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CLIENT ALERT: Supreme Court Decision on Jurisdiction for a Patent Malpractice Claim

Posted by Unknown | Feb 22, 2013 | 0 Comments

In Gunn v. Minton, No. 11-1118, slip op. (U.S. February 20, 2013), the United States Supreme Court held that the state court has jurisdiction for a patent malpractice claim because the claim did not meet the “arising under” factors to provide exclusive federal jurisdiction.

Background of the Case

Minton was the plaintiff in a patent infringement case in which the defense asserted that Minton's patent was invalid due to an on-sale bar that occurred when he leased the technology. Minton's counsel did not argue the experimental-use exception and Minton's patent was held invalid. Minton filed a motion for reconsideration that went to the Federal Circuit who held that the experimental-use argument had been waived.

Minton's sued his attorneys, Gunn et al., for malpractice in Texas state court. The trial court held that Minton's experimental-use argument would have failed if it was timely raised because he put on “less than a scintilla of proof.” Id. at 3. Minton appealed, arguing that his malpractice claim arose under federal patent law and should be heard in federal court instead of state court. The Court of Appeals held that Minton's malpractice claim did not arise under federal patent law but the Supreme Court of Texas reversed that decision. Gunn et al. filed a petition for certiorari to the United States Supreme Court that was subsequently granted.

Supreme Court Holding

The Supreme Court reversed and remanded the decision of the Texas Supreme Court in a 9-0 decision. There is federal jurisdiction over a state law claim if the 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. The Court held that although a federal issue was necessarily raised and actually disputed, the federal issue was not substantial and the federal issue was not capable of resolution in federal court without disrupting the federal-state balance.

For the federal issue to be substantial, it must be important to the federal system as a whole, not just the parties. Legal malpractice in Texas requires four elements, 1) that the defendant attorney owed the plaintiff a duty; 2) that the attorney breached that duty; 3) that the breach was the proximate cause of the plaintiff's injury; and 4) that damages occurred. The causation element of the malpractice claim requires a “case within a case analysis” of whether the outcome of the litigation would have been different had the experimental-use exception argument, a disputed federal issue, been made. The Court found that the raising the argument would not have changed the result of the patent litigation. Therefore, the federal issue in this case does not carry significance. Moreover, the state court decision will not have a broad effect because federal courts would not be bound by any state court decisions that are contrary to federal precedent.

Resolution of the malpractice claim in federal court would disrupt the federal-state balance. As discussed above, there is not a substantial federal issue but the state courts do have an interest in regulating the lawyers within their state.

The judgment of the Supreme Court of Texas was reversed. The case was sent back to the Supreme Court of Texas for further proceedings.

What Does the Decision Mean for Litigants

Patent malpractice or licensing claims pending in federal court filed before enactment of the changes to 28 U.S.C. § 1338(a) (clarifying that state courts lack jurisdiction over legal claims arising under patent laws) and new 28 U.S.C. § 1454 (the new removal statute) on September 16, 2011 may be dismissed because the federal court does not have subject matter jurisdiction. For those considering filing such claims, the changes to 28 U.S.C. § 1338 and new 28 U.S.C. § 1454 will apply, therefore allowing litigants a chance at removal to federal court.

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