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SCOTUS: Federal Courts Lack Jurisdiction Over Patent Legal Malpractice Claims
Practical Law Legal Update 5-524-3289 (Approx. 3 pages)
SCOTUS: Federal Courts Lack Jurisdiction Over Patent Legal Malpractice Claims
by PLC Intellectual Property & Technology
| Published on 22 Feb 2013 • USA (National/Federal) |
On February 20, 2013, in Gunn v. Minton, the US Supreme Court reversed a decision by the Supreme Court of Texas that a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court. The Court held that these legal malpractice claims did not raise a substantial federal issue.
This case arose out of a failed federal patent infringement suit by Vernon Minton against the National Association of Securities Dealers, Inc. and the NASDAQ Stock Market, Inc. After the district court in that case granted summary judgment in favor of the defendants on the ground that the Patent Act's "on sale" bar rendered Minton's patent invalid, Minton filed a motion for reconsideration arguing, for the first time, that the patent fell within the "experimental use" exception to the on sale bar. The district court held, and the Federal Circuit affirmed, that Minton had waived that argument.
Minton then sued his lawyer, Jerry Gunn, for legal malpractice in state court claiming that Gunn's failure to timely make the experimental use argument had caused him to lose the underlying lawsuit and have his patent invalidated. The trial court granted summary judgment to Gunn, finding that Minton's patent suit would have failed even if Gunn had timely raised this argument.
Milton appealed, arguing that the state court did not have subject matter jurisdiction over his malpractice claim because federal courts have exclusive jurisdiction over cases arising under any federal act relating to patents under Section 1338(a) of the Patent Act. The Court of Appeals of Texas rejected Milton's argument, but the Supreme Court of Texas reversed, concluding that:
- Minton's claim involved a substantial federal issue because its success turned on an interpretation of the viability of the experimental use exception.
- Adjudicating the claim in federal court reflected an appropriate balance of federal and state court responsibilities in light of federal government's and patent litigants' interest in uniform application of patent law.
In its February 20, 2013 decision, the US Supreme Court reversed the Supreme Court of Texas' decision and held that Minton's state legal malpractice claims should be heard in state, not federal, court. The Court acknowledged that federal courts have exclusive jurisdiction over cases arising under any federal act relating to patents. Under Section 1338(a), a case arises under federal law if either:
- Federal law creates the cause of action asserted.
- The claim is based on state law, but a federal issue is:
- necessarily raised;
- actually disputed;
- substantial; and
- capable of resolution in federal court without disrupting the federal-state balance approved by Congress.
The Court found that Minton's state law malpractice claim satisfied the first two of the criteria for Section 1338(a) jurisdiction over state law claims, but that:
- It failed to raise a substantial federal issue.
- Asserting federal jurisdiction would disrupt the balance between federal and state court.
No Substantial Federal Issue
The Court found that Minton's malpractice claim did not raise a substantial federal issue. The Court found that while determining whether Minton would have prevailed in the underlying patent infringement case was significant to the particular parties in the immediate suit, it did not create a substantial federal issue because the determination was not important to the federal system as a whole. Although the legal malpractice claim would require the state court to conduct a case within a case on Minton's patent infringement claims, the state court's determination of his patent claims would not:
- Change the real-world result of the preceding federal patent litigation.
- Be controlling in numerous other federal cases.
Balance Between Federal and State Courts
The Court also found that Minton failed to meet the requirement that the issue be capable of resolution in federal court without disrupting the federal-state balance. The Court already determined that there was not a substantial federal issue in Minton's legal malpractice claim. It further held that states have a special responsibility for maintaining standards among members of the licensed professions, especially lawyers.
Court Document