Federal Circuit Clarifies Need for Clear Contractual Triggers in Patent Settlement Payments Post-PTP

Patent settlements aim to transform litigation uncertainty into contractual certainty. However, the Federal Circuit’s August 28, 2026 decision in T-Mobile US, Inc. v. KAIFI LLC demonstrates the pitfalls when a settlement resolves infringement claims but leaves the financial implications of ongoing Patent Office proceedings vague.

The dispute originated from a settlement and patent license agreement between T-Mobile and KAIFI that required T-Mobile to make an additional payment if an asserted patent claim “survives” an ex parte reexamination proceeding. Although several claims were later confirmed as patentable without amendment, the parties disagreed on whether those claims had in fact “survived” under the terms of their agreement. This disagreement triggered new litigation and ultimately led to a Federal Circuit ruling that the case did not arise under patent law.

KAIFI initially sued T-Mobile in the Eastern District of Texas for infringement of U.S. Patent No. 6,922,728, which related to Wi-Fi calling technology. During the infringement litigation, T-Mobile requested an ex parte reexamination of the patent.

Before the Patent Office completed the reexamination, the parties settled in January 2022. Their Settlement and Patent License Agreement granted T-Mobile a license, required an initial payment, and established a contingent “EPR Payment” if any identified “Asserted Claim survives the EPR.” The agreement also generally barred T-Mobile from challenging validity or enforceability, except for the reexamination proceeding it had initiated.

The Patent Office later confirmed seven of the eight asserted claims without amendment and found the eighth patentable as amended. Despite this, T-Mobile refused to make the additional payment.

T-Mobile’s refusal was not based on claim cancellation. Instead, it argued that KAIFI had taken positions during reexamination that materially altered claim scope from those advanced in the infringement litigation. T-Mobile also alleged inequitable conduct related to KAIFI’s allegedly inconsistent claim-construction positions.

The district court rejected T-Mobile’s arguments, interpreting “survives” by reference to the formal outcome of the reexamination. It concluded that claims confirmed as patentable without amendment had indeed survived, granting summary judgment in favor of KAIFI.

On appeal, the Federal Circuit faced an unusual jurisdictional question because both parties contended that the Federal Circuit had jurisdiction. The court disagreed.

Under 28 U.S.C. § 1295(a)(1), the Federal Circuit has exclusive appellate jurisdiction over district court cases arising under federal patent law. The court applied the framework from Christianson v. Colt Industries Operating Corp. and Gunn v. Minton, which limits such jurisdiction to claims created by patent law or state-law claims that necessarily raise a substantial federal patent issue.

Because T-Mobile initiated the case via a declaratory judgment complaint, the court used the approach from ABB Inc. v. Cooper Industries, LLC, considering the claim KAIFI would have brought in a hypothetical well-pleaded complaint. That claim was a breach of contract under Texas law.

This reframing was decisive. The court examined whether KAIFI needed to prove a patent law proposition to recover the contingent payment. It concluded that KAIFI did not.

According to 35 U.S.C. § 307(a), an ex parte reexamination concludes with formal Patent Office action canceling unpatentable claims, confirming patentable claims, and incorporating amended or new claims. Since seven asserted claims were confirmed without amendment, a court could interpret the contract and the Reexamination Certificate to conclude that a claim had “survived” without resolving issues like prosecution disclaimer or inequitable conduct.

This alternative interpretation was sufficient to defeat the federal-question jurisdiction requirement under Gunn.

The Federal Circuit contrasted this case with Jang v. Boston Scientific Corp., which involved a contract requiring additional compensation for products covered by specified patents. In Jang, determining payment required deciding patent infringement, embedding patent law directly into the contractual liability.

In T-Mobile, the performance trigger was whether an asserted claim “survives” a Patent Office proceeding. Because this language could be applied to the agency’s formal disposition, patent infringement and related doctrines were not indispensable to the contract claim. Consequently, the Federal Circuit transferred the appeal to the Fifth Circuit.

This distinction carries broader implications beyond appellate jurisdiction. Contract provisions can assign commercial significance to patent-law determinations in varying ways. Royalties tied explicitly to patent infringement may require courts to decide substantive patent law. Conversely, payments linked to objectively identified administrative events may present ordinary contract interpretation questions.