Federal Jurisdiction Over Patent Malpractice Claims

On January 16, 2013, the United States Supreme Court heard oral argument in Gunn v. Minton, a case in which the Court must determine whether and when federal courts have exclusive jurisdiction over legal malpractice claims involving patent issues.  In the ordinary course, legal malpractice claims, which arise out of allegations of negligence, are heard in state court, unless diversity jurisdiction applies.

The question of whether federal courts have exclusive jurisdiction, pursuant to section 28 U.S.C. § 1338(a), over legal malpractice claims arising out of patent prosecution or patent litigation was addressed in 2007.  In two unrelated cases, the Federal Circuit Court of Appeals held that the federal courts have exclusive subject matter jurisdiction over patent malpractice cases.  Those decisions heralded a sea change in jurisdiction over what everyone concedes is a state common law tort – legal malpractice.

In March and April 2012, however, Federal Circuit Judge Kathleen M. O’Malley, in both dissenting and concurring opinions, called for her Court to reconsider its position.  Judge O’Malley concluded that her Court had misapplied Supreme Court precedent and failed to examine independently whether the precise “patent” issue in the malpractice cases was “substantial” in addition to being necessary.   According to Judge O’Malley, necessity and substantiality are two separate prongs of the four-part test used to determine federal court jurisdiction.   She wrote: “By finding that whenever a federal issue is a necessary element of a plaintiff’s state law claim, the federal issue automatically is a substantial one, our case law has collapsed the inquiry and discarded substantiality as a separate consideration.”

In Minton, a Texas state court patent malpractice case wound its way to the Texas Supreme Court.   The Texas Supreme Court relied on the 2007 Federal Circuit decisions and held that it lacked jurisdiction and, therefore, could not reach the merits of the legal malpractice claim.  Three judges dissented, arguing that the Federal Circuit “has not remained faithful to the Supreme Court’s federalism inquiry in the context of malpractice decisions arising from patent cases.”   Although the legal malpractice claim depended upon a determination of whether the experimental use exception was available as a defense in the underling patent infringement suit, because there was no dispute about the “validity, construction or effect” of the experimental use exception, the dissenting judges concluded the case on appeal did not involve a controversy about any federal issue.   They wrote: “[h]ere, the federal issue is not substantial for three reasons the Supreme Court has outlined: (1) the determination is one of fact – not law; (2) it will not result in precedent that controls numerous other cases; and (3) it involves federal common law, not a federal statute.”

The United States Supreme Court’s decision in Minton may have a broad impact, particularly where one study concludes that legal malpractice claims arising from alleged patent prosecution mistakes or patent litigation errors rose 30 percent from 2003 to 2007 and continue to rise.

You can read the transcript of the oral argument before the Supreme Court here.