Point Conversions, LLC v. WPB Hotel Partners, LLC

• Decision Date: 02 June 2021
• Docket Number: No. 4D19-3017,4D19-3017
• Citation: 324 So.3d 947
• Parties: POINT CONVERSIONS, LLC, Appellant, v. WPB HOTEL PARTNERS, LLC, Appellee.
• Court: Florida District Court of Appeals

324 So.3d 947

POINT CONVERSIONS, LLC, Appellant,

v.WPB HOTEL PARTNERS, LLC, Appellee.

No. 4D19-3017

District Court of Appeal of Florida, Fourth District.

[June 2, 2021]

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." 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.

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, 133 S.Ct. 1059, 185 L.Ed.2d 72 (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, 133 S.Ct. 1059. 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, 133 S.Ct. 1059 (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, 133 S.Ct. 1059. These four factors, first articulated in Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg ., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (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 without disrupting the federal-state balance approved by Congress." Gunn , 568 U.S. at 258, 133 S.Ct. 1059 ; see also Christianson v. Colt Indus. Operating Corp ., 486 U.S. 800, 808, 108 S.Ct. 2166, 100 L.Ed.2d 811 (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, 133 S.Ct. 1059.

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, 133 S.Ct. 1059 (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, 133 S.Ct. 1059 (quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc ., 489 U.S. 141, 162, 109 S.Ct. 971, 103 L.Ed.2d 118 (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, 133 S.Ct. 1059.

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, 133 S.Ct. 1059. 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, 133 S.Ct. 1059. Afterwards, Minton filed a legal malpractice action in Texas state court against the attorneys who represented him in the patent case. Id . at 255, 133 S.Ct. 1059. 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"...