POINT CONVERSIONS, LLC v. WPB HOTEL PARTNERS, LLC

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
POINT CONVERSIONS, LLC,
Appellant,
v.
WPB HOTEL PARTNERS, LLC,
Appellee.
No. 4D19-3017
[June 2, 2021]
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach
County; Glenn D. Kelley, Judge; L.T. Case No. 502019CA002264XXXXMB.
Nancy W. Gregoire of Birnbaum, Lippman & Gregoire, PLLC, Fort Lauderdale,
and Kenneth W. Ferguson of Ferguson Law P.A., Fort Lauderdale, for appellant.
Matthew R. Chait, Joseph W. Bain, and Sean M. Smith of Shutts & Bowen
LLP, West Palm Beach, Daniel E. Nordby of Shutts & Bowen LLP, Tallahassee,
and Garrett A. Tozier of Shutts & Bowen LLP, Tampa, for appellee.
ON APPELLEE’S MOTION FOR REHEARING OR CLARIFICATION
KLINGENSMITH, J.
We grant appellee’s motion for rehearing and clarification in part, withdraw
our previously issued opinion, and substitute the following in its place.
Point Conversions, LLC (“appellant”), a software development company,
appeals the trial court’s final order dismissing its Complaint against WPB Hotel
Partners, LLC (“appellee”), an independently owned franchisee of a hotel chain,
for lack of subject matter jurisdiction on the authority of Solar Dynamics, Inc. v.
Buchanan Ingersoll & Rooney, P.C., 211 So. 3d 294 (Fla. 2d DCA 2017). Because
we believe this case is controlled by precedent established by the United States
Supreme Court rather than the Second District’s opinion, we reverse.
In September 2017, appellant entered into an agreement allowing it to acquire
an exclusive license to a third party’s patents which it then used to create
software called Point Boundaries. The agreement between appellant and the
patent owner provides that appellant “acquires an exclusive, non-transferrable
… right to develop and use the Software within the scope of the Existing Patents.”
1
The agreement also states that appellant’s software “shall be the only software
possessing the usage right under the Existing patents.” In the agreement, the
patent owner denied appellant the “right to sue for infringement of the existing
patents,” but acknowledged that appellant retained “all right, title and interest,
including Intellectual Property Rights” in and to its own software.
The Point Boundaries software facilitates the exchange of loyalty or reward
points between separate business entities or cross-channels. For instance, if an
individual receives reward points for flying with a particular airline, the Point
Boundaries software enables them to use those points at different businesses.
While appellee offers its customers loyalty reward points for staying at its hotel,
it directs its customers to use software other than Point Boundaries to transfer
those earned points.
Appellant filed a Complaint against appellee in the Fifteenth Judicial Circuit1
with the following common allegations: its rights under its exclusive license with
the patent owner, its development of the Point Boundaries software, appellee’s
knowledge of appellant’s rights to the Point Boundaries software, appellee’s
violation of those rights, and finally, the benefits appellee was receiving due to
the aforementioned violations. After reciting these common allegations,
appellant’s Complaint stated four separate causes of action against appellee: (1)
unjust enrichment for benefiting from its patrons’ use of software that violates
appellant’s exclusive license; (2) temporary and or permanent injunctive relief to
enjoin appellee’s violations of its exclusive rights; (3) conversion by way of
receiving illicit compensation for the unauthorized use of its software; and (4)
violations of Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”).
Appellee did not file an answer to the Complaint, but instead filed a motion
to dismiss alleging a lack of subject matter jurisdiction. Although appellant’s
Complaint alleged state law claims, appellee’s motion argued that the trial court
lacked subject matter jurisdiction because the claims were in essence “patent
infringement claims disguised as state law claims.” According to appellee, the
claims in the Complaint were patent law claims because they were “founded on
a breach of a right created by the patent laws.” As such, appellee argued that it
required a “determination of the core patent issues reserved exclusively to the
jurisdiction of federal courts under 28 U.S.C. § 1338(a).”
The trial court held a hearing on the jurisdictional question. At the hearing,
appellee relied primarily on the Second District’s Solar Dynamics case to support
its motion to dismiss. Appellee also claimed a hearing was required—but only
before a federal court—where the patents involved could be construed to
determine whether its conduct, as alleged by appellant, fell under those patents.
1 Appellant also filed forty-six similar complaints against other franchisees in seven
counties around the state.
2
In opposition to the motion, appellant claimed that the proper test to
determine the trial court’s subject matter jurisdiction under patent law was the
four-part test utilized in Gunn v. Minton, 568 U.S. 251 (2013). Under this test,
a court must determine whether the federal issue was: “(1) necessarily raised, (2)
actually disputed, (3) substantial, and (4) capable of resolution in federal court
without disrupting the federal-state balance approved by Congress.” Gunn, 568
U.S. at 259. Although appellant agreed that its unjust enrichment, conversion,
and injunctive relief claims would necessarily entail an evaluation of patent
infringement issues, it still argued that appellee could not meet all facets of the
Gunn test and therefore the trial court could exercise jurisdiction over its claims.
Further, appellant argued that deciding the jurisdictional issue at this stage was
premature because its claims could not be truly evaluated under this four-part
test until an answer to the Complaint was filed. Without an answer, it would
not be able to know whether any of the patent issues were “actually disputed.”
After hearing both parties’ arguments, the trial court entered a final order
granting appellee’s motion to dismiss. In the order, the trial court opined that it
did not have subject matter jurisdiction because the claims “necessarily
require[d] a determination of the scope, validity or infringement of a patent.” This
appeal followed.
“Whether a court has subject matter jurisdiction is a question of law reviewed
de novo.” Sanchez v. Fernandez, 915 So. 2d 192, 192 (Fla. 4th DCA 2005).
“Subject matter jurisdiction means ‘the power of the court to adjudicate the class
of cases to which the particular case belongs.’” VL Orlando Bldg. Corp. v. AGD
Hosp. Design & Purchasing, Inc., 762 So. 2d 956, 957 (Fla. 4th DCA 2000)
(citation omitted).
However, Congress has granted federal district courts original jurisdiction
over “any civil action arising under any Act of Congress relating to patents . . .
[and] copyrights.” 28 U.S.C. § 1338(a). This original jurisdiction for issues
related to patents and copyrights also functions as exclusive jurisdiction as
Congress has stated that “[n]o State court shall have jurisdiction over any claim
for relief arising under any Act of Congress relating to patents . . . or copyrights.”
Id. Thus, the key to determining whether a case involving a patent or copyright
falls within the federal district court’s exclusive jurisdiction is to determine
whether the case “aris[es] under any Act of Congress relating to patents” or
copyrights. Gunn, 568 U.S. at 257 (quoting 28 U.S.C. § 1338(a)).
“[A] case can ‘aris[e] under’ federal law in two ways”: (1) “when federal law
creates the cause of action asserted” or (2) when a state law claim meets four
factors. Id. at 257-58. These four factors, first articulated in Grable & Sons
Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005), ask whether
the federal issues within that state law claim are: “(1) necessarily raised, (2)
actually disputed, (3) substantial, and (4) capable of resolution in federal court
3
without disrupting the federal-state balance approved by Congress.” Gunn, 568
U.S. at 258; see also Christianson v. Colt Indus. Operating Corp., 486 U.S. 800,
808 (1988). The state law claims within the plaintiff’s complaint must meet all
four of these factors for federal jurisdiction to lie. Gunn, 568 U.S. at 258.
A federal issue or question is “substantial in the relevant sense” when “a state
court’s resolution of the federal question ‘would be controlling in numerous other
cases.’” Id. at 260, 262 (citation omitted). Allowing a state court to resolve
controlling federal questions, particularly when they involve complex issues,
would “undermine ‘the development of a uniform body of [] law.’” Id. at 261(quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989)).
Thus, “[t]he substantiality inquiry under Grable looks . . . to the importance of
the issue to the federal system as a whole.” Id. at 260.
In Gunn, the question presented was whether a legal malpractice claim
involving a patent issue had to be adjudicated in federal court. Id. at 253. There,
Minton filed an unsuccessful patent infringement action against several
defendants in federal district court; the court granted summary judgment for the
defendants and declared Minton’s patent invalid. Id. at 254. Afterwards, Minton
filed a legal malpractice action in Texas state court against the attorneys who
represented him in the patent case. Id. at 255. Minton lost his malpractice case
at the trial court level and appealed, arguing that the trial court’s order should
be vacated because the state court lacked the subject matter jurisdiction to
decide the malpractice case, as it involved a patent issue. Id. The case was
appealed to the Supreme Court of Texas, which concluded that Minton’s
malpractice claim involved “‘a substantial federal issue’ within the meaning of
Grable” thus triggering section 1338 “arising under” jurisdiction in federal court.
Id. at 256.
Taking the case on certiorari jurisdiction, the United States Supreme Court
unanimously reversed the Texas Supreme Court’s ruling, opining that Minton’s
legal malpractice claim did not need to be adjudicated in federal court. Id. at
258. Chief Justice Roberts, writing for the Court, applied Grable’s four-part test
and found that the malpractice claim did not arise under federal patent law for
purposes of section 1338. Id.The Gunn Court conceded that it would be “necessary” for a state court to
resolve a federal patent issue when deciding Minton’s case and acknowledged
that the patent issue was “actually disputed” by both Minton and the attorney
defendants. Id. at 259. But, according to the Court, the federal issue in Minton’s
state law malpractice claim was “not substantial in the relevant sense” because
nothing would change the result of the prior federal patent litigation that
invalidated his patent. Id. at 260-61. Any subsequent state court decision
regarding the patent issue would be part of a “case within a case” and would not
bind federal courts. Id. at 262. Finally, because the patent issue in Minton’s
4
state law malpractice claim was not “substantial,” the Court found that deciding
it in state court would “disrupt[] the federal-state balance approved by
Congress.” Id. at 258, 264.
After the Gunn decision, the Second District was presented with a similar
factual scenario in Solar Dynamics, involving whether a state court had subject
matter jurisdiction to handle a legal malpractice claim involving a patent. 211
So. 3d at 295-96. However, unlike the United States Supreme Court in Gunn,
the Second District concluded that the state court did not have jurisdiction over
the claim. Id. at 296. In that case, Solar Dynamics retained an attorney to
obtain a patent for a product it created. Id. It was later determined that the
patent obtained by the attorney failed to adequately protect Solar Dynamics’
product idea. Id. After learning this, Solar Dynamics filed a legal malpractice
action against the attorney in state court. Id. The attorney filed a motion to
dismiss the suit, alleging that the state trial court lacked subject matter
jurisdiction over the claims. Id. The trial court agreed and dismissed Solar
Dynamics’ suit. Id.On appeal, Solar Dynamics contended that the decision in Gunn compelled
the trial court to exercise jurisdiction over its legal malpractice claim even though
the claim involved patent issues. Id. at 298. However, the Second District
disagreed and affirmed the trial court’s dismissal for lack of subject matter
jurisdiction. Id. at 296. According to the Second District, Gunn did not “reach
as far as Solar [Dynamics] would hope.” Id. at 298. It noted that in Gunn, there
had been a prior federal case filed addressing the patent’s validity before the
state court legal malpractice case was initiated. Id. In contrast, the Second
District recounted that Solar Dynamics “proceed[ed] directly with a state
malpractice case,” not a federal action, which required the state trial court to
“rule in the first instance upon the scope, validity, or infringement of its patent.”
Id. In other words, “[b]efore reaching the merits of any malpractice claim, the
state trial court w[ould] have to construe the claims of the Solar patent, and then
assess whether the products of . . . any other competitor infringe the patent.” Id.
at 299. To the Second District, these were “quintessential federal issues” that
would be “best decided in a federal court lawsuit between Solar [Dynamics] and
an alleged infringer.” Id. at 298, 300.
After the Second District concluded that Gunn—and the four-part test
therein—was not dispositive of the case, it utilized the following test from
Schachel v. Closet Concepts, Inc., 405 So. 2d 487 (Fla. 3d DCA 1981):
[I]f the suit is founded on a breach of a right created by the patent
laws, even if that right is confirmed by separate agreement, the case
arises under the patent laws, and a state court is without subject
matter jurisdiction. On the other hand, if the suit is founded on
some right falling outside the ambit of the patent laws, then the state
5
court has jurisdiction, even if during the course of the suit the court
is called upon to determine questions involving the patent laws.
Solar Dynamics, 211 So. 3d at 300 (quoting Schachel, 405 So. 2d at 488).
Applying this test, the Second District held that the patent issues were central
to the dispute, and that Solar Dynamics’ legal malpractice claim arose under the
patent laws. Id. at 300-01. The court came to this conclusion after noting,
again, that the only way for Solar Dynamics to prove its legal malpractice claim
was to show that its “patent was invalid or that its scope was not sufficiently
broad to protect Solar from its allegedly infringing competitors.” Id.
Against the backdrop of these two cases, we must determine whether the trial
court has subject matter jurisdiction over appellant’s case. Because appellant’s
case concerns a patent, when determining jurisdiction we must consider whether
the case “aris[es] under any Act of Congress relating to patents [or copyrights].”
Gunn, 568 U.S. at 257. If the case indeed “arises under” federal law, it falls
under the exclusive jurisdiction of the federal district court—meaning the
Fifteenth Judicial Circuit would not have jurisdiction to hear it. See 28 U.S.C. §
1338(a). Conversely, if the case does not “arise under” federal law, jurisdiction
would be proper in the state trial court. A case can “arise under” federal law
when federal law creates the cause of action asserted or the state law claim meets
Gunn’s four enumerated factors. See Gunn, 568 U.S. at 258.
Here, it is clear that none of appellant’s claims are created by federal law. See
id. This conclusion is evident because the Complaint filed herein “is entirely
devoted to state law causes of action.” ClearPlay, Inc. v. Abecassis, 602 F.3d
1364, 1367 (Fed. Cir. 2010). Thus, for a federal court to have exclusive
jurisdiction over appellant’s proffered state law claims, those claims must meet
all four Gunn factors. See Gunn, 568 U.S. at 258. We now consider each
jurisdictional prerequisite as applied to this case.
A. Whether appellant’s state law claims necessarily raise an issue of
federal law
Gunn’s first factor asks whether a federal issue is “necessarily raised” in the
claim. See id. “[A] patent law issue will be necessarily raised only if it is a
necessary element of one of the well-pleaded claims.” NeuroRepair, Inc. v. The
Nath Law Group, 781 F.3d 1340, 1344 (Fed. Cir. 2015). Appellant brought its
four claims using causes of action which “find[ ] [their] origins in state rather
than federal law.” Gunn, 568 U.S. at 258. Because appellant brought separate
state law claims, each of those claims must be evaluated to see whether
jurisdiction lies in federal court. See Ragner Tech. Corp. v. Berardi, No. 9:20-CV-
80020, 2020 WL 1244863, at *3-4 (S.D. Fla. Mar. 16, 2020) (evaluating the
elements of the plaintiff’s fraudulent misrepresentation and breach of contract
claims to see if patent law issues were a necessary element of those claims).
6
Count 1. Unjust Enrichment
The elements of an unjust enrichment claim are:
1) the plaintiff has conferred a benefit on the defendant; 2) the
defendant has knowledge of the benefit; 3) the defendant has
accepted or retained the benefit conferred; and 4) the circumstances
are such that it would be inequitable for the defendant to retain the
benefit without paying fair value for it.
Della Ratta v. Della Ratta, 927 So. 2d 1055, 1059 (Fla. 4th DCA 2006).
Using this rubric to determine whether appellant’s unjust enrichment claim
raises an issue of federal law, both the patent and the licensing agreement
between appellant and the patent owner must be examined. According to the
licensing agreement, appellant had the exclusive right to develop and use
software created under the owner’s “Existing Patents.” Further confirming this
exclusivity, the agreement stated that the software appellant developed would be
the only software that possessed the right to use the owner’s “Existing Patents.”
Notably, however, the owner did not grant appellant the right to sue for
infringement of its patents. Appellant was aware it could not sue for
infringement and therefore asserts that its rights, and its causes of action,
emanate from this exclusive licensing agreement to use those patents. Appellant
generally contends in the Complaint that appellee violated its rights under the
agreement by facilitating the transfer of reward points using software that was
not licensed to use the patents. In other words, appellant alleges that appellee
is unjustly benefiting from using another software program to facilitate the
transfer of reward points.
To evaluate the merit of this claim and decide whether appellee has been
unjustly enriched, the trial court will have to construe the patents, determine
their validity, and interpret their scope. See Point Conversion, LLC v. Tropical
Paradise Resorts, LLC, 339 F. Supp. 3d 1350, 1355 (S.D. Fla. 2018) (“Before
Plaintiff can obtain relief on any of its claims, a court will necessarily have to
determine whether the licensed patents . . . are valid.”); Inspired Dev. Grp., LLC
v. Inspired Prods. Grp., LLC, 938 F.3d 1355, 1363 (Fed. Cir. 2019) (holding that
a patent issue was not “necessarily raised” in the plaintiff’s unjust enrichment
claim because the plaintiff gave the defendant an exclusive license to use its
patents and could easily show that it conferred a benefit on the defendant). If a
court finds that the patents have not been infringed upon, appellee could not
have been unjustly enriched, thus defeating this as well as the other claims
raised. Therefore, appellant’s unjust enrichment claim does “necessarily” raise
an issue of federal law.
7
Count 2. Permanent and Temporary Injunctive Relief
For a plaintiff or petitioner to obtain a temporary injunction, this court has
stated that they must establish the following four elements: “(1) irreparable
harm will result if the temporary injunction is not entered; (2) an adequate
remedy at law is unavailable; (3) there is a substantial likelihood of success on
the merits; and (4) entry of the temporary injunction will serve the public
interest.” Donoho v. Allen-Rosner, 254 So. 3d 472, 474 (Fla. 4th DCA 2018)
(citations omitted). To obtain a permanent injunction, the plaintiff “must
‘establish a clear legal right, an inadequate remedy at law and that irreparable
harm will arise absent injunctive relief.’” Hollywood Towers Condo. Ass’n v.
Hampton, 40 So. 3d 784, 786 (Fla. 4th DCA 2010) (citations omitted). Irreparable
harm “is an injury of such a nature that it cannot be redressed in a court of law.”
Pro. Golfers Ass’n of Am. v. Bankers Life & Cas. Co., 166 So. 2d 488, 491–92 (Fla.
2d DCA 1964) (citations omitted).
In its claim for injunctive relief, appellant contends that it was irreparably
harmed by appellee’s continued encouragement of its patron’s use of a non-
licensed, third-party platform to transfer points. To decide whether appellant
was irreparably harmed by these actions, the trial court must determine whether
appellee violated appellant’s rights under the patent. For this issue, the trial
court must also construe the validity of the patent to determine whether appellee
is prohibited from creating or using third-party software to facilitate the
exchange of reward points. Thus, this claim also necessarily raises an issue of
federal law.
Count 3. Conversion
Conversion is “an ‘act of dominion wrongfully asserted over another’s property
inconsistent with his ownership therein.’” Warshall v. Price, 629 So. 2d 903, 904
(Fla. 4th DCA 1993) (citations omitted).
Appellant contends that its exclusive license agreement with the patent owner
granted it the right to create reward point conversion software using the subject
patents, and that appellee is wrongfully asserting dominion over that right by
using another reward point conversion software. As with the prior claims, the
trial court would have to evaluate the validity and scope of the patents to some
extent. Therefore, the appellant’s conversion claim likewise raises an issue of
federal law. See MDS (Canada), Inc. v. Rad Source Techs., Inc., 720 F.3d 833,
841-42 (11th Cir. 2013) (finding that a breach of contract claim necessarily
raised a federal issue that was actually disputed because plaintiff licensee was
required to prove that the questioned device the defendant developed and
promoted infringed the licensed patents).
Count 4. FDUTPA
8
FDUTPA “protect[s] the consuming public and legitimate business enterprises
from those who engage in unfair methods of competition, or unconscionable,
deceptive, or unfair acts or practices in the conduct of any trade or commerce.”
§ 501.202(2), Fla. Stat. (2019). “Although not specifically identified in the
statute, there are basically three elements that are required to be alleged to
establish a claim pursuant to the FDUTPA: 1) a deceptive act or unfair practice;
2) causation; and 3) actual damages.” KC Leisure, Inc. v. Haber, 972 So. 2d
1069, 1073 (Fla. 5th DCA 2008); see also Stewart Agency, Inc. v. Arrigo Enters.,
Inc., 266 So. 3d 207, 212 (Fla. 4th DCA 2019) (same). The Florida Supreme
Court defines a deceptive act as a “representation, omission, or practice that is
likely to mislead the consumer acting reasonably in the circumstances, to the
consumer’s detriment.” PNR, Inc. v. Beacon Prop. Mgmt., Inc., 842 So. 2d 773,
777 (Fla. 2003) (citation omitted). The Court further defines an unfair practice
as “one that ‘offends established public policy’ and one that is ‘immoral,
unethical, oppressive, unscrupulous or substantially injurious to consumers.’”
Id. (citations omitted).
Under its FDUTPA claim, appellant contends that appellee was engaging in a
deceptive act or unfair practice by “providing, exchanging, and accepting reward
points to and from customers across program boundaries without Point
Conversions software or some other software with a license to the JB set of
patents.” While it is a much closer call as to whether this pure state law claim
founded on a state statute raises any issues of federal law, we hold that it does
in this case. As with the other claims, the potential exists that the trial court
may have to interpret the validity and scope of the patents to decide the issue,
which in this claim is whether appellee’s actions were deceptive or unfair. Once
the subject patents are evaluated, the court will be able to determine whether
they grant appellant the right to discourage the use of third-party reward point
conversion software, or whether appellee can accept points that were converted
using such a program. See Tropical Paradise Resorts, LLC v. JBSHBM, LLC, 18-
CV-60912, 2019 WL 78983, at *2 (S.D. Fla. Jan. 2, 2019) (“Point Conversions’
FDUTPA counterclaims depend entirely on whether Rodeway and Choice Hotel’s
infringed the patent at issue”).
B. Whether an issue of federal law is “actually disputed.”
Gunn’s second factor to be analyzed is whether an issue of federal law, in this
case patent or copyright law, is “actually disputed.” See Gunn, 568 U.S. at 258.
At their core, appellant’s causes of action are more akin to claims of interference
with a contract, or more precisely, a claimed infringement upon an exclusive
licensing agreement with the patent owner. The causes of action do not dispute
the validity of the subject patents, nor will the outcome affect their scope.
Additionally, because appellee has filed no answer to the complaint and has yet
9
to address the merits of appellant’s claims, it is difficult to ascertain whether an
issue of federal law is actually disputed. Cf. Gunn, 568 U.S. at 259 (concluding
that a federal issue was actually disputed because the “the central point of
dispute [on the merits]” was whether the experimental-use exception applied to
a claim of patent infringement); Inspired Dev. Grp., LLC, 938 F.3d at 1363
(concluding that the issue was actually disputed because the defendant below
denied that it manufactured or sold products in an infringing manner);
NeuroRepair, 781 F.3d at 1345 (concluding that the issue of whether the
defendant timely filed the patent at issue was actually disputed). However, for
the purposes of our analysis, we will assume that appellee actually disputes
appellant’s claims regarding the scope and validity of JB’s patents, inter alia.
C. Whether the federal issues involved in the case are “substantial.”
Gunn’s third factor asks whether the federal issue within the state law claim
was “substantial.” See Gunn, 568 U.S. at 258. The substantiality inquiry “looks
. . . to the importance of the issue to the federal system as a whole.” Id. at 260.
In NeuroRepair, the Court of Appeals for the Federal Circuit stated that “a
substantial federal issue is more likely to be present” when the following three
elements are met: (1) “a ‘pure issue of [federal] law’ is ‘dispositive of the case,’”
(2) “the court’s resolution of the issue will control ‘numerous other cases,’” and
(3) “[t]he Government . . . has a direct interest in the availability of a federal
forum to vindicate its own administrative action.” NeuroRepair, 781 F.3d at 1345
(citations omitted); see also MDS (Canada), Inc. v. Rad Source Techs., Inc., 720
F.3d 833, 842 (11th Cir. 2013).
First, as to whether a pure issue of federal law is dispositive, we cannot say
that one is in this case. 2 Even though patent law issues may necessarily be
raised by appellant’s four state law claims, that does not end the inquiry. After
the trial court construes the various patents, appellant would still have to prove
each element of its four separate claims—all which involve questions of both fact
and Florida law—to prevail. See Ragner Tech. Corp., 2020 WL 1244863, at *4
(stating that a patent issue was not dispositive because plaintiff had to prove
elements of its fraudulent misrepresentation and breach of contract claims,
which involved questions of fact and Florida law). For example, under appellant’s
unjust enrichment claim in Count 1, assuming it is proved that appellant has
“conferred a benefit” on appellee, appellant would also have to prove that
appellee had knowledge of that benefit—a matter that involves both questions of
fact and Florida law. See id.; see also Della Ratta, 927 So. 2d at 1059 (stating
the elements of an unjust enrichment claim); MDS (Canada) Inc., 720 F.3d at
842 (stating that a question of patent infringement was “heavily ‘fact-bound and
2Even if a pure issue of federal law is dispositive of appellant’s claims, the other two
NeuroRepair factors evaluated below support a finding that the federal issues within
appellant’s claims are not substantial.
10
situation specific,’” and required “a fact-specific application of rules that come
from both federal and state law rather than a context-free inquiry into the
meaning of a federal law”) (citations omitted). Similar questions of fact and law
must be decided on the other counts as well. Therefore, under NeuroRepair’s
first element, no pure issues of federal law are dispositive of any of appellant’s
four causes of action.
Second, the trial court’s resolution of this issue will not control “numerous
other cases.” Assuming this case is adjudicated to its end in state court, a
subsequent federal court would not be controlled by the Fifteenth Circuit court’s
determinations. See Inspired Dev. Grp., LLC, 938 F.3d at 1364-65. While those
determinations might influence other state circuit courts where appellant
brought similar claims, those courts would not necessarily be bound by them.
See Carillon Cmty. Residential v. Seminole Cnty., 45 So. 3d 7, 11 (Fla. 5th DCA
2010) (stating that a state circuit court was not bound to follow the decision of
another state circuit court); see also Bonner v. City of Prichard, Ala., 661 F.2d
1206, 1209 (11th Cir. 1981) (“Under the established federal legal system the
decisions of one circuit are not binding on other circuits.”). And although other
state courts may find that appellant is estopped by the Fifteenth Circuit’s
determinations and findings, this is not the same as controlling “numerous other
cases” within the meaning of Gunn, MDS (Canada) Inc., or NeuroRepair because
any such determination would likely be limited to the ongoing disputes between
appellant and other franchisees pending in the various state courts. See Ragner
Tech. Corp., 2020 WL 1244863, at *4; see also MDS (Canada) Inc., 720 F.3d at
842 (“the highly specialized nature of patent claims and the niche market for the
[devices] suggest[ed] that the resolution of th[e] issue [was] unlikely to impact
any future constructions of claims.”).
Third, we cannot find that the government has a direct interest in this dispute
between these parties because, as previously stated, the resolution of this case
will not control “numerous other cases.” Appellant seeks to establish not only
that the subject patents are valid, but also that the owner conveyed exclusive
rights to them through its licensing agreement. This analysis is “heavily ‘fact-
bound and situation-specific’” and will not result in resolving a general question
of patent law likely to affect future cases. See MDS (Canada) Inc., 720 F.3d at
842 (quoting Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 701
(2006)). Thus, it is evident that the federal issues within appellant’s state law
causes of action are not “substantial in the relevant sense.” See Gunn, 568 U.S.
at 260; MDS (Canada) Inc., 720 F.3d at 842 (finding the government’s interest
was minimal given the fact-specific nature of the patent issue). Therefore, the
issue of patent infringement here, while necessarily raised, is not substantial
enough to confer federal jurisdiction over appellant’s state law claims.
We should note that we are not the first court to find similar federal issues
were not “substantial” under the Gunn analysis. In another case, appellant filed
11
suit against a third-party for similar alleged infringement on its reward point
conversion software. See Tropical Paradise Resorts, LLC, 339 F. Supp. 3d at
1353. After appellant filed its suit in state court, the defendant attempted to
have the case removed to federal court, claiming the state court lacked subject
matter jurisdiction; the defendant alleged, as do appellees here, that the action
“arose under” the federal patent law. In that removal action, the district court
examined the same four claims as found in this Complaint for the purposes of
deciding section 1338 federal jurisdiction. Id. The district court opined that
while the complaint raised a federal issue because “a court will necessarily have
to determine whether the licensed patents . . . are valid,” the issue of patent
infringement was not “substantial.” Id. at 1355-56. The court reasoned that
because appellant’s claimed patented technology was “highly specialized,” the
patent analysis would be “fact-specific” and would “not result in resolving a
general question of patent law likely to affect future cases.” Id. at 1356. As
such, the court concluded that the government did not have a strong interest in
litigating the issue in federal court and ordered the case to be remanded to the
state court. Id. at 1356, 1359. We agree with that analysis.
D. Whether the state law claims are capable of resolution in federal court
without disrupting the federal-state balance approved by Congress.
Gunn’s fourth factor asks whether exercising federal jurisdiction over state
law claims would “disrupt[] Congress’s intended division of labor between state
and federal courts.” See id. at 258. Because we hold that the issues of federal
law within the four counts were not “substantial,” we also find that bringing
these claims in federal court would indeed disrupt Congress’s intended division
of labor between state and federal courts. See id.; see also MDS (Canada) Inc.,
720 F.3d at 843 (“To hold that all questions of patent infringement are
substantial questions of federal law for the purposes of federal patent jurisdiction
would sweep a number of state-law claims into federal court.”).
We understand the lower court’s predicament in believing it was compelled to
apply Solar Dynamics to this case. Any district court of appeal decision controls
the lower courts in the absence of a decision by the appellate court overseeing
its own district. See Pardo v. State, 596 So. 2d 665, 666 (Fla. 1992). However,
we are not bound by a sister appellate court’s decision, see Durham v. Palm Court,
Inc., 558 So. 2d 59, 60 (Fla. 4th DCA 1990), just as we are not controlled by a
federal district court’s decision, see Pignato v. Great W. Bank, 664 So. 2d 1011,
1015 (Fla. 4th DCA 1995). That said, however, we are bound by the United
States Supreme Court’s decisions, and as a result we are obligated to follow
them. See Pignato, 664 So. 2d at 1015.
In Solar Dynamics, the Second District declined to follow Gunn, noting that
their case was distinguishable from it; we, in turn, see this case as
distinguishable from Solar Dynamics because, unlike in that case where the
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patents’ enforceability or validity was likely dispositive of the malpractice claim,
here the underlying patents’ validity is not being directly attacked.
The Second District in Solar Dynamics also believed the trial court lacked
subject matter jurisdiction over the case because the state trial court would have
been required to rule in the first instance upon the scope, validity, or
infringement. See Solar Dynamics, 211 So. 3d at 298, 301. To the Second
District, these were “core concepts of patent law” that conferred “arising under”
jurisdiction exclusively in federal district court. See id. at 299. However, we see
that concern was effectively dismissed by the United States Supreme Court. See
Gunn, 568 U.S. at 258. (“[S]tate legal malpractice claims based on underlying
patent matters will rarely, if ever, arise under federal patent law for purposes of
§ 1338(a).”). As a result, at least two appellate courts in other states have ruled
similarly. See Wonders v. Johnson, 01-12-00438-CV, 2013 WL 3771313, at *3
(Tex. Ct. App. July 16, 2013) (reversing a state trial court that dismissed a
patent-related legal malpractice claim for lack of subject matter jurisdiction after
improperly concluding that the claim should have been filed in federal court);
Schmirler v. Essmann, 2012AP462, 2013 WL 12182164, at *1 (Wis. Ct. App. June
5, 2013) (same); see also Warsaw Orthopedic, Inc. v. Sasso, 162 N.E.3d 1, 12-26
(Ind. Ct. App. 2020) (handling claims regarding a patent after a federal court
ruled it did not have jurisdiction under Gunn). One federal court has even
referred to Solar Dynamics as an “outlier” and noted that no other federal or state
court has either cited to it or followed the reasoning therein. See Exceller
Software Corp. v. Dine, 1:18-CV-538, 2019 WL 6606084, at *3 (S.D. Ohio Dec. 5,
2019).
Although appellee challenges the subject matter jurisdiction of the state
court, it made no attempt either to remove this case to federal court or lodge a
preemption defense as other defendants who have defended against appellant’s
complaints have done. See Tropical Paradise Resorts, LLC, 339 F. Supp. 3d at
1353; see also Tropical Paradise Resorts, LLC v. JBSHBM, LLC, 2019 WL 78983,
at *2 (finding no error in the conclusion that Point Conversions’ state-law
counterclaims were preempted by federal patent law). In Tropical Paradise, after
the case was removed to federal court, the federal court found that it lacked
jurisdiction over these identical state law claims and remanded the case to state
court citing Gunn, among other cases. See 339 F. Supp. 3d at 1353. This
decision likely informed appellant where to file this lawsuit. See id. While
nothing requires appellee to request the removal of this matter to federal court,
we find Tropical Paradise instructive in deciding how a federal court is likely to
decide the jurisdictional issues presented here. See id.
Therefore, we decline to follow the Second District’s holding in Solar Dynamics
and instead apply the United States Supreme Court’s precedent in Gunn. We
find that the lower court has subject matter jurisdiction over this matter, and
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thus we reverse the order dismissing the case and remand for further
proceedings.
Reversed and remanded for further proceedings.
DAMOORGIAN and CIKLIN, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
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