Gunn v. Minton: Implications for Legal Malpractice Cases Involving Patent Law and Beyond
In Wisconsin, a plaintiff seeking to prove a legal malpractice claim must establish the following four elements: (1) that an attorney-client relationship existed; (2) that the defendant committed acts or
omissions constituting professional negligence; (3) that the negligence was the proximate cause of the injury; and (4) the nature and extent of the injury alleged.1 As legal malpractice actions are governed by state law, they are traditionally heard in state court. However, a unique subset of legal malpractice cases involving federal patent law arguably should be heard in federal court as opposed to state court. Unfortunately, the U.S. Supreme’s Court 2013 decision in Gunn v. Minton2 all but closed the door for federal courts to hear legal malpractice cases involving issues related to patent law. This article will examine pre-Gunn precedent for legal malpractice cases that involved patent law, the Gunn decision, and the practical implications post-Gunn of litigating a legal malpractice case involving federal law issues in state court.
I.Pre-Gunn Case Law
Prior to Gunn, two key cases discussing federal court jurisdiction over legal malpractice claims involving patent law had concluded that the substantiality requirement necessary for exclusive federal court subject matter jurisdiction of patent law cases under 28 U.S.C. § 1338(a) was met only if patent law was a “necessary element” of the malpractice case.
Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P.,3 involved a legal malpractice action arising out of alleged errors in patent prosecution and patent litigation. The Air Measurement court started out by noting the two part test to determine whether the federal courts had exclusive patent law jurisdiction under 28 U.S.C. § 1338(a): “a well-pleaded complaint establishes either that federal patent law creates the cause of action or the plaintiff’s right to relief necessarily depends on the resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.”4
In Air Measurement, the second prong was implicated. The Air Measurement court stated that because the underlying suit involved a patent infringement action, the district court had to hypothetically adjudicate the merits of the infringement claim. Because proof of patent infringement was necessary to prove that the plaintiff would have prevailed in the prior litigations, it was a “necessary element” of the plaintiff’s malpractice claim and presented a substantial question of patent law, thus conferring exclusive federal subject matter jurisdiction under 28 U.S.C. § 1338(a).5
Immunocept, LLC v. Fulbright & Jaworksi, LLP,6 decided the same day as Air Measurement, also held that the district court had exclusive federal subject matter jurisdiction over a legal malpractice claim involving patent law under 28 U.S.C. § 1338(a). In Immunocept, a patent owner sued its former attorneys for failing to secure proper patent protection for its invention. Specifically, the plaintiff claimed that a drafting error in the patent application allowed competitors to copy the claimed methods in the patent without infringing the patent.7
The Immunocept court, citing Air Measurement, among other cases, stated that “where patent infringement is a necessary element of a legal malpractice claim stemming from prior litigation, there is § 1338 jurisdiction.”8 The court noted that, “[b]ecause patent claim scope defines the scope of patent protection, we surely consider claim scope to be a substantial question of patent law.”9 The Immunoceptcourt further stated that, since claim scope determination can be a complex question of law, as it could involve numerous claim construction devices, litigants would benefit from federal judges who would be used to handling those complicated rules.10
II. Gunn v. Minton
In Gunn, decided in 2013, the U.S. Supreme Court addressed the issue of whether a state law claim alleging legal malpractice in the handling of a patent case had to be brought in federal court. Not only did the supreme court state that there was no such requirement to litigate in federal court, the court stated that it would be the rare exception for a case of that nature to be litigated in federal court.
A. Factual and Procedural Background
In Gunn, Minton invented a computer program designed to facilitate securities trading. He leased the system to a securities brokerage and, a little over one year later, he applied for a patent based substantially on the system he had leased. The U.S. Patent and Trademark Office issued the patent, which Minton then used to file a patent infringement suit against a third party. That party moved to dismiss Minton’s suit on the basis that the patent was invalid under the “on sale” bar. Under the “on sale” bar, an inventor is not entitled to a patent if the invention was on sale in the United States for more than one year prior to the filing of the application. The defendant claimed that since Minton had leased his system to a securities brokerage more than one year prior to filing his patent application, Minton was not entitled to a patent. The district court granted the defendant’s motion for summary judgment and declared Minton’s patent invalid.11
Minton filed a motion for reconsideration,arguing for the first time that his lease agreement with the securities brokerage was part of an ongoing testing of his system and therefore came within the “experimental use” exception to the “on sale” bar.12 The district court denied Minton’s motion, in part due to his failure to have raised the issue earlier. Minton then appealed to the U.S. Court of Appeals for the Federal Circuit, which affirmed the district court.13
Minton then brought a malpractice suit in Texas state court against the attorneys who represented him in the patent infringement suit. Minton claimed that his attorneys’ failure to raise the “experimental use” argument earlier in the patent infringement litigation had led to his losing that lawsuit and the invalidation of his patent. His former attorneys countered that his lease of his system to the securities brokerage was not an “experimental use,” and thus, even if that argument had been timely raised, it would not have saved his patent. The trial court agreed.14
Minton appealed, raising for the first time the argument that because his legal malpractice claim was based on an alleged error in a patent case, it arose under federal patent law for purposes of 28 U.S.C. § 1338(a). Minton claimed that the state court lacked subject matter jurisdiction to decide his case and that its order granting summary judgment to his prior counsel should be vacated and the case dismissed so Minton could start over in federal court.
While the Court of Appeals of Texas rejected Minton’s argument, the Supreme Court of Texas reversed, relying on Air Measurement and Immunocept, and held that Texas state courts had lacked subject matter jurisdiction to hear the suit “because the success of Minton’s malpractice claim [was] reliant upon the viability of the experimental use exception as a defense to the on-sale bar,” which the court concluded was a substantial issue of federal patent law.15 The court further noted that exclusive federal court subject matter jurisdiction was appropriate 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.”16
B. The Supreme Court’s Holding in Gunn
The U.S. Supreme Court granted certiorari and held that 28 U.S.C. § 1338(a) did not deprive the Texas state courts of jurisdiction over Minton’s legal malpractice claims, even though the claims involved questions of federal patent law. In reaching this holding, the court stated that “state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of sec. 1338(a).”17
The Gunn court held that “federal jurisdiction over a state law claim will only 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.”18 Instead of considering whether the issue is substantial to the parties, however, the court held that the “[t]he substantiality inquiry ... looks instead to the importance of the issue to the federal system as a whole.”19
Gunn then provided two examples of state law claims that did raise “substantial” federal issues:
In [Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005)], the Internal Revenue Service had seized property from the plaintiff and sold it to satisfy the plaintiff’s federal tax delinquency. Five years later, the plaintiff filed a state law quiet title action against the third party that had purchased the property, alleging that the IRS had failed to comply with certain federally imposed notice requirements, so that the seizure and sale were invalid. In holding that the case arose under federal law, we primarily focused not on the interests of the litigants themselves, but rather on the broader significance of the notice question for the Federal Government. We emphasized the Government’s “strong interest” in being able to recover delinquent taxes through seizure and sale of property, which in turn “require[d] clear terms of notice to allow buyers to satisfy themselves that the Service has touched the bases necessary for good title.” ... The Government’s “direct interest in the availability of a federal forum to vindicate its own administrative action” made the question “an important issue of federal law that sensibly belonged in a federal court.” 
A second illustration of the sort of substantiality we require comes from Smith v. Kansas City Title & Trust Co., 255 U. S. 180 (1921), which Grable described as “[t]he classic example” of a state claim arising under federal law.... In Smith, the plaintiff argued that the defendant bank could not purchase certain bonds issued by the Federal Government because the Government had acted unconstitutionally in issuing them.... We held that the case arose under federal law, because “the decision depends upon the determination” of “the constitutional validity of an act of Congress which is directly drawn in question.” ... Again, the relevant point was not the importance of the question to the parties alone but rather the importance more generally of a determination that the Government “securities were issued under an unconstitutional law, and hence of no validity.”20
The cases discussed above clearly present issues important to the federal system as a whole. Equally clear is that, given the Gunn court’s holding, most legal malpractice cases involving patent law will not be construed as important to the federal system as a whole, and will therefore not be subject to exclusive federal subject matter jurisdiction under 28 U.S.C. § 1338(a).
In reaching its decision, the Gunn court noted that “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 patent,’ sec. 1338(a).”21 The court noted that it interpreted “arising under” in both § 1331 and § 1338(a) identically.22
The court noted that a case can arise under federal law in two ways. First, a case arises under federal law when the cause of action is created by federal law.23 Second, a federal court has jurisdiction over a state law claim “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.”24 The court noted that when all four prongs are satisfied, jurisdiction is proper because there is a “‘serious federal interest in claiming the advantages thought to be inherent in a federal forum,’ which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts.”25
Since Minton’s legal malpractice claim originated under state law, the only way he could claim federal jurisdiction in his case was by satisfying the four- prong test. The court concluded that resolution of a federal patent question was necessary to Gunn’s case, as the hypothetical patent case within the malpractice case had to be resolved to decide the malpractice case.26 The court further stated that this federal issue was “actually disputed,” as the parties disagreed as to whether the experimental use exception to the “on sale” bar would have saved Minton’s patent infringement claim.27 However, the court concluded that Minton’s claim failed to meet the substantiality requirement, in which the court inquires as to whether the issue is important to the federal system as a whole. The court stated that no matter how the malpractice case was decided, the patent would remain invalid. The court also stated that allowing the state court to resolve the case would not undermine the development of a uniform body of patent law.28
III. Wisconsin Recognizes Gunn v. Minton.
Gunn is already affecting legal malpractice cases in Wisconsin. In an unreported 2013 Wisconsin court of appeals case,29 the plaintiff sued his former lawyers in state court, alleging legal malpractice arising out of their representation of him before the United States Patent and Trademark Office relating to a patent application and the payment of a patent issue fee. The plaintiff’s former attorneys moved to have the case transferred to federal court on the basis that, since the basis of the malpractice claim arose under federal patent law, the federal courts had exclusive subject matter jurisdiction under 28 U.S.C. § 1338(a).30
The circuit court agreed and dismissed the plaintiff’s case for lack of subject matter jurisdiction. The plaintiff appealed and, while the appeal was pending, Gunn was decided. The court of appeals concluded that Gunn mandated a summary reversal, stating that there was nothing about the case that suggested it presented the “singular circumstance that eluded the imagination of the Supreme Court.”31 The court then remanded the case to the trial court for further proceedings.32
This is exactly the kind of case that the U.S. Supreme Court in Gunn wanted to keep on state court dockets.
IV. The Practical Implications of Litigating Cases Involving Federal Law in State Court
In holding that 28 U.S.C. § 1338(a) will very rarely deprive state courts of subject matter jurisdiction over legal malpractice cases involving patent law, the Gunn court concluded that permitting a state court to resolve the hypothetical case within a case necessary to resolving legal malpractice claims would not “undermine ‘the development of a uniform body of [patent] law.’”33 The risk of a line of state court cases out of variance with the federal body of law was apparently not enough of a concern for the court to hold that federal jurisdiction should be mandatory.
That said, there are potential benefits other than uniformity to litigating legal malpractice cases involving patent law in federal court that should have warranted more consideration by the U.S. Supreme Court.
First, patent law is a specialty area of law, arguably more so than any other area. Not only are patent prosecution attorneys required to have scientific and technical qualifications, they must also pass the Patent Bar in order to practice before the United States Patent and Trademark Office. Moreover, the United States Court of Appeals for the Federal Circuit is the only appellate court that has jurisdiction to decide patent cases brought under 28 U.S.C. § 1338(a).
It stands to reason that, if an attorney is required to have specialized training and take a specific examination to practice before the United States Patent and Trademark Office, then cases that involve alleged errors or omissions arising out of that practice, and representation of clients with respect to those issues, will benefit from courts that have significant background, experience, and resources in handling those types of cases.
In addition, federal courts arguably have better resources for resolving lawsuits that implicate federal patent law. For example, the discovery procedures under the Federal Rules of Civil Procedure are more effective for dealing with complex cases. Unlike the typical auto accident case, patent cases often involve parties that are not local. Moreover, the individuals material to resolving a malpractice suit involving patent issues may be uncooperative due to the fierce competition in getting and maintaining patents. The subpoena powers under the Federal Rules are more effective for dealing with complex cases and obstructive parties, and being able to compel discovery efficiently and effectively is critical to successfully defending such a case.
At the same time, state courts often lack the resources necessary to handle complicated cases involving extensive scientific or technical issues. Although both state and federal courts are often burdened with very large caseloads, a critical difference for the federal courts is the general availability of judicial law clerks to assist in researching complex issues. State trial courts rarely have the resources to hire full-time law clerks. While a federal court hearing a legal malpractice claim involving patent law might be able to devote a law clerk to researching a complex issue relating to the case, following Gunn, state courts without sufficient staffing will now be forced to undertake a class of cases that can often involve a significant amount of research involving the federal patent laws. Moreover, it is unlikely that state court judges will be able to draw on a reserve of specialized knowledge relating to patents in general, as it is rare to find a state court judge with a significant background in intellectual property.
A larger question is whether the federal courts will need to revisit Gunn at some point in the future. The Gunn court noted that, in resolving the patent law case within a legal malpractice case, a state court would be “expected to hew closely to the pertinent federal precedents.”34 Yet if state courts issue rulings in these types of malpractice cases at variance with federal court rulings on similar issues, and litigants become accustomed to that, will the federal courts need to revert to the old substantiality test under Air Measurement, or will litigants need to satisfy the Gunn test, showing that resolution of the matter by a federal court is important to the federal system as a whole in order to right the course from years of varying state court decisions? While it is too early to tell, litigants should be mindful of these questions as they become involved in state court cases that involve issues of patent law.
Finally, patent law is only one area of law in which the federal courts have exclusive subject matter jurisdiction. The federal courts also have exclusive jurisdiction over several other classes of cases, including admiralty, the military, anti- trust, immigration, and bankruptcy. Applying the substantiality requirement to cases involving those underlying issues, counsel should be mindful of the implications of having those cases litigated in state as opposed to federal court.
Given the U.S. Supreme Court’s decision in Gunn, legal malpractice cases involving patent law will rarely—if ever—be heard in federal court. While the court was confident that its ruling would maintain the proper state versus federal court balance, attorneys defending malpractice claims based on patent law may be at a disadvantage now that removal will rarely be an option.
Ahndrea R. Van Den Elzen is an attorney in the Milwaukee office of Peterson, Johnson & Murray, S.C. Her practice encompasses a wide variety of civil litigation matters, including business disputes, professional negligence, and appellate matters.
Terry Johnson is an attorney admitted to practice before the state and federal courts in Wisconsin, the Northern District of Illinois, the 7th Circuit Court of Appeals, and the United States Supreme Court. He is a member of the Wisconsin Defense Counsel and the American Board of Trial Advocates.
Mr. Johnson received his law degree from the University of Wisconsin in 1975 with honors and has since been engaged in the private practice of law in Milwaukee. He has been engaged primarily in civil litigation.
Mr. Johnson handles virtually every type of civil litigation other than tax disputes and family law. Mr. Johnson has handled legal malpractice actions for over thirty years as well as representing individuals with regard to both grievances filed with the Office of Lawyer Regulation and formal complaints filed with the Supreme Court of Wisconsin concerning disciplinary proceedings and licensing matters. In addition, he has testified as an expert witness in proceedings in the state and federal courts dealing with legal malpractice, bad faith, and ethics issues on many occasions.
Mr. Johnson is a frequent lecturer to attorneys on a wide variety of subjects, primarily focusing on attorney ethics, attorney discipline, legal malpractice, and the preparation and trial of civil actions. In addition, he has taught on an occasional basis at both the University of Wisconsin and Marquette University Law Schools.
1 Lewandowski v. Continental Casualty Co., 88 Wis. 2d 271, 277, 276 N.W.2d 284 (1979).
2 568 U.S. ___, 133 S.Ct. 1059 (2013).
3 504 F.3d 1262 (Fed. Cir. 2007).
4 Id. at 1267-68.
5 Id. at 1269.
6 504 F.3d 1281 (Fed. Cir. 2007).
7 Id. at 1284-85.
8 Id. at 1285.
9 Id. (citing Johnson & Johnston Assocs. v. R.E. Serv. Co., 285 F.3d 1046, 1052 (Fed. Cir. 2002) (en banc)).
11 Gunn, 133 S.Ct. at 1062.
12 Id. at 1062-63.
25 Id. (quoting Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 313-14 (2005)). 26 Id.
27 Id. at 1065-66.
28 Id. at 1066-68.
29 Milwaukee County Circuit Court Case No. 11-CV-241;Wisconsin Court of Appeals Case No. 12-AP-462.
31 Id. (June 5, 2013 Court of Appeals Summary Dismissal Order), available at: http://www.wicourts.gov/ca/opinion/ DisplayDocument.pdf?content=pdf&seqNo=97926.
33 Gunn, 133 S.Ct. at 1067 (quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989)). 34 Id.
© 2014 Wisconsin Defense Counsel. All rights reserved. Ahndrea R. Van Den Elzen & Terry E. Johnson, Gunn v Minton: Implications for Legal malpractice Cases Involvoing Patent Law and Beyond, Wisconsin Civil Trial Journal (Summer 2014)