Justice GREEN delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice WAINWRIGHT, Justice JOHNSON, and Justice LEHRMANN joined.
This case arises out of patent infringement litigation. We consider whether federal courts possess exclusive subject-matter jurisdiction over state-based legal malpractice claims that require the application of federal patent law. The federal patent issue presented here is necessary, disputed, and substantial within the context of the overlying state legal malpractice lawsuit. Additionally, the patent issue may be determined without creating a jurisdictional imbalance between state and federal courts. We conclude that exclusive federal jurisdiction exists in this case. Accordingly, without reaching the merits of the legal malpractice claim, we reverse the court of appeals' judgment and dismiss this case.
Petitioner, Vernon Minton, is a former securities broker. In early 1990, Minton
More than one year after signing the TEXCEN lease, Minton filed a provisional application for a patent covering an interactive securities trading system that contained features very similar to TEXCEN. Minton's patent attorney drafted the patent application with the aid of TEXCEN's software assistance manual, which Minton had provided him. The United States Patent and Trademark Office granted Minton a patent (the '643 Patent) on January 11, 2000.
Subsequently, Minton filed a patent infringement action against NASD and The NASDAQ Stock Market, Inc. in the United States District Court for the Eastern District of Texas. Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 226 F.Supp.2d 845, 852 (E.D.Tex.2002). Minton's infringement suit alleged that the NASDAQ software system used in conjunction with NASD's services infringed the '643 patent. Id. at 854. At the time they filed the patent infringement suit on Minton's behalf, his attorneys had no knowledge of the TEXCEN lease. NASD and NASDAQ moved for summary judgment, alleging the '643 patent's invalidity under the "on-sale bar" provided in § 102(b) of the U.S. Patent Act. Id. at 852; see 35 U.S.C. § 102(b). Under the on-sale bar, a patent is invalid when the invention claimed by the patent is sold "more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b). As an initial defense to the application of the on-sale bar, Minton pled that TEXCEN was a different type of software system than that claimed by the '643 patent. Minton, 226 F.Supp.2d at 855. The federal district court found Minton's argument unpersuasive and, accordingly, granted NASD and NASDAQ's motion for summary judgment and declared the '643 patent invalid. Id. at 852, 882-84.
Following the district court's decision, Minton asked his attorneys to consider a new defense to the on-sale bar—the experimental use exception. Under the experimental
Minton filed a legal malpractice suit in state court against Respondents, the attorneys who had originally prosecuted his patent infringement litigation in the federal district court: Jerry W. Gunn, individually; Williams Squire & Wren, L.L.P.; James E. Wren, individually; Slusser & Frost, L.L.P.; William C. Slusser, individually; Slusser Wilson & Partridge, L.L.P.; and Michael E. Wilson, individually (collectively "Gunn"). Minton alleged that Gunn's negligent failure to timely plead and brief the experimental use exception to the on-sale bar cost him the opportunity of winning his federal patent infringement litigation. Alternatively, Minton claimed that Gunn's negligence resulted in the pretrial dismissal of his patent infringement suit, costing him a potential settlement with NASD and NASDAQ of his claim for more than $100,000,000.00 in damages. Gunn, in turn, challenged the causation element of Minton's malpractice claim by filing joint no-evidence and traditional motions for summary judgment. Gunn's joint motions asserted that he was not obligated to raise the experimental use exception to the on-sale bar because, under the facts in existence at the time of the federal patent infringement litigation, the exception was neither a legally nor factually viable defense. Therefore, Gunn asserted that Minton could not establish as a matter of law that, but for his failure to plead the experimental use exception, Minton would have won his patent infringement lawsuit.
Based on the absence of any evidence that the primary purpose of the TEXCEN lease was experimental, the trial court granted Gunn's no-evidence motions for summary judgment and motions to dismiss and rendered a take-nothing judgment in his favor.
Shortly after Minton filed his state court appeal, the United States Court of Appeals for the Federal Circuit decided Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed.Cir.2007). Air Measurement held that when "establishing patent infringement is a necessary element of a [state] malpractice claim stemming from alleged mishandling of ... earlier patent litigation, the issue is substantial and contested, and federal resolution of the issue was intended by Congress," and thus, federal courts possess exclusive "arising under" jurisdiction of the malpractice claim. Id. at 1273. Relying on Air Measurement, Minton argued that his malpractice suit arose under exclusive federal patent law jurisdiction and asked the court of appeals to dismiss his appeal for lack of subject-matter jurisdiction. Declining to follow the Federal Circuit's precedent, the court of appeals held that it had subject-matter jurisdiction over Minton's appeal and denied his motion to dismiss. Minton, 301 S.W.3d at 709. The court of appeals then affirmed the trial court's judgment, which granted Gunn's joint motions for summary judgment. Id. at 715. Minton filed a petition for review, which we granted. 54 TEX.SUP.CT.J. 538 (Feb. 8, 2011).
Before we can reach the merits of Minton's claim, we must first determine whether we possess subject-matter jurisdiction to consider this appeal. See Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1, 9 (Tex.2008) (considering jurisdiction before proceeding to determine the merits of the case). The question of "[w]hether a court has subject matter jurisdiction is a question of law that we review de novo." City of Dallas v. Carbajal, 324 S.W.3d 537, 538 (Tex.2010) (per curiam). In support of his view that this case arises under exclusive federal patent law jurisdiction, Minton relies chiefly on two Federal Circuit opinions. Air Measurement, 504 F.3d 1262; Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed.Cir.2007). Minton asserts that the court of appeals erred in rejecting these cases and in applying non-patent law cases to reach its holding. In reply, Gunn argues that this Court is not bound by the decisions of the Federal Circuit and that the two Federal Circuit opinions that Minton would have us follow fail to apply the federalism analysis required by the United States Supreme Court in cases involving the division of jurisdiction between state and federal courts. See Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). Although we disagree with Minton's claim that non-patent law cases are inapplicable to the issues presented here, we do agree that the experimental use exception to the on-sale bar plays a substantial role within the context of Minton's state-based legal malpractice claim. Cf. Alexander v. Turtur & Assocs., 146 S.W.3d 113, 117 (Tex.2004) ("To prevail on a legal malpractice claim, a plaintiff must show that ... [his attorney's negligence] proximately caused the plaintiff's injuries ...." (internal quotations omitted)); Schaeffer v. O'Brien, 39 S.W.3d 719, 720 (Tex.App.-Eastland 2001, pet. denied) (legal malpractice plaintiffs must prove a "case within a case"). We are also of the opinion that federal courts may entertain the application of this patent law concept within a state-based legal malpractice suit without disturbing the balance Congress has struck between state and federal judicial responsibilities. See Grable, 545 U.S.
Congress has provided federal courts jurisdiction over civil actions generally "arising under" federal law and also over actions specifically "arising under" any federal law relating to patents. See 28 U.S.C. §§ 1331 (providing general federal question jurisdiction), 1338(a) (providing patent law jurisdiction). One form of "arising under" federal-question jurisdiction stems from "state-law claims that implicate significant federal issues." Grable, 545 U.S. at 312, 125 S.Ct. 2363. In Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988), the Supreme Court construed § 1338(a)'s "arising under" language to extend federal jurisdiction to any case "in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." 486 U.S. at 808-09, 108 S.Ct. 2166. Whether a patent issue presented in a state-based action is substantial enough to trigger federal jurisdiction under § 1338(a) "must be determined from what necessarily appears in the plaintiff's [well-pleaded complaint] ... unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose." Id. at 809, 108 S.Ct. 2166 (internal quotations omitted).
Several opinions issued by the United States Supreme Court demonstrate federal courts' traditional reluctance to allow state plaintiffs to open "the `arising under' door" by simply pleading a federal issue. E.g., Grable, 545 U.S. at 313, 125 S.Ct. 2363; Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 117-18, 57 S.Ct. 96, 81 L.Ed. 70 (1936) (declining to define cases arising under federal law broadly and adopting instead "a selective process which picks the substantial causes out of the web and lays the other ones aside"); Shulthis v. McDougal, 225 U.S. 561, 569, 32 S.Ct. 704, 56 L.Ed. 1205 (1912) ("A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction, or effect of such a law, upon the determination of which the result depends."). Based on its reluctance to open wide the federal courthouse doors, the Supreme Court has added several other requirements, in addition to substantiality, which must be satisfied before a federal patent issue presented in a state action may trigger exclusive federal patent jurisdiction.
In Grable, the Supreme Court refined the Christianson test and clarified the role that federalism concerns should play in the analysis of whether a state-based lawsuit with embedded federal issues arises under federal jurisdiction: "[T]he question is, does a state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314, 125 S.Ct. 2363. "In other words, federal question jurisdiction exists where (1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and state judicial responsibilities." Singh v.
While we are not bound by the holdings of the Federal Circuit, its opinions in Air Measurement and Immunocept are directly on point with the issues and facts presented by Minton's legal malpractice action. Cf. Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex.1993) (stating that only the opinions of the United States Supreme Court are binding on this Court). Air Measurement dealt with a state-based legal malpractice claim stemming from an underlying patent dispute. 504 F.3d at 1265. In the underlying patent litigation, Air Measurement filed several patent infringement suits and ultimately settled all of the cases. Id. at 1266. Based on information discovered with subsequent counsel, Air Measurement claimed it was forced to settle for an amount far below the market value of the patents due to errors committed by their original patent attorney during the patent application process. Id. Air Measurement alleged that the patent attorney failed to timely file the patent application within the one year on-sale bar, failed to disclose prior patents and other facts while prosecuting the patent applications, and committed other errors that led to the invalidity of Air Measurement's patents in the underlying litigation. Id. In the resulting state-based legal malpractice lawsuit, the Federal Circuit held that it possessed exclusive jurisdiction over the malpractice suit. Id. at 1269. The Federal Circuit explained that "[b]ecause proof of patent infringement is necessary to show [Air Measurement] would have prevailed in the prior litigation, patent infringement is a `necessary element' of [Air Measurement's] malpractice claim and therefore apparently presents a substantial question of patent law conferring [exclusive federal patent law] jurisdiction." Id. The Immunocept case involved a similar issue. 504 F.3d at 1282. There, the assignee of a patent brought a state-based legal malpractice action against the patent attorney originally hired to apply for and prosecute the patent at issue. Id. at 1283-84. The basis of the resulting malpractice suit was the patent attorney's claim-drafting error, which allegedly resulted in a lower level of protection for the patented technology. Id. at 1284-85. Again, the Federal Circuit determined that it had exclusive jurisdiction over the state-based legal malpractice suit "[b]ecause patent claim scope defines the scope of patent protection ... [and] is the first step of a patent infringement analysis," and is therefore "a substantial question of patent law." Id. at 1285.
To support his assertion that we should follow the Federal Circuit's holdings in Air Measurement and Immunocept, Minton criticizes the court of appeals' reliance on non-patent law cases and argues that we should look only to patent law cases because Congress has given federal courts exclusive jurisdiction over patent law. See Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 682, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) (involving a state lawsuit for reimbursement based on a provision of the Federal Employees Health Benefits Act); Grable, 545 U.S. at 310, 125 S.Ct. 2363 (involving a state quiet title action based on a federal tax statute); Singh, 538 F.3d at 338 (involving a state-based legal malpractice claim stemming from an underlying trademark dispute). We find this distinction to be unpersuasive
The first prong of the Grable test requires that the applicability of the experimental use exception to the on-sale bar be a necessary component in the determination of Minton's state-based legal malpractice claim. See Grable, 545 U.S. at 314, 125 S.Ct. 2363. In Grable, the Supreme Court held that the interpretation of a federal tax statute was a necessary element of the petitioner's state-based quiet title action because the success of his claim turned on that issue alone. Id. at 314-15, 125 S.Ct. 2363. Until the Supreme Court construed the language and determined the meaning of the federal statute, it could not determine whether the petitioner had successfully proven his state-law claim. Id. The Supreme Court has further explained that a federal element cannot be deemed necessary to a state-law claim if on the face of the well-pleaded complaint there are alternative theories upon which the claimant may recover. Christianson, 486 U.S. at 810, 108 S.Ct. 2166. Here, Minton's trial court petition asserted only one theory in support of his legal malpractice claim—his attorneys' negligent failure to timely plead and brief the experimental use exception to the on-sale bar. Because Minton relies on a single negligence claim, there are no alternative theories on which he may establish his attorneys' legal malpractice. Moreover, a determination of whether Minton would have won his underlying federal patent infringement action necessarily requires a consideration of the legal and factual viability of the experimental use defense. See Grable, 545 U.S. at 314-15, 125 S.Ct. 2363; Alexander, 146 S.W.3d at 117; see also Air Measurement, 504 F.3d at 1270 (noting that in the case-within-a-case requirement for legal malpractice claims, the plaintiff had the burden of proving patent infringement, and whether the plaintiff would have prevailed against the on-sale bar defense raised in the underlying patent litigation is "not the sort of jurisdiction-defeating defense[] contemplated by [the Supreme Court in] Christianson" because it is "part of the malpractice causation element rather than the defense[] raised by [the defendant] in the" malpractice claim). If the experimental use defense would not apply under the facts of his case, for instance, Minton's attorneys' negligence could not have proximately caused the federal district court to invalidate the claims of the '643 patent. See Grable, 545 U.S. at 314-15, 125 S.Ct. 2363. Therefore, the applicability of the experimental use exception is a necessary element of Minton's state legal malpractice suit, and the first Grable prong is satisfied.
The second prong of the Grable test requires that the experimental use exception to the on-sale bar be disputed in Minton's state-based legal malpractice lawsuit. See id. at 314, 125 S.Ct. 2363. For obvious reasons, the legal and factual viability of the experimental use exception is
The third prong of the Grable test demands that the applicability of the experimental use exception be a substantial issue within Minton's state-based legal malpractice claim. See 545 U.S. at 314, 125 S.Ct. 2363. Although we recognize that this question is close, we disagree with the court of appeals' holding that the experimental use exception is not a substantial element here. In determining whether a federal patent issue is a substantial element within the context of a state-based legal malpractice claim, we are informed by the Supreme Court's holding in Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006). In Empire, an insurance carrier sued the estate of one of its deceased insureds in federal district court when it learned that the insured's estate had settled a state-based personal injury suit on his behalf. Id. at 683, 126 S.Ct. 2121. The carrier's federal suit sought reimbursement for the full amount of benefits it had paid to the insured after he sustained injuries in an accident. Id. The carrier asserted that its reimbursement claims arose under federal jurisdiction because a preemption provision in the insured's insurance contract stated that federal law shall supersede any state law relating to benefits. See id. at 699, 126 S.Ct. 2121. The Supreme Court held that the operation of the preemption clause of the federal insurance contract was not a substantial issue because "the bottom-line practical issue [in the state-based reimbursement claim] is the share of [the] settlement properly payable to [the carrier]." Id. at 700-01, 126 S.Ct. 2121. Unlike Grable, where the construction and interpretation of a federal tax statute was the crux of the state-based lawsuit, even if the preemption provision in Empire allowed federal law to trump state law regarding reimbursement for benefits, the carrier could not win until it proved that it was entitled to reimbursement from the state-based personal injury recovery. Compare Grable, 545 U.S. at 315, 125 S.Ct. 2363, with Empire, 547 U.S. at 700-01, 126 S.Ct. 2121. We conclude that the experimental use exception presented here is more similar to the substantial federal issue presented in Grable than the insubstantial issue presented in Empire.
Following Grable, other courts have deemed federal patent issues substantial when the determination of the patent issue establishes the success or failure of an overlying state-law claim. See, e.g., USPPS, Ltd. v. Avery Dennison Corp., 647 F.3d 274, 280-82 (5th Cir.2011) (holding that the state-law claims of fraud and breach of fiduciary duty in connection with a patent application presented a substantial federal patent issue because the causation element required the plaintiff to prove the underlying patentability of its invention); Warrior Sports, Inc. v. Dickinson Wright, P.L.L.C., 631 F.3d 1367, 1372 (Fed.Cir.2011) (holding that in order for the plaintiff to prove its case-within-a-case
Finally, the fourth Grable element requires that the determination of the viability of the experimental use exception be a question that a federal court may decide without upsetting the balance between federal and state judicial responsibilities. Grable, 545 U.S. at 314, 125 S.Ct. 2363. This final factor is perhaps the most important. See id. ("[T]he presence of a disputed federal issue and the ostensible importance of a federal forum are never necessarily dispositive; there must always be an assessment of any disruptive portent in exercising federal jurisdiction."). Although we recognize that legal malpractice claims traditionally fall under the domain of state courts, we conclude that federal courts may decide this malpractice case without upsetting the jurisdictional balance between federal and state courts. Compare USPPS, 647 F.3d at 282 (finding federal-question jurisdiction in a state-based tort claim where the underlying proceedings involved substantial questions of patent law), with Singh, 538 F.3d at 338 (recognizing the importance of federalism considerations and holding a state-based legal malpractice resulting from an underlying
Gunn attempts to persuade us that the facts of this case cannot survive the Grable federalism inquiry because they are more similar to those considered by the Supreme Court in Empire. See Empire, 547 U.S. at 677, 126 S.Ct. 2121. As explained above, Empire involved a state cause of action for reimbursement based on a preemption provision contained within a federal health care act. See id. at 693, 699, 126 S.Ct. 2121. There, the Supreme Court determined that the federal health care statute was not a substantial element of the carrier's state reimbursement suit because the more important factor was the extent to which the carrier could attain
At first glance, the fact that the experimental use exception to the on-sale bar is a product of case law, rather than statute, appears to warrant a determination that the experimental use exception, like the federal issue in Empire, does not survive the Grable federalism inquiry. See, e.g., City of Elizabeth v. Pavement Co., 97 U.S. 126, 134-35, 24 L.Ed. 1000 (1877) (establishing the experimental use exception to the on-sale bar). However, courts applying this exception have noted that because the experimental use exception only operates within the context of the statutory on-sale bar, "the focus remains throughout the inquiry on application of the statutory bar itself." EZ Dock v. Schafer Sys., Inc., 276 F.3d 1347, 1351-52 (Fed.Cir.2002); see 35 U.S.C. § 102(b). Accordingly, because we cannot determine the success of Minton's legal malpractice claim without focusing on the application of the on-sale bar, which is based directly in a federal statute, we are not convinced by Gunn's attempt to liken this case to Empire. The on-sale bar serves to invalidate patents issued by the federal government. 35 U.S.C. § 102(b). We agree with the Federal Circuit that when the validity of a patent is questioned, even if within the context of a state-based legal malpractice claim, the federal government and patent litigants have an interest in the uniform application of patent law by courts well-versed in that subject matter. See, e.g., Immunocept, 504 F.3d at 1285-86; Air Measurement, 504 F.3d at 1272. Accordingly, Minton's malpractice claim satisfies the fourth prong of the Grable test.
Because this case satisfies all four elements of the Grable test, we hold that federal courts possess exclusive jurisdiction to determine Minton's state-based legal malpractice claim. Gunn and the dissent have predicted that this holding will cause all legal malpractice suits arising out of patent litigation to fall under the exclusive patent law jurisdiction of the federal courts. We do not foresee this result. Our opinion should only be construed as conferring exclusive federal patent jurisdiction based upon the specific facts of this case. In the future, just as Minton has done, any state litigant asserting a legal malpractice action to recover for damages resulting from his patent attorney's negligence in patent prosecution or litigation must also satisfy all four elements of the Grable test to place his claim under exclusive federal jurisdiction. In the context of state-based legal malpractice claims, plaintiffs will not always be able to meet such a burden. See, e.g., Holmes Grp., Inc., 535 U.S. at 831, 122 S.Ct. 1889 (holding a patent-law counterclaim cannot serve as the basis for "arising under" jurisdiction); Thompson v. Microsoft Corp., 471 F.3d 1288, 1291-92 (Fed.Cir.2006) (finding the state-law claim of unjust enrichment did not arise under § 1338 jurisdiction because the plaintiff could prevail on the claim by showing the defendant's unauthorized use of proprietary information without proving inventorship under U.S. patent laws); Roof Tech. Servs., Inc. v. Hill, 679 F.Supp.2d 749, 754 (N.D.Tex.2010) (explaining that a state legal malpractice action involving an attorney's "failure to meet deadlines and communicate with [his] client" and in which "[p]atent issues are merely floating on the periphery," did not trigger exclusive federal patent jurisdiction);
Because we determine that the application of the experimental use exception to the on-sale bar is a necessary, disputed, and substantial element of Minton's state-based legal malpractice claim, and because the federal courts are capable of addressing this issue without disrupting the jurisdictional balance existing between state and federal courts, we hold that Minton's claim has triggered exclusive federal patent jurisdiction. Accordingly, we do not reach the merits of Minton's claims, and we reverse the court of appeals' judgment and dismiss the case.
Justice GUZMAN filed a dissenting opinion, in which Justice MEDINA and Justice WILLETT joined.
Justice HECHT did not participate in the decision.
Justice GUZMAN, joined by Justice MEDINA and Justice WILLETT, dissenting.
Our system of justice has a "deep-rooted historic tradition that everyone should have his own day in court," Martin v. Wilks, 490 U.S. 755, 762, 109 S.Ct. 2180, 104 L.Ed.2d 835 (1989) (quotation marks omitted), but there is no right to a second day in a different court. By adopting the approach of the Federal Circuit instead of the United States Supreme Court, the Court allows a defeated litigant to undeservedly hit the "reset" button on his failed legal malpractice case. The defendants, having won on the merits in state court, must now repeat a no doubt costly and time-consuming defense all over again in federal court, a result not required by the mainstream of federal question jurisprudence.
In concluding that there is exclusive federal jurisdiction over this case, the Court principally relies on a pair of Federal Circuit cases, with additional support from a Fifth Circuit case. See USPPS, Ltd. v. Avery Dennison Corp., 647 F.3d 274 (5th Cir.2011); Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed.Cir. 2007); Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed.Cir.2007). The two Federal Circuit opinions were written by the same judge, for the same three-judge panel, and issued on the same day. The Fifth Circuit's position in USPPS appears to have been primarily driven by those two opinions. Collectively, these opinions represent a novel method of determining federal question jurisdiction, and one which this Court should not adopt.
Contrary to the Federal Circuit's reasoning in Air Measurement and Immunocept, federal question jurisprudence requires a more nuanced approach than the version found in these two cases, and implicitly adopted today by this Court. The United States Supreme Court mandates that courts conduct a four-part inquiry before finding federal question jurisdiction in embedded federal issue cases. See Grable
Only opinions of the United States Supreme Court are binding on this Court. See Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex.1993). Therefore, we are not required to follow the Federal Circuit's view of federal patent jurisdiction. We are, however, bound to follow the Supreme Court's pronouncements, id., and they fully support the conclusions drawn by the Fifth Circuit in Singh and the court of appeals' judgment in the instant case. The Supreme Court's federal question precedents require that we reject Minton's assertion of exclusive federal jurisdiction over this case, and, with the exception of Singh, the circuit cases on point are contrary to the Supreme Court's opinions and unpersuasive on this point of law. Because federal question jurisprudence does not require the result reached by the Court today, I respectfully dissent.
Unlike the courts of this state, federal courts are courts of limited jurisdiction, and thus "due regard for the constitutional allocation of powers between the state and federal systems requires a federal court scrupulously to confine itself to the jurisdiction conferred on it by Congress and permitted by the Constitution." In re Carter, 618 F.2d 1093, 1098 (5th Cir.1980). There are two main types of federal jurisdiction: diversity jurisdiction, and federal question jurisdiction, often also referred to as "arising under" jurisdiction because of the governing constitutional and statutory language. See ERWIN CHEMERINSKY, FEDERAL JURISDICTION 266 (5th ed.2007). Federal question jurisdiction is in turn subdivided into (1) cases in which federal law provides a cause of action, and (2) state-law claims that implicate a federal issue. Grable, 545 U.S. at 312, 125 S.Ct. 2363. It is this latter subtype, often referred to as "embedded" federal-issue cases, CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3562 at 187 (3d ed.2008), that is at issue here.
One area of federal question jurisdiction, encompassing both subtypes described above, is that covering federal intellectual property law, as established by section 1338(a) of the United States Code.
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988) (citations omitted).
The above quote is the point of departure for the Court today, and also for the Federal Circuit cases the Court relies on. However, the full inquiry when determining federal question jurisdiction is not so simple: the well-pleaded complaint must "necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable, 545 U.S. at 314, 125 S.Ct. 2363. In other words, it is not enough that the federal issue constitute an element of the plaintiff's well-pleaded complaint. See id. at 313, 125 S.Ct. 2363 ("[E]ven when the state action discloses a contested and substantial federal question, the exercise of federal jurisdiction is subject to a possible veto."); Singh, 538 F.3d at 338 ("The fact that a substantial federal question is necessary to the resolution of a state-law claim is not sufficient to permit federal jurisdiction...."). Rather, the Supreme Court has laid out a four-element test for determining whether federal question jurisdiction is proper over a state-law claim with an embedded federal issue (such as this case): "federal question jurisdiction exists where (1) resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb the balance of federal and state judicial responsibilities." Singh, 538 F.3d at 338 (interpreting Grable, 545 U.S. at 314, 125 S.Ct. 2363). Explicating the final element, the Supreme Court explains that "the federal issue will ultimately qualify for a federal forum only if federal jurisdiction is consistent with congressional judgment about the sound division of labor between state and federal courts." Grable, 545 U.S. at 314, 125 S.Ct. 2363. The Supreme Court further requires: "[T]here must always be an assessment of any disruptive portent in exercising federal jurisdiction." Id. As the Supreme Court explained, "[t]he doctrine captures the commonsense notion that a federal court ought to be able to hear claims recognized under state law that nonetheless turn on substantial questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues." Id. at 312, 125 S.Ct. 2363.
Grable is a landmark case in this area of jurisprudence, and it should be the touchstone for any court's analysis of whether embedded question jurisdiction is proper. See CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3562 at 197-99 (3d ed. 2008) ("In 2005, the Supreme Court issued its finest effort in this line of cases.... In Grable, the Court for the first time discussed comprehensively the relevant factors for assessing [embedded question jurisdiction].... Grable brings considerable clarity to what had been quite muddled."). I therefore turn to the analysis required of this Court by Grable.
In this case, only the first of the Grable elements is potentially met; the other three are not. The federal issue here is
First, the federal issue is not in dispute. The Court and the Federal Circuit have read this element of the Grable test as simply requiring some live controversy, effectively making it a mootness requirement. But a review of the roots of the element reveal its true meaning: for the federal issue to be "disputed" under Grable, there must be a controversy as to the "`validity, construction, or effect'" of the federal issue. Grable, 545 U.S. at 315 n. 3, 125 S.Ct. 2363 (quoting Shulthis v. McDougal, 225 U.S. 561, 570, 32 S.Ct. 704, 56 L.Ed. 1205 (1912)). The Supreme Court noted "the limiting effect of the requirement that the federal issue in a state-law claim must actually be in dispute to justify federal-question jurisdiction," and cited Shulthis as an example where "this Court found that there was no federal-question jurisdiction to hear a plaintiff's [state law] claim in part because the federal statutes on which [the claim] depended were not subject to `any controversy respecting their validity, construction, or effect.'" Id. (quoting Shulthis, 225 U.S. at 570, 32 S.Ct. 704) (emphasis added).
Here, there is no such controversy. The experimental use exception is well-established in meaning and scope. See Elizabeth v. Pavement Co., 97 U.S. 126, 134-35, 24 L.Ed. 1000 (1877) (establishing the exception in 1877); Electromotive Div. of Gen. Motors Corp. v. Transp. Sys. Div. of Gen. Elec. Co., 417 F.3d 1203, 1210-18 (Fed.Cir.2005) (applying it in its modern form). The parties do not dispute its meaning; they simply dispute whether it was available as a defense in the original patent infringement suit. And that dispute turns on whether the TEXCEN lease concluded between Minton and R.M. Stark & Co. was experimental or commercial in nature—a question to be resolved by reference to the lease and the conduct of the parties, rather than a disputed construction of federal law.
The federal issue is also not substantial. The Supreme Court has explained that federal question jurisdiction based on federal law being a "necessary element" of the complaint is limited to a "special and small category" of cases, Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) (citations omitted), and that "it takes more than a federal element `to open the "arising under" door,'" id. at 701, 126 S.Ct. 2121 (quoting Grable, 545 U.S. at 313, 125 S.Ct. 2363). The Court emphasized that Grable, in which interpretation of a federal statutory notice provision was at issue, presented an almost purely legal issue, one whose resolution would both be dispositive in that case, and "controlling in numerous other cases." Id. at 700, 126 S.Ct. 2121 (citing Grable, 545 U.S. at 313, 125 S.Ct. 2363). It was also significant that Grable "centered on the action of a federal agency (IRS) and its compatibility with a federal statute," thus making the issue "`substantial.'" Id. (citing Grable, 545 U.S. at 313, 125 S.Ct. 2363). The Supreme Court has also drawn a line between federal statutory construction issues and other issues such as federal common law. In Empire, the United States asserted that the federal issue of whether an insurer's recovery of amounts paid to an insured as a result of an accident should take into account the insured's attorney's fees in obtaining the initial recovery. Id. at 701, 126 S.Ct. 2121. While the Supreme Court conceded that may be an issue, it
Here, the federal issue is not substantial for three reasons the Supreme Court has outlined: (1) the determination is one of fact—not law; (2) it will not result in precedent that controls numerous other cases; and (3) it involves federal common law, not a federal statute. First, the federal issue is whether the experimental use exception was legally and factually available to Minton's attorneys in the underlying patent infringement case. The answer to this question is purely factual and turns on the nature of the TEXCEN lease between Minton and R.M. Stark & Co.: was that particular lease for experimental purposes (thus making the exception available) or for commercial ends (rendering it unavailable)? Because the federal issue is one of fact, it is not substantial. See Empire, 547 U.S. at 700-01, 126 S.Ct. 2121 (noting that Grable claim was subject to federal jurisdiction because it was a "nearly pure issue of law" but that claim at issue in Empire was not subject to federal jurisdiction because it was "fact-bound and situation-specific"). Second, the experimental use exception is well defined. It need only be applied to the facts of this case. A determination of whether the experimental use exception applies to the lease will not result in an important precedent. Id. at 700, 126 S.Ct. 2121 (citing Grable, 545 U.S. at 313, 125 S.Ct. 2363) (noting that Grable claim was subject to federal jurisdiction because it "would be controlling in numerous other cases" but that claim at issue in Empire was not subject to federal jurisdiction because the bottom-line practical issue was the share of settlement property from a state court proceeding). Third, the experimental use exception is a creature of federal common law, not of any statute. See id. (noting that Grable claim was subject to federal jurisdiction because it involved a federal statute and IRS action but that claim at issue in Empire was not subject to federal jurisdiction because it involved a federal common law determination in a state law claim). Because the federal issue here is one of fact (not law), will not control numerous other cases, and involves only federal common law and not a federal statute, the federal issue here is not substantial.
Finally, the Court's holding today upsets the division between federal and state courts envisioned by Congress. Legal malpractice, along with the regulation of the practice of law generally, has traditionally been a matter for the states. See Singh, 538 F.3d at 339 ("Legal malpractice has traditionally been the domain of state law, and federal law rarely interferes with the power of state authorities to regulate the practice of law."). It was not the purpose of Congress to encroach on this state sphere when it enacted section 1338; rather, the plain language of the statute simply indicates an intent to assure federal jurisdiction over, and uniform interpretation of, federal intellectual property law. It is only under the gloss applied to that language by later decisions of the Federal Circuit that we could imagine that a legal malpractice action "arises under" patent law. Common sense tells us that this is a matter for state courts. And our sense on this matter is confirmed by the oft-quoted wisdom of Justice Cardozo:
Gully v. First Nat. Bank in Meridian, 299 U.S. 109, 117-18, 57 S.Ct. 96, 81 L.Ed. 70 (1936), quoted with approval in Grable, 545 U.S. at 313, 125 S.Ct. 2363.
In Justice Cardozo's terms, the federal issue here is collateral, not basic. This is a legal malpractice case, litigated after final judgment in the original, federal case. Resolution of the malpractice claim in question does not impact any live patent law claims. Cf. Singh, 538 F.3d at 341 (noting that a legal malpractice action "will in no way disturb or interfere with the judgments of the federal courts" regarding the underlying federal intellectual property lawsuit). Moreover, it is unlikely that the legal malpractice opinions of Texas courts will in any way disrupt the uniformity of patent law that Congress sought by enacting section 1338; on the merits of actual patent lawsuits, federal courts will no doubt look first to federal patent precedents, not Texas legal malpractice cases.
Unfortunately, the Federal Circuit has not remained faithful to the Supreme Court's federalism inquiry in the context of malpractice decisions arising from patent cases. Instead, under the Federal Circuit's approach, the federalism element is simply an invocation of the need for uniformity in patent law. In Air Measurement, the federalism discussion was limited to the benefits of a federal forum, the need for uniformity in patent law, and the fact that patents are issued by a federal agency. See Air Measurement, 504 F.3d at 1272. There was no consideration of what effect asserting exclusive federal jurisdiction would have over the balance between the state and federal judiciaries intended by Congress. See id.; see also USPPS 647 F.3d at 281 n. 4 ("Air Measurement Technologies is silent as to the Grable question of federalism...."). Rather, the court simply noted "[i]n § 1338, Congress considered the federal-state division of labor and struck a balance in favor of this court's entertaining patent infringement." Air Measurement, 504 F.3d at 1272. Of course, there is no doubt that Congress wants the Federal Circuit to "entertain[] patent infringement," but that is not the issue under Grable's federalism analysis: what is required is a consideration of the impact on our federal system.
In Immunocept, application of the Grable factors, and particularly the federalism analysis, was equally cursory. The Federal Circuit concluded that the federalism element was met simply because litigants benefit from the expertise of federal judges, and Congress intended to "remove non-uniformity in the patent law." Immunocept, 504 F.3d at 1285-86. Again, there was no consideration of the impact on the balance between state and federal courts, as required by the Supreme Court in precedents such as Grable and Empire.
This point is telling, because the Supreme Court's fears have already been realized in USPPS. There, the Fifth Circuit adopted the reasoning applied by the Federal Circuit in Air Measurement and Immunocept to reach the same outcome in a fraud and breach of fiduciary duty case involving patent law. See USPPS, 647 F.3d at 284.
In contrast to Air Measurement and Immunocept, Singh correctly applied the Supreme Court's federal question jurisprudence governing embedded question cases to a section 1338 trademark legal malpractice case, with a proper analysis of the federalism element. Singh discussed at length the Grable factors of substantialness and federalism. See Singh, 538 F.3d at 337-41. As for the first, the court noted that trademark law has an entirely different
In sum, the cases relied on by the Court are not persuasive authority because they either ignore the standard required by United States Supreme Court precedent or apply it in a conclusory manner. The Court therefore errs when it concludes, based on the importance of uniformity in patent law emphasized in Air Measurement and Immunocept, that the balance between state and federal courts is not upset by allowing jurisdiction here.
The Federal Circuit has pursued a particular mandate—to achieve uniformity in
This Court should not be quick to follow Federal Circuit case law that fails to follow the test set forth by the Supreme Court. Because this case fails to meet three of the four elements required by the Supreme Court for federal-element "arising under" jurisdiction, the court of appeals was correct when it held that exclusive federal patent jurisdiction does not lie here. I therefore respectfully dissent.
