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IP Alert: Gunn v. Minton Holds Malpractice Claims Belong in State Court

February 28, 2013

As previously reported, on February 20, 2013, in Gunn v. Minton, the U.S. Supreme Court issued a unanimous decision concerning whether there is federal subject matter jurisdiction over an attorney malpractice claim involving attorney conduct in a patent infringement lawsuit previously brought in a federal court. The Court held that state courts have jurisdiction over such attorney malpractice claims and that such claims do not arise under federal patent law for purposes of federal jurisdiction under 28 U.S.C. 1338(a).

Minton filed a malpractice suit in Texas state court against attorneys who had represented him in earlier patent infringement proceedings. Minton alleged that the attorneys had failed to present arguments based on “experimental use” exception to rebut an on-sale bar defense in the earlier proceedings, thus leading to a holding that Minton’s patent was invalid. The Texas court granted summary judgment for the defendant attorneys, and Minton appealed to a Texas court of appeals.

On appeal, Minton attacked the jurisdiction of the state court. He argued that his legal malpractice claim was based on a patent infringement lawsuit and that the case therefore should be dismissed and tried in federal district court. Minton predicated his argument on 28 U.S.C. 1338(a), which provides “no State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents.” A divided panel of the appeals court rejected Minton’s argument.

Minton then appealed to the Supreme Court of Texas, which subsequently reversed this decision. Relying on Federal Circuit authority, such as Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. and Immunocept, LLC v. Fulbright & Jaworski, LLP, the court held that Minton’s claim involved a “substantial federal issue” because “the success of Minton’s malpractice claim [was] reliant upon the viability of the experimental use exception as a defense to the on-sale bar.”

The U.S. Supreme Court then granted a writ of certiorari to hear an appeal from this decision. On appeal, the U.S. Supreme Court reversed. The Court based its analysis on an earlier Supreme Court case, Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., which provided a four-part test for determining whether there is federal jurisdiction over a state court claim:

Federal 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. Where all four of these requirements are met . . . jurisdiction [in federal court] is proper. . . .

The Court held the first two requirements were met because by the nature of the malpractice suit, the parties were required to dispute issues pertaining to patent provisions. But the Court held the second two requirements were not met. As to whether the federal issue was “substantial,” the Court reasoned that although the federal issue was significant to the parties involved in the immediate suit, the appropriate “substantiality” inquiry under Grable requires a determination of the importance of the issue to the federal system as a whole. The Court observed that the result of the malpractice suit would have no impact on the actual underlying patent infringement case. As the Court observed, the malpractice claim was of a “backward-looking nature,” and no matter how the state courts resolve the malpractice claim, Minton’s patent would remain invalid. Also, the federal courts would not be bound by any state court interpretation of patent law. The Court rejected Minton’s argument that the state decision might be issue-preclusive in subsequent federal cases, noting that “the result would be limited to the parties and patents that had been before the state court.” The Court likewise rejected Minton’s touting of the “federal courts’ greater familiarity with patent law.”

Regarding the federal-state balance, the Court observed that states have a special interest in regulating lawyers in light of the importance of the legal profession within each state. The Court reasoned, “we are comfortable concluding that state legal malpractice claims based on underlying patent matter will rarely, if ever, arise under federal patent law for purposes of §1338(a),” as these cases “are by their nature unlikely to have the sort of significance for the federal system necessary to establish jurisdiction.”  

Absent diversity jurisdiction, therefore, it is likely that federal district courts will lack jurisdiction over patent-related malpractice cases that arise under state law. The full import of the decision has yet to be determined, however, and there may be cases where federal question jurisdiction over such claims is appropriate.

On February 25, 2013, the Court entered an order in Byrne v. Wood, Herron & Evans, LLP, a case presenting a similar issue to that in Gunn. The Court granted certiorari, immediately vacated the lower court’s decision, and remanded the case for reconsideration in light of Gunn. That same day the Court also denied the petition for a writ of certiorari in Regents of Univ. of California v. Caldera Pharmaceuticals, Inc., a case raising the issue of whether the federal courts have exclusive jurisdiction over breach of contract and fraud issues in a dispute concerning a patent license.

For more information on the Gunn case, please contact Fitch Even partner Karl R. Fink.

-- Written by Fitch Even attorney Jonathan C. Hughley

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