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Gunn et al v. Minton: Patent Malpractice Not a Federal Issue

Written by Jason Williams
JD Candidate 2013, William & Mary Law School
Posted: March 4, 2013 @ 9:45 am

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Chief Justice John Roberts delivered the opinion of a unanimous Court.

On February 20, 2013, the Supreme Court of the United States ruled on the question of whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court, ultimately determining that patent legal malpractice claims do not arise under federal law and can be handled in State Courts. See Gunn et al v. Minton.

The respondent Vernon Minton (“Minton”) developed a computer program and subsequent telecommunications network aimed towards facilitating securities trading. A few years later in 1995, Minton leased the very same technology to R. M. Stark & Co. (“Stark”). In January of 2000, the U.S. Patent and Trademark Office granted Minton a patent on his securities trading technology.

Mr. Minton proceeded to file a lawsuit against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market alleging patent infringement. Mr. Minton was represented by Jerry Gunn (“Gunn”). Almost immediately after the lawsuit was filed, NASD and NASDAQ filed a motion for summary judgment on the basis that the Minton patent was invalid pursuant to the “on sale” bar -35 U.S.C. §102(b).  NASD and NASDAQ alleged that since Minton leased the product to Stark at least a year prior to the patent being issued, that Minton therefore should be barred from being issued a patent, as a matter of law. The District Court did not find Minton’s argument persuasive and granted the motion for summary judgment in favor of NASD and NASDAQ.

Minton proceeded to file a motion for reconsideration raising for the first time the argument that the lease agreement he had in place with Stark was for ongoing testing of the securities product, and as a result should fall within the “experimental use” exception. The District Court denied the motion and the case was then appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC), who affirmed the decision of the lower court in finding that Minton had waived the experimental-use argument.

While the merits of the patent infringement case are settled, Minton was convinced that but for his lawyers bringing the experimental use defense later in the appeals process, his patent infringement suit would have turned out differently. Therefore, Minton brought a lawsuit for malpractice action in Texas state court against his former legal representation. The former lawyer contended that the lease Minton made to Stark was not for experimental use, and thus the patent claims had a very good chance of being invalidated. “Ultimately the trial court agreed stating that Minton had put forth ‘less than a scintilla of proof’ that the lease had been for an experimental purpose.”

However, on appeal, Minton raised yet again a new legal argument. That is, because Minton’s malpractice claims arose out of a patent case that it “aris[es] under” federal patent law for the purposes of 28 U.S.C. §1338(a). Therefore Minton argued that even though he brought the malpractice suit in state court, the Texas state court lacked subject matter jurisdiction to adjudicate his case. Minton was looking for the state decision to be vacated and that he be allowed to start over in Federal Court.

While the Court of Appeals for Texas was divided, it ultimately rejected Minton’s claims. “Applying the test [they] articulated in Grable & Sons Metal Products v. Darue Engineering & Mfg, it held that the federal interests implicated by Minton’s state law claim were not sufficiently substantial to trigger 1338 ‘arising under’ jurisdiction. [The Court of Appeals for Texas] 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.” The Supreme Court of Texas reversed the Court of Appeals decision in part because they found that Minton’s claims had a “substantial federal issue” specifically “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.”

The Supreme Court of the United States granted the Supreme Court of Texas Certiorari.  The Supreme Court tried to simplify the issue by concentrating on whether the state-law claim raised a substantial and disputed federal issue, which a federal forum would be able to entertain without disturbing the approved balance between federal and state jurisdictional responsibilities. The Supreme Court went on to note that “federal 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. Where all four of these requirement are met, we held, jurisdiction is proper because there is a ‘serious federal interest in claiming the advantages thought to be inherent in a federal forum.”

The Supreme Court unequivocally found that Minton’s legal malpractice claim does not arise under federal patent law. In fact, the Court goes as far as saying that state malpractice claims will rarely, if ever, arise under federal patent law for the purpose of §1338(a). The Court found that the merits of Minton’s case foundered on the Grable substantiality requirement. This requirement examines the importance of the issue to the federal system as a whole.  “[As applied], the federal issue does not carry the necessary significance. No matter how the state courts resolve the hypothetical ‘case within a case,’ the real-world result of the prior federal patent litigation will not change. Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law.” Lastly, although Minton suggested that the state court answers to hypothetical patent questions could have an impact on future patents via issue preclusion, the Supreme Court refuted this notion stating: “but even assuming that [this] is true, such ‘face-bound and situation specific’ effects are not sufficient to establish arising under jurisdiction.”

Chief Justice Roberts delivered the opinion for a unanimous Court.


About the Author

Jason Williams is a current 3L law student at William & Mary’s School of Law located in Virginia. Mr. Williams received his undergraduate degree in electrical engineering from Rensselaer Polytechnic Institute, located in upstate New York. Mr. Williams also has experience with both district court patent litigation as well as matters before the International Trade Commission (ITC). Post-graduation from William & Mary, Mr. Williams will begin his legal career at a prominent law firm in Boston, Massachusetts focusing on patent litigation.

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