Premier Networks, Inc. v. Stadheim & Grear, Ltd., 395 Ill. App. 3d 629, 632 (2009)
IL: Patent Law
Student Contributor: Rachel Vincent
Facts: Patent owner (Premier) is suing law firm and two of its attorneys (Stadheim) for legal malpractice and seeking a declaration to void their contingent fee agreement. Premier owns a patent on a system that amplifies telephone signals. Premier believed that Lucent Technologies (Lucent) was infringing on its patent and hired plaintiffs to bring a federal lawsuit against Lucent. The federal district court granted summary judgment for Lucent, finding no patent infringement. When Premier hired Stadheim, Premier entered into a written contingency agreement where Stadheim would receive 40% of all future income derived from the patents, plus costs, in return for it’s services. The agreement gave both parties the right to terminate the agreement. Premier is suing Stadheim for legal malpractice and is seeking a declaration that contingent fee agreement is void. The circuit court dismissed the malpractice claim and granted judgment on the pleading to Stadheim on the declaratory judgment claim. Premier appealed.
1. Whether the court correctly dismissed the malpractice claim for lack of subject matter jurisdiction?
2. Was the contingent fee agreement between Premier and Stadheim valid?
1. Yes. Federal court has exclusive jurisdiction over patent cases, pursuant to the United States Constitution. The court lacked subject mater jurisdiction over the case because Premier’s legal malpractice claim against Stadheim were “inextricably bound to determinations of substantive issues of patent law, over which federal courts had exclusive jurisdiction.”
2. No. Contingent fee agreement between Premier and Stadheim, which granted Stadheim 40% of income received from patents in exchange for legal services did not violate the Rules of Professional conduct requiring lawyers fees to be reasonable. Even if the fee was found to violate the rules of professional conduct that is not enough to invalidate the agreement.
Lesson: The lesson here is two fold. First, a state court will not decide a malpractice case if it deals with an area that is exclusively under the federal courts jurisdiction. Second, just because an attorney’s fee’s is high, doesn’t necessarily make it unreasonable. The federal circuits, however are split as to whether the state courts retain jurisdiction over legal malpractice claims even if they arise from an underlying patent case.
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