Supreme Court Holds State Court Has Jurisdiction over Legal Malpractice Suit in Patent Case

Gunn v. Minton By Laura Fishwick - Edited by Charlie Stiernberg Gunn v. Minton, No. 11-1118, 2013 WL 610193 (U.S. Feb. 20, 2013) Slip Opinion [caption id="attachment_3080" align="alignleft" width="150"]Photo By: - CC BY 2.0 Photo By: - CC BY 2.0[/caption] In a unanimous decision, the Supreme Court of the United States reversed and remanded a decision of the Supreme Court of Texas, Minton v. Gunn, 355 S.W.3d 634 (Tex. 2011), by finding that state courts can have jurisdiction over a legal malpractice claim based on an underlying patent matter. The Supreme Court of Texas had held that the case involved a substantial federal issue sufficient to trigger 28 U.S.C. § 1338(a)—which provides that “[f]ederal courts have exclusive jurisdiction over cases ‘arising under any Act of Congress relating to patent’”—because the resolution of the case turned on evaluation of an “experimental use” defense to anticipation under the on-sale bar of 35 U.S.C. § 102(b). In the 1990s, Vernon Minton developed and patented a computer program and telecommunications network used for securities trading. Minton filed an infringement suit in federal district court against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc. The district court declared Minton’s patent invalid on the basis of § 102(b)’s on-sale bar, because Minton had leased his patented program more than one year before filing his application. The district court further denied Minton’s motion for reconsideration, which argued for the first time that the lease agreement was part of ongoing testing qualifying under the “experimental use” exception to anticipation. The Federal Circuit affirmed, reasoning that Minton had waived this defense by not bringing it earlier. Minton then brought suit against his attorneys in Texas state court for failure to raise the experimental use argument. The state court rejected Minton’s argument, finding “less than a scintilla of proof” in his favor. Gunn, slip op. at 3. Minton appealed, arguing inter alia that the state trial court’s order should be vacated and the case dismissed because federal courts had exclusive jurisdiction over his patent law claim under § 1338(a). Patently-O provides an overview of the case, and PatentDocs gives more detailed descriptions of the Court’s arguments. SCOTUSblog discusses the major holdings and impact for the Federal Circuit. Chief Justice Roberts, writing for the Court, began by noting that the key question is whether this case would have been proper in federal court given the scope of Congressional authorization of original jurisdiction under 28 U.S.C. § 1331 and § 1338(a). Under these statutes, a case can “aris[e] under” federal law when the federal law creates the cause of action asserted, or as argued here, when it satisfies the Gable test, whereby the “state-law claim necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.” Gunn, slip op. at 6 (quoting Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005)) (emphasis added). The success of Minton’s malpractice case depended on whether he would have prevailed in his patent infringement suit if his lawyers had timely raised the experimental use defense, and therefore necessarily required an application of patent law. Despite resting on a judgment of a hypothetical patent case, the Court found that the federal issue was not substantial in the relevant sense. According to the Court’s interpretation, “substantial” refers to “the importance of the issue to the federal system as a whole,” not the significance of the issue to the parties in the immediate suit (which is relevant to the “actually disputed” factor). Id. at 8. The Court found that the federal issue had no special significance for the federal government, since it was merely a hypothetical patent case that “will not change the real-world result of the prior federal patent litigation” or “undermine ‘the development of a uniform body of [patent] law.’” Id. at 9–10 (quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989)). The Supreme Court laid down several important rulings for future patent malpractice claims. In addition to clarifying the meaning of “substantial” in the Grable test, the Court opined that federal courts would not be bound by state court “case-within-a-case” patent rulings. In support of their decision, the Court reasoned that in the event a state court misconstrued federal patent law, the error would be corrected when the same issue was heard in a federal patent case. The Court noted that state court decisions and claim constructions would probably not have preclusive effect on the U.S. Patent and Trademark Office for future patent applications; though if they did, the effect would be “fact-bound and situation-specific.” Id. at 11. Summarizing the effect of their holding, the Court opined in dicta “that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a).” Id. at 6–7. The Court in this case was motivated to balance state and federal judicial responsibilities with the traditional role of state courts in managing lawyers. The Court’s interpretation of “substantial” raises the bar for getting into federal court on patent subject matter jurisdiction under the limited circumstances in which a federal law does not create the cause of action asserted but the state law claim raises a federal issue. The Court may have also been swayed by the extreme facts of this case, in which the plaintiff argued the jurisdiction issue in order to overcome an adverse judgment, after having already brought the case in state court himself and fully availed himself of the Texas system. Laura Fishwick is a 3L at Harvard Law School.