminary injunction order was entered and appealed from, is entirely devoted to state law causes of action. Thus, federal patent la w does not “create[] the cause of action” as to any of the claims in the complaint. 1

1 Nissim asserts that the doctrine of complete preem ption converts ClearPlay’s state-law claims into federal causes of action. See Metropolitan Life Ins. Co. v. Taylor , 481 U.S. 58, 63-67 (1987) (noting t hat in rare instances federal policy is so powerful as to displace entirely any state cause of action and convert it into an action arising under federal law). In Hunter Douglas , however, we held that claims like the ones in this case may implicate conflict preempt ion but do not give rise to complete preemption that2009-1471 7 Applying the second part of the Christianson test is more difficult, as is typically the case. In order for this court to have ju risdiction under that part of the test, at least one of the plaintiff’s claims must necessarily turn on an issue of federal patent law. That is, if there is a theory of liability for each of the asserted claims for which it is not necessary to resolve an issue of federal patent law, the district court lacked jurisdiction under section 1338, and we correspondingly lack jurisdiction under section 1295. This is such a case. ClearPlay’s se cond amended complaint raises six state law claims: (1) tortious interference with a c ontractual relationship between ClearPlay and Target by, inter alia , “falsely stating to Target t hat the ClearPlay DVD players and related filtering technology[] were not co vered by the License Agreement and by threatening to sue Target if Target did not immediately c ease sales of the ClearPlay DVD players”; (2) tortious interference with a contractual relationship between ClearPlay and Best Buy based on similar alleged conduct; (3 ) tortious interference with potentially advantageous business relationships between Cl earPlay and its clients through similar conduct directed at Target, Best Buy, and Samsung, and by “publishing false press releases on [Nissim’s] webs ite stating that ClearPlay was engaged in the sale and distribution of DVD players and/or related f iltering technology which are not covered by a Nissim license”; (4) breach of the license agreement by interfering with ClearPlay’s business operations through Nissim’s comm unications with Target, Best Buy, and

converts the state law claim into a federal claim. 153 F.3d at 1332-37; see also Dow Chem. Co. v. Exxon Corp. , 139 F.3d 1470, 1473-79 (Fed. Cir. 1998) (no complete preemption of a state law cause of acti on alleging intentional interference with contractual relations, even though the acti on implicated the pat ent law issue of inequitable conduct). Nonetheless, to the extent that the prin ciples of federal patent law apply to this case and conflict wit h relevant state tort law, t hose principles would provide the rules of decision as a matter of conf lict preemption, regardless of the forum.2009-1471 8 Samsung; (5) breach of the covenant of good faith and fair dealing through the previously alleged conduct; and (6) violation of Florida’s Deceptive and Unfair Trade Practices Act by entering into the license agreement in bad faith, seeking to disrupt ClearPlay’s relationships with its busine ss partners, and threatening its business partners with patent in fringement suits. While it is true that questions of patent infringement are addressed at various points in the communications t hat are at issue in ClearPlay ’s complaint, and while it is possible that patent law issues could aris e in the course of litigating any one of ClearPlay’s claims, it is equally clear that none of those claims necessarily turns on an issue of patent law. That is, in the case of each asse rted claim, there is at least one theory of relief that would not require the resolution of a patent law issue.

The breach of contract claim and the related claim of breach of the covenant of good faith and fair dealing plainly do not require resolution of a patent law issue. Each

of those claims is directed to Nissim’s c onduct with respect to the parties’ respective obligations under the license agreement. ClearPlay alleges, inter alia , that Nissim has failed to submit disputes under the agreement to a special master, as required by the agreement; that it has not dealt with ClearPlay in good faith with respect to the provisions of the agreement; and that it has failed to comply with the “most favored nations” clause in the agreement by refusing to provide ClearPlay with copies of DVDDevice license agreements that Nissim has entered into with other parties. None of those theories of recovery would require a court to resolve a patent law issue. Similarly, each of the th ree tortious interference claims alleges at least one theory of relief that would not require the court to address any patent law issue. For2009-1471 9 example, in each of those claims ClearPlay asserts that Nissim falsely stated that the ClearPlay DVD players and relat ed filtering technology were not covered by the license agreement. Resolution of that issue would not require the court to address any patent law question; it would require only that the court consider the provisions of the license agreement in light of the DVD players and filters sold by ClearPlay. Nissim argues that its allegedly false assertions that ClearPlay’s products are unlicensed would constitute meaningful threats only if t he products infringed Nissim’s patent. That may be true, but

it does not mean that any issue of infringement must be decided in order to determine whether Nissim has engaged in tortious behavior. ClearPlay could prevail on its claims by showing that the asserti ons that ClearPlay’s products are unlicensed were false, without regard to whether sale of the products, if unlicensed, would infringe Nissim’s patents. If ClearPlay could prove that its devices, even absent a license, did not infringe, that would be another arrow in its quiver, but even assuming the devices would infringe if unlicensed, ClearPlay would st ill have viable theories of liability under its complaint. In particular, if ClearPlay can prove its allegations that Nissim has falsely represented that ClearPlay’s products are unlicensed, thos e representations could be actionable regardless of whether the products fall within the scope of Nissim’s patent. Finally, the claim of violation of Flor ida’s Deceptive and Unfair Trade Practices Act also asserts theories of liability that do not require resolution of a patent law issue. That count of the complaint alleges that Nissim entered into t he license agreement in

bad faith with no intention to co mply with its obligations unde r the agreement; that it has failed to submit any disputes arising from the agreement to the special master, as required by the agreement; and that it has interfered with relationships between2009-1471 10 ClearPlay and its customers by threatening infringement su its against those customers

even “when Nissim was aware of and knew that the ClearPlay DVD play ers sold at Best Buy and at Target were not sold in br each of the parties’ License Agreement.” At oral argument, counsel for Nissim repeatedly sounded the theme that, at bottom, the dispute between the parties in th is case is founded on allegations of patent infringement and that all of the claims in ClearPlay’s complain t stem ultimately from that underlying dispute. While it may be true, in a holistic sense, that the dispute between these parties is patent-based, t he Supreme Court’s decision in Christianson embraces a distinctly non-holistic approach to “arising under” jurisdiction. It is not enough that patent law issues are in the air. Instead, resolution of a patent law issue must be necessary to every theory of relief under at l east one claim in the plaintiff’s complaint.

And that is not so in this case. As ClearPlay points out, this case is quite similar to Christianson in several respects. In Christianson , the plaintiff’s complaint alleged violations of f ederal antitrust laws and a state law regarding tortious inte rference with business relationships. The Supreme Court accepted, for purposes of argument, that a patent law issue was an “essential element” of one theory of liabilit y under each of the plaintiff’s claims. Nonetheless, the Court observed that as to each asserted claim t here was at least one theory of recovery that did not require the resolution of a patent law question. As the Court explained, there were “reasons comp letely unrelated to the provisions and purposes of federal pat ent law why petitioners may or may not be entitled to the relief [they] seek.” Christianson , 486 U.S. at 812. The Court stated that the appearance in the complaint of an alternative, non-patent theory with respect to each claim “compels2009-1471 11 the conclusion” that the claims “ do[] not ‘arise under’ patent law.” Id. at 813. The same analysis applies to each of the state law claims set forth in the complaint in this case. 2 In sum, we have no jurisdiction over this appeal. Because it appears that the district court had jurisdiction over this ca se based on diversity of citizenship, and because an appeal to the Eleventh Circuit would have been proper when the appeal was taken to this court, we conc lude that it is in the interest of justice to transfer the

case to the Eleventh Circuit. See 28 U.S.C. § 1631. Costs are taxed against the appellants.

TRANSFERRED

.

2 Nissim argues briefly that this c ourt has jurisdiction over this appeal because this case has been consolidated in the dist rict court with a pending patent infringement action brought by Nissim, No. 08-CV-80535. In fact, although the two cases have been set for trial together, they have not been formally consolidated. The court’s coordinated scheduling of discovery and trial in the two cases does not convert them into a single action for purposes of this court’s jurisdiction.