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Which Court Decides,Federal v. State? Jurisdiction Over Legal Malpractice Claims Arising From Patents

In order to prove a claim of legal malpractice, a plaintiff, no differently than in other cases alleging negligence, must prove the existence of a duty, breach of that duty, and proximately caused damages. These are fundamentally state tort law issues. In legal malpractice cases, the causation element normally requires the plaintiff to prove what would have happened if the attorney had not breached the applicable standard of care in representing his client. When the legal representation concerned matters of federal law, which, standing alone, would have been subject to federal court jurisdiction, an issue that presents itself in a subsequent legal malpractice case is whether the legal malpractice action, too, is subject to federal jurisdiction. This issue has received increased attention recently, particularly as a result of two 2007 decisions by the United States Court of Appeals for the Federal Circuit. This article discusses how the federal jurisdiction issue has been evolving in the context of legal malpractice cases arising from patent-related representation.

Federal Jurisdiction

Congress has established exclusive federal jurisdiction over cases arising under patent law or copyright law. 28 U.S.C. § 1338(a) provides:

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.

The leading case on the scope of § 1338 jurisdiction is the Supreme Court’s decision in Christianson v. Colt Industries Operating Corp., 486 U.S. 800 (1988). In Christianson, the Supreme Court was called upon to resolve what it termed “a peculiar jurisdictional dispute between” the Court of Appeals for the Federal Circuit and the Court of Appeals for the Seventh Circuit. Each of the circuit courts had ruled that the other had sole appellate jurisdiction over antitrust claims that involved underlying patent infringement issues. If § 1338 jurisdiction applied, the Federal Circuit had proper appellate jurisdiction.

The Court defined the essential test as follows: § 1338(a) jurisdiction extends to “those cases 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.” Id. at 808-09.

Because federal patent law plainly did not create the plaintiff’s cause of action, the issue to be decided was whether patent law was a “necessary element” of one of the well-pleaded antitrust claims. In addressing this issue, the Court cited two principles that it derived from its earlier decision in Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983). First, whether a claim arises under patent law must be determined from the allegations of the complaint; a case in which only a patent law defense is asserted does not arise under patent law. 486 U.S. at 809. Second, when a claim is supported by alternative theories in the complaint, the case does not arise under patent law unless patent law is essential to each of those theories. Id. at 810. Applying these principles to the case before it, the Court held that the case did not fall within § 1338 jurisdiction because patent law was not essential to all of the plaintiff’s antitrust theories. Id. at 811-13.

A second important case is Grable & Sons Metal Products, Inc., v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005). There, the issue was whether a quiet title action initially filed in state court could be removed to federal court based on 28 U.S.C. § 1331, the basic “federal question” statute, which provides for federal jurisdiction over cases “arising under the Constitution, laws, or treaties of the United States.” The complaint alleged that the plaintiff, whose property had been seized by the IRS to satisfy a tax delinquency and then sold to the defendant, was entitled to the property because the seizure had been procedurally defective. In addressing whether federal jurisdiction could be exercised over a state law claim that turned on federal law, the court observed that there is no “single, precise, all-embracing test for jurisdiction over federal issues embedded in state-law claims”. Id. at 314. The Court then framed the essential question as, “[D]oes 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.” Id. Applying this test, the Court held that federal jurisdiction existed because the interpretation of a federal tax statute was an essential element of the quiet title claim, the meaning of the statute was in dispute, and the question was an important issue of federal law. Id. at 315.

The Early Decisions

After the Christianson decision, a number of courts adopted fairly narrow positions on malpractice cases arising from patent-related legal representation involving either prosecution of patent applications before the United States Patent and Trademark office or patent litigation. Most of the decisions simply repeated the Christianson test and stated their conclusions with little analysis or discussion.

In Fotodyne, Inc. v. Barry, 1989 WL 142846 (Wis. App. 1989), decided the year after Christianson, the Wisconsin Court of Appeals, in an unpublished opinion, held that Wisconsin state courts had jurisdiction over a legal malpractice action relating to a patent filing. The plaintiff alleged that the defendant attorneys had been negligent in three ways:

  1. Filing an incomplete patent application
  2. Delaying the filing of an application
  3. Failing to inform the client timely that the application had been rejected by the United States Patent and Trademark Office but that patent protection might be available in foreign countries

Relying on Christianson’s observation that a claim supported by alternative theories may not form the basis for § 1338 patent jurisdiction unless patent law is essential to each of those theories, the court concluded that the state courts had jurisdiction unless each of the negligent acts involved a substantial question of patent law. Finding that the third allegation of malpractice – the delay in informing the client – was unrelated to the provisions and purposes of the United States patent laws, and the plaintiff might be able to prevail solely on this theory, the court held that jurisdiction over the case could be exercised in a state court.

Commonwealth Film Processing, Inc. v. Moss & Rocovich, P.C., 778 F. Supp. 283 (W. D. Va. 1991), raised issues of malpractice in patent litigation. The plaintiff alleged that its attorneys had been negligent in a number of ways, including lacking adequate knowledge of the law of trade secrets and patents so as to advise the corporation properly in the defense and settlement of a prior patent lawsuit. The court, in a brief opinion, ruled that the case should be remanded to state court, finding that patent law did not create the malpractice cause of action nor was it an essential element of the claim. The court concluded that there would be no need to construe patent law but, instead, only to determine whether there had been a breach of the appropriate standard of care.

In Minatronics Corp. v. Buchanan Ingersoll, P.C., 28 Pa. D. & C. 4th 214, 1996 WL 766508 (Pa. Com. Pl.1996), a Pennsylvania trial court considered whether it had subject matter jurisdiction over a legal malpractice case in which the plaintiff claimed that the defendant attorney told his client that he had filed a patent claim but in fact had never done so. The court recognized that resolution of the case would necessarily involve determining such issues as the scope of the patent that might have been issued and the extent of the damages that the plaintiff suffered due to lack of patent protection. The court, however, ruled that it had subject matter jurisdiction, finding that no decision in the state court action could have “any impact” on the “federal patent program,” since no patent had ever been issued or could be issued.

In IMT, Inc. v. Haynes & Moore, L.L.P., 1999 WL 58838 (N.D. Tex. 1999), the plaintiff corporation alleged that the defendant attorneys had committed errors in prosecuting a patent application. Although the patent was issued, the corporation alleged that the patent could not be licensed because it was subject to challenge for enforceability and validity. Although the corporation stipulated that the patent was, in fact, valid and enforceable, it asserted that there was a “stigma” on the patent’s marketability. The court concluded that the relief requested by the plaintiff, based on an alleged diminution of the patent’s value, did not depend on a resolution of any issue of patent law and that patent law was not a necessary element of the cause of action. Accordingly, the court found federal jurisdiction to be lacking.

Adamasu v. Gifford, Krass, Groh, Sprinkle, Anderson & Citkowski, P.C.,409 F. Supp. 2d 788 (E.D. Mich. 2005), is another case arising from a patent application. The plaintiff alleged that the defendant law firm had filed an improper form of patent application, and it brought a claim against the firm for a loss of royalties and licensing fees. After the defendants removed the case to federal court, the court granted the plaintiff’s motion to remand. The defendants argued that the calculation of damages in the case would require the plaintiff to prove the scope of the plaintiff’s patent claims and that his patent was being infringed, thus implicating substantial patent law issues. The court, however, rejected this argument out of hand, focusing wholly on the plaintiff’s state-law claims of negligence and finding patent law to be “merely incidental” to those claims. Based on the allegations of the complaint, the court found no indication that it would be required to engage in claim construction of the patent or to determine whether other persons were infringing on the patent in order to resolve the case before it.

New Tek Manufacturing, Inc. v. Beehner, 702 N.W.2d 336 (2005), is the only decision from a state supreme court or federal appellate court prior to the Federal Circuit decisions. In that case (“New Tek I”), the Supreme Court of Nebraska considered whether it had subject matter jurisdiction over an attorney malpractice case in which the plaintiff alleged that its former attorney had negligently caused the expiration of its patent and that it had lost the ability to sue an infringer. The Supreme Court of Nebraska concluded that the plaintiff’s legal malpractice action was not one “arising under” patent law within the meaning of § 1338(a). The Court held:

The sole cause of action presented in this case is professional negligence. Patent law is implicated only incidentally, in that the measure of New Tek’s alleged damages requires consideration of the hypothetical infringement of the ‘080 patent. But the precise question is not whether Orthman Manufacturing infringed on the ‘080 patent; rather, the question is whether, absent Beehner’s negligence, New Tek would have been successful in an infringement action against Orthman. . . . The construction and alleged infringement of the ‘080 patent is relevant only insofar as it helps us to determine who would have prevailed in that hypothetical action. Simply stated, it is difficult to see how this case arises under federal patent law when on the record before us, the only patent that has been construed, and of which infringement is alleged, has expired. The federal government has no interest in hypothetical determinations regarding an unenforceable patent. Id. at 346.

Finally, in one of the few cases finding federal jurisdiction, in GroteApproach, Ltd. v. Reynolds, 2005 WL 5852677 (N.D. Tex. 2005), the plaintiff alleged that the defendant had negligently failed to file a timely patent application. The court agreed with the defendant’s argument that the plaintiff was required to prove that it possessed something that was patentable and also that the application deadline actually had been missed. The court found that these issues met the Christianson test of “necessarily depend[ing] on resolution of . . . substantial question[s] of federal patent law” and, accordingly, ruled that it had subject matter jurisdiction.

The Federal Circuit Decisions

A substantial shift in the view of whether federal or state courts have jurisdiction over patent-related legal malpractice claims occurred on October 15, 2007. In two cases decided on that date, the United States Circuit Court for Federal Circuit held that attorney malpractice cases alleging errors in creating and enforcing patent rights do produce questions of federal patent law substantial enough to establish § 1338(a) jurisdiction. In Air Measurement Technologies, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007), the plaintiff alleged that the defendant law firm had committed several errors, including failing to file patent applications in a timely fashion and failing to make required disclosures during the prosecution of the patent applications before the U.S. Patent and Trademark Office. The plaintiff alleged that it discovered these errors during the course of prior patent infringement litigation when the defendants in that litigation asserted that the plaintiff’s patents were invalid and unenforceable. The plaintiff claimed that, as a result, it was forced to settle the litigation on unfavorable terms.

The plaintiff sued its former attorneys in a Texas state court, and the defendants removed the case to the United States District Court for the Western District of Texas. The district court denied the plaintiff’s motion to remand the case to state court, and the litigation proceeded in federal court. However, after several years of litigation, the parties switched positions; the defendants moved to remand, and the plaintiff opposed the motion. The district court denied the second motion to remand but certified the issue for interlocutory appeal to the Federal Circuit.

The Federal Circuit applied Christianson’s two-part test based on the allegations of the “well-pleaded complaint.” Because patent law obviously did not create the plaintiff’s malpractice cause of action, the issue before the court was whether the plaintiff’s right to relief necessarily depended on a resolution of a “substantial question” of patent law. The Federal Circuit found this alternative test to be satisfied. It concluded that, because the plaintiff would have to prove that it would have succeeded in the underlying patent litigation but for its attorneys’ alleged errors, the trial court would “have to adjudicate, hypothetically, the merits of the infringement claim.” Id. at 1269. In the court’s view, this requirement that the plaintiff prove that its patents had been infringed presented “a substantial question of patent law conferring § 1338 jurisdiction” consistent with Christianson’s holding. The court found that the Supreme Court’s discussion of federalism issues in Grable did not alter its analysis, noting that “there is a strong federal interest in the adjudication of federal issues in a federal court.” Id. at 1272. The Court concluded, “[W]e hold that at least where, as here, establishing patent infringement is a necessary element of a malpractice claim stemming from alleged mishandling of patent prosecution and earlier patent litigation, the issue is substantial and contested, and federal resolution of the issue was intended by Congress, there is ‘arising under’ jurisdiction under § 1338.” Id. at 1273.

The Federal Circuit reached a similar conclusion in the companion case of Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed. Cir.2007). The plaintiff alleged that the defendant law firm had been negligent in drafting a patent too narrowly, resulting in inadequate patent protection. The court held that determining the scope of the plaintiff’s patent was a necessary element of the malpractice cause of action and that the issue presented a substantial question of patent law no less than the patent infringement issue in Air Measurement Technologies, finding that determination of the claim’s scope was a “necessary, substantial, and contested element” of the malpractice claim. Id. at 1289.

Recent Decisions

A number of courts have addressed the jurisdictional issue since the Air Measurement Technologies and Immunocept decisions and have come to varying conclusions. The following courts have adopted the Federal Circuit’s analysis and arrived at the same conclusion, finding federal jurisdiction.

In Chopra v. Townsend, Townsend & Crew, L.L.P., 2008 WL 413944 (D. Colo. 2008), the plaintiffs alleged that the defendants failed to respond to the Patent and Trademark Office and abandoned his patent applications, resulting in a competitor being able to obtain a patent on a similar technology. The court found that in order to establish his claims, the plaintiff needed to prove that his application would have been successful and that his competitor’s application would not have succeeded if his application had been prosecuted properly. Thus, the plaintiff’s complaint “arguably establish[ed] that his right to damages depended upon the resolution of a substantial question of patent law.” Consequently, the court concluded that it had jurisdiction over the case.

Labelle v. McGonagle, 2008 WL 3842998 (D. Mass. 2008), presented facts similar to those of the 1996 Minatronics case from Pennsylvania but came to the opposite conclusion. The plaintiffs alleged that their patent attorney had failed to file a patent application on their behalf notwithstanding the fact that he had informed them that he had done so. The suit was filed in a Massachusetts state court and was removed to federal court by the defendant. The court denied the plaintiff’s motion to remand. Stating that it should look to the Federal Circuit for guidance, the court concluded that the Air Measurement Technologies and Immunocept cases were indistinguishable from the case before it. Accordingly, the court found that federal subject matter jurisdiction existed because the plaintiff’s complaint necessarily depended on the resolution of a substantial question of federal patent law – i.e., whether the plaintiffs would have obtained a valid patent had the attorney filed the application.

In Byrne v. Wood, Herron & Evans, LLP, 2008 WL 3833699 (E.D. Ky.2008), the plaintiff alleged that the defendants represented him negligently in patent infringement litigation. The court found that, to prevail, the client needed to prove that his patent infringement suit would have been successful but for the defendants’ alleged negligence. The court found no meaningful distinction between the case before it and the Air Measurement Technologies case and determined to follow the Federal Circuit decision.

However, another court distinguished the Federal Circuit decisions based on the nature of the alleged malpractice. In Eddings v. Glast, Phillips & Murray, 2008 WL 2522544 (N.D. Tex. 2008), the plaintiffs alleged that the defendants had negligently represented them in the defense of patent litigation that resulted in a judgment against them. The plaintiffs alleged a number of particular instances of negligence in the handling of the litigation prior to and
at trial: failing to make a timely production of evidence of costs that would have been a basis for a credit or offset against the judgment and failing to make an offer of proof as to those costs; failing to request a claims construction hearing as to the patent; failing to properly raise motions for judgment; and failing to obtain discovery on a particular defense. In opposing the defendants’ motion to remand the case to the state court in which it had been filed, the plaintiffs asserted that their claims raised merely procedural errors, not substantial issues of patent law. The court distinguished Air Measurement Technologies and Immunocept, noting that because the plaintiffs in this case had not been plaintiffs in the underlying lawsuit, they would not be required to establish any patent infringement claims but, instead, only to prove that the judgment that had been entered against them would have been smaller but for the procedural errors. Although a number of the alleged negligent acts or omissions might involve patent issues, the court concluded that at least the alleged error as to presenting a damage mitigation defense did not depend on a resolution of any patent issues. The court noted that the Air Measurement Technologies court had observed that federal jurisdiction might not exist if a legal malpractice plaintiff could prevail on a malpractice theory that did not involve a substantial patent law question. Consequently, the court held that it did not have § 1338 jurisdiction.

Two courts, at least implicitly, have indicated disagreement with the Federal Circuit. First, the Nebraska New Tek I case returned to the state supreme court in 2008. In New Tek Manufacturing, Inc. v. Beehner, 751 N.W.2d 135 (2008) (“New Tek II”), the principal issue on appeal was whether the trial court had appropriately granted summary judgment in favor of the defendants following remand from the earlier appeal in the case. After the second appeal was filed, however, the Nebraska Supreme Court requested briefing on whether Nebraska state courts had jurisdiction over the subject matter of the action in light of the Federal Circuit decisions. Without engaging in any discussion or analysis, the court concluded that the legal malpractice case fell within the jurisdiction of the state courts. The court stated, without elaboration, “We reiterate our determination in New Tek I, that this professional malpractice case arises entirely under state law, and conclude that we do have subject matter jurisdiction over the claim.” Id. at 145. 

In Singh v. Duane Morris, LLP, 538 F.3d 334 (5th Cir. 2008), the plaintiff sued his attorneys for malpractice allegedly committed during their representation of him in a federal trademark lawsuit. The plaintiff had lost the prior case on appeal when the Fifth Circuit found that he had failed to establish a necessary element of his claim. In the malpractice action, the client alleged that the attorneys had negligently failed to introduce available evidence on that element. The Fifth Circuit found that the malpractice case did not involve any important issue of federal law. The court found, rather, that the federal issue was predominantly one of fact – whether the plaintiff had sufficient evidence to support his trademark claim. The court concluded that this issue was not “substantial”; it did not require “resort to the experience, solicitude and hope of uniformity that a federal forum offers.” Id. at 339, quoting Grable, supra, 545 U.S. at 312. Moreover, the court found that exercising federal jurisdiction over this state law malpractice claim would “upend the balance between federal and state judicial responsibilities”, since legal malpractice has historically been in the domain of state law. Id. Moreover, finding federal jurisdiction, according to the court, could “sweep innumerable state-law malpractice claims into federal court.” Id. at 340.

Up to this point in its opinion, the Fifth Circuit’s decision is not necessarily inconsistent with Air Measurement Technologies and Immunocept. Indeed, the Fifth Circuit stated that it did not need to decide whether it would follow the Federal Circuit in a case where a patent was at issue, observing that it was “possible” that the federal interest in patent cases might be more substantial than the federal interest in trademark cases such as the one before it. Id. However, the court appeared to criticize the Federal Circuit in that, in the Fifth Circuit’s view, the Federal Circuit “did not consider the reasons addressed here, involving the federal interest and the effect on federalism.” Id. Thus, there is reason to question whether the Fifth Circuit would agree with the Federal Circuit if the kinds of issues in Air Measurement Technologies and Immunocept were to come before it.

Conclusion

The Federal Circuit decisions in Air Measurement Technologies and Immunocept establish exclusive federal jurisdiction over legal malpractice claims of a breadth that is considerably more expansive than a number of earlier decisions had found. However, the Fifth Circuit’s decision in Singh and the Nebraska Supreme Court’s decision in New Tek II suggest that the Federal Circuit’s conclusion may not gain universal acceptance. Moreover, other questions remain even if the Federal Circuit’s position prevails. Does federal jurisdiction exist for some patent-related malpractice claims but not others? Just what is the meaning of a “substantial issue of patent law”? What kinds of issues are “substantial” and what are not? Does the Federal Circuit’s analysis apply to trademarks and copyrights as well as patents? Can the same analysis be applied to malpractice claims based on federal statutory issues beyond intellectual property issues? These sorts of questions are very much unresolved at present and will have to be developed by the courts in years to come.

Robert W. Hesselbacher, Jr. is a partner in the Baltimore law firm of Wright, Constable & Skeen, LLP, where his practice focuses on the defense of lawyers and other professionals and on business and commercial litigation. Mr. Hesselbacher is a former Chair of the Professional Liability Committee.

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