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Federal Courts Have No Exclusive Jurisdiction Over Patent Malpractice Claims

The United States Supreme Court has ruled that state courts, not federal courts, have subject matter jurisdiction over legal malpractice claims arising under federal patent law.  Gunn v. Minton, Case No. 11-1118 (U.S. February 20, 2013) (Minton) (available here).  Vernon Minton created a computer program in the early 1990s to facilitate securities trading known as the Texas Computer Exchange Network (TEXCEN).  Minton hired Jerry Gunn as a patent attorney for a federal patent infringement suit regarding the patented TEXCEN program. However, Minton’s patent was found to be invalid because Minton had leased his interactive securities trading system to a third party in 1995, more than a year before applying for the patent. See U.S.C. § 120.  Minton appealed, arguing that the lease was part of ongoing testing, and therefore was experimental use to the § 102 sale bar.  The appeal was denied.  Minton sued Gunn for legal malpractice, arguing that if the experimental use argument had been raised earlier, then Minton’s patent would not have been invalidated.  At the malpractice trial, the Texas trial court sided with Gunn.  Minton appealed, arguing that federal district courts have exclusive jurisdiction over federal patent infringement malpractice claims under 28 U.S.C. §1338(a) (federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents”), and that the trial court did not have jurisdiction to hear the case.  The Texas Court of Appeals rejected Minton’s argument, the Texas Supreme Court reversed, but the U.S. Supreme Court determined that 28 U.S.C. §1338(a) did not deprive state courts of subject matter jurisdiction over Minton’s malpractice claim.

Congress gave federal courts exclusive jurisdiction over patent-specific cases, stating that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents.”  28 U.S.C. §1338(a).  The U.S. Supreme Court had to determine whether Minton’s claim of malpractice arose under any Act of Congress relating to patents.  There are two ways that a case can arise under federal law: (1) when federal law creates the cause of action asserted in the case, or (2) when a state claim raises a federal issue that is actually disputed, substantial, and capable of being resolved in federal court without disrupting the federal-state court balance approved by Congress.  Minton, Slip Op. Pp. 8-9.  Minton’s patent infringement claim arose under federal law because it was authorized under 35 U. S. C. §§271, 281.  However, Minton’s malpractice claim is under state law.  Therefore, the U.S. Supreme Court had to analyze whether the malpractice claim fit the second scenario of how a case arises under federal law.

Under Texas malpractice laws, Minton had to prove, among other things, that Gunn’s failure to raise the experimental use argument earlier in the case was the proximate cause of Minton’s loss in his patent infringement case.  This requires Minton to show that he would have prevailed in his federal patent infringement claim only if Gunn had made the experimental use argument.  Under patent law, experimental use is an exception to the § 102 one-year on sale bar.  As such, the U.S. Supreme Court determined that Minton’s malpractice claim raises a disputed federal issue: whether the experimental use argument would have saved Minton’s patent.  However, the U.S. Supreme Court found that the federal issue in Minton’s malpractice claim was not substantial when looking at the entire federal system.  Minton, Slip Op. Pp. 10-11.

“Here, the federal issue carries no such significance.  Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental- use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical ‘case within a case,’ it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.”  Minton, Slip Op. Pp. 12-13.

The U.S. Supreme Court continued, “[a]s for more novel questions of patent law that may arise for the first time in a state court ‘case within a case,’ they will at some point be decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent; if it does not arise frequently, it is unlikely to implicate substantial federal interests.”  Minton, Slip Op. P. 13.

The U.S. Supreme Court rejected Minton’s argument that his malpractice claim belonged in federal court because “the possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law.”  Minton, Slip Op. P. 15.  “We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue.”  Id.

The U.S. Supreme Court concluded that, although the Texas state court would have to answer a question of federal patent law for Minton’s malpractice claim, this answer will not having any lasting effect on future patent claims.

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