February 20, 2013

Supreme Court Decides Gunn v. Minton

On February 20, 2013, the Supreme Court decided Gunn v. Minton, No. 11-1118, holding that state courts have jurisdiction to resolve state legal malpractice claims even if the determination of the malpractice claim requires resolution of a disputed federal patent question.

In the early 1990s, Vernon Minton developed a computer program and network to facilitate securities trading. In March 1995, he leased the system to a securities brokerage firm. More than a year later, he applied for a patent based substantially on the leased system, and he received the patent in January 2000. Minton then filed a patent infringement suit against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc. in federal district court. NASD and NASDAQ won summary judgment on the ground that Minton's patent was invalid under the "on sale" bar, 35 U.S.C. § 102(b), because the system had been leased for more than a year before Minton applied for a patent.

After a motion for reconsideration and an appeal failed, Minton sued his lawyers in Texas state court for failing to raise an argument—the "experimental use" exception—on a timely basis. Minton's lawyers successfully defended the malpractice case on the ground that the "experimental use" exception would have failed even if it had been raised on a timely basis because of insufficient evidence that the lease had been for an experimental purpose. Minton appealed. He newly argued to the Texas Court of Appeals that his legal malpractice claim arose under federal patent law, over which the federal courts have exclusive jurisdiction, and therefore the Texas trial court decision must be vacated and his case dismissed—leaving him free to re-file his malpractice claim in federal court. The Texas Court of Appeals panel rejected Minton's argument and affirmed the trial court, but the Supreme Court of Texas reversed, holding that under Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), Minton's malpractice claim involved a "substantial federal issue" and adjudication in federal court was appropriate given the federal interest in uniform determination of patent law matters. 

The Supreme Court reversed and remanded. The Court determined that Minton's malpractice claim did not arise under federal law. The Court cited the four-point framework set forth in Grable, specifically that federal jurisdiction will lie over a state law claim if the 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." The Court acknowledged that the federal patent question at issue—the viability of the experimental use exception—was necessary and actually disputed in Minton's malpractice claim. However, the Court determined that that federal question was not "substantial." The resolution lacked significance to the federal system because the patent law issue would only be resolved in a hypothetical sense in the context of the malpractice litigation. Regardless of whether the state court determined that the experimental use exception applied, Minton's patent would remain invalid. State court adjudication of these matters in similar cases will not undermine the development of federal patent law. Likewise, the Court found the fourth requirement of Grable unsatisfied: "We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue."  

Chief Justice Roberts delivered the opinion for a unanimous Court.

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