Court Opinion

ID: 4439265
Source: CourtListenerOpinion
Date Created: 2019-09-18 16:00:43.505827+00
Date Added: 2024-06-11T14:53:05.674785
License: Public Domain

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
2        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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 (“In-
spired Development”) sued Appellee Inspired Products
Group, LLC, d/b/a KidsEmbrace, LLC (“KidsEmbrace”) for
breach of contract and other related state law claims in fed-
eral district court on the basis of diversity jurisdiction un-
der 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 Elev-
enth Circuit discovered that diversity jurisdiction did not
exist, the district court concluded on remand that it re-
tained 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 De-
velopment. 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.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS          3
GROUP, LLC

    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 com-
pany, 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 roy-
alties. 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.
4        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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 (al-
leging 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 “un-
justifiably and unilaterally” terminating the Agreement).
Count III pled a claim for unjust enrichment in the alter-
native 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 misrep-
resentation, 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 Flor-
ida 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 Develop-
ment 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
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS              5
GROUP, LLC

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 “Ju-
risdictional 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 ju-
risdiction over the relevant claims in the first instance.” Id.
    The Eleventh Circuit’s concerns were well founded. Af-
ter a closer examination of their respective members, the
parties “admitted that they are not diverse.” Limited Re-
mand, 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.).
6        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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 con-
tract action. See Order on Subject Matter Jurisdiction at
9, Inspired Dev. Grp. v. Inspired Prods. Grp., No. 9:16-CV-
80076 (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 Elev-
enth 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. In-
spired 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              7
GROUP, LLC

Comm’n v. Mutual Benefits Corp., 408 F.3d 737, 741 (11th
Cir. 2005) (same). 2
    “‘Federal courts are courts of limited jurisdiction,’ pos-
sessing ‘only that power authorized by Constitution and
statute.’” Gunn v. Minton, 568 U.S. 251, 256 (2013) (quot-
ing 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.” Semi-
conductor 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 ju-
risdiction.” 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 jurisdic-
tion in civil actions “arising under the Constitution, laws,
or treaties of the United States.” 28 U.S.C. § 1331. “Fed-
eral 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-record-
ings. 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 chal-
lenged here.
8        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

     For statutory purposes, a case will “arise under” fed-
eral 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 ra-
ther 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 cate-
gory,” 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 in-
terest in claiming the advantages thought to be inherent in
a federal forum,’ which can be vindicated without disrupt-
ing 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. KidsEm-
brace 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 im-
plied 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 enrich-
ment. Appellee’s Br. 27. KidsEmbrace’s arguments mis-
characterize 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 control-
ling. J.A. 99 ¶ 43; see also Diamond “S” Dev. Corp. v. Mer-
cantile 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             9
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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 free-
standing 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 un-
enforceable—rings hollow. There is simply no support for
KidsEmbrace’s position. 3
    This matter does not fall into the first category of tra-
ditional “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 re-
view of the pleadings in the complaint, we note that the
district court’s decision on summary judgment below is en-
tirely 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 mat-
ters 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 en-
forceable and controlling, Count III was precluded. Id. (cit-
ing 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.
10       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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 bal-
ance 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.” Neu-
roRepair, 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 with-
out 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          11
GROUP, LLC

   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-and-
   superhero-themed children’s safety seats.
   46. Defendant had knowledge of the benefit con-
   ferred 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,
12       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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 be-
cause 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 pay-
ment in 2012 and 2013. Id. ¶ 35.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS           13
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enough that the federal issue be significant to the particu-
lar parties in the immediate suit; that will always be true
when the state claim ‘necessarily raise[s]’ a disputed fed-
eral 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 un-
dermine “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 fac-
tors 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 “sub-
stantial 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 nu-
       merous 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 “sub-
stantial” issue of federal patent law.
14       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

                             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 “numer-
ous 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 Neu-
roRepair. There, appellees argued that if a state court

     5  The record below mirrors our conclusion. As dis-
cussed, the district court disposed of Inspired Develop-
ment’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 al-
ready 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 KidsEm-
brace and a condition precedent was not satisfied. Id. at
*5–8 (applying Florida law).
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS            15
GROUP, LLC

adjudicated the case, “a third-party infringer could conceiv-
ably 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 determi-
nation of invalidity, it is self-evident the state court deci-
sion 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 al-
most exclusively cites to our decision in Jang v. Boston Sci-
entific 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 state-
federal conflict here. The analysis in Jang took place en-
tirely between federal courts. In Jang, diversity jurisdic-
tion 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 Fed-
eral Circuit had appellate jurisdiction. Id.
    That tension between federal courts of appeal con-
trolled 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 un-
der” jurisdiction under § 1295(a)(1).”). Thus, we consider
Jang here.
16        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                               GROUP, LLC

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 “sub-
stantial” enough to confer jurisdiction on the Federal Cir-
cuit over the regional circuit, the panel reasoned:
     Permitting regional circuits to adjudicate ques-
     tions of patent validity, for example, could result in
     inconsistent judgments between a regional circuit
     and the Federal Circuit, resulting in serious uncer-
     tainty for parties facing similar infringement
     charges before district courts within that regional
     circuit. Maintaining Federal Circuit jurisdiction
     over such contractual disputes to avoid such con-
     flicting rulings is important to “the federal system
     as a whole” and not merely “to the particular par-
     ties 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” con-
cerns for the federal system. Id.
    The risk of such conflict from state courts here is re-
mote. 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 In-
spired Development’s contract claims. Appellee’s Br. 21.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS            17
GROUP, LLC

KidsEmbrace “has not identified any case finding . . . pre-
clusive effect based on a state court decision” regarding in-
fringement 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 juris-
diction.” Id. (quoting Empire Healthchoice Assurance, Inc.
v. McVeigh, 547 U.S. 677, 701 (2006)).
     KidsEmbrace also argues that Gunn is limited to mal-
practice claims, which involve only “backward-looking” or
“hypothetical” questions of how patent infringement
should have been litigated differently by counsel. Appel-
lee’s Br. 37–38. In KidsEmbrace’s view, a state court’s de-
cision on invalidity outside the context of such backward-
looking claims will no longer be hypothetical. In turn, Kid-
sEmbrace reads Gunn to say that these decisions will con-
flict 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 re-
quired 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 infringe-
ment. The benefit conferred was that KidsEmbrace was
“allow[ed] . . . to use” the patents for past sales of KidsEm-
brace 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 prod-
ucts 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
18       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

federal district courts . . . . In resolving the nonhypothet-
ical 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 ques-
tion 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 ac-
tual 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 in-
terests.” Id. Certainly, Gunn leaves open the possibility
that state court actions with embedded patent issues can
raise issues of substantial importance to the federal sys-
tem. 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 re-
quirement. See Gunn, 568 U.S. at 258 (“[W]e are comfort-
able concluding that state legal malpractice claims based
on underlying patent matters will rarely, if ever, arise un-
der federal patent law . . . .”). In doing so, the Supreme
Court underscored the importance of the “substantial” is-
sue 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.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS             19
GROUP, LLC

The “resolution of a patent issue” may be “vitally im-
portant” to the particular parties here. Id. at 263. “But
something more, demonstrating that the question is signif-
icant 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 “substan-
tial” issue.
    The other precedent raised by the parties—and dis-
cussed 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. Kar-
avan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999).
    For example, Forrester simply confirms that purely
“backward-looking” or “hypothetical” patent issues are in-
substantial. It does not hold that all future-looking or non-
hypothetical 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 allega-
tions 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 is-
sue, the allegations involved fundamentally different
claims. Forrester concerned claims for business disparage-
ment (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
20       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

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’ pa-
tents.” 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 Su-
preme 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 “con-
flict.” 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 infringe-
ment question could conclude that the accusation of in-
fringement 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 (empha-
sis 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 sug-
gested 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 quasi-
contract 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 pub-
licly assert the full scope of its patent as discussed in For-
rester 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.
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS           21
GROUP, LLC

    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 De-
velopment—or other litigants—could replicate this claim
and sue any other competitor or third-party is unpersua-
sive. 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 relation-
ship), this might raise greater concerns for the federal sys-
tem. 8
    In sum, a state court’s decision on Inspired Develop-
ment’s alternative quasi-contract claim based on its busi-
ness 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 enrich-
ment” 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.
22       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

                              c
    Turning to the third NeuroRepair factor, here the gov-
ernment has no direct interest in this contract dispute be-
tween 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 “substan-
tial” federal issue. Though these factors are not exhaus-
tive, KidsEmbrace offers no other meaningful reason why
the issue in this case is substantial. Given that Gunn’s
substantiality factor is not satisfied, Inspired Develop-
ment’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 jurisdic-
tion would upset the “balance of federal and state judicial
responsibilities.” Grable, 545 U.S. at 314. Under these cir-
cumstances, it would.
    As discussed, KidsEmbrace invites us to essentially ig-
nore Gunn’s clear requirements and read Jang to say that
any breach of contract claim or related equitable claim in-
volving 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 in-
fringement or invalidity question, federal question jurisdic-
tion 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
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS           23
GROUP, LLC

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 be-
cause 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 not-
withstanding 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 juris-
diction are unavailing. First, KidsEmbrace argues that
Counts I and II regarding breach of contract might also
confer jurisdiction. Second, KidsEmbrace argues its volun-
tarily dismissed state law counterclaims also create “aris-
ing 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.
24       INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                              GROUP, LLC

require resolution of basic patent issues. See, e.g., Appel-
lee’s Br. 36–41. But once again, there is no indication these
claims rise to the level of substantial federal issues as re-
quired 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 “royal-
ties on invalid and otherwise valueless patents.” J.A. 141–
43. In KidsEmbrace’s view, these counterclaims raise sub-
stantial 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 require-
ments of the Gunn test. In particular, nothing in the alle-
gations 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
INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS            25
GROUP, LLC

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 indica-
tion that the patentee would be enjoined from patent rights
otherwise impacted in future suits in federal court unre-
lated to the contracts here. Sweeping these state law con-
tract counterclaims as specifically pled here into federal
court would upset the state-federal balance.
     Second, KidsEmbrace voluntarily dismissed its coun-
terclaims. “We have repeatedly held that an amendment
to the complaint that dismisses the patent law claims with-
out 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 with-
out prejudice of his inventorship claims, the Second
Amended Complaint did not contain any claims which de-
pended ‘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 amend-
ment 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 pre-
sent suit does not ‘arise under’ the patent laws for jurisdic-
tional purposes.”).
   We have considered KidsEmbrace’s remaining argu-
ments and find them unpersuasive.
26        INSPIRED DEVELOPMENT GROUP v. INSPIRED PRODUCTS
                                               GROUP, LLC

                        CONCLUSION
    Because the district court lacked subject matter juris-
diction, we vacate the district court’s judgment and remand
for dismissal.
              VACATED AND REMANDED
                           COSTS
     The parties shall bear their own costs.