State Courts Can Hear Patent Malpractice Cases

, The National Law Journal

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WASHINGTON - State courts may hear claims alleging legal malpractice in the handling of a patent case, a unanimous U.S. Supreme Court ruled yesterday.

The justices handed victory to a quartet of attorneys who had challenged a Texas Supreme Court decision holding that the patent malpractice lawsuit against them belonged in federal court, not state court, where they had prevailed.

The Supreme Court's decision in Gunn v. Minton, 11-1118, is expected to have ramifications beyond patent legal malpractice cases because it clarified a particularly muddy area of the law: when there is federal jurisdiction over a state law claim.

See Briefs filed in the case and the Oral Argument Transcript.

The legal malpractice claim—a state law claim—stemmed from a patent infringement suit brought by Vernon Minton in federal court against the National Association of Securities Dealers and the Nasdaq stock market. Minton was represented by Jerry Gunn of Jerry W. Gunn & Associates in Houston; James Wren of Williams Squires & Wren in Waco, Texas; and William Slusser and Michael Wilson, now in the Houston office of Fulbright & Jaworski.

Minton lost his patent infringement suit. He brought a malpractice suit in Texas state court against his lawyers because he believed their failure to raise a patent-related argument earlier in the case resulted in his loss and the invalidation of his patent. After he lost his malpractice suit, he raised a new argument on appeal: Because the malpractice claim was based on an alleged error in a patent case, it "arises under" federal patent law.

Minton asked the Texas appeals courts to vacate the trial court order and dismiss the case so he could start over in federal court. The Texas Supreme Court, in a divided opinion, agreed with Minton.

In reversing the Texas Supreme Court, Chief Justice John Roberts Jr. carefully laid out the analysis of when a case can "arise under" federal law. There are two ways, he wrote, the first being when federal law creates the cause of action asserted. Minton's original patent infringement suit, for example, arose under federal law because it was specifically authorized by a federal statute, he wrote.

The Supreme Court, he added, also has identified a "special and small category" of cases in which there is "arising under" jurisdiction even when a claim has its origins in state rather than federal law, as did Minton's legal malpractice claim.

"In outlining the contours of this slim category, we do not paint on a blank canvas," Roberts wrote. "Unfortunately, the canvas looks like one that Jackson Pollock got to first."

Looking to the court's 2005 decision in Grable & Sons Metal Products v. Darue Engineering, 04-603, Roberts said federal jurisdiction over a state law claim will lie if a federal issue is necessarily raised; actually disputed; substantial; and capable of resolution without disrupting the federal-state balance approved by Congress.

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