By Dennis Crouch
Gunn v. Minton, 568 U. S. ____ (Supreme Court 2013)
In a 9-0 decision, the Supreme Court has limited the scope of "arising under" jurisdiction for patent cases and held that the Minton's patent litigation malpractice case does not arise under the patent laws and therefore is not amenable to exclusive federal jurisdiction. This decision collaterally overrules the Federal Circuit's prior case law in Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L. L. P., 504 F. 3d 1262 (2007) and Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F. 3d 1281 (2007)). As I discuss at the end of this essay, the America Invents Act of 2011 expanded the scope of federal court jurisdiction and thus counteracts some of the impact of this decision.
28 U. S. C. §1338(a) indicates that federal "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents" and that the jurisdiction "shall be exclusive of the courts of the states." (Note, this language has now been somewhat amended by the AIA).
Gunn used to be Minton's attorney and represented Minton in prior patent infringement litigation. However, in that prior litigation, the district court declared Minton's patent invalid because he had placed it "on sale" more than one year prior to filing his application. Minton later found that he may have won under the "experimental use" exception to the on-sale bar, but Gunn had allegedly failed to advise him on that front. Minton then sued Gunn for attorney malpractice in Texas state court. However, after losing in State court, Minton changed heart and asked that the case be sent to Federal Court based upon Section 1338(a)'s provision for exclusive federal jurisdiction over any case "arising under any Act of Congress relating to patents." The Texas Supreme Court agreed with Minton and found that the exclusivity prong of the federal law denied jurisdiction to the state. Gunn then petitioned the Supreme Court to decide the scope of federal arising under jurisdiction in this case.
The "arising under" language used in Section 1338(a) has its foundation in the U.S. Constitution. Article III states that "[t]he judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution." §1338(a) language is also parallel to §1331's general principle of federal court jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." §1338(a) is particularly limited to "any civil action arising under any Act of Congress relating to patents." However, the statute is also particularly strong because, unlike most causes of action, the statute provides for exclusive federal jurisdiction if the arising under condition is met. §1338(a).
In most patent cases the arising under analysis is simple because the complaint asserts a cause of action that is based on federal patent law, such as patent infringement or declaratory judgment of invalidity. Supreme Court has additionally held that arising under jurisdiction may exist in cases where the cause of action is not based upon federal law, but where there is an underlying federal issue arising from the well pled complaint. Most importantly, see Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005). In Grable, the Supreme Court indicated that this secondary form of arising under jurisdiction only exists when the claim made in the complaint " 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." Grable was an interpretation of §1331 arising under jurisdiction, but the court previously held in Christianson v. Colt Indus. that §1331 arising under analysis applies to §1338(a) analysis as well. Christianson v. Colt Industries Operating Corp., 486 U. S. 800, 808–809 (1988).
Regarding the present case, we know that malpractice is ordinarily a state law claim and thus we need to consider whether the case qualifies under Grable. On that point, the Supreme Court agreed that  Minton's "experimental use" theory was a federal patent question necessary for his case and that  the issue was actually disputed. However, the Court found Minton's case failed  to raise a "substantial" federal issue with  the appropriate balance of state and federal interests.
Here, the substantiality requirement is focused on the impact that the case may have on the federal system as a whole. The court writes:
[T]he federal issue in this case is not substantial in the relevant sense…. I]t is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raise[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.
This case, the court found carries no significance with regard to the federal system:
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.
At the creation of the Federal Circuit, patent law was given a somewhat special status based upon the congressional sense for national uniformity of the patent law. The Supreme Court confirmed that notion in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141 (1989). Here, the Supreme Court found that the sense of national uniformity is not disturbed by state law decisions since (1) the federal courts are of course not bound by state court decisions; and these particular malpractice proceedings only ask hypothetical patent questions of "what would have happened."
One point that Minton raised in the case is that the Texas state court applied patent law doctrine in a way that varies from Federal Circuit precedent. On that point, the Supreme Court merely stated that "state courts can be expected to hew closely to the pertinent federal precedents" and that issues not already covered by federal precedent will eventually 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." This is the one point where the Supreme Court decision is somewhat disingenuous since state courts are not obligated to follow precedent set by either district courts or the Federal Circuit. Thus, the reality is that it is well within a state court's power to unsettle issues seemingly well-settled by Federal Circuit precedent.
Although not so holding, the Supreme Court also suggested that state court decisions on patent issues should not have preclusive effect on other courts. Thus, a state court decision involving a licensing dispute that results in invalidation of a patent would have no preclusive effect on either the USPTO or other Federal Courts. Rather, "the result would be limited to the parties and patents that had been before the state court."
Since Minton failed to prove a substantial Federal interest in deciding the state cause of action., it also follows that Minton fails the fourth prong of Grable that involves the balancing of State and Federal interests.
In its conclusion, the Court makes a clear statement of its decision:
As we recognized a century ago, "[t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subject-matter of the controversy." New Marshall Engine Co. v. Marshall Engine Co., 223 U. S. 473 (1912). In this case, although the state courts must answer a question of patent law to resolve Minton's legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton's patent. Accordingly, there is no "serious federal interest in claiming the advantages thought to be inherent in a federal forum," Grable. Section 1338(a) does not deprive the state courts of subject matter jurisdiction.
The judgment of the Supreme Court of Texas is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
On remand, the Texas Supreme Court will now be asked to decide the merits of Minton's appeal rather than merely the jurisdictional question.
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In many ways, this decision is the echo of EBay and MedImmne where the court basically said: patent litigation is not special, it is just litigation. Patent cases are not untouchable by state courts and Congressional statements regarding the uniformity principle are not statements also declaring that patent law is especially unique.
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Impact: This case will have some immediate impact in that patent law malpractice suits currently being litigated in federal court, absent special circumstances or diversity, should be dismissed for lack of subject matter jurisdiction. And, malpractice cases will likely be almost uniformly heard in state court going forward.
Role of the AIA: For licensing dispute, the decision here means that few breach-of-contract allegations will be seen as arising under the patent law. However, the impact of this case on licensing disputes is likely wholly overwhelmed by the changes to §1338(a) and the new removal statue 28 U.S.C. §1454. The new law does not apply to the Gunn case because the complaint was filed before the law was enacted. However, under the new law, the question is not whether the "civil action" arises under the patent laws, but instead whether the lawsuit involves "any claim for relief arising under any Act of Congress relating to patents." Section 1454 makes clear that the federal court will have jurisdiction whenever "any party" asserts a claim arising under the patent laws. Thus, in a breach-of-patent-license dispute it is almost always the case that the accused breaching party can assert a counterclaim of patent invalidity. When that occurs, the new law expressly eliminates state court jurisdiction and offers an option for removal to Federal Court rather than straight dismissal. This change in the law essentially overrules the Supreme Court's decision in Holmes Group, Inc. v. Vornado Aircirculation Systems, Inc., 535 U.S. 826 (2002). In Holmes Group, the Supreme Court held that patent claims that arise only in a counterclaim did not trigger Federal jurisdiction under §1338(a).