State of Vermont v. Mphj Technology Investments , 803 F.3d 635 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
STATE OF VERMONT,
Plaintiff-Appellee
v.
MPHJ TECHNOLOGY INVESTMENTS, LLC,
Defendant-Appellant
______________________
2015-1310
______________________
Appeal from the United States District Court for the
District of Vermont in No. 2:14-cv-00192-wks, Judge
William K. Sessions III.
______________________
Decided: September 28, 2015
______________________
BRIDGET ASAY, Vermont Office of the Attorney Gen-
eral, Montpelier, VT, argued for plaintiff-appellee. Also
represented by BENJAMIN D. BATTLES, NAOMI SHEFFIELD.
WILLIAM BRYAN FARNEY, Farney Daniels PC,
Georgetown, TX, argued for defendant-appellant. Also
represented by STEVEN R. DANIELS; DAVID P. SWENSON,
Minneapolis, MN.
______________________
Before PROST, Chief Judge, NEWMAN, and O’MALLEY,
Circuit Judges.
2 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
O’MALLEY, Circuit Judge.
On May 8, 2013, Plaintiff-Appellee State of Vermont
(“Vermont” or “the State”) filed a state court action
against Defendant-Appellant MPHJ Technology Invest-
ments LLC (“MPHJ”) alleging violations of the Vermont
Consumer Protection Act, 9 V.S.A. §§ 2451 et seq.
(“VCPA”). The complaint alleged that letters mailed to
Vermont businesses informing them that they may be
infringing certain patents were deceptive and otherwise
violative of the VCPA. MPHJ removed the case twice to
the United States District Court for the District of Ver-
mont, once under the State’s original complaint (“original
complaint”) and once under the State’s amended com-
plaint (“amended complaint”). The district court remand-
ed the case to state court both times. Before this court is
MPHJ’s appeal of the district court’s second remand
order. Because removal under § 1442(a)(2) is not author-
ized in the circumstances at issue here, and MPHJ does
not appeal the district court’s other removal rulings in the
second remand order, we affirm.
I. BACKGROUND
MPHJ is a non-practicing entity incorporated in Del-
aware that acts through a variety of shell corporations
incorporated in many states. Beginning in September
2012, businesses in Vermont began to receive a series of
letters from one or more of the MPHJ shell corporations.
These letters alleged potential infringement of MPHJ’s
patents and requested that the recipients either purchase
licenses or confirm that they were not infringing the
patents. Although the content and subject matter of
MPHJ’s patents are irrelevant to this appeal, they gener-
ally cover systems in which computers are networked and
connected to a scanner, such that scanned documents are
sent directly to employee email addresses as PDF attach-
ments.
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 3
MPHJ’s letters to each Vermont business followed a
similar format and involved the same sequence of events.
The first letter a business would receive stated, “We have
identified your company as one that appears to be using
the patented technology,” and gave a list of questions that
the company needs to investigate regarding its computer
server to determine if it is infringing. Exhibit A to Con-
sumer Protection Complaint at 1, Vermont v. MPHJ Tech.
Invs., LLC, No. 2:14-cv-00192, 2015 U.S. Dist. LEXIS
3309 (D. Vt. Jan. 9, 2015), ECF No. 1. The letter ex-
plained that these questions were based on “[o]ur re-
search, which includes review of several marketplace
trends and surveys,” and that “you should enter into a
license agreement with us at this time.” Id. at 3-4. It
further stated that “we have had a positive response from
the business community to our licensing program.” Id.
The second and third letters were sent from the law
firm of Farney Daniels PC, MPHJ’s counsel. They would
routinely arrive a few weeks after the first letter and
second letter, respectively, if MPHJ did not hear back
from the recipient. Both stated that the recipient’s non-
response to the previous letters was taken as an admis-
sion of infringement. And, both implied that litigation
would commence if the recipient did not enter into a
license agreement. See Exhibit B to Consumer Protection
Compl. at 1, MPHJ, 2015 U.S. Dist. LEXIS 3309 (No.
2:14-cv-00192), ECF No. 1.
In response to complaints from the Vermont business
community about these letters, the State filed its original
complaint against MPHJ on May 8, 2013 in state court.
The original complaint asserted a single cause of action
under the Vermont Consumer Protection Act, 9 V.S.A.
§ 2453(a). Under this cause of action, the complaint listed
two bases for liability: “unfair trade practices” and “decep-
tive trade practices.” Consumer Protection Compl. at 8,
MPHJ, 2015 U.S. Dist. LEXIS 3309 (No. 2:14-cv-00192),
ECF No. 1. The State alleged that MPHJ engaged in
4 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
“unfair trade practices” by, inter alia, threating litigation
even though litigation was unlikely, targeting small
businesses, placing the burden on the recipient to do the
investigation, and using shell corporations to minimize
liability. Id. at 8-9. The State alleged that MPHJ en-
gaged in “deceptive trade practices” by, inter alia, stating
in its letters that it would bring suit immediately absent a
license, the licensing program was successful with many
businesses taking part, and the average license was
$1000/employee. Id. at 9-10. The State sought various
forms of relief, including two permanent injunctions:
(1) A permanent injunction prohibiting Defendant
from engaging in any business activity in, into or
from Vermont that violates Vermont law.
(2) A permanent injunction requiring Defendant
to stop threatening Vermont businesses with pa-
tent-infringement lawsuits.
Id.
A. First Removal
MPHJ timely filed a motion to remove the case to the
United States District Court for the District of Vermont
on June 7, 2013 (“the first removal”). MPHJ claimed that
the court had diversity jurisdiction and that the court had
federal question jurisdiction because the validity, in-
fringement, and enforcement of its patents were at issue.
The State thereafter moved to remand, arguing that its
complaint sounded solely in the VCPA, a state law.
MPHJ then filed a motion to dismiss the case for lack of
personal jurisdiction and a motion for sanctions under
Federal Rules of Civil Procedure (“FRCP”) 11. The dis-
trict court held a hearing on these pending motions on
February 25, 2014, and expressed concern that the State’s
second request for an injunction could prevent MPHJ
from sending legitimate assertions regarding patent
infringement to Vermont businesses. On March 7, 2014,
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 5
the State filed a motion to clarify or amend its complaint
to delete the second injunction request (“A permanent
injunction requiring Defendant to stop threatening Ver-
mont businesses with patent-infringement lawsuits”).
On April 14, 2014, the district court issued an order
remanding the case to state court, without deciding the
other pending motions, including the State’s motion to
clarify or amend the complaint. Vermont v. MPHJ Tech.
Invs., LLC, No. 2:13-cv-170, 2014 U.S. Dist. LEXIS 52132,
at *2 (D. Vt. Apr. 14, 2014). The court concluded that it
did not have subject matter jurisdiction. The court stated
that, under the test set out in Gunn v. Minton, 133 S. Ct.
1059, 1065 (2013), federal patent law issues were not
“necessarily raised” on the face of the State’s complaint
because the claims in the original complaint did not
challenge the validity of the patents nor require any
determination of actual infringement. MPHJ, 2014 U.S.
Dist. LEXIS 52132, at *17. The court also concluded that
the original complaint did not raise a “substantial” federal
question under Gunn, as any possible federal question
would at best involve “application of existing patent law
to the facts of this case,” with no wide-reaching determi-
nations about patent law itself. Id. at *27. The court also
determined that there was no diversity jurisdiction. Id. at
*29.
On May 13, 2014, MPHJ filed a notice of appeal of the
remand decision to this court and petitioned this court for
a writ of mandamus, claiming that the district court
abused its discretion. Upon return to the state court, the
State filed its amended complaint on May 7, 2014. Dur-
ing a subsequent motions hearing, the state court indicat-
ed that, because MPHJ had not yet answered, the State
was entitled to amend its complaint as a matter of right
under state court rules. Exhibit 1 of Vermont’s Mot. to
Expedite Proceedings at 37-38, MPHJ, 2015 U.S. Dist.
LEXIS 3309 (No. 2:14-cv-00192), ECF No. 3. Despite
having acknowledged that, however, the state court
6 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
ultimately granted the State’s motion to amend at the
same time it denied MPHJ’s motion to dismiss for lack of
personal jurisdiction. Exhibit 3-12 to MPHJ’s Notice of
Removal at 2, 6, MPHJ, 2015 U.S. Dist. LEXIS 3309 (No.
2:14-cv-00192), ECF No. 1. On August 11, 2014, this
court held that it did not have jurisdiction over either the
appeal or the mandamus petition by virtue of 28 U.S.C.
§ 1447(d). Vermont v. MPHJ Tech. Invs., LLC, 763 F.3d
1350, 1352 (Fed. Cir. 2014). Section 1447(d) provides that
a remand order to a state court “is not reviewable on
appeal or otherwise,” with a couple of specific, statutorily-
provided exceptions. Id. at 1353. The Supreme Court has
concluded that this prohibition applies only to remands
based on 28 U.S.C. § 1447(c), which includes the district
court’s first remand order. Id.B. Second Removal
MPHJ filed an answer and counterclaims to the
State’s amended complaint on September 9, 2014. MPHJ
claimed that the State, by requesting an injunction that
required MPHJ’s compliance with “Vermont law,” sought
to compel MPHJ to comply with the Vermont Bad Faith
Assertions of Patent Infringement Act (“BFAPIA”), 9
V.S.A. §§ 4195–99. The BFAPIA was passed on May 22,
2013 and became effective on July 1, 2013, after the State
filed the original complaint and while this case was
pending in federal district court after the first removal.
Its key provision, 9 V.S.A. § 4197, defines the factors that
a court can consider in determining if a person made a
“bad faith assertion of patent infringement,” including,
among others, the contents of the demand letter, the
extent of any pre-assertion investigation, demands for
payment of a license fee in an unreasonably short time,
and deceptive assertions of infringement.
In its answer, MPHJ asserted that the BFAPIA was
preempted by federal law because it permitted the State
to bar MPHJ’s infringement assertions without a showing
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 7
of objective baselessness, contrary to our precedent in
Globetrotter Software, Inc. v. Elan Computer Group, Inc.,
362 F.3d 1367 (Fed. Cir. 2004). MPHJ also asserted six
counterclaims. It sought a declaratory judgment that the
BFAPIA is invalid or preempted by the First, Fifth, and
Fourteenth Amendments (counterclaim 1), or by Title 35
of the U.S. Code, the Supremacy Clause, and the Patent
Clause (counterclaim 2). MPHJ also sought a declaratory
judgment that its patents were valid (counterclaim 3) and
infringed (counterclaim 4), or at least that it was not
objectively baseless for a reasonable person to believe so.
Finally, MPHJ sought a declaratory judgment that the
VCPA is invalid or preempted by the First, Fifth, and
Fourteenth Amendments, the Supremacy and Patent
Clauses, and Title 35 of the U.S. Code (counterclaim 5)
and that it did not violate the VCPA (counterclaim 6).
Based on these counterclaims, MPHJ sought relief from
both the BFAPIA and the VCPA as applied to it.
On the same day that MPHJ filed its answer and
counterclaims, it filed a second notice of removal (“the
second removal”) to federal court under 28 U.S.C.
§ 1442(a)(2) (“federal officer removal statute”), 28 U.S.C.
§ 1443 (“civil rights removal statute”), and 28 U.S.C.
§ 1454 (“patent removal statute”). MPHJ claimed that
the amended complaint “now seeks an injunction requir-
ing MPHJ to comply with the [BFAPIA],” and that en-
forced compliance with the BFAPIA affects the validity of
35 U.S.C. §§ 261, 271, 284, 285 and 287, as well as the
First, Fifth, and Fourteenth Amendments, the Supremacy
Clause, and the Patent Clause of the Constitution.
MPHJ’s Notice of Removal at 2, 4, MPHJ, 2015 U.S. Dist.
LEXIS 3309 (No. 2:14-cv-00192), ECF No. 1. MPHJ
claimed that its notice of removal was timely because it
was filed within thirty days of the August 28, 2014 state
court order granting the motion to amend the complaint.
Id. at 4. The State, in response, filed a motion to remand,
insisting that the BFAPIA was not part of its amended
8 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
complaint, the validity of MPHJ’s patents was not at
issue, and the second removal was untimely.
The district court issued an opinion on the second no-
tice of removal on January 12, 2015. The court found that
the State’s amended complaint never “revived” MPHJ’s
right to remove in the first place. MPHJ, 2015 U.S. Dist.
LEXIS 3309, at *12. According to the court, the State’s
request for injunctive relief, “read in the context of the
State’s pleading,” made clear that the State did not seek
relief under the BFAPIA. Id. at *13. The district court
further found that, even if the passage of the BFAPIA by
the Vermont legislature provided a new opportunity for
removal, the second removal was untimely. Vermont
enacted the BFAPIA prior to the initial remand decision,
and MPHJ cited the Act in its opposition to the first
motion to remand, filed on September 18, 2013. The
district court found, therefore, that MPHJ could have
included the BFAPIA as a ground for its first removal and
could have moved to amend to add counterclaims at that
time. The court concluded that untimeliness under 28
U.S.C. § 1446(b) can be based on evidence of an exchange
of documents in the course of litigation that evidences a
“party’s knowledge of the grounds for removal.” Id. at *14.
The district court further concluded that the removal,
even if timely, failed to meet the requirements of 28
U.S.C. § 1442(a)(2), the federal officer removal statute.
The court was “skeptical of Section 1442(a)(2)’s applica-
tion to a patent case” based on the historical purpose of
the statute. Id. at *18. In any event, the court held that
removal could not be based on § 1442(a)(2) because
MPHJ’s answer and counterclaims did not “call into
question the validity of any federal law,” as required by
that section. Id. The district court found that MPHJ’s
assertion that the BFAPIA frustrates interests protected
by federal statutes and the Constitution was irrelevant in
light of its finding that the amended complaint did not
require compliance with the BFAPIA. Finally, the court
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 9
also declined to allow removal under either 28 U.S.C.
§ 1443 or 28 U.S.C. § 1454. MPHJ filed a timely notice of
appeal to this court, challenging only the district court’s
timeliness and 28 U.S.C. § 1442 analyses. Remands
under § 1442 and § 1443 are exceptions to the bar of
§ 1447(d). MPHJ has only appealed the district court’s
decision under § 1442, and not § 1443, however.
II. JURISDICTION
The parties dispute our jurisdiction over this appeal.
The State asserts that we have none and asks that we
dismiss the appeal. MPHJ argues that we do have juris-
diction over this appeal and correctly points out that, even
if we disagreed with that contention, the appropriate
remedy would be a transfer to the Second Circuit, not
dismissal. 28 U.S.C. § 1295 defines the scope of this
court’s jurisdiction. Specifically, it provides that this
court has jurisdiction “in any civil action arising under, or
in any civil action in which a party has asserted a com-
pulsory counterclaim arising under, any Act of Congress
relating to patents.” 28 U.S.C. § 1295(a)(1). Because we
find jurisdiction on the basis of at least one of MPHJ’s
counterclaims, counterclaim 5, we have jurisdiction over
this appeal. We, therefore, do not need to assess whether
this court could exercise jurisdiction on the basis of
MPHJ’s other counterclaims or Vermont’s claim.
Counterclaim 5 seeks a declaratory judgment that the
VCPA is invalid or preempted as applied under the First,
Fifth, and Fourteenth Amendments, the Supremacy and
Patent Clauses of the Constitution, and Title 35 of the
U.S. Code. Ultimately, MPHJ seeks to prevent the State
from relying on the VCPA in its action against it. 1
1 The State is correct that MPHJ did not argue
counterclaim 5 as the basis of this court’s jurisdiction.
Appellee Br. 27. See Appellant Br. 22-23; Appellant Reply
10 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
“[A] plaintiff who seeks injunctive relief from state
regulation, on the ground that such regulation is pre-
empted by a federal statute which, by virtue of the Su-
premacy Clause of the Constitution must prevail, thus
presents a federal question over which the federal courts
have jurisdiction under 28 U.S.C. § 1331 to resolve.”
Lawrence Cty. v. Lead-Deadwood Sch. Dist. No. 40-1, 469
U.S. 256, 259 n.6 (1985) (quoting Shaw v. Delta Air Lines
Inc., 463 U.S. 85, 96 n.14 (1983)). Thus, while the Su-
premacy Clause does not itself create a cause of action for
its violation, Armstrong v. Exceptional Child Ctr., Inc.,
135 S. Ct. 1378, 1384 (2015), a claim that a state law
contravenes a federal statute remains “basically constitu-
tional in nature” because “the application of preempted
state law is . . . unconstitutional.” Id. at 1391 (Sotomayor,
J., dissenting). Based on these principles, we have con-
cluded that this court has jurisdiction over a complaint
alleging that the state law is preempted by the patent
laws. Biotechnology Indus. Org. v. Dist. of Columbia, 496
Br. 4-6. According to the State, this failure “defeats any
claim of jurisdiction based on [that] counterclaim[ ].”
Appellee Br. 27. The case the State cites in support of
this assertion, Palmer v. Barram, 184 F.3d 1373, 1377
(Fed. Cir. 1999), however, does not stand for the proposi-
tion that this court can relinquish jurisdiction where it
clearly possesses it based on the factual allegations and
causes of action claimed in the case. We must always
fulfill our obligation to satisfy ourselves of our jurisdiction
over any appeal. See Bender v. Williamsport Area Sch.
Dist., 475 U.S. 534, 541 (1986).
The State also argues that we are bound by the mo-
tions panel determination that this court lacked jurisdic-
tion to consider the first remand order. Appellee Br. 24.
That argument merits scant attention. The order relating
to the appeal of the first remand was predicated on
§ 1447(d), which is not at issue here.
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 11
F.3d 1362, 1368 (Fed. Cir. 2007) (deciding under pre-
America Invents Act (“AIA”) version of § 1295(a)(1) that,
where a complaint seeks to enjoin enforcement of state
law on grounds that it is preempted by the patent laws,
this court has jurisdiction) (citing Shaw, 463 U.S. at 96
n.14).
Before the passage of the AIA, it was also well estab-
lished that only complaints filed by one seeking to prevent
enforcement of state law would give rise to federal juris-
diction under either 28 U.S.C. § 1331 or § 1338, or to this
court’s appellate jurisdiction under 28 U.S.C. § 1295(a)(1).
See Vaden v. Discover Bank, 556 U.S. 49, 60 (2009) (“Fed-
eral jurisdiction cannot be predicated on an actual or
anticipated defense . . . Nor can federal jurisdiction rest
upon an actual or anticipated counterclaim.”); Holmes
Group, Inc. v. Vornado Air Circulation Sys., 535 U.S. 826,
831 (2002) (“a counterclaim—which appears as part of the
defendant's answer, not as part of the plaintiff’s com-
plaint—cannot serve as the basis for ‘arising under’
jurisdiction” under § 1295(a)(1)).
The AIA amended 28 U.S.C. §§ 1338 and 1295(a)(1)
and added 28 U.S.C. § 1454, however. Leahy-Smith
America Invents Act, Pub. L. No. 112-29, 125 Stat. 284(2011). § 1338(a) originally read:
The district courts shall have original jurisdiction
of any civil action arising under any Act of Con-
gress relating to patents, plant variety protection,
copyrights and trademarks. Such jurisdiction
shall be exclusive of the courts of the states in pa-
tent . . . cases.
and now, post-AIA, reads:
The district courts shall have original jurisdiction
of any civil action arising under any Act of Con-
gress relating to patents, plant variety protection,
copyrights and trademarks. No State court shall
12 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
have jurisdiction over any claim for relief arising
under any Act of Congress relating to patents . . . .
§ 1295(a)(1) was changed from:
(a) The United States Court of Appeals for the
Federal Circuit shall have exclusive jurisdiction—
(1) of an appeal from a final decision of a
district court of the United States . . . if
the jurisdiction of that court was based, in
whole or in part, on section 1338 of this ti-
tle . . . ;
to:
(a) The United States Court of Appeals for the
Federal Circuit shall have exclusive jurisdiction—
(1) of an appeal from a final decision of a
district court of the United States . . . in
any civil action arising under, or in any
civil action in which a party has asserted a
compulsory counterclaim arising under,
any Act of Congress relating to pa-
tents . . . .
The AIA also added § 1454, a new removal provision,
which reads:
(a) In general. A civil action in which any party
asserts a claim for relief arising under any Act of
Congress relating to patents . . . may be removed
to [federal] district court . . . .
These changes are commonly referred to as the
“Holmes Group fix.” See, e.g., MPHJ, 2015 U.S. Dist.
LEXIS 3309 (citing Andrews v. Daughtry, 994 F. Supp. 2d
728, 731-32 (M.D.N.C. 2014) (citing Joe Matal, A Guide to
the Legislative History of the America Invents Act: Part II
of II, 21 FED. CIR. B.J. 539, 539 (2012))). See generally
Paul M. Schoenhard, Gaps, Conflicts and Ambiguities in
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 13
the Federal Courts’ Post-AIA Patent Jurisdiction, INTELL.
PROP. & TECH. L.J., July 2013, at 20-23. In other words,
they were intended to provide federal courts, and this
court specifically, with a broader range of jurisdiction;
that is, with jurisdiction over claims arising under the
patent laws even when asserted in counterclaims, rather
than in an original complaint. At the same time, the
changes to § 1338 expressly remove such claims from the
ambit of state court jurisdiction. Taken together, these
provisions mean that seeking relief from application of
state law on preemption grounds in a compulsory coun-
terclaim will vest jurisdiction in this court as long as it
“arises under” the patent laws.
Turning to counterclaim 5, we first assess whether it
is a compulsory counterclaim. Under Second Circuit law:
Whether a counterclaim is compulsory or permis-
sive turns on whether the counterclaim arises out
of the transaction or occurrence that is the subject
matter of the opposing party’s claim, and this Cir-
cuit has long considered this standard met when
there is a logical relationship between the coun-
terclaim and the main claim.
Jones v. Ford Motor Credit Co., 358 F.3d 205, 209 (2d Cir.
2004) (internal citations and quotation marks omitted).
The “logical relationship” test does not require “an abso-
lute identity of factual backgrounds,” but the “essential
facts of the claims [must be] so logically connected that
considerations of judicial economy and fairness dictate
that all the issues be resolved in one lawsuit.” Id. (inter-
nal citations and quotation marks omitted); see also id. at
210 (“The essential facts for proving the counterclaims
and the ECOA claim are not so closely related that resolv-
14 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
ing both sets of issues in one lawsuit would yield judicial
efficiency.”). 2
Counterclaim 5 meets the requirements of the “logical
relationship” test. The State’s claims are premised on the
alleged unlawful nature of MPHJ’s patent infringement
inquiry letters under the VCPA. According to the State’s
amended complaint, the essential facts involved in prov-
ing whether MPHJ violated the VCPA include whether
MPHJ in fact “[s]tat[ed] that litigation would be brought
against the recipients, when Defendant was neither
prepared nor likely to bring litigation,” “[t]arget[ed] small
businesses that were unlikely to have the resources to
fight patent-litigation, or even pay patent counsel,” and
“[s]en[t] letters that threatened patent-infringement
litigation with no independent evidence that the recipi-
ents were infringing its patents,” among a series of other
allegations. First Amended Consumer Protection Compl.
at 8, MPHJ, 2015 U.S. Dist. LEXIS 3309 (No. 2:14-cv-
00192), ECF No. 7. In counterclaim 5, MPHJ asserts that
the VCPA would be preempted on the basis of the same
essential facts. For example, MPHJ asserts that, “[u]nder
at least some circumstances, federal law permits a patent
owner to threaten suit even if the patent owner does not
2 Because the concept of what constitutes a “com-
pulsory counterclaim” now directly impacts our jurisdic-
tion, it is governed by Federal Circuit law, rather than by
that of the regional circuits. Arlington Indus. v. Bridge-
port Fittings, Inc., 759 F.3d 1333, 1336 (Fed. Cir. 2014)
(“[w]e apply our own law, rather than regional circuit law,
to questions relating to our own appellate jurisdiction”)
(quoting Int'l Elec. Tech. Corp. v. Hughes Aircraft Co.,
476 F.3d 1329, 1330 (Fed. Cir. 2007)). Because this court
has not yet adopted a body of law governing what consti-
tutes a compulsory counterclaim, we turn to Second
Circuit law for guidance in this case.
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 15
intend to bring suit.” MPHJ’s Answer and Counterclaims
at 26, MPHJ, 2015 U.S. Dist. LEXIS 3309 (No. 2:14-cv-
00192), ECF No. 20. MPHJ further contends that,
“[u]nder federal law, a patent owner may communicate an
intention to bring suit for infringement without having
conducted, or completed, such investigation as is neces-
sary to satisfy FED. R. CIV. P. 11.” Id. at 27. MPHJ also
asserts that “Counterclaim Defendants have no basis to
allege that 35 U.S.C. § 271 exempts from liability for
infringement those companies that are smaller than a
certain size . . . .” Id. The same underlying facts are
involved in both the State’s claim and counterclaim 5.
The acts that the State alleges entitle it to relief under
the VCPA are the same acts that MPHJ claims are pro-
tected under federal law. We find, therefore, that coun-
terclaim 5 is a compulsory counterclaim.
Second, we must determine whether counterclaim 5
“aris[es] under” the federal patent laws, as 28 U.S.C.
§ 1295(a)(1) requires. We conclude that it does. As noted,
we concluded in BIO that a preemption claim does “arise
under” the patent laws. BIO, 496 F.3d at 1368. Since
BIO, however, the Supreme Court has provided additional
guidance on whether and when an action arises under the
patent laws. Gunn, 133 S. Ct. 1059 (2013). We, thus,
consider anew whether a claim such as that in counter-
claim 5 arises under the patents laws for purposes of
§ 1295(a)(1).
An action “aris[es] under” federal law: (1) where “fed-
eral law creates the cause of action asserted,” and (2) in a
“special and small category of cases” in which arising
under jurisdiction still lies.” Gunn, 133 S. Ct. at 1064.
For this second category of cases, “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 Con-
gress.” Id. at 1065. “Arising under” is interpreted identi-
16 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
cally and interchangeably under 28 U.S.C. § 1331 and 28
U.S.C. § 1338(a). Id. at 1064. This court recently clari-
fied that the interpretation of § 1338(a) necessarily impli-
cates interpretation of § 1295(a)(1), and vice versa.
Madstad Eng’g, Inc. v. U.S. Patent & Trademark Office,
756 F.3d 1366, 1370-71 (Fed. Cir. 2014) (“Through 28
U.S.C. § 1338(a), Congress placed the resolution of actions
arising under an Act of Congress relating to patents
exclusively within the federal courts. Through 28 U.S.C. §
1295(a)(1), Congress placed appeals from such matters
exclusively within the province of the Federal Circuit”).
This court has since applied the Gunn test to assess
“arising under” jurisdiction under § 1295(a)(1). See Jang
v. Boston Sci. Grp., 767 F.3d 1334, 1337–38 (Fed. Cir.
2014) (state law contract dispute regarding royalties
under patent license met Gunn test because analysis
required determination of infringement and validity of
underlying patents); Krauser v. BioHorizons, Inc., 753
F.3d 1263, 1268–70 (Fed. Cir. 2014) (state law claim for
ownership over a dental implant system did not meet
Gunn test).
Because counterclaim 5 is not a cause of action creat-
ed by the federal patent laws, we ask whether it falls into
the “special and small category of cases” in Gunn. Gunn,
133 S. Ct. at 1064. Resolution of a federal question is
clearly “necessary” to MPHJ’s counterclaim, as proving
preemption of the VCPA by federal patent laws would
necessarily require proving that the patent laws preclude
enforcement of the VCPA as applied. Thus, MPHJ’s right
to relief on the counterclaim depends on an issue of feder-
al law. The federal issue is also “actually disputed.”
Indeed, the federal issue here “is the central point of
dispute.” Id. at 1065.
Under Gunn, the “substantiality” inquiry looks to “the
importance of the issue to the federal system as a whole”
and not the significance “to the particular parties in the
immediate suit.” Id. at 1066 (citing Grable & Sons Metal
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 17
Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005)).
In other words, we focus on the broader significance of the
federal issue and ask ourselves whether allowing state
courts to resolve these cases undermines “the develop-
ment of a uniform body of [patent] law.” Id. at 1066-67
(quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141, 162 (1989)). Counterclaim 5 also passes
this test. Whether federal patent laws preempt or invali-
date the VCPA as applied has considerable significance
beyond the current case. A hypothetical finding that the
VCPA is not invalid or preempted in state court would
affect the development of a uniform body of patent law, as
such a decision would be binding in Vermont, but would
not be in other states with similar laws or in federal
court. The facts of this case are fundamentally unlike
Gunn, in which the Court recognized that the federal
issue was a “backward-looking . . . legal malpractice
claim” that would be unlikely to have any “preclusive
effect” on future patent litigation and was, therefore, not
substantial. Id. at 1067. As an “as applied” challenge,
counterclaim 5 depends to a certain extent on the specific
facts of this case, but the resolution of this case would
assist in delineating the metes and bounds of patent law
and clarifying the rights and privileges afforded to pa-
tentees in pursuing patent infringement claims.
Finally, we find that the last prong of the Gunn test,
“capable of resolution in federal court without disrupting
the federal-state balance,” is satisfied. Gunn, 133 S. Ct.
at 1065; see Grable, 545 U.S. at 310. Allowing a state
court to resolve a patent law preemption question risks
“inconsistent judgments between state and federal
courts.” Jang, 767 F.3d at 1337 (quoting
Forrester Envtl. Servs. v. Wheelabrator Techs., Inc., 715
F.3d 1329, 1334 (Fed. Cir. 2013)). We cannot permit such
a result when Congress has vested exclusive appellate
jurisdiction over patent cases in this court. We conclude
18 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
that, because the requirements of § 1295(a)(1) are satis-
fied, we have jurisdiction over this appeal.
III. DISCUSSION
A. Standard of Review
When analyzing “a procedural issue not unique to pa-
tent law,” we apply the law of the applicable regional
circuit, here the Second Circuit. Versata Software, Inc. v.
Callidus Software, Inc., 780 F.3d 1134, 1136 (Fed Cir.
2015). The Second Circuit reviews a district court’s
removal determination, and a district court’s analysis of
subject matter jurisdiction, de novo. Isaacson v. Dow
Chem. Co., 517 F.3d 129, 135 (2d Cir. 2008). Where, as
here, the defendant asserts federal jurisdiction in a re-
moval petition, the defendant has the burden of establish-
ing that removal is proper. Veneruso v. Mount Vernon
Neighborhood Health Ctr., 933 F. Supp. 2d 613, 618
(S.D.N.Y. 2013) (citing United Food & Commercial Work-
ers Union v. CenterMark Props. Meriden Square, Inc., 30
F.3d 298, 301 (2d Cir. 1994)), aff’d, 586 F. App’x 604 (2d
Cir. 2014).
Section 1442(a) is commonly known as the federal of-
ficer removal statute and normally authorizes removal by
federal officers sued in state court. Section 1442(a)(2)
expands the circumstances in which removal is author-
ized to allow owners of federally-derived property rights
to remove a cause of action to federal court—even where a
federal officer is not a defendant—if the action “affects the
validity of any law of the United States.” § 1442(a)(2).
Removal under § 1442(a)(2) requires that (1) an action be
instituted in state court; (2) the action be against or
directed to the holder of a property right; (3) the property
right be derived from a federal officer; and (4) the action
would “affect” the validity of a federal law. Id. MPHJ
asserts that its patents were property rights, derived from
the Patent and Trademark Office pursuant to Title 35 of
the U.S. Code, and that the State’s action—which it
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 19
asserts would frustrate MPHJ’s ability to assert its patent
rights—“affects” the interests protected under the Patent
Act. As with other removal decisions, we review de novo a
district court’s determination of whether removal is
authorized under § 1442(a)(2). Isaacson, 517 F.3d at 135.
B. No Basis for Removal
On appeal, the parties dispute whether: (1) MPHJ’s
second removal was timely and (2) the requirements for
removal under 28 U.S.C. § 1442 are met. With respect to
the requirements for removal, the State asserts that:
patent rights are not property rights within the meaning
of § 1442(a)(2); because the patents at issue were trans-
ferred to MPHJ from the original patent owner, they were
not directly “derived from a federal officer”; and because
the state court complaint neither alleges a violation of nor
seeks relief under the BFAPIA, there is no risk that the
state court action can affect the validity of federal law.
MPHJ vigorously disputes each of these points. Im-
portantly, however, MPHJ concedes that, if the BFAPIA
is not at issue in the state court action, its assertions that
the current action would affect its rights under the Patent
Act and, thus, affect the validity of that act, are not well
taken. Oral Argument at 05:34-6:20, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1310.mp3. Because it is dispositive, we address only
whether claims under the BFAPIA are in the amended
complaint. We find that they are not. Because the
amended complaint neither asserts claims under, nor
requests an injunction requiring MPHJ to comply with,
the BFAPIA, we find there was no basis in the amended
complaint for removal under 28 U.S.C. 1442(a)(2). We,
therefore, affirm.
At this stage in the proceedings, we do not consider
whether the action was removable under the original
complaint. As we explained in our decision on appeal of
the first remand, a remand order to a state court under
20 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
§ 1447(c) is immune from review under § 1447(d). MPHJ,
763 F.3d at 1353; see Quackenbush v. Allstate Ins. Co.,
517 U.S. 706, 711–12 (1996). Therefore, 28 U.S.C.
§ 1446(b)(1), which sets forth the procedural requirements
for the removal of civil actions removable based on the
allegations in an original complaint, does not apply. 3
We are left to decide, therefore, if the previously non-
removable action became removable under § 1446(b)(3).
The district court framed the issue as “whether the
Amended Complaint ‘revived’ MPHJ’s right to remove
after its first removal was unsuccessful.” MPHJ, 2015
U.S. Dist. LEXIS 3309, at *12. The court noted that “an
amendment of the complaint will not revive the period for
removal if a state court case previously was removable . . .
,’ [although] a different result generally is reached if the
pleading amendment provides (1) a ‘new basis for remov-
al’ or (2) ‘changes the character of the litigation so as to
make it substantially a new suit.’” Id. (quoting Braud v.
Trans. Serv. Co. of Illinois, 445 F.3d 801, 806 (5th Cir.
2006)). The court then proceeded to determine whether
the intervening passage of the BFAPIA by the Vermont
legislature “revived” MPHJ’s right to remove. Because
the original complaint was not removable, however, it is
unnecessary to search for a new basis for removal in the
amended complaint, but rather only necessary to search
for a basis for removal under § 1446(b)(3). Semantics
aside, we agree with the district court that there is no
3 There is no dispute that the original complaint did
not invoke the BFAPIA. See, e.g., Appellant Reply Br. 17-
18 (“At the time [the State’s original complaint was filed],
the BFAPIA was not part of state law. Thus, obviously,
the original complaint did not seek relief involving the
BFAPIA. Indeed, in a rare agreement, the State, MPHJ,
and the district court all agree the original complaint did
not invoke the BFAPIA.”)
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 21
basis for removal because the injunction the State seeks
does not include compliance with the BFAPIA.
MPHJ’s Notice of Removal clearly bases removal un-
der § 1442(a)(2) solely on its claim that the BFAPIA is
inconsistent with and preempted by federal law. See
MPHJ Notice of Removal at 3, MPHJ, 2015 U.S. Dist.
LEXIS 3309 (No. 2:14-cv-00192), ECF No. 1 (“Removal of
this case is authorized under 28 U.S.C. § 1442(a)(2)
because the Amended Complaint [seeks to] require MPHJ
to comply with the [BFAPIA]”). As the district court
noted, MPHJ’s Opp’n to the State’s Mot. to Remand cites
only to the BFAPIA as “affect[ing] the validity” of federal
statutes, 35 U.S.C. §§ 261, 271, 284, 285 and 287, and
certain parts of the Constitution. MPHJ, 2015 U.S. Dist.
LEXIS 3309, at *18. And, as noted, MPHJ conceded at
oral argument that whether there is a basis for removal
under § 1442(a)(2) hinges entirely on whether the State
seeks compliance with the BFAPIA under its amended
complaint. Oral Argument at 05:34-6:20, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20
15-1310.mp3.
The parties dispute, however, whether the amended
complaint either implicates or requests an injunction
requiring compliance with BFAPIA. The State amended
its original complaint to delete one request for an injunc-
tion, leaving only one. The remaining injunction request-
ed reads:
(1) A permanent injunction prohibiting Defendant
from engaging in any business activity in, into or
from Vermont that violates Vermont law.
The issue is, thus, whether the phrase “Vermont law”
encompasses not only the VCPA, but also the BFAPIA.
The State has consistently argued that the BFAPIA is not
part of its amended complaint, just as it was not part of
its original complaint. In its motion to remand, it stated
that it “did not add or change any allegations or change
22 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
its claim. The amendment removed a single phrase in the
request for relief.” Vermont’s Mot. to Remand at 6,
MPHJ, 2015 U.S. Dist. LEXIS 3309 (No. 2:14-cv-00192),
ECF No. 22-1. According to the State, the amended
complaint “merely alleges that MPHJ’s actions—sending
unfair and deceptive licensing solicitations into Ver-
mont—violate Vermont’s consumer protection statute.”
Id. at 13.
MPHJ, on the other hand, maintains that the amend-
ed complaint includes the BFAPIA—i.e., a provision of
Vermont law—and that the State cannot now “disavow
that its suit seeks this relief.” MPHJ’s Resp. in Opp’n to
Mot. to Remand at 16 n.31, MPHJ, 2015 U.S. Dist. LEXIS
3309 (No. 2:14-cv-00192), ECF No. 26. The state legisla-
ture passed the BFAPIA between the time of the filing of
the original complaint and the State’s motion to amend
the complaint. MPHJ argues that, therefore, although
the amendment to the State’s complaint did not add any
new text, it implicitly added new meaning to the phrase
“Vermont law.”
The district court found MPHJ’s interpretation of the
amended complaint unpersuasive. Specifically, the court
found that the State made explicit efforts to limit its
reach to MPHJ’s purported violations of the VCPA. The
title of the amended complaint, “First Amended Consum-
er Protection Complaint,” tracks the title of the original
complaint, “Consumer Protection Complaint,” which
neither party disputes concerned only the VCPA. First
Amended Consumer Protection Compl., MPHJ, 2015 U.S.
Dist. LEXIS 3309 (No. 2:14-cv-00192), ECF No. 7. The
first sentence states that the Vermont Attorney General
“brings this suit under the Vermont Consumer Protection
Act.” Id. at 1. The sole allegations in the amended com-
plaint are that MPHJ violated the VCPA. Importantly,
the BFAPIA does not appear at all on the face of the
complaint. Thus, the district court found that the amend-
ed complaint did not “revive” MPHJ’s ability to remove
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 23
the case. MPHJ, 2015 U.S. Dist. LEXIS 3309, at *13.
Notwithstanding this finding, however, the district court
proceeded to analyze the removal under § 1442(a)(2).
Unsurprisingly, it concluded, “the Amended Complaint is
brought exclusively under the VCPA, and does not seek
relief under any other statute or legal provision. The
Court therefore declines to allow removal under Section
1442(a)(2).” Id. at *18.
On appeal, the parties reiterate their positions with
respect to the BFAPIA. MPHJ assigns significance to
Vermont’s decision not to limit its injunction explicitly to
compliance with the VCPA. Since March 7, 2014, the date
on which Vermont sought leave to amend its complaint,
was after the date the BFAPIA became effective, July 1,
2013, MPHJ argues that “the Amended Complaint indis-
putably [seeks] to compel MPHJ to comply with the
BFAPIA.” Appellant Br. 11. MPHJ also argues that
Vermont Attorney General William Sorrell made clear in
an interview published by Law 360 that the BFAPIA was
specifically designed to prohibit MPHJ from sending its
inquiry letters. Id. at 8.
The State opposes MPHJ’s characterization of the
amended complaint as seeking relief under the BFAPIA.
First, the State correctly points out that the amended
complaint never mentions that statute by name. Appellee
Br. 7. Second, the State says its deletion from the original
complaint narrowed its request for relief, not broadened
it. Id. at 30. Third, the State argues that it did not assert
a claim against MPHJ under the BFAPIA because the
conduct the State challenges pre-dated the statute: “[t]hat
statute was passed in May 2013, after MPHJ stopped
sending the letters described in the State’s complaints,
and after the State filed this action.” Id. at 27.
We resolve this issue based on the State’s concession
at oral argument and our own understanding of the
amended complaint. Counsel for the State conceded at
24 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
oral argument that the BFAPIA is not—and never was—
part of the State’s amended complaint. Indeed, when
asked whether counsel would stipulate that the amended
complaint does not cover the BFAPIA, counsel responded:
A: We have asserted that repeatedly in filings in
multiple courts, that we are seeking, we are not
asserting a claim under the new statute and we
are not seeking relief under that statute.
Q: You mean not seeking an injunction that would
require them to comply with that statute?
A: No, we’re not, your Honor.
Oral Argument at 14:30-15:45, available at http://
oralarguments.cafc.uscourts.gov/default.aspx?fl=2015-
1310.mp3. We hold the State to its concession at oral
argument; it has expressly disavowed any request to
enjoin MPHJ’s conduct under the BFAPIA.
Even if the State had not conceded at oral argument
that the injunction does not include a request for an
injunction under the BFAPIA, we are not persuaded that
MPHJ’s reading of the amended complaint is a fair one.
We begin with the language of the amended complaint,
which never mentions the BFAPIA on its face. Rather, as
the State explained, the amended complaint is identical to
the original complaint except that the State’s original
request for an injunction requiring MPHJ to stop threat-
ening Vermont businesses with patent infringement
lawsuits has been deleted. As the district court pointed
out, the amended complaint is entitled “First Amended
Consumer Protection Complaint,” and the first sentence
states that the suit was brought “under the Vermont
Consumer Protection Act.” And under “III. Statutory
Framework” of the amended complaint, the only statute
listed is the VCPA. “V. Cause of Action: Unfair and
Deceptive Trade Practices” likewise mentions only the
VCPA. The language of “Unfair and Deceptive Trade
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 25
Practices” comes directly from VCPA § 2453(a) and has no
counterpart in the BFAPIA. The word “unfair” is absent
from the BFAPIA, and while the word “deceptive” appears
once in § 4197, there is no mention of “trade practices.” 9
V.S.A. § 4197(b)(7). 4 When read in its entirety, it is clear
that the phrase “Vermont law”—as used in the amended
complaint—refers only to the VCPA.
This interpretation finds further support in the record
evidence regarding the parties’ understanding of the
amendment and its purpose. The district court expressed
concern about the State’s second injunction request at a
hearing to discuss pending motions following the first
removal. 5 Less than two weeks later, the State filed its
motion to clarify and/or amend the complaint. In the
motion, the State explained that it did not intend to
prevent MPHJ from engaging in lawful patent-
enforcement activities. Rather, recognizing that “such
broad injunctive relief may be preempted by federal
patent law,” the State sought to limit the relief sought “by
4 The BFAPIA lists circumstances in which “[t]he
claim or assertion of patent infringement is deceptive” as
a factor which would militate in favor of finding a viola-
tion of the provisions of the Act. 9 V.S.A. § 4197(b)(7).
5 The district court observed at the February 25,
2014 hearing: “This seems to suggest that in Vermont,
they’re not allowed to enforce a patent. And doesn’t that,
unto itself, raise a patent law issue which would be
preempted . . . .,” and, “But when you, in your complaint,
suggest that you are requesting an order to prevent the
exercise of patent rights, broadly speaking, not related in
any way to deception or violation of the [VCPA], then
that’s–is that a horse of a different color?” Transcript of
Mots. Hearing at 11-13, MPHJ, No. 2:13-cv-170, 2014
U.S. Dist. LEXIS 52132 (D. Vt. Feb. 25, 2014), ECF No.
50.
26 STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS
removing paragraph two” of its injunction requests.
Vermont’s Conditional Mot. to Clarify And/Or Amend
Compl. at 2, MPHJ, No. 2:13-cv-170, 2014 U.S. Dist.
LEXIS 52132, ECF No. 45. The State further explained
explicitly in its motion to amend that “[t]his proposed
revision does not change the State’s claim as originally
filed” and “[t]his change does not alter the nature of the
State’s claim, which arises from Vermont’s consumer
protection act.” Id. at 2-3. The timing and nature of the
proposed amendment show that it was clearly a response
to the district court’s criticism of the scope of the second
injunction request. The purpose of the amendment was to
narrow the scope of the complaint, not broaden it.
Finally, although MPHJ relies on a Law 360 article
featuring an interview with Vermont Attorney General
William Sorrell, which it originally included as an exhibit
to its notice of removal, that article supports the State’s
position. In that interview, which was published two
months after the State filed its conditional motion to
amend, Sorrell was asked whether the lawsuit against
MPHJ was filed under the VCPA:
Q: So the case against MPHJ was filed under the
then existing consumer protection law?
A: Yes.
Exhibit 3-9 to Notice of Removal at 170, MPHJ, No. 2:14-
cv-00192, 2015 U.S. Dist. LEXIS 3309, ECF No. 1-12.
And, when asked about how the BFAPIA would be en-
forced, Sorrell’s response revealed that he did not think
lawsuits had been filed yet under the BFAPIA:
Q: Concerning Vermont's new consumer protec-
tion law, has thought been given to what analysis
would be required to determine which accused
products are covered by the claims of the asserted
patents?
STATE OF VERMONT v. MPHJ TECHNOLOGY INVESTMENTS 27
A: . . . I think when the first lawsuits are filed un-
der the new Vermont statute, I'm sure there will
be more flesh added to the bones of the statute
through those cases . . . .
Id. at 171. In these circumstances, we see no reason to
disturb the district court’s finding that the State is not
seeking an injunction that requires MPHJ’s compliance
with the BFAPIA. Given this conclusion, if the State
prevails on the merits in state court, it may not seek an
injunction requiring MPHJ to comply with the BFAPIA
based on the amended complaint. Because MPHJ relies
on the BFAPIA as its basis for removal under
§ 1442(a)(2), the necessary consequence of our decision is
that we find no grounds for removal to federal court.
Given these conclusions, we decline to decide whether
§ 1442(a)(2) applies to intellectual property rights or
whether the phrase “derived from” a federal officer means
the property right at issue must have been obtained by
the removing defendant itself from such an officer, rather
than by a predecessor in interest to that defendant.
Because MPHJ has not appealed the district court’s
ruling pursuant to 28 U.S.C. § 1454, we have no occasion
to address the timeliness or propriety of MPHJ’s attempt-
ed removal under that statute or how that newly enacted
provision should be interpreted in light of the other
amendments to jurisdictional statutes adopted in the AIA.
IV. CONCLUSION
For the foregoing reasons, we hold that there is no ba-
sis for removal to federal court under § 1442(a)(2). We,
therefore, affirm.
AFFIRMED