Supreme Court Holds a Gunn to Exclusive Federal Court Jurisdiction Over Patent Malpractice Claims

28 February 2013 PharmaPatents Blog

In Gunn v. Minton, the Supreme Court held that federal courts do not have exclusive jurisdiction over patent malpractice claims. Under 28 USC § 1338(a), federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents,” but the Court determined that patent malpractice claims do not arise under the patent laws.

The Alleged Malpractice

Gunn represented Minton in a patent infringement case, where Minton’s patent was found invalid under the on-sale bar provisions of 35 USC § 102(b). In a motion for reconsideration, Gunn/Minton argued for the first time that the sale at issue did not fall under the on-sale bar because it was an experimental use. The district court denied the motion and the Federal Circuit agreed that the “experimental use” argument had been waived.

Minton brought a malpractice claim in Texas state court, alleging that Gunn’s failure to raise the “experimental use” argument earlier led to the verdict against him. Gunn defended on the basis that the sale was not an experimental use, and so Minton would have lost the patent infringement case even if the issue had been raised earlier. The state court agreed with Gunn, noting that Minton “had put forward ‘less than a scintilla of proof’” on that issue.

In his appeal to the Texas Court of Appeals, Minton argued that the state court’s decision should be vacated because it lacked jurisdiction over his malpractice claim, because his claim “was based on an alleged error in a patent case,” and so “arises under” the patent laws, such that federal courts have exclusive jurisdiction. (Was Minton going to charge his new attorney with malpractice for filing his malpractice case in state court?)  The Texas Court of Appeals disagreed, and affirmed the state court on the merits. The Supreme Court of Texas reversed in a divided decision, citing Federal Circuit precedent that supports exclusive federal court jurisdiction over patent malpractice claims.

The Grable Test

Legal malpractice usually is a state law cause of action, but patent malpractice claims can involve substantive issues of patent law. To determine whether those patent law issues confer federal court jurisdiction, the U.S. Supreme Court applied its four-part test from Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg.:

[F]ederal jurisdiction over a state law claim will lie if a federal issue is: (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.

In the Gunn case, as in most patent malpractice cases, the substantive patent law issue was both (1) necessarily raised and (2) actually disputed. However, the Court explained that the issue was not “substantial” as that term is used in the Grable test. The Court explained that the requirement that a federal issue be “substantial” is not assessed from the perspective of the parties, but only is satisfied if substantial federal interests are at stake, e.g., if the issue is important “to the federal system as a whole.”

The Court noted several reasons why this requirement is not met for patent malpractice cases:

  • The state court’s decision will not affect the outcome of the prior federal patent litigation or the validity (etc.) of the patent(s) at issue.
  • Federal courts will not be bound by any state court decisions on patent law issues.
  • The USPTO will not be bound by any state court decisions on patent law issues.

The Court rejected the argument that “federal courts’ greater familiarity with patent law” justifies federal court jurisdiction.

[T]he possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law.

The Court concluded:

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.

Having found that the “substantial” prong of the Grable test was not met, the Court found that the fourth prong also was not met. Indeed, the Court noted that states “have ‘a special responsibility for maintaining standards among members of the licensed professions.’” The Court concluded:

We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue.

Shooting Down Federal Expertise

While the specific outcome in this case makes sense, I am troubled by the Supreme Court’s dismissal of the value of having patent law issues resolved by courts who are “well-versed” in those interests. If I ever have to defend my professional conduct against charges of malpractice, I certainly would want the court to understand the complexities of patent law. Further, this decision abrogates Federal Circuit case law supporting federal jurisdiction over patent malpractice claims, including the two Federal Circuit Decisions that the Texas Supreme Court had relied upon. I also find it interesting that the Court concludes its opinion by citing a case from “a century ago” (1912), which was long before both the 1952 Patent Act and the Federal Circuit came into existence.

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