Gunn v. Minton

568 U.S. 251

133 S.Ct. 1059

185 L.Ed.2d 72

Jerry W. GUNN, et al., Petitioners

v.Vernon F. MINTON.

No. 11–1118.

Supreme Court of the United States

Argued Jan. 16, 2013.

Decided Feb. 20, 2013.

Thomas M. Michel, Fort Worth, Texas, for Respondent.

Jane M.N. Webre, Cynthia S. Connolly, Scott, Douglass & McConnico, L.L.P., Austin, Texas, Robert S. Harrell, Charles B. Walker, Jr., Fulbright & Jaworski, L.L.P., Houston, Texas, David E. Keltner, Kelly Hart & Hallman, L.L.P., Fort Worth, Texas, Edward J. Murphy, Bruce C. Morris, Beirne, Maynard & Parsons, L.L.P., Houston, TX, for Petitioners.

Thomas M. Michel, Robley E. Sicard, Griffith, Jay & Michel, LLP, Fort Worth, Texas, Coyt Randal Johnston, Robert L. Tobey, Coyt Randal Johnston, Jr., Johnston Tobey, P.C., Dallas, Texas, Theodore F. Shiells, Shiells Law Firm P.C., Dallas, Texas, Gregory W. Carr, Carr LLP, Frisco, Texas, Daniel R. Ortiz, Charlottesville, Virginia, for Respondent.

Chief Justice ROBERTS delivered the opinion of the Court.

Federal courts have exclusive jurisdiction over cases "arising under any Act of Congress relating to patents." 28 U.S.C. § 1338(a). The question presented is whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court.

I

In the early 1990s, respondent Vernon Minton developed a computer program and telecommunications network designed to facilitate securities trading. In March 1995, he leased the system—known as the Texas Computer Exchange Network, or TEXCEN—to R.M. Stark & Co., a securities brokerage. A little over a year later, he applied for a patent for an interactive securities trading system that was based substantially on TEXCEN. The U.S. Patent and Trademark Office issued the patent in January 2000.

Patent in hand, Minton filed a patent infringement suit in Federal District Court against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc. He was represented by Jerry Gunn and the other petitioners. NASD and NASDAQ moved for summary judgment on the ground that Minton's patent was invalid under the "on sale" bar, 35 U.S.C. § 102(b). That provision specifies that an inventor is not entitled to a patent if "the invention was ... on sale in [the United States], more than one year prior to the date of the application," and Minton had leased TEXCEN to Stark more than one year prior to filing his patent application. Rejecting Minton's argument that there were differences between TEXCEN and the patented system that precluded application of the on-sale bar, the District Court granted the summary judgment motion and declared Minton's patent invalid. Minton v. National Assn . of Securities Dealers, Inc., 226 F.Supp.2d 845, 873, 883–884 (E.D.Tex.2002).

Minton then filed a motion for reconsideration in the District Court, arguing for the first time that the lease agreement with Stark was part of ongoing testing of TEXCEN and therefore fell within the "experimental use" exception to the on-sale bar. See generally Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 64, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998) (describing the exception). The District Court denied the motion. Minton v. National Assn . of Securities Dealers, Inc., No. 9:00–cv–00019 (ED Tex., July 15, 2002).

Minton appealed to the U.S. Court of Appeals for the Federal Circuit. That court affirmed, concluding that the District Court had appropriately held Minton's experimental-use argument waived. See Minton v. National Assn . of Securities Dealers, Inc., 336 F.3d 1373, 1379–1380 (C.A.Fed.2003).

Minton, convinced that his attorneys' failure to raise the experimental-use argument earlier had cost him the lawsuit and led to invalidation of his patent, brought this malpractice action in Texas state court. His former lawyers defended on the ground that the lease to Stark was not, in fact, for an experimental use, and that therefore Minton's patent infringement claims would have failed even if the experimental-use argument had been timely raised. The trial court agreed, holding that Minton had put forward "less than a scintilla of proof" that the lease had been for an experimental purpose. App. 213. It accordingly granted summary judgment to Gunn and the other lawyer defendants.

On appeal, Minton raised a new argument: Because his legal malpractice claim was based on an alleged error in a patent case, it "aris[es] under" federal patent law for purposes of 28 U.S.C. § 1338(a). And because, under § 1338(a), "[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents," the Texas court—where Minton had originally brought his malpractice claim—lacked subject matter jurisdiction to decide the case. Accordingly, Minton argued, the trial court's order should be vacated and the case dismissed, leaving Minton free to start over in the Federal District Court.

A divided panel of the Court of Appeals of Texas rejected Minton's argument. Applying the test we articulated in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), it held that the federal interests implicated by Minton's state law claim were not sufficiently substantial to trigger § 1338"arising under" jurisdiction. It also held that finding exclusive federal jurisdiction over state legal malpractice actions would, contrary to Grable 's commands, disturb the balance of federal and state judicial responsibilities. Proceeding to the merits of Minton's malpractice claim, the Court of Appeals affirmed the trial court's determination that Minton had failed to establish experimental use and that arguments on that ground therefore would not have saved his infringement suit.

The Supreme Court of Texas reversed, relying heavily on a pair of cases from the U.S. Court of Appeals for the Federal Circuit. 355 S.W.3d 634, 641–642 (2011) (discussing Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L. P., 504 F.3d 1262 (2007) ; Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (2007) ). The Court concluded that Minton's claim involved "a substantial federal issue" within the meaning of Grable "because the success of Minton's malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar." 355 S.W.3d, at 644. Adjudication of Minton's claim in federal court was consistent with the appropriate balance between federal and state judicial responsibilities, it held, because "the federal government and patent litigants have an interest in the uniform application of patent law by courts well-versed in that subject matter." Id., at 646 (citing Immunocept, supra, at 1285–1286; Air Measurement Technologies, supra, at 1272 ).

Justice Guzman, joined by Justices Medina and Willett, dissented. The dissenting justices would have held that the federal issue was neither substantial nor disputed, and that maintaining the proper balance of responsibility between state and federal courts precluded relegating state legal malpractice claims to federal court.

We granted certiorari. 568 U.S. ––––, 133 S.Ct. 420, 184 L.Ed.2d 251 (2012).

II

"Federal courts are courts of limited jurisdiction," possessing "only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). There is no dispute that the Constitution permits Congress to extend federal court jurisdiction to a case such as this one, see Osborn v. Bank of United States, 9 Wheat. 738, 823–824, 6 L.Ed. 204 (1824) ; the question is whether Congress has done so, see Powell v. McCormack, 395 U.S. 486, 515–516, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969).

As relevant here, Congress has authorized the federal district courts to exercise original jurisdiction in "all civil actions arising under the Constitution, laws, or treaties of the United States," 28 U.S.C. § 1331, and, more particularly, over "any civil action arising under any Act of Congress relating to patents," § 1338(a). Adhering to the demands of "[l]inguistic consistency," we have interpreted the phrase "arising under" in both sections identically, applying our § 1331 and § 1338(a) precedents interchangeably. See Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 808–809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988). For cases falling within the patent-specific arising under jurisdiction of § 1338(a), however, Congress has not only provided for federal jurisdiction but also eliminated state jurisdiction, decreeing that "[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents." § 1338(a) (2006 ed., Supp. V). To determine whether jurisdiction was proper in the Texas courts, therefore, we must determine whether it would have been proper in a federal district court—whether, that is, the case "aris [es] under any Act of Congress relating to patents."

For statutory purposes, a case can "aris[e] under" federal law in two ways. Most directly, a case arises under federal law when federal law creates the cause of action asserted. See American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 60 L.Ed. 987 (1916) ("A suit arises under the law that creates the cause of action"). As a rule of inclusion, this "creation" test admits of only extremely rare exceptions, see, e.g., Shoshone Mining Co. v. Rutter, 177 U.S. 505, 20 S.Ct. 726, 44 L.Ed. 864 (1900), and accounts for the vast bulk of suits that arise under federal law, see Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 9, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). Minton's original patent infringement suit against NASD and NASDAQ, for example, arose under federal law in this manner because it was authorized by 35 U.S.C. §§ 271, 281.

But even where a claim finds its origins in state rather than federal law—as Minton's legal...