One long-standing feature of the U.S. patent system is exclusive court jurisdiction over patent cases. Exclusive federal jurisdiction at the trial level, combined with the U.S. Court of Appeals for the Federal Circuit’s exclusive jurisdiction over patent appeals, helps to ensure the uniform application of patent law nationwide. Since the Supreme Court’s 2013 ruling in Gunn v. Minton,[1] however, an increasing number of patent issues are being decided in state courts and regional courts of appeal. This trend appears to be at odds with the system envisioned by Congress, and results from apparent misapplications of Gunn.
I. “Arising Under” Jurisdiction Prior to Gunn
Federal subject matter jurisdiction over patent cases is based on 28 U.S.C. § 1338(a):
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. No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents[.]
Section 1338(a) requires federal courts to hear cases involving claims for relief under the Patent Act, including infringement and declaratory judgment actions. In addition, 28 U.S.C. § 1295 establishes the Federal Circuit’s nationwide appellate jurisdiction over appeals from the same cases.
Exclusive federal jurisdiction extends to state-law claims featuring “embedded” patent law issues. Federal jurisdiction under § 1338 “extend[s] only 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.”[2] Prior to Gunn, state and federal courts applying this test frequently applied federal jurisdiction over state-law claims with embedded patent issues, including breach of contract claims involving patent licenses, defamation, and legal malpractice claims.
II. Gunn Sends “Backward-Looking” Claims To State Court
In Gunn v. Minton, the Supreme Court restricted the scope of federal jurisdiction over state-law claims with embedded patent issues. Minton asserted a legal malpractice claim in Texas state court after a federal court ruled that his patent was invalid due to a statutory bar, alleging that his attorney, Gunn, failed to timely raise the experimental use exception. The Texas Supreme Court ruled that the action should have been litigated in federal court, because Minton’s malpractice claim relied on the viability of the experimental use exception as a defense to invalidity.
In a 9-0 ruling, the U.S. Supreme Court reversed and ruled that the malpractice claim must be heard in a state court. The Court relied on its 2005 decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg.,[3] stating a standard for “arising under” jurisdiction under the federal question jurisdiction statute, 28 U.S.C. § 1331 (a test interchangeable with the test under § 1338):
[F]ederal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.
The Court concluded that Minton’s claim failed to satisfy the third and fourth factors identified in Grable. First, it held that the patent issue was not "substantial," even though it was pivotal to Minton’s claim for relief, because an issue is substantial under Grable only if it is important “to the federal system as a whole.” The Court held that the patent issue in Minton’s claim was not substantial because it was purely “backward-looking:”
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.[4]
The Court noted that the fourth Grable factor also was not met, because requiring federal courts to adjudicate malpractice claims would disrupt Congress’ state-federal balance due to the strong state interest in maintaining standards for licensed attorneys. The Court then proceded to proclaim that since the third and fourth Grable factors were lacking, similar malpractice claims “rarely, if ever” would qualify for federal jurisdiction under § 1338.[5]
The Court brushed aside concerns that state-court rulings in patent cases would result in inconsistent development of patent law by noting that, “In resolving the nonhypothetical patent questions [federal] cases present, the federal courts are of course not bound by state court case-within-a-case rulings.”[6]
III. Courts Apply Gunn Expansively, Perhaps Improperly
Federal and state courts have applied Gunn to exercise jurisdiction over cases which previously would have enjoyed exclusive federal jurisdiction. A key factor in many of these decisions is the character of the patent rights at issue: Whether or not the issue presented is “backward-looking” or limited to a narrow, case-specific set of facts.
The Federal Circuit applied Gunn in Forrester Environmental Services, Inc. v. Wheelabrator Tech., Inc.[7] to decline federal jurisdiction over a state court defamation action based on the defendant’s statements that the plaintiff was infringing three patents. Although the court noted that pre-Gunn cases in which it had recognized jurisdiction over disparagement claims “may well have survived the Supreme Court’s decision in Gunn,”[8] the claims in Forrester did not survive because any state court rulings on the scope or infringement of the patents would have no forward-looking affect: The patents all had expired and the defamatory statements referenced conduct in Taiwan, which would not be infringement in any event.
A. Malpractice Claims Are Not Necessarily Backward-Looking
Unfortunately, many other courts have declined to recognize jurisdiction even where the affected patents are not completely invalid and have not expired. For example, in Petter Investment Co. v. Price Heneveld Cooper DeWitt & Litton,[9] the court considered a malpractice action involving a botched settlement in an ongoing, parallel patent infringement case. The court characterized the malpractice claim as backward-looking and only...
