Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton

By Dennis Crouch

Gunn v. Minton, (on petition for Writ of Certiorari at the U.S. Supreme Court)

Vernon Minton developed a set of software that he leased to the Texas Int'l Stock Exchange (TISE) more than one year before filing a provisional patent application on the invention embodied by the product. The USPTO granted Minton U.S. Patent No. 6,014,643. However, in a later lawsuit against NASDAQ, the patent was invalidated via the on-sale bar of 35 U.S.C. § 102(b) and that invalidity finding was upheld on appeal. Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003). In that decision, the Federal Circuit confirmed that the lease constituted a sale for 102(b). In a post-judgment motion, Minton asked the district court to consider whether the use by TISE was an experimental use. However, the court refused to consider that issue because of its untimely introduction.

The present lawsuit arose when Minton then sued his patent litigation counsel (who have now joined the Fulbright & Jaworski firm). The crux of the malpractice claim is that the litigation counsel failed to timely plead the experimental use question. Minton sued in Texas state court and lost on a pretrial motion based upon the trial court's judgment that Minton had failed to present "a scintilla of proof . . . to support his claims." That no-damages judgment was affirmed by the Texas court of appeals. However, the Supreme Court of Texas took an orthogonal view and held that Texas courts lacked subject matter jurisdiction over case. In particular, the Texas Supreme Court held that Minton's malpractice claim required resolution of a substantial question of patent law and therefore fell within the exclusive "arising under" jurisdiction of the federal courts and, eventually, the Court of Appeals for the Federal Circuit. This ruling gives Minton another shot at winning the case – this time in federal district court.

The 5-3 Texas Supreme Court decision followed the lead set by the Federal Circuit in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007). In those cases the Federal Circuit gave a broad interpretation to arising under jurisdiction based upon the court's congressionally mandated goal of national uniformity in the patent system. Both the Akin Gump and the Fulbright Jaworski cases were decided on the same day by the same panel and both penned by then Chief Judge Paul Michel. (Judges Lourie and Rader joined the panels). Although the Texas court did not treat the Federal Circuit decisions as binding precedent, the court chose to adopt the logic of those decisions. The dissent argued that the State of Texas has a strong interest in (and a regulatory scheme in place for) ensuring that Texas attorneys maintain a high level of quality and that federalism concerns suggest that many of these cases should be adjudged at the state court level. In a non-patent case, the Supreme Court approved of this more nuanced analysis of arising under jurisdiction in the case of Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005).

The lawyer defendants have now appealed to the U.S. Supreme Court – asking that court to provide its verdict on the breadth of arising under jurisdiction for non-patent cases that require interpretation of a patent law issue. Gunn presents the following question:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005), for "arising under" jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit's mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims – which involve no actual patents and have no impact on actual patent rights – into the federal courts?

This may be surprising to some, but in most cases the respondent does not actually file any response to a Supreme Court petition for writ of certiorari. The Supreme Court tends to only hear important cases that are well represented on both sides. The lack of response is intended to suggest that the case should not rise to that threshold level of importance. Here, Minton declined to respond to the petition. However, in a recent order, the Supreme Court has asked for Minton's response. This judicial action suggests interest in the case, and that interest may be prompted that may be further spurred by the recent spate of decisions showing some disagreement within the Federal Circuit on the very issue. In a supplemental filing in support of its petition, Gunn argued that "[t]he Federal Circuit, which created the jurisdictional morass at issue in this case, is thus split within itself regarding whether to abandon the misguided and overly-broad jurisdictional standard it articulated in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007)."

If the Supreme Court takes the case, argument will likely be scheduled for late 2012.

10 thoughts on “Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton

  1. This is a great blog, except when you try to talk about how the Supreme Court works. Like the first poster said, a lone clerk can CFR a case without any consultation at all. A CFR is basically meaningless and potentially pro forma in an important paid case like this.

  2. I presently have a legal mal case pending in the Federal Circuit which was argued on 9/9/11, with no decision yet. Judge O’Malley, the court’s most vocal critic of the assertion of federal jurisdiction, was on my panel, and this is a very long period to be waiting for a decision from that court. If the U.S. Supremes review Minton, it will surely be to drop the jurisdiction in these cases from the federal docket, which may be a black eye to Chief Judge Rader of the Federal Circuit, who seems highly supportive of it. This is an interesting issue intellectually, though I would prefer not to have a stake in its outcome; my case was removed from state court by the defendant law firm, and dismissed on summary judgment by the district court.

  3. This point is not that the Federal District court would be bound by any action of the State Court, but that the defendants were successful on a no evidence summary judgment motion, and so presumably like their chances of summary judgement or dismissal at the Federal Court. There is no question that would be cheaper than an appeal to the Supremes.

  4. The idea of winning a case on the merits at the trial court and then losing on appeal based on a lack of subject matter jurisdiction has long been a nightmare of mine. All of that work goes swirling down the drain, even if you did everything right.

    It’s painful to lose on appeal no matter what, but I find it particularly cruel to lose on appeal when the appellate court hints that it agrees with you on the merits, but nonetheless…

  5. As I understand it, the petitioner (attorney accused of screwing up) won in the trial court, won on appeal, and then the Texas Supreme Court wiped the slate clean and said that the whole thing has to start over in federal court. And the main reason for that is because Texas is following the Federal Circuit’s caselaw on federal vs. state jurisdiction over malpractice claims.

    It is odd for a cert petition from a state court to start with “Did the Federal Circuit depart…,” but in this case it kind of makes sense.

    As for the relative expense, I don’t know that a dispositive motion would necessarily succeed in federal court given that the Texas Supreme Court vacated the state court’s rulings.

  6. I’m confused by all of this. THe Question Presented makes it seem as though the petititioner is seeking review of the federal circuit cases, which they are not, and have no standing to do. I also don’t understand the strategy of appealing–in the most expensive way possible–a decision they won, rather than just filing a 12(b)(6) motion or MSJ when Minton eventually files in federal court.

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  8. The request for a response is significant, but I wouldn’t read too much into it. It simply means that the clerk in the cert pool assigned to the case wants to see a response. It is unlikely any Justice has reviewed the case yet.

    Still, I agree with you, Dennis, that this case has a good shot of a cert grant. We’re now seeing a problematic split among appellate courts on just where these malpractice cases belong.

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