Federal Circuit’s Exclusive Jurisdiction Over Patent-Misuse Counterclaims

Introduction

In Honeywell International, Inc. v. OPTO Electronics Co., Ltd., No. 23-1850/23-2038 (4th Cir. Apr. 29, 2025), Honeywell and OPTO—two competitors in the barcode-scanning market—found themselves in a complex web of patent infringement suits, a mutual licensing agreement, and then renewed litigation over royalties and patent scope. The key parties are:

Honeywell International, Inc. (Delaware corporation; licensor and initial patent-infringement plaintiff);
OPTO Electronics Co., Ltd. (Japanese corporation; licensee and counterclaimant).

The central issue on appeal was not the merits of royalty payments or patent scope, but whether the Fourth Circuit or the Federal Circuit has exclusive appellate jurisdiction when a defendant’s compulsory counterclaim asserts patent misuse.

Summary of the Judgment

The Fourth Circuit concluded that:

OPTO’s counterclaim for patent misuse was compulsory because it arose out of the same licensing agreement that gave rise to Honeywell’s breach-of-contract suit.
That counterclaim “arises under” federal patent law—specifically 35 U.S.C. § 271—because it sought a declaration rendering Honeywell’s patents unenforceable and thus defended against a hypothetical infringement suit.
Pursuant to 28 U.S.C. § 1295(a)(1), the Federal Circuit has exclusive jurisdiction over appeals from any civil action in which a party has asserted a compulsory counterclaim arising under the patent statutes.
The Fourth Circuit therefore dismissed the appeal and directed the parties to proceed in the Federal Circuit.

Analysis

1. Precedents Cited

Ex parte McCardle, 74 U.S. (7 Wall.) 506 (1868) – establishes that a court must have jurisdiction before reaching the merits.
Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149 (1908) – the “well-pleaded complaint” rule for federal-question jurisdiction.
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) – historical background on Federal Circuit creation and jurisdiction.
Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826 (2002) – held that counterclaims raising patent issues fell outside § 1338’s “arising under” language.
Leahy-Smith America Invents Act (2011) – the “Holmes Group fix,” expressly extending Federal Circuit jurisdiction to compulsory patent counterclaims.
Gunn v. Minton, 568 U.S. 251 (2013) – two avenues for “arising under” jurisdiction: (1) federal law creates the cause of action or (2) the issue is substantial and actually disputed.
Medtronic, Inc. v. Mirowski Family Ventures, LLC, 571 U.S. 191 (2014) – clarifies jurisdiction in declaratory-judgment actions by focusing on the hypothetical threatened suit.

2. Legal Reasoning

The Fourth Circuit’s reasoning unfolds in three main steps:

Compulsory Counterclaim: Under Federal Rule of Civil Procedure 13(a), OPTO’s patent-misuse counterclaim arises from the same “transaction or occurrence” as Honeywell’s breach-of-contract claim—namely, the 2020 licensing agreement.
“Arises Under” the Patent Laws:
- The Declaratory Judgment Act does not itself create jurisdiction; instead, courts look to the underlying cause of action that is defended via declaratory relief.
- OPTO sought a declaration that Honeywell’s patents are unenforceable due to misuse—relief that protects against a patent-infringement suit under 35 U.S.C. § 271.
- Because patent infringement is the natural threatened action and is grounded in federal patent law, OPTO’s counterclaim “arises under” the patent statutes.
Exclusive Appellate Jurisdiction: Section 1295(a)(1) grants the Federal Circuit exclusive jurisdiction over “any civil action in which a party has asserted a compulsory counterclaim arising under” the patent laws. Once a single counterclaim meets those criteria, the entire appeal must be heard in the Federal Circuit.

3. Impact

This decision reinforces and clarifies several important points:

Uniform Patent Law: Centralizing patent issues—whether raised by complaint or compulsory counterclaim—in the Federal Circuit ensures consistent interpretation of patent-law doctrine across the country.
Declaratory Judgment Practice: Parties defending against possible infringement suits may preemptively invoke patent-misuse defenses without fear that a regional circuit will retain jurisdiction simply because the original plaintiff styled its action as a contract dispute.
Counsel Guidance: Litigators must recognize that even a single patent-based counterclaim will transfer jurisdiction—along with any non-patent claims—to the Federal Circuit on appeal.

Complex Concepts Simplified

Compulsory Counterclaim: A counterclaim that must be filed because it arises from the same facts or agreement as the opponent’s original claim. If omitted, it may later be lost.
Declaratory Judgment Act: Federal statute (28 U.S.C. § 2201) permitting a party to seek a court ruling on rights or legal relations in an ongoing dispute, rather than waiting to be sued.
Patent Misuse: An equitable defense that bars enforcement of a patent when the patent holder has impermissibly expanded its patent rights—for example, by extracting royalties on unpatented products or extending royalties past patent expiration.
“Arises Under” Jurisdiction: A federal court’s authority to decide a case when a claim or counterclaim is created by federal law (avenue one) or when a federal issue is substantial and actually in dispute (avenue two).
Exclusive Appellate Jurisdiction: Congress can assign certain appeals to a specialized court. The Federal Circuit was granted exclusive rights to hear patent appeals, preserving uniformity in patent law.

Conclusion

Honeywell International, Inc. v. OPTO Electronics Co., Ltd. establishes that when a defendant asserts a compulsory counterclaim of patent misuse seeking a declaration of patent unenforceability, federal patent law creates the cause of action and divests regional circuits of appellate jurisdiction. Under 28 U.S.C. § 1295(a)(1), only the Federal Circuit may decide such appeals. This ruling preserves the centralized, uniform treatment of patent issues and provides clear guidance to litigants about forum and strategy in licensing disputes where patent defenses are anticipated.