On Jan. 23, 2013, this column reported Chief Justice John Roberts’ concern expressed at oral argument that state courts opining on federal issues such as patent rights could be "disruptive to the uniformity of federal patent law." We predicted that it remained "to be seen how the justices will eventually decide [Gunn v. Minton, 133 S.Ct. 1059 (Feb. 20, 2013), argued Jan. 16, 2013], but it is likely a reasonable bet that federal courts will retain at least some jurisdiction.…"
The Supreme Court, however, held unanimously in Gunn, that state courts indeed may hear legal malpractice claims involving federal patent questions, reversing the Texas Supreme Court’s decision that federal courts had exclusive jurisdiction.
Gunn originated in Texas state court, as the fallout from an underlying patent litigation in which respondent Vernon Minton sued Nasdaq for patent infringement in the Eastern District of Texas. That action was dismissed when the court there invalidated the patent in suit for violating the on-sale bar of 35 U.S.C. 102(b). Allegedly, the lawyers representing Minton neglected to assert the experimental use exception to the on-sale bar, and the decision was upheld on appeal.
Minton responded by filing a malpractice suit in Texas state court, alleging that the lawyer’s negligent failure to timely raise the experimental use exception to the on-sale bar cost him the opportunity of winning his federal patent infringement litigation. The trial court dismissed the action for lack of evidence, and Minton appealed to the state appellate court in Fort Worth. While the appeal was pending, the U.S. Court of Appeals for the Federal Circuit issued its opinions in Air Measurement v. Akin Gump1 and Immunocept v. Fulbright,2 holding that when a state-law malpractice case arises from a substantive issue of patent law, federal courts have jurisdiction over such claims. Minton then moved to dismiss his own case for lack of subject matter jurisdiction, hoping to re-file the malpractice suit in federal court. The appeals court was unmoved, however, and instead affirmed the trial court’s ruling dismissing the suit with prejudice.
On appeal to the Texas Supreme Court, Minton prevailed: The court held that, purportedly under U.S. Supreme Court precedent, Minton’s malpractice case belonged exclusively in federal court, and granted the motion to dismiss. The court agreed that because his legal malpractice claim was based on an alleged error in a patent case, it "aris[es] under" federal patent law for purposes of 28 U.S.C. §1338(a). And because, under §1338(a), no "state court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents," the Texas court lacked subject matter jurisdiction to decide the case.
Supreme Court’s Analysis
The Supreme Court disagreed, relying on its precedent set in Grable & Sons Metal Products v. Darve Engineering & Mfg., 545 U.S. 308, 314 (2005):
Does the "state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities?" Grable, 545 U.S., at 314, 125 S.Ct. 2363. That is, federal jurisdiction over a state law claim will lie if a federal issue is (1) necessarily raided, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirements are met we held, jurisdiction is proper because there is a "serious federal interest in claiming the advantages thought to be inherent in a federal forum," which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts.
Id., at 313-314, 125 S.Ct. 2363.
Applying Grable’s inquiry, the Supreme Court found that this particular legal malpractice claim does not "arise" under federal patent law and, indeed, state legal malpractice claims based on underlying patent matters will "rarely, if ever," arise under federal patent law for purposes of 1338(a).
In Minton’s case, although a federal patent question (i.e., whether the experimental use exception to an on-sale bar factually applied) was "necessarily raised," and "actually disputed," the federal issue, the court concluded, was "not substantial in the relevant sense:"
As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raises[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole. [emphasis in original]
Here, the federal issue carries no such significance. Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical "case within a case," it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.
There is no doubt that resolution of a patent issue in the context of a state legal malpractice action can be vitally important to the particular parties in that case. But something more, demonstrating that the question is significant to the federal system as a whole, is needed. That is missing here.
The Supreme Court further concluded that the fourth prong of the Grable test was also not met, stating that states have a "special responsibility for maintaining standards among members of the licensed professions" and that there is no reason to "suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue." Accordingly, the judgment of the Supreme Court of Texas was reversed.
Robert C. Scheinfeld is a partner and the head of the intellectual property group in the New York office of Baker Botts. Parker H. Bagley is a partner at Goodwin Procter.
1. Air Measurement Technologies v. Akin Gump Strauss Hauer & Feld, 504 F.3d 1262 (Fed. Cir. 2007).
2. Immunocept v. Fulbright & Jaworski, 504 F.3d 1281 (Fed. Cir. 2007).