US Supreme Court: Underlying patent infringement suit
FACTS: Minton was awarded a patent covering a computer program and telecommunications network for the securities trading industry. He then filed a patent infringement action against the National Association of Securities Dealers (NASD) and NASDAQ. He was represented by Attorney Gunn. The patent was declared invalid and Minton’s infringement suit was dismissed by the District Court. Gunn moved for reconsideration and asserted for the first time that the patent was not invalid based on the “experimental use” provision in the patent law which would have preserved the patent from invalidation. On appeal, the Federal Circuit Court of Appeals, where patent appeals are typically heard, ruled that Minton had waived the “experimental use” argument by failing to raise it below. Minton believed that he would have prevailed had this argument been timely raised by his lawyer. He sued his attorney for malpractice in Texas state court. The attorneys argued the state court had no jurisdiction because the underlying patent claim gives the federal court exclusive jurisdiction. The Texas Supreme Court ultimately agreed and dismissed the malpractice claim for lack of jurisdiction. Minton appealed to the U.S. Supreme Court.
ISSUE: As succinctly stated by the Court:
"Federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents” 28 U.S.C. §1338 (a). The question presented is whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court.”
RULING: No. State Courts are the appropriate forum for patent based legal malpractice claims.
In a unanimous decision issued on February 20, 2013, the U.S. Supreme Court held that state courts have jurisdiction to resolve state legal malpractice actions even if the determination of the malpractice claim requires resolution of a disputed federal patent question. This decision instructs that state courts may not dismiss malpractice cases having their origins in patent law malpractice for want of federal court jurisdiction, and provides the federal courts with impetus to remand such cases to state court, as they do not “aris[e] under” federal patent law pursuant to 28 U.S.C. § 1338. Congress did not confer exclusive jurisdiction over claims which merely touch upon patent law and pose hypotheticals which would not have precedential value, such as with state-based legal malpractice claims which would not yield a binding decision on the validity or invalidity of a patent claim. In rejecting the arguments that the federal courts have exclusive jurisdiction, that the federal courts are better suited to exercise their expertise in the field, and that allowing state courts to decide patent issues disturbs the balance between the state and federal courts, Gunn allows such (non-diversity) matters to remain in state court and effectively overrules contrary decisions found in Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, LLP, 504 F.3d 1262 (Fed Cir. 2007) and Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed Cir. 2007). Gunn is also consistent with the U.S. Supreme Court’s decision in Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826 (2002), which can be cited for the proposition that where the patent issue is raised via counterclaim (such as where counsel sues a former client for attorney’s fees, and the client responds with a patent-based malpractice claim, the case cannot be said to “arise under” 28 U.S.C. § 1338 and federal court jurisdiction cannot be maintained.
LESSON: In its opinion, the Court held that “state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of §1338(a).” Gunn v. Minton thus permits clients who assert malpractice claims against their patent lawyer to file those claims in state court without fear that state courts will summarily reject the suit for want of jurisdiction and grant an application to remove the matter to federal court. Now, patent based legal malpractice claims will necessarily focus on the merits of the case wihout concern that unnecessary time and effort will be spent moving between the trial and appellate courts litigating the procedural grounds of subject matter jurisdiction.
Posted in: Federal