Supreme Court to decide if patent-law legal malpractice claims are subject to exclusive federal court jurisdcition

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by Jay Pate

The laws governing federal court jurisdiction include 28 U.S.C. 1338(a), which provides in part:

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.

Does this mean the federal courts have exclusive jurisdiction in any cases that involve patent law, even when the patent issue is not the primary issue in the case? For example, what about a legal malpractice claim brought under state law alleging that a lawyer mishandled a case involving patent rights.

In the early 1990s, Vernon Minton, a former securities broker, developed the Texas Computer Exchange Network (TEXCEN) software that allowed financial traders to execute trades on their own. R.M. Stark & Co. (Stark) agreed to lease TEXCEN. More than one year later, Minton filed for a patent that was granted by the United States Patent and Trademark Office on January 11, 2000.

Minton then filed a federal patent infringement action against the National Association of Securities Dealers Inc. The federal district court dismissed Minton’s suit on summary judgment, concluding that Minton’s patent was invalid because of the “on-sale bar” doctrine, and the Federal Circuit affirmed.

Minton then filed a malpractice action against his lawyers in Texas state court, alleging they had failed timely to assert that Minton had an “experimental use defense” to the on-sale bar rule. Minton alleges that the negligence of his lawyers caused him to lose the patent infringement suit.

The lawyers filed motions for summary judgment challenging the causation element of Minton’s malpractice claim, arguing that the experimental use exception did not apply to the commercial lease at issue so their alleged failure to timely raise the exception could not have caused Minton harm in the patent litigation. The trial court granted the summary judgment motions and rendered a take-nothing judgment on all Minton’s legal malpractice claims against the lawyers.

Minton appealed. While his appeal was pending, the Federal Circuit Court of Appeals decided two cases holding that federal courts have exclusive jurisdiction over all legal malpractice suits involving underlying patent matters: Air Measure- ment Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immuno- cept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007). Based on those two cases, Minton argued that the legal malpractice claims he filed (and lost) in state court were actually within the exclusive jurisdiction of the federal courts.

The Supreme Court of Texas agreed with Minton. The court followed the Federal Circuit in Air Measurement and Immunocept and held that Minton’s claims come within the exclusive jurisdiction of the federal courts. Minton has since refiled his legal malpractice claims against the lawyers from scratch in federal court. The United States Supreme Court granted certiorari to consider the Texas Supreme Court’s decision.

In Grable & Sons Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), the Supreme Court articulated a standard for “arising under” jurisdiction over state law claims with embedded federal issues that is careful, narrowly drawn, and rejects the notion that “mere need to apply federal law in a state-law claim will suffice to open the ‘arising under’ door.” Under Grable, is not enough that the state claims contain an embedded federal issue; the federal issue must be “actually disputed and substantial,” and it must be one that the federal courts can entertain without disturbing the balance between federal and state judicial responsibility. According to the petition for certiorari, the question before the Supreme Court actually involves the correctness of the Federal Circuit decisions relied on by the Texas court:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), for “arising under” jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit’s mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims – which involve no actual patents and have no impact on actual patent rights – into the federal courts?

During the recent oral argument before the Supreme Court, Jane Webre, representing the lawyers, focused on an argument that the questions about patent law in malpractice cases are not “substantial” because they are hypothetical and will affect the patent office or subsequent patent cases. Thomas Michel, arguing for Minton, suggested the case should be resolved by the statute’s language that federal courts have exclusive jurisdiction over cases “arising under” the patent laws. However, Justices Ginsburg and Kennedy noted that such a broad rule could sweep into the federal courts all legal malpractice cases involving antitrust, copyright, and immigration law.

A decision in Jerry W. Gunn et al. v. Vernon F. Minton, No. 11-1118, is expected later this term.

Patent Law Cases and Our Law Firm

At Heygood, Orr & Pearson, our attorneys have handled numerous patent matters including prosecuting claims for infringement, as well as for interfered-with patent rights. We have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with its patent rights to liposome technology.

Our attorneys are capable of litigating patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.

Beyond our specific experience in the field of intellectual property, our ability to prosecute patent infringement action is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules is a must for attorneys handling patent infringement claims, there is no substitute for courtroom experience. At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex patent case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas for several years in a row.** Our firm is AV rated, the highest legal and ethical ranking available from the leasing law firm ranking service, Martindale-Hubbell.

If you or your company is in need of representation in an intellectual property matter, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by completing the free case evaluation form located on this page.

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Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2013.