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IP Malpractice Suits Belong In State Court, Justices Rule
By Ryan Davis
Law360, New York (February 20, 2013, 7:16 PM ET) -- The U.S. Supreme Court ruled unanimously
Wednesday that legal malpractice suits involving patents should nearly always be heard in state court, a
decision that overturns Federal Circuit precedent and will mean the loss of a body of cases that has
helped shape the law.
The court reversed a decision that the federal courts had jurisdiction over a suit by inventor Vernon
Minton alleging that his attorneys had mishandled an infringement suit. It concluded that unless a
malpractice case raises issues "significant to the federal system as a whole," it belongs in state court.
The opinion by Chief Justice John Roberts made clear that scarcely any patent malpractice cases will
meet the test for federal jurisdiction. It rejected the Federal Circuit's finding that federal courts should
hear such cases to ensure the uniform application of patent law.
"We are comfortable concluding that state legal malpractice claims based on underlying patent matters
will rarely, if ever, arise under federal patent law," the court wrote. "Although such cases may
necessarily raise disputed questions of patent law, those cases are by their nature unlikely to have the
sort of significance for the federal system necessary to establish jurisdiction."
With most patent-related malpractice suits now proceeding in state court, litigants will have to be
prepared to take the time to educate judges about the specifics of patent law, said Paul Swanson of
Lane Powell PC.
"We'll need experts to explain to state court judges and their staff patent law issues they would
otherwise never encounter," he said. "I think we're going to miss the regularity of federal court
decisions that had actually started creating a body of law."
Jane Webre of Scott Douglass & McConnico LLP, counsel for the attorneys whom Minton had accused of
malpractice, said her clients were "ecstatic" with the decision, which leaves intact a summary judgment
ruling in their favor.
"The opinion took real pains not just to resolve this case, but inject as much clarity as possible into this
area of jurisdiction," she said.
The inventor Minton had claimed that inadequate counsel by his attorneys from Williams Squire & Wren
LLP, Slusser & Frost LLP and Slusser Wilson & Partridge LLP had resulted in his securities trading system
patent being found invalid. The attorneys represented him in an infringement case he had brought
against Nasdaq Stock Market Inc.
He filed suit in Texas state court, and the trial court granted summary judgment to his attorneys. On
appeal, Minton argued that his suit should have been filed in federal court. The Texas Supreme Court
agreed, citing earlier Federal Circuit rulings, and let Minton refile his case in federal court.
The Supreme Court had held in 2005 that some state law claims, such as legal malpractice, can be heard
in federal court if they involve substantial issues of federal law. In a pair of cases in 2007, the Federal
Circuit ruled that most legal malpractice cases involving patents implicate substantial patent issues, so
they belong in federal court.
However, the Supreme Court said Wednesday that the bar for what is considered to be a substantial
patent law issue if far higher than the Federal Circuit had said. It is not enough that the federal issue be
substantial and important to the parties, the court said; it must raise questions of wide importance for
the U.S. patent system.
Most legal malpractice cases involving patents look at whether a case's outcome would have been
different if the attorneys accused of malpractice had acted differently — a question that has no broader
significance, the court said.
"Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely
hypothetical sense," it said. "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."
The justices rejected the argument that patent malpractice cases belong in federal court to ensure a
uniform body of patent law. Federal courts handling actual infringement disputes would not be bound
by the findings of state courts on hypothetical patent issues, they wrote.
In addition, the court said that although federal courts are better-versed in patent law, the possibility
that a state court might misunderstand a patent law issue in deciding a malpractice case is not a reason
to require that patent malpractice cases be filed in federal court.
It is difficult to imagine a patent malpractice case that would have such deep importance to the patent
system that it would meet the Supreme Court's test for federal jurisdiction, said Richard Simpson of
Wiley Rein LLP.
"Under this standard, it would have to be a pretty extraordinary case," he said. "In virtually all cases,
that will no longer be an option."
Suits over litigation malpractice will hardly ever meet the standard, Swanson said. But it's possible that
allegations of misconduct during patent prosecution could pass muster, so that a state court could avoid
having to rule on standards of practice before the U.S. Patent and Trademark Office.
For the most part, though, the ruling is "somewhat of a rebuke to the Federal Circuit," he said. It will
return the litigation landscape to where it was before the 2007 decisions, when most patent malpractice
cases were filed in state court.
While state judges are generally less familiar with the nuances of patent law, it's not clear that the
quality of decisions on patent malpractice in state and federal courts are any different, said John
Garretson of Shook Hardy & Bacon LLP.
"Both state and federal judges are interested in doing the right thing and applying the law," he said,
noting that state court judges are likely much more familiar with the specifics of malpractice law.
The ruling seems to be an attempt by the Supreme Court to cut down the workload of federal judges,
said Peter Toren of Weisbrod Matteis & Copley PLLC.
"They're acutely concerned with how busy the federal courts are and how they're overwhelmed by new
federal causes of action," he said. "This is a pretty easy way to avoid the possibility of even more cases
coming into the federal courts."
An attorney Minton could not immediately be reached for comment on the decision Wednesday.
The attorneys accused of malpractice are represented by Jane Webre and Cynthia Connolly of Scott
Douglass & McConnico LLP.
Minton is represented by Thomas Michel and Robley Sicard of Griffith Jay & Michel LLP.
The case is Gunn et al. v. Minton, case No. 11-1118, in the U.S. Supreme Court.
--Editing by Kat Laskowski and Chris Yates.
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