Justia.com Opinion Summary: This case arose out of patent infringement litigation. At issue was whether federal courts possess exclusive subject matter jurisdiction over state-based legal malpractice claims that require the application of patent law. The federal patent issue presented here was necessary, disputed, and substantial within the context of the overlying state legal malpractice lawsuit. Additionally, the patent issue could be determined without creating a jurisdictional imbalance between state and federal courts. Therefore, the court concluded that exclusive federal jurisdiction existed in this case. Accordingly, without reaching the merits of the legal malpractice claim, the court reversed the court of appeals' judgment and dismissed this case.
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IN THE SUPREME COURT OF TEXAS
444444444444
NO . 10-0141
444444444444
VERNON F. MINTON, PETITIONER,
v.
JERRY W. GUNN, INDIVIDUALLY, WILLIAMS SQUIRE & WREN, L.L.P., JAMES E.
WREN, INDIVIDUALLY, SLUSSER & FROST, L.L.P., WILLIAM C. SLUSSER,
INDIVIDUALLY, SLUSSER WILSON & PARTRIDGE, L.L.P., AND MICHAEL E.
WILSON, INDIVIDUALLY, RESPONDENTS
4444444444444444444444444444444444444444444444444444
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE SECOND DISTRICT OF TEXAS
4444444444444444444444444444444444444444444444444444
Argued March 1, 2011
JUSTICE GREEN delivered the opinion of the Court, in which CHIEF JUSTICE JEFFERSON ,
JUSTICE WAINWRIGHT , JUSTICE JOHNSON , and JUSTICE LEHRMANN joined.
JUSTICE GUZMAN filed a dissenting opinion, in which JUSTICE MEDINA and JUSTICE WILLETT
joined.
JUSTICE HECHT did not participate in the decision.
This case arises out of patent infringement litigation. We consider whether federal courts
possess exclusive subject-matter jurisdiction over state-based legal malpractice claims that require
the application of federal patent law. The federal patent issue presented here is necessary, disputed,
and substantial within the context of the overlying state legal malpractice lawsuit. Additionally, the
patent issue may be determined without creating a jurisdictional imbalance between state and federal
courts. We conclude that exclusive federal jurisdiction exists in this case. Accordingly, without
reaching the merits of the legal malpractice claim, we reverse the court of appeals’ judgment and
dismiss this case.
I. BACKGROUND
A. TEXCEN and the ‘643 Patent
Petitioner, Vernon Minton, is a former securities broker. In early 1990, Minton formed Texas
International Stock Exchange, Inc. (TISE). A couple of years later, Minton began developing the
Texas Computer Exchange Network (TEXCEN), a software program intended to operate over a
telecommunications network. Minton developed the TEXCEN software to allow financial investors
to “open[] brokerage accounts and execut[e] trades” at their own convenience “with all the
investment technology the experts enjoy.” After successfully establishing TEXCEN’s commercial
viability to R.M. Stark & Co. (Stark), a New York corporation and member of the National
Association of Securities Dealers, Inc. (NASD), Minton asked Stark to employ TEXCEN in its
business. In a January 1995 letter, Minton touted TEXCEN’s utility to Stark’s business, stating that
“[a]fter five years of development, TEXCEN is scheduled to be on-line during March or April of this
year.” Stark agreed to lease TEXCEN from TISE, Minton’s company. The lease permitted Stark
to use TEXCEN “for the purpose of opening brokerage accounts and executing trades for
individuals.” In exchange, Stark agreed to pay TISE a monthly payment of the lesser of $2,000.00
or 30% of the gross revenues that Stark derived from using TEXCEN. The lease warranted that
“TEXCEN will perform in a workmanlike manner.” During the lease negotiations, Minton knew
that Stark could not use TEXCEN or provide its customers with TEXCEN’s benefits until NASD
2
had reviewed and approved of the software. Despite this knowledge, Minton did not disclose to
Stark that he intended to lease TEXCEN to Stark for experimental purposes.
More than one year after signing the TEXCEN lease, Minton filed a provisional application
for a patent covering an interactive securities trading system that contained features very similar to
TEXCEN. Minton’s patent attorney drafted the patent application with the aid of TEXCEN’s
software assistance manual, which Minton had provided him. The United States Patent and
Trademark Office granted Minton a patent (the ‘643 Patent) on January 11, 2000.
B. Underlying Patent Infringement Litigation
Subsequently, Minton filed a patent infringement action against NASD and The NASDAQ
Stock Market, Inc. in the United States District Court for the Eastern District of Texas. Minton v.
Nat’l Ass’n of Sec. Dealers, Inc., 226 F. Supp. 2d 845, 852 (E.D. Tex. 2002). Minton’s infringement
suit alleged that the NASDAQ software system used in conjunction with NASD’s services infringed
the ‘643 patent. Id. at 854. At the time they filed the patent infringement suit on Minton’s behalf,
his attorneys had no knowledge of the TEXCEN lease. NASD and NASDAQ moved for summary
judgment, alleging the ‘643 patent’s invalidity under the “on-sale bar” provided in § 102(b) of the
U.S. Patent Act. Id. at 852; see 35 U.S.C. § 102(b). Under the on-sale bar, a patent is invalid when
the invention claimed by the patent is sold “more than one year prior to the date of the application
for patent in the United States.” 35 U.S.C. § 102(b). As an initial defense to the application of the
on-sale bar, Minton pled that TEXCEN was a different type of software system than that claimed
by the ‘643 patent. Minton, 226 F. Supp. 2d at 855. The federal district court found Minton’s
3
argument unpersuasive and, accordingly, granted NASD and NASDAQ’s motion for summary
judgment and declared the ‘643 patent invalid. Id. at 852, 882–84.
Following the district court’s decision, Minton asked his attorneys to consider a new defense
to the on-sale bar—the experimental use exception. Under the experimental use exception, a patent
will not be invalidated by the on-sale bar if the purpose for which the patented invention was sold
was primarily experimental rather than commercial. See Electromotive Div. of Gen. Motors Corp.
v. Transp. Sys. Div. of Gen. Elec. Co., 417 F.3d 1203, 1210 (Fed. Cir. 2005). Minton obtained new
counsel to brief the experimental use exception to the on-sale bar, and a motion for reconsideration
arguing the experimental use exception was filed on Minton’s behalf. When the federal district court
denied Minton’s motion for reconsideration, Minton appealed to the United States Court of Appeals
for the Federal Circuit. See Minton v. Nat’l Ass’n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir.
2003). On appeal, the Federal Circuit affirmed the federal district court’s denial of reconsideration
because the experimental use exception was not timely asserted during trial. Id. at 1379–81.
C. Resulting State-Based Legal Malpractice Lawsuit
Minton filed a legal malpractice suit in state court against Respondents, the attorneys who
had originally prosecuted his patent infringement litigation in the federal district court: Jerry W.
Gunn, individually; Williams Squire & Wren, L.L.P.; James E. Wren, individually; Slusser & Frost,
L.L.P.; William C. Slusser, individually; Slusser Wilson & Partridge, L.L.P.; and Michael E. Wilson,
individually (collectively “Gunn”). Minton alleged that Gunn’s negligent failure to timely plead and
brief the experimental use exception to the on-sale bar cost him the opportunity of winning his
federal patent infringement litigation. Alternatively, Minton claimed that Gunn’s negligence resulted
4
in the pretrial dismissal of his patent infringement suit, costing him a potential settlement with
NASD and NASDAQ of his claim for more than $100,000,000.00 in damages. Gunn, in turn,
challenged the causation element of Minton’s malpractice claim by filing joint no-evidence and
traditional motions for summary judgment. Gunn’s joint motions asserted that he was not obligated
to raise the experimental use exception to the on-sale bar because, under the facts in existence at the
time of the federal patent infringement litigation, the exception was neither a legally nor factually
viable defense. Therefore, Gunn asserted that Minton could not establish as a matter of law that, but
for his failure to plead the experimental use exception, Minton would have won his patent
infringement lawsuit.
Based on the absence of any evidence that the primary purpose of the TEXCEN lease was
experimental, the trial court granted Gunn’s no-evidence motions for summary judgment and
motions to dismiss and rendered a take-nothing judgment in his favor.1 Minton appealed the
judgment to the Second Court of Appeals in Fort Worth. Minton v. Gunn, 301 S.W.3d 702 (Tex.
App.—Fort Worth 2009, pet. granted).
Shortly after Minton filed his state court appeal, the United States Court of Appeals for the
Federal Circuit decided Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld,
1
Gunn filed two joint motions for summary judgment, with the second filing in response to Minton’s first
amended original petition. Both of Gunn’s joint motions included no-evidence and traditional motions for summary
judgment. Initially, the trial court granted Gunn’s first no-evidence motion for summary judgment and partially granted
Gunn’s first traditional motion for summary judgment, but waited for additional briefing to dispose of the new claims
alleged in Minton’s amended petition. Minton’s amended petition included a new damages theory, alleging that Minton
would have settled the patent litigation or that Minton would have prevailed at trial and recovered damages of at least
$100,000,000.00 if the federal district court had not dismissed his claim under the on-sale bar. In response to Gunn’s
second joint motion, Minton merely incorporated by reference his briefing and evidence filed in response to Gunn’s first
joint motion and offered no additional evidence or argument. After reviewing the additional briefing and summaryjudgment evidence, the trial court granted Gunn’s second joint motion for summary judgment.
5
L.L.P., 504 F.3d 1262 (Fed. Cir. 2007). Air Measurement held that when “establishing patent
infringement is a necessary element of a [state] malpractice claim stemming from alleged
mishandling of . . . earlier patent litigation, the issue is substantial and contested, and federal
resolution of the issue was intended by Congress,” and thus, federal courts possess exclusive “arising
under” jurisdiction of the malpractice claim. Id. at 1273. Relying on Air Measurement, Minton
argued that his malpractice suit arose under exclusive federal patent law jurisdiction and asked the
court of appeals to dismiss his appeal for lack of subject-matter jurisdiction. Declining to follow the
Federal Circuit’s precedent, the court of appeals held that it had subject-matter jurisdiction over
Minton’s appeal and denied his motion to dismiss. Minton, 301 S.W.3d at 709. The court of appeals
then affirmed the trial court’s judgment, which granted Gunn’s joint motions for summary judgment.
Id. at 715. Minton filed a petition for review, which we granted. 54 TEX . SUP . CT . J. 538 (Feb. 8,
2011).
II. ANALYSIS
A. Subject-Matter Jurisdiction
Before we can reach the merits of Minton’s claim, we must first determine whether we
possess subject-matter jurisdiction to consider this appeal. See Coastal Oil & Gas Corp. v. Garza
Energy Trust, 268 S.W.3d 1, 9 (Tex. 2008) (considering jurisdiction before proceeding to determine
the merits of the case). The question of “[w]hether a court has subject matter jurisdiction is a
question of law that we review de novo.” City of Dallas v. Carbajal, 324 S.W.3d 537, 538 (Tex.
2010) (per curiam). In support of his view that this case arises under exclusive federal patent law
jurisdiction, Minton relies chiefly on two Federal Circuit opinions. Air Measurement, 504 F.3d
6
1262; Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed. Cir. 2007). Minton
asserts that the court of appeals erred in rejecting these cases and in applying non-patent law cases
to reach its holding. In reply, Gunn argues that this Court is not bound by the decisions of the
Federal Circuit and that the two Federal Circuit opinions that Minton would have us follow fail to
apply the federalism analysis required by the United States Supreme Court in cases involving the
division of jurisdiction between state and federal courts. See Grable & Sons Metal Prods., Inc. v.
Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). Although we disagree with Minton’s claim that
non-patent law cases are inapplicable to the issues presented here, we do agree that the experimental
use exception to the on-sale bar plays a substantial role within the context of Minton’s state-based
legal malpractice claim. Cf. Alexander v. Turtur & Assocs., 146 S.W.3d 113, 117 (Tex. 2004) (“To
prevail on a legal malpractice claim, a plaintiff must show that . . . [his attorney’s negligence]
proximately caused the plaintiff’s injuries . . . .” (internal quotations omitted)); Schaeffer v. O’Brien,
39 S.W.3d 719, 720 (Tex. App.—Eastland 2001, pet. denied) (legal malpractice plaintiffs must prove
a “case within a case”). We are also of the opinion that federal courts may entertain the application
of this patent law concept within a state-based legal malpractice suit without disturbing the balance
Congress has struck between state and federal judicial responsibilities. See Grable, 545 U.S. at
313–14. Accordingly, we are persuaded that exclusive federal patent law jurisdiction has been
triggered and that we lack subject-matter jurisdiction to consider Minton’s appeal.
Congress has provided federal courts jurisdiction over civil actions generally “arising under”
federal law and also over actions specifically “arising under” any federal law relating to patents. See
28 U.S.C. §§ 1331 (providing general federal question jurisdiction), 1338(a) (providing patent law
7
jurisdiction). One form of “arising under” federal-question jurisdiction stems from “state-law claims
that implicate significant federal issues.” Grable, 545 U.S. at 312. In Christianson v. Colt Indus.
Operating Corp., 486 U.S. 800 (1988), the Supreme Court construed § 1338(a)’s “arising under”
language to extend federal jurisdiction to any case “in which a well-pleaded complaint establishes
either that federal patent law creates the cause of action or that the plaintiff’s right to relief
necessarily depends on resolution of a substantial question of federal patent law, in that patent law
is a necessary element of one of the well-pleaded claims.” 486 U.S. at 808–09. Whether a patent
issue presented in a state-based action is substantial enough to trigger federal jurisdiction under
§ 1338(a) “must be determined from what necessarily appears in the plaintiff’s [well-pleaded
complaint] . . . unaided by anything alleged in anticipation or avoidance of defenses which it is
thought the defendant may interpose.” Id. at 809 (internal quotations omitted).
Several opinions issued by the United States Supreme Court demonstrate federal courts’
traditional reluctance to allow state plaintiffs to open “the ‘arising under’ door” by simply pleading
a federal issue. E.g., Grable, 545 U.S. at 313; Gully v. First Nat’l Bank in Meridian, 299 U.S. 109,
117–18 (1936) (declining to define cases arising under federal law broadly and adopting instead “a
selective process which picks the substantial causes out of the web and lays the other ones aside”);
Shulthis v. McDougal, 225 U.S. 561, 569 (1912) (“A suit to enforce a right which takes its origin in
the laws of the United States is not necessarily, or for that reason alone, one arising under those laws,
for a suit does not so arise unless it really and substantially involves a dispute or controversy
respecting the validity, construction, or effect of such a law, upon the determination of which the
result depends.”). Based on its reluctance to open wide the federal courthouse doors, the Supreme
8
Court has added several other requirements, in addition to substantiality, which must be satisfied
before a federal patent issue presented in a state action may trigger exclusive federal patent
jurisdiction.
In Grable, the Supreme Court refined the Christianson test and clarified the role that
federalism concerns should play in the analysis of whether a state-based lawsuit with embedded
federal issues arises under federal jurisdiction: “[T]he question is, does a state-law claim necessarily
raise 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.” Grable, 545 U.S. at 314. “In other words, federal question jurisdiction exists
where (1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal
issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not
disturb the balance of federal and state judicial responsibilities.” Singh v. Duane Morris LLP, 538
F.3d 334, 338 (5th Cir. 2008) (interpreting Grable). Although Grable is a non-patent law case, we
may apply this test here to determine whether Minton’s state-based legal malpractice claim arises
under exclusive federal patent law jurisdiction. See Holmes Grp., Inc. v. Vornado Air Circulation
Sys., Inc., 535 U.S. 826, 829–30 (2002); Christianson, 486 U.S. at 808–09.
While we are not bound by the holdings of the Federal Circuit, its opinions in Air
Measurement and Immunocept are directly on point with the issues and facts presented by Minton’s
legal malpractice action. Cf. Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993)
(stating that only the opinions of the United States Supreme Court are binding on this Court). Air
Measurement dealt with a state-based legal malpractice claim stemming from an underlying patent
9
dispute. 504 F.3d at 1265. In the underlying patent litigation, Air Measurement filed several patent
infringement suits and ultimately settled all of the cases. Id. at 1266. Based on information
discovered with subsequent counsel, Air Measurement claimed it was forced to settle for an amount
far below the market value of the patents due to errors committed by their original patent attorney
during the patent application process. Id. Air Measurement alleged that the patent attorney failed
to timely file the patent application within the one year on-sale bar, failed to disclose prior patents
and other facts while prosecuting the patent applications, and committed other errors that led to the
invalidity of Air Measurement’s patents in the underlying litigation. Id. In the resulting state-based
legal malpractice lawsuit, the Federal Circuit held that it possessed exclusive jurisdiction over the
malpractice suit. Id. at 1269. The Federal Circuit explained that “[b]ecause proof of patent
infringement is necessary to show [Air Measurement] would have prevailed in the prior litigation,
patent infringement is a ‘necessary element’ of [Air Measurement’s] malpractice claim and therefore
apparently presents a substantial question of patent law conferring [exclusive federal patent law]
jurisdiction.” Id. The Immunocept case involved a similar issue. 504 F.3d at 1282. There, the
assignee of a patent brought a state-based legal malpractice action against the patent attorney
originally hired to apply for and prosecute the patent at issue. Id. at 1283-84. The basis of the
resulting malpractice suit was the patent attorney’s claim-drafting error, which allegedly resulted in
a lower level of protection for the patented technology. Id. at 1284–85. Again, the Federal Circuit
determined that it had exclusive jurisdiction over the state-based legal malpractice suit “[b]ecause
patent claim scope defines the scope of patent protection . . . [and] is the first step of a patent
infringement analysis,” and is therefore “a substantial question of patent law.” Id. at 1285.
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To support his assertion that we should follow the Federal Circuit’s holdings in Air
Measurement and Immunocept, Minton criticizes the court of appeals’ reliance on non-patent law
cases and argues that we should look only to patent law cases because Congress has given federal
courts exclusive jurisdiction over patent law. See Empire Healthchoice Assurance, Inc. v. McVeigh,
547 U.S. 677, 682 (2006) (involving a state lawsuit for reimbursement based on a provision of the
Federal Employees Health Benefits Act); Grable, 545 U.S. at 310 (involving a state quiet title action
based on a federal tax statute); Singh, 538 F.3d at 338 (involving a state-based legal malpractice
claim stemming from an underlying trademark dispute). We find this distinction to be unpersuasive
because the Federal Circuit applied these very cases to reach its holdings in Air Measurement and
Immunocept. See Immunocept, 504 F.3d at 1285–86; Air Measurement, 504 F.3d at 1271–73.
Moreover, in various contexts, the Supreme Court has applied the same rules and tests to patent law
and non-patent law cases alike. See, e.g., Holmes Grp., 535 U.S. at 829–30; Christianson, 486 U.S.
at 808–09. Thus, we may look to both patent and non-patent law cases to determine whether
exclusive federal jurisdiction exists. After applying the law to the facts and issues presented here,
we determine each of the four Grable elements have been satisfied and that the court of appeals erred
in concluding that exclusive federal patent law jurisdiction was not triggered by the federal issue
embedded in Minton’s legal malpractice lawsuit.
The first prong of the Grable test requires that the applicability of the experimental use
exception to the on-sale bar be a necessary component in the determination of Minton’s state-based
legal malpractice claim. See Grable, 545 U.S. at 314. In Grable, the Supreme Court held that the
interpretation of a federal tax statute was a necessary element of the petitioner’s state-based quiet
11
title action because the success of his claim turned on that issue alone. Id. at 314–15. Until the
Supreme Court construed the language and determined the meaning of the federal statute, it could
not determine whether the petitioner had successfully proven his state-law claim. Id. The Supreme
Court has further explained that a federal element cannot be deemed necessary to a state-law claim
if on the face of the well-pleaded complaint there are alternative theories upon which the claimant
may recover. Christianson, 486 U.S. at 810. Here, Minton’s trial court petition asserted only one
theory in support of his legal malpractice claim—his attorneys’ negligent failure to timely plead and
brief the experimental use exception to the on-sale bar. Because Minton relies on a single negligence
claim, there are no alternative theories on which he may establish his attorneys’ legal malpractice.
Moreover, a determination of whether Minton would have won his underlying federal patent
infringement action necessarily requires a consideration of the legal and factual viability of the
experimental use defense. See Grable, 545 U.S. at 314–15; Alexander, 146 S.W.3d at 117; see also
Air Measurement, 504 F.3d at 1270 (noting that in the case-within-a-case requirement for legal
malpractice claims, the plaintiff had the burden of proving patent infringement, and whether the
plaintiff would have prevailed against the on-sale bar defense raised in the underlying patent
litigation is “not the sort of jurisdiction-defeating defense[] contemplated by [the Supreme Court in]
Christianson” because it is “part of the malpractice causation element rather than the defense[] raised
by [the defendant] in the” malpractice claim). If the experimental use defense would not apply under
the facts of his case, for instance, Minton’s attorneys’ negligence could not have proximately caused
the federal district court to invalidate the claims of the ‘643 patent. See Grable, 545 U.S. at 314–15.
12
Therefore, the applicability of the experimental use exception is a necessary element of Minton’s
state legal malpractice suit, and the first Grable prong is satisfied.
The second prong of the Grable test requires that the experimental use exception to the onsale bar be disputed in Minton’s state-based legal malpractice lawsuit. See id. at 314. For obvious
reasons, the legal and factual viability of the experimental use exception is clearly in dispute.
Minton’s attorneys will be liable for legal malpractice if the experimental use exception would have
been a viable defense to the on-sale bar and a defense that a reasonably prudent patent attorney
would have raised. See Alexander, 146 S.W.3d at 117. Accordingly, to defeat the applicability of
the experimental use exception, Gunn alleges Minton leased TEXCEN for a primarily commercial
purpose. Minton, on the other hand, avers that the exception would have applied to save the ‘643
patent from invalidation because the TEXCEN system was not fully operational and, therefore,
required extensive experimentation at the time he leased the software to Stark. This dispute
regarding the applicability of the experimental use exception satisfies the second element of the
Grable test.
The third prong of the Grable test demands that the applicability of the experimental use
exception be a substantial issue within Minton’s state-based legal malpractice claim. See 545 U.S.
at 314. Although we recognize that this question is close, we disagree with the court of appeals’
holding that the experimental use exception is not a substantial element here. In determining
whether a federal patent issue is a substantial element within the context of a state-based legal
malpractice claim, we are informed by the Supreme Court’s holding in Empire Healthchoice
Assurance, Inc. v. McVeigh, 547 U.S. 677 (2006). In Empire, an insurance carrier sued the estate
13
of one of its deceased insureds in federal district court when it learned that the insured’s estate had
settled a state-based personal injury suit on his behalf. Id. at 683. The carrier’s federal suit sought
reimbursement for the full amount of benefits it had paid to the insured after he sustained injuries
in an accident. Id. The carrier asserted that its reimbursement claims arose under federal jurisdiction
because a preemption provision in the insured’s insurance contract stated that federal law shall
supersede any state law relating to benefits. See id. at 699. The Supreme Court held that the
operation of the preemption clause of the federal insurance contract was not a substantial issue
because “the bottom-line practical issue [in the state-based reimbursement claim] is the share of [the]
settlement properly payable to [the carrier].” Id. at 700–01. Unlike Grable, where the construction
and interpretation of a federal tax statute was the crux of the state-based lawsuit, even if the
preemption provision in Empire allowed federal law to trump state law regarding reimbursement for
benefits, the carrier could not win until it proved that it was entitled to reimbursement from the statebased personal injury recovery. Compare Grable, 545 U.S. at 315, with Empire, 547 U.S. at 700–01.
We conclude that the experimental use exception presented here is more similar to the substantial
federal issue presented in Grable than the insubstantial issue presented in Empire.
Following Grable, other courts have deemed federal patent issues substantial when the
determination of the patent issue establishes the success or failure of an overlying state-law claim.
See, e.g., USPPS, Ltd. v. Avery Dennison Corp., 647 F.3d 274, 280–82 (5th Cir. 2011) (holding that
the state-law claims of fraud and breach of fiduciary duty in connection with a patent application
presented a substantial federal patent issue because the causation element required the plaintiff to
prove the underlying patentability of its invention); Warrior Sports, Inc. v. Dickinson Wright,
14
P.L.L.C., 631 F.3d 1367, 1372 (Fed. Cir. 2011) (holding that in order for the plaintiff to prove its
case-within-a-case in the legal malpractice suit, the state-based malpractice action presented a
substantial federal patent issue because it required a resolution on the merits of the patent
infringement claims, which were not addressed by the federal district court in the underlying patent
infringement litigation); Davis v. Brouse McDowell, L.P.A., 596 F.3d 1355, 1361–62 (Fed. Cir.
2010), cert. denied, 131 S.Ct. 118 (2010) (holding that a state-based legal malpractice action
presented a substantial federal patent issue where no patent had actually issued because of the
attorney’s alleged failure to timely file the patent application); Immunocept, 504 F.3d at 1285
(holding that the construction of patent claims, which define the amount of protection a patent
receives against infringement, was a substantial federal issue within the context of a state legal
malpractice suit based on a patent attorney’s claim-drafting error); U.S. Valves, Inc. v. Dray, 212
F.3d 1368, 1372 (Fed. Cir. 2000) (stating that a federal patent issue was substantial to a state breachof-contract claim where a patent licensee had to construe the claims of the licensed patent to show
that the licensor had sold products protected by the patent in contravention of a licensing agreement);
Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 986 F.2d 476, 477–78 (Fed. Cir.
1993) (holding that a determination of patent infringement was a substantial federal issue within the
context of a state-based business disparagement claim in which the plaintiff could not succeed until
it showed that the defendant lied about the plaintiff having infringed its patent); Landmark Screens,
LLC v. Morgan, Lewis & Bockius, LLP, 107 Cal. Rptr. 3d 373, 381 (Cal. Ct. App. 2010), cert.
denied, 131 S.Ct. 1472 (2011) (finding exclusive federal question jurisdiction where the plaintiff’s
legal malpractice claim, stemming from the attorney’s negligence in prosecuting the patent, required
15
proof of a substantial issue of federal patent law). Similarly, to succeed on his state-based legal
malpractice claim, Minton must establish that Gunn was required to raise the experimental use
exception because it was a legally and factually viable defense to the on-sale bar and that Gunn’s
failure to do so proximately caused Minton to lose his federal patent infringement litigation. See
Alexander, 146 S.W.3d at 117. Therefore, because the success of Minton’s malpractice claim is
reliant upon the viability of the experimental use exception as a defense to the on-sale bar, we hold
that it is a substantial federal issue satisfying the third prong of the Grable inquiry.
Finally, the fourth Grable element requires that the determination of the viability of the
experimental use exception be a question that a federal court may decide without upsetting the
balance between federal and state judicial responsibilities. Grable, 545 U.S. at 314. This final factor
is perhaps the most important. See id. (“[T]he presence of a disputed federal issue and the ostensible
importance of a federal forum are never necessarily dispositive; there must always be an assessment
of any disruptive portent in exercising federal jurisdiction.”). Although we recognize that legal
malpractice claims traditionally fall under the domain of state courts, we conclude that federal courts
may decide this malpractice case without upsetting the jurisdictional balance between federal and
state courts. Compare USPPS, 647 F.3d at 282 (finding federal-question jurisdiction in a state-based
tort claim where the underlying proceedings involved substantial questions of patent law), with
Singh, 538 F.3d at 338 (recognizing the importance of federalism considerations and holding a statebased legal malpractice resulting from an underlying trademark dispute did not meet the standard
16
for federal jurisdiction).2 In Grable, the Supreme Court held that allowing a federal court to have
jurisdiction over the construction of the federal tax statute did not upset the congressionally approved
balance of judicial responsibility because the federal government had a strong interest in having the
tax statute applied consistently in the future by federal officials who are frequently charged with the
duty of collecting delinquent taxes. Grable, 545 U.S. at 312–14. In conducting the federalism
analysis required under Grable, the Federal Circuit has recognized that federal courts also have a
strong interest in having federal patent law applied uniformly. See Immunocept, 504 F.3d at
1285–86 (recognizing Congress’s “intent to remove non-uniformity in the patent law, as evidenced
by its enactment of the Federal Courts Improvement Act of 1982” (citing Federal Courts
Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25)); Air Measurement, 504 F.3d at 1272
(“There is a strong federal interest in the adjudication of patent infringement claims in federal court
because patents are issued by a federal agency.”). Not only does the federal government have an
interest in the uniform application of patent law, but so do litigants involved in patent law disputes.
2
The dissent and Gunn’s emphasis on the Fifth Circuit’s holding in Singh is misplaced. Although Singh also
involves a determination of whether exclusive federal jurisdiction over a state-based legal malpractice claim exists, that
case is inapplicable to the question considered here. The federal issue in Singh arose under trademark law. Id. at 336.
W e have recognized that the distinction between patent and non-patent law cases is irrelevant to our consideration of
whether a case arises under federal jurisdiction, however, the Fifth Circuit in Singh expressly declined to extend its
jurisdictional holding to the area of federal patent law. Id. at 340 (“[W ]e decline to follow or extend a recent opinion
of the Federal Circuit, which found ‘arising under’ jurisdiction for a malpractice claim stemming from representation
in a federal patent suit.” (referencing Air Measurement, 504 F.3d at 1269)). W hile limiting its Singh holding to the
embedded federal trademark dispute, the Fifth Circuit noted the following: “It is possible that the federal interest in patent
cases is sufficiently more substantial, such that it might justify federal jurisdiction. But we need not decide [the patent
law issue], because it is not before us.” Id. More recently in USPPS, the Fifth Circuit addressed the distinction between
underlying trademark and patent disputes embedded in state-based claims. 647 F.3d at 282. In USPPS, the Fifth Circuit
recognized the federalism concerns expressed in Singh, but distinguished Singh’s holding, which concerned a legal
malpractice claim arising from an underlying trademark dispute, and adopted the Federal Circuit’s Air Measurement
holding of federal question jurisdiction for a state-law tort claim arising from an underlying patent litigation dispute. Id.
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See Immunocept, 504 F.3d at 1285 (“Litigants will benefit from federal judges who are used to
handling these complicated [patent law] rules.”); Air Measurement, 504 F.3d at 1272 (stating that
patent litigants will benefit from the “experience, solicitude, and hope of uniformity that a federal
forum offers on federal issues” (quoting Grable, 545 U.S. at 315) (internal quotation marks
omitted)).
Gunn attempts to persuade us that the facts of this case cannot survive the Grable federalism
inquiry because they are more similar to those considered by the Supreme Court in Empire. See
Empire, 547 U.S. at 677. As explained above, Empire involved a state cause of action for
reimbursement based on a preemption provision contained within a federal health care act. See id.
at 693, 699. There, the Supreme Court determined that the federal health care statute was not a
substantial element of the carrier’s state reimbursement suit because the more important factor was
the extent to which the carrier could attain reimbursement for the medical bills it covered. Id. at 701.
When applying Grable’s federalism inquiry to the non-statutory issue of reimbursement, the
Supreme Court stated that “it is hardly apparent why a proper federal-state balance would place such
a nonstatutory issue under the complete governance of federal law, to be declared in a federal
forum.” See id. at 701 (internal citations and quotations omitted).
At first glance, the fact that the experimental use exception to the on-sale bar is a product of
case law, rather than statute, appears to warrant a determination that the experimental use exception,
like the federal issue in Empire, does not survive the Grable federalism inquiry. See, e.g., City of
Elizabeth v. Pavement Co., 97 U.S. 126, 134–35 (1877) (establishing the experimental use exception
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to the on-sale bar).
However, courts applying this exception have noted that because the
experimental use exception only operates within the context of the statutory on-sale bar, “the focus
remains throughout the inquiry on application of the statutory bar itself.” EZ Dock v. Schafer Sys.,
Inc., 276 F.3d 1347, 1351–52 (Fed. Cir. 2002); see 35 U.S.C. § 102(b). Accordingly, because we
cannot determine the success of Minton’s legal malpractice claim without focusing on the
application of the on-sale bar, which is based directly in a federal statute, we are not convinced by
Gunn’s attempt to liken this case to Empire. The on-sale bar serves to invalidate patents issued by
the federal government. 35 U.S.C. § 102(b). We agree with the Federal Circuit that when the
validity of a patent is questioned, even if within the context of a state-based legal malpractice claim,
the federal government and patent litigants have an interest in the uniform application of patent law
by courts well-versed in that subject matter. See, e.g., Immunocept, 504 F.3d at 1285–86; Air
Measurement, 504 F.3d at 1272. Accordingly, Minton’s malpractice claim satisfies the fourth prong
of the Grable test.
Because this case satisfies all four elements of the Grable test, we hold that federal courts
possess exclusive jurisdiction to determine Minton’s state-based legal malpractice claim. Gunn and
the dissent have predicted that this holding will cause all legal malpractice suits arising out of patent
litigation to fall under the exclusive patent law jurisdiction of the federal courts. We do not foresee
this result. Our opinion should only be construed as conferring exclusive federal patent jurisdiction
based upon the specific facts of this case. In the future, just as Minton has done, any state litigant
asserting a legal malpractice action to recover for damages resulting from his patent attorney’s
negligence in patent prosecution or litigation must also satisfy all four elements of the Grable test
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to place his claim under exclusive federal jurisdiction. In the context of state-based legal malpractice
claims, plaintiffs will not always be able to meet such a burden. See, e.g., Holmes Grp., Inc., 535
U.S. at 831 (holding a patent-law counterclaim cannot serve as the basis for “arising under”
jurisdiction); Thompson v. Microsoft Corp., 471 F.3d 1288, 1291–92 (Fed. Cir. 2006) (finding the
state-law claim of unjust enrichment did not arise under § 1338 jurisdiction because the plaintiff
could prevail on the claim by showing the defendant’s unauthorized use of proprietary information
without proving inventorship under U.S. patent laws); Roof Tech. Servs., Inc. v. Hill, 679 F. Supp.
2d 749, 754 (N.D. Tex. 2010) (explaining that a state legal malpractice action involving an attorney’s
“failure to meet deadlines and communicate with [his] client” and in which “[p]atent issues are
merely floating on the periphery,” did not trigger exclusive federal patent jurisdiction); Genelink
Biosciences, Inc. v. Colby, 722 F. Supp. 2d 592, 601 (D. N.J. 2010) (holding that where a state
malpractice claim was based on missed deadlines, and not on the validity of the actual patent itself,
there was no patent issue triggering exclusive federal patent law jurisdiction); E-Pass Techs., Inc.
v. Moses & Singer, LLP, 117 Cal. Rptr. 3d 516, 521 (Cal. Ct. App. 2010) (finding no federalquestion jurisdiction where the ultimate question in the legal malpractice claim was not the
attorney’s negligence in the prosecution of the patent, but rather “that the defendant attorneys knew
or should have known that [the plaintiff] did not have sufficient evidence to support the claims” they
asserted on its behalf in the underlying litigation.).
III. CONCLUSION
Because we determine that the application of the experimental use exception to the on-sale
bar is a necessary, disputed, and substantial element of Minton’s state-based legal malpractice claim,
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and because the federal courts are capable of addressing this issue without disrupting the
jurisdictional balance existing between state and federal courts, we hold that Minton’s claim has
triggered exclusive federal patent jurisdiction. Accordingly, we do not reach the merits of Minton’s
claims, and we reverse the court of appeals’ judgment and dismiss the case.
_____________________________
Paul W. Green
Justice
OPINION DELIVERED: December 16, 2011
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