GUNN v. MINTON
In the early 1990s, Vernon Minton, a former securities broker, developed the Texas Computer Exchange Network (TEXCEN) software that allowed financial traders to execute trades on their own. R.M. Stark & Co. (Stark) agreed to lease TEXCEN. More than one year later, Minton filed for a patent that was granted by the United States Patent and Trademark Office on January 11, 2000.
Minton later sued the NASDAQ and the National Association of Securities Dealers (NASD) and alleged that their services infringed on his patent. NASD and NASDAQ argued that a patent is invalid when the invention claimed is sold more than a year before the patent application is filed. The district court granted summary judgment for NASD and NASDAQ. Minton retained new counsel to argue his case under the experimental use exception, which states that the patent remains valid if the invention was sold primarily for experimental, rather than commercial, use. He filed a motion for reconsideration, which the district court denied. The United States Court of Appeals for the Federal Circuit affirmed.
Minton sued his original attorneys (collectively referred to as Gunn) for legal malpractice and argued that their failure to argue the experimental use exception in the original suit cost him the case. Gunn filed for summary judgment arguing no-evidence due to the fact that the attorneys did not know of the earlier sale in order for the experimental use exception to be relevant. The trial court granted summary judgment in favor of Gunn. Minton appealed to the Second Court of Appeals for Texas. Shortly after he filed his appeal, the United States Court of Appeals for the Federal Circuit decided a case that gave jurisdiction to the federal courts in malpractice suits arising from patent litigation. Minton filed a motion to dismiss his case from the Second Court of Appeals for Texas, but the court denied his motion and affirmed the decision of the trial court. The Supreme Court of Texas reversed and dismissed the case.
Do the federal courts have exclusive jurisdiction in any cases that involve patent law, even when the patent issue is not the primary issue in the case?
Legal provision: 28 U.S.C. §1338(a)
No. Chief Justice John G. Roberts, Jr., writing for a unanimous Court, reversed the lower court and remanded. The Supreme Court applied Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., which provided that a case only arises under federal patent law when it “necessarily raise[s] 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.” The Court held that Minton failed to show that the federal issue in the case carried the necessary significance. The need to decide a hypothetical patent case is not substantial enough to deprive the state court of jurisdiction. A state court decision in a state law malpractice case relating to patent law will not substantially affect federal patent law.
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
JERRY W. GUNN, et al., PETITIONERS v. VERNON F. MINTON
on writ of certiorari to the supreme court of texas
[February 20, 2013]
Chief Justice Roberts delivered the opinion of the Court.
Federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents.” 28 U. S. C. §1338(a). The question presented is whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court.I
In the early 1990s, respondent Vernon Minton developed a computer program and telecommunications network designed to facilitate securities trading. In March 1995, he leased the system—known as the Texas Computer Exchange Network, or TEXCEN—to R. M. Stark & Co., a securities brokerage. A little over a year later, he applied for a patent for an interactive securities trading system that was based substantially on TEXCEN. The U. S. Patent and Trademark Office issued the patent in January 2000.
Patent in hand, Minton filed a patent infringement suit in Federal District Court against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc. He was represented by Jerry Gunn and the other petitioners. NASD and NASDAQ moved for summary judgment on the ground that Minton’s patent was invalid under the “on sale” bar, 35 U. S. C. §102(b). That provision specifies that an inventor is not entitled to a patent if “the invention was . . . on sale in [the United States], more than one year prior to the date of the application,” and Minton had leased TEXCEN to Stark more than one year prior to filing his patent application. Rejecting Minton’s argument that there were differences between TEXCEN and the patented system that precluded application of the on-sale bar, the District Court granted the summary judgment motion and declared Minton’s patent invalid. Minton v. National Assn. of Securities Dealers, Inc., 226 F. Supp. 2d 845, 873, 883–884 (ED Tex. 2002).
Minton then filed a motion for reconsideration in the District Court, arguing for the first time that the lease agreement with Stark was part of ongoing testing of TEXCEN and therefore fell within the “experimental use” exception to the on-sale bar. See generally Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 64 (1998) (describing the exception). The District Court denied the motion. Minton v. National Assn. of Securities Dealers, Inc., No. 9:00–cv–00019 (ED Tex., July 15, 2002).
Minton appealed to the U. S. Court of Appeals for the Federal Circuit. That court affirmed, concluding that the District Court had appropriately held Minton’s experimental-use argument waived. See Minton v. National Assn. of Securities Dealers, Inc., 336 F. 3d 1373, 1379–1380 (CA Fed. 2003).
Minton, convinced that his attorneys’ failure to raise the experimental-use argument earlier had cost him the lawsuit and led to invalidation of his patent, brought this malpractice action in Texas state court. His former lawyers defended on the ground that the lease to Stark was not, in fact, for an experimental use, and that therefore Minton’s patent infringement claims would have failed even if the experimental-use argument had been timely raised. The trial court agreed, holding that Minton had put forward “less than a scintilla of proof” that the lease had been for an experimental purpose. App. 213. It accordingly granted summary judgment to Gunn and the other lawyer defendants.
On appeal, Minton raised a new argument: Because his legal malpractice claim was based on an alleged error in a patent case, it “aris[es] under” federal patent law for purposes of 28 U. S. C. §1338(a). And because, under §1338(a), “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents,” the Texas court—where Minton had originally brought his malpractice claim—lacked subject matter jurisdiction to decide the case. Accordingly, Minton argued, the trial court’s order should be vacated and the case dismissed, leaving Minton free to start over in the Federal District Court.
A divided panel of the Court of Appeals of Texas rejected Minton’s argument. Applying the test we articulated in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308, 314 (2005) , it held that the federal interests implicated by Minton’s state law claim were not sufficiently substantial to trigger §1338 “arising under” jurisdiction. It 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. Proceeding to the merits of Minton’s malpractice claim, the Court of Appeals affirmed the trial court’s determination that Minton had failed to establish experimental use and that arguments on that ground therefore would not have saved his infringement suit.
The Supreme Court of Texas reversed, relying heavily on a pair of cases from the U. S. Court of Appeals for the Federal Circuit. 355 S. W. 3d 634, 641–642 (2011) (discussing Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L. L. P., 504 F. 3d 1262 (2007); Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F. 3d 1281 (2007)). The Court concluded that Minton’s claim involved “a substantial federal issue” 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.” 355 S. W. 3d, at 644. Adjudication of Minton’s claim in federal court was consistent with the appropriate balance between federal and state judicial responsibilities, it held, 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.” Id., at 646 (citing Immunocept, supra, at 1285–1286; Air Measurement Technologies, supra, at 1272).
Justice Guzman, joined by Justices Medina and Willett, dissented. The dissenting justices would have held that the federal issue was neither substantial nor disputed, and that maintaining the proper balance of responsibility between state and federal courts precluded relegating state legal malpractice claims to federal court.
We granted certiorari. 568 U. S. ___ (2012).II
“Federal courts are courts of limited jurisdiction,” possessing “only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U. S. 375, 377 (1994) . There is no dispute that the Constitution permits Congress to extend federal court jurisdiction to a case such as this one, see Osborn v. Bank of United States, 9 Wheat. 738, 823–824 (1824); the question is whether Congress has done so, see Powell v. McCormack, 395 U. S. 486 –516 (1969).
As relevant here, 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 patents,” §1338(a). Adhering to the demands of “[l]inguistic consistency,” we have interpreted the phrase “arising under” in both sections identically, applying our §1331 and §1338(a) precedents interchangeably. See Christianson v. Colt Industries Operating Corp., 486 U. S. 800 –809 (1988). For cases falling within the patent-specific arising under jurisdiction of §1338(a), however, Congress has not only provided for federal jurisdiction but also eliminated state jurisdiction, decreeing that “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents.” §1338(a) (2006 ed., Supp. V). To determine whether jurisdiction was proper in the Texas courts, therefore, we must determine whether it would have been proper in a federal district court—whether, that is, the case “aris[es] under any Act of Congress relating to patents.”
For statutory purposes, a case can “aris[e] under” federal law in two ways. Most directly, a case arises under federal law when federal law creates the cause of action asserted. See American Well Works Co. v. Layne & Bowler Co., 241 U. S. 257, 260 (1916) (“A suit arises under the law that creates the cause of action”). As a rule of inclusion, this “creation” test admits of only extremely rare exceptions, see, e.g., Shoshone Mining Co. v. Rutter, 177 U. S. 505 (1900) , and accounts for the vast bulk of suits that arise under federal law, see Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U. S. 1, 9 (1983) . Minton’s original patent infringement suit against NASD and NASDAQ, for example, arose under federal law in this manner because it was authorized by 35 U. S. C. §§271, 281.
But even where a claim finds its origins in state rather than federal law—as Minton’s legal malpractice claim indisputably does—we have identified a “special and small category” of cases in which arising under jurisdiction still lies. Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U. S. 677, 699 (2006) . In outlining the contours of this slim category, we do not paint on a blank canvas. Unfortunately, the canvas looks like one that Jackson Pollock got to first. See 13D C. Wright, A. Miller, E. Cooper, & R. Freer, Federal Practice and Procedure §3562, pp. 175–176 (3d ed. 2008) (reviewing general confusion on question).
In an effort to bring some order to this unruly doctrine several Terms ago, we condensed our prior cases into the following inquiry: Does the “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. That is, 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 requirements 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,” which can be vindicated without disrupting Congress’s intended division of labor between state and federal courts. Id., at 313–314.III
Applying Grable’s inquiry here, it is clear that Minton’s legal malpractice claim does not arise under federal patent law. Indeed, for the reasons we discuss, we are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of §1338(a). 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.A
To begin, we acknowledge that resolution of a federal patent question is “necessary” to Minton’s case. Under Texas law, a plaintiff alleging legal malpractice must establish four elements: (1) that the defendant attorney owed the plaintiff a duty; (2) that the attorney breached that duty; (3) that the breach was the proximate cause of the plaintiff’s injury; and (4) that damages occurred. See Alexander v. Turtur & Associates, Inc., 146 S. W. 3d 113, 117 (Tex. 2004). In cases like this one, in which the attorney’s alleged error came in failing to make a particular argument, the causation element requires a “case within a case” analysis of whether, had the argument been made, the outcome of the earlier litigation would have been different. 355 S. W. 3d, at 639; see 4 R. Mallen & J. Smith, Legal Malpractice §37:15, pp. 1509–1520 (2012). To prevail on his legal malpractice claim, therefore, Minton must show that he would have prevailed in his federal patent infringement case if only petitioners had timely made an experimental-use argument on his behalf. 355 S. W. 3d, at 644. That will necessarily require application of patent law to the facts of Minton’s case.B
The federal issue is also “actually disputed” here—indeed, on the merits, it is the central point of dispute. Minton argues that the experimental-use exception properly applied to his lease to Stark, saving his patent from the on-sale bar; petitioners argue that it did not. This is just the sort of “ ‘dispute . . . respecting the . . . effect of [federal] law’ ” that Grable envisioned. 545 U. S., at 313 (quoting Shulthis v. McDougal, 225 U. S. 561, 569 (1912) ).C
Minton’s argument founders on Grable’s next requirement, however, for the federal issue in this case is not substantial in the relevant sense. In reaching the opposite conclusion, the Supreme Court of Texas focused on the importance of the issue to the plaintiff’s case and to the parties before it. 355 S. W. 3d, at 644 (“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, we hold that it is a substantial federal issue”); see also Air Measurement Technologies, 504 F. 3d, at 1272 (“the issue is substantial, for it is a necessary element of the malpractice case”). As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim “necessarily raise[s]” a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.
In Grable itself, for example, the Internal Revenue Service had seized property from the plaintiff and sold it to satisfy the plaintiff’s federal tax delinquency. 545 U. S., at 310–311. 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. Ibid. 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.” Id., at 315. 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 belong[ed] in a federal court.” Ibid.
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. 545 U. S., at 312. 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. 255 U. S., at 198. 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.” Id., at 201. 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.” Ibid.; see also Merrell Dow Pharmaceuticals Inc. v. Thompson, 478 U. S. 804 , n. 12 (1986).
Here, the federal issue carries no such significance. Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? 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. Minton’s patent will remain invalid.
Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 162 (1989) . Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit. See 28 U. S. C. §§1338(a), 1295(a)(1). In resolving the nonhypothetical patent questions those cases present, the federal courts are of course not bound by state court case-within-a-case patent rulings. See Tafflin v. Levitt, 493 U. S. 455, 465 (1990) . In any event, the state court case-within-a-case inquiry asks what would have happened in the prior federal proceeding if a particular argument had been made. In answering that question, state courts can be expected to hew closely to the pertinent federal precedents. It is those precedents, after all, that would have applied had the argument been made. Cf. ibid. (“State courts adjudicating civil RICO claims will . . . be guided by federal court interpretations of the relevant federal criminal statutes, just as federal courts sitting in diversity are guided by state court interpretations of state law”).
As for more novel questions of patent law that may arise for the first time in a state court “case within a case,” they will at some point be decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent; if it does not arise frequently, it is unlikely to implicate substantial federal interests. The present case is “poles apart from Grable,” in which a state court’s resolution of the federal question “would be controlling in numerous other cases.” Empire HealthChoice Assurance, Inc., 547 U. S., at 700.
Minton also suggests that state courts’ answers to hypothetical patent questions can sometimes have real-world effect on other patents through issue preclusion. Brief for Respondent 33–36. Minton, for example, has filed what is known as a “continuation patent” application related to his original patent. See 35 U. S. C. §120; 4A D. Chisum, Patents §13.03 (2005) (describing continuation applications). He argues that, in evaluating this separate application, the patent examiner could be bound by the Texas trial court’s interpretation of the scope of Minton’s original patent. See Brief for Respondent 35–36. It is unclear whether this is true. The Patent and Trademark Office’s Manual of Patent Examining Procedure provides that res judicata is a proper ground for rejecting a patent “only when the earlier decision was a decision of the Board of Appeals” or certain federal reviewing courts, giving no indication that state court decisions would have preclusive effect. See Dept. of Commerce, Patent and Trademark Office, Manual of Patent Examining Procedure §706.03(w), p. 700–79 (rev. 8th ed. 2012); 35 U. S. C. §§134(a), 141, 145; Reply Brief 9–10. In fact, Minton has not identified any case finding such preclusive effect based on a state court decision. But even assuming that a state court’s case-within-a-case adjudication may be preclusive under some circumstances, the result would be limited to the parties and patents that had been before the state court. Such “fact-bound and situation-specific” effects are not sufficient to establish federal arising under jurisdiction. Empire HealthChoice Assurance, Inc., supra, at 701.
Nor can we accept the suggestion that the federal courts’ greater familiarity with patent law means that legal malpractice cases like this one belong in federal court. See Air Measurement Technologies, 504 F. 3d, at 1272 (“The litigants will also benefit from federal judges who have experience in claim construction and infringement matters”); 355 S. W. 3d, at 646 (“patent litigants have an interest in the uniform application of patent law by courts well-versed in that subject matter”). It is true that a similar interest was among those we considered in Grable. 545 U. S., at 314. But the possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts’ exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law.
There is no doubt that resolution of a patent issue in the context of a state legal malpractice action can be vitally important to the particular parties in that case. But something more, demonstrating that the question is significant to the federal system as a whole, is needed. That is missing here.D
It follows from the foregoing that Grable’s fourth requirement is also not met. That requirement is concerned with the appropriate “balance of federal and state judicial responsibilities.” Ibid. We have already explained the absence of a substantial federal issue within the meaning of Grable. The States, on the other hand, have “a special responsibility for maintaining standards among members of the licensed professions.” Ohralik v. Ohio State Bar Assn., 436 U. S. 447, 460 (1978) . Their “interest . . . in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts.” Goldfarb v. Virginia State Bar, 421 U. S. 773, 792 (1975) (internal quotation marks omitted). 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.* * *
As we recognized a century ago, “[t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subject-matter of the controversy.” New Marshall Engine Co. v. Marshall Engine Co., 223 U. S. 473, 478 (1912) . In this case, although the state courts must answer a question of patent law to resolve Minton’s legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton’s patent. Accordingly, there is no “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” Grable, supra, at 313. Section 1338(a) does not deprive the state courts of subject matter jurisdiction.
The judgment of the Supreme Court of Texas is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
It is so ordered.
ORAL ARGUMENT OF JANE WEBRE ON BEHALF OF THE PETITIONERS
Chief Justice John G. Roberts: We will hear argument next this morning in Case Number 11-1118, Gunn v. Minton.
Jane Webre: Mr. Chief Justice, and may it please the Court:
In Grable, this Court explained that arising under jurisdiction demands not only a contested Federal issue, but a substantial one embedded in a State claim in order to indicate whether there is a serious Federal interest in exercising Federal jurisdiction over the State claim.
This Court should reverse the judgment below because Minton -- Mr. Minton's claims do not present a substantial Federal issue, and exercising Federal jurisdiction over his claim and legal malpractice claims like his, State legal malpractice claims would--
Justice Ruth Bader Ginsburg: The question is whether the experimental use, whether that was a viable theory.
Why isn't that a substantial -- what do you mean by “ substantial ”?
Jane Webre: --Well, Your Honor, defining substantiality is a difficult point.
I would answer in two layers.
First, Mr. Minton's claim did not involve a legal question of does the -- how does the experimental use doctrine work; how is it applied, what are its parameters.
The question was, did his fact-bound and situation-specific affidavit present relevant evidence of the application here in this particular case.
And it is not a substantial question because, first, from a unique case perspective, it involved merely a hypothetical determination.
There were no actual patent rights that would be at issue.
Those were already fully, finally, irrevocably determined in the underlying patent litigation in Federal court.
And second, from a jurisprudence standpoint, the question of uniformity of patent law, any decision by a State court in Mr. Minton's legal malpractice claim would not be binding in any way on either the PTO in a patent application, or on any subsequent Federal court deciding a real patent case.
Justice Ruth Bader Ginsburg: You mean substantial beyond the -- this particular case?
Jane Webre: Yes, Your Honor.
And I think that that's where the Federal circuit jurisdictional -- the Federal circuits “ arising under ” jurisdiction standard which the Supreme Court of Texas applied here, that's exactly where it goes awry, is that the court improperly conflates the question of necessity of a Federal issue with the question of whether that issue is substantial.
And in the Grable case, this Court emphasized that those are two separate issues.
There are four prongs to the Grable test: The Federal issue embedded in the State claim must be necessary to the State claim; actually disputed; substantial; and then there is a federalism inquiry that exercised a Federal jurisdiction over this State claim can't upend the proper balance between State and Federal authority.
The Grable court announced that, and then just a year later in the Empire Healthchoice case, Your Honor, Justice Ginsburg, you wrote that opinion for the Court, and that acted sort of as an underscoring of
"and here's how limited the Grable rule really is. "
The Empire Healthchoice opinion distinguishes between Grable, which presented a merely pure question of law, and the claims at issue in Empire Healthchoice which were fact-bound and situation-specific.
It distinguished the -- the question of whether a State court is competent to apply Federal law to the extent relevant to the claims and found that, yes, it was.
And the Court emphasized that certainly the State courts are going to be deciding the occasional Federal issue here and there, but let's not make a Federal case out of each and every State tort claim that might have an embedded Federal issue.
Now, in the earlier argument, there was some discussion of the fact that jurisdiction means a lot of different things in a lot of different contexts.
But here, this Court has on more than one occasion determined that jurisdiction, “ arising under ” jurisdiction, means the same thing in 1331, the general Federal question jurisdictional grant, and 1338(a), the -- the exclusive provision that's applicable specifically to patents.
Now, that has been amended slightly.
It now includes compulsory counterclaims where they didn't used to be a part.
But the jurisdictional grant that Congress gave through the first sentence of 1338(a) uses the same exact phrase, the “ arising under ”,
"any civil action arising under Federal law. "
And Justice Scalia, you wrote the opinion for the Court in the Holmes Group case and explained that the linguistic consistency between those two means that they mean the same thing.
There is nothing unique about this subject matter, the patent subject matter, that changes the scope of the jurisdictional grant.
To be sure, the grant of original jurisdiction to the district courts is exclusive and that is different from the general Federal question.
Justice Samuel Alito: Well, why isn't that significant?
Doesn't that manifest Congress's view that this is a complicated specialty area, and so there would be arguably a special reason for having these cases, cases that involve a patent issue, in Federal court rather than State court?
Jane Webre: Yes, Your Honor.
But the Congress did that in a couple of different ways.
First of all, I think it begs the question, it begs the core question, to say that exclusive -- the fact that jurisdiction is exclusive answers the substantiality, because in order to get to exclusivity of the jurisdiction you have to get to jurisdiction first.
You have to -- it has to be arising under an act of Congress relating to patents before it can then be exclusive.
So -- so we still have the first step.
But also, Congress did not cast a net broader than the general “ arising under ” standard.
Even under the statutory framework after the America Invents Act amendment, under the statutory structure there are still a number of patent issues, legal issues that are going to be decided in the State courts, that do not come within the exclusive jurisdiction of the Federal courts.
For example, compulsory counterclaims now come within the exclusive jurisdiction, but permissive counterclaims don't.
Permissive counterclaims can certainly present just as substantive a question of patent law, and yet those are excluded under the statutory scheme of 1338(a).
Patent issues raised as a defensive matter are not sufficient to support “ arising under ” jurisdiction under 1338(a).
So certainly, Congress contemplated a situation where some patent issues are just not going to come within the exclusive jurisdiction of the Federal courts.
And I think it's interesting to back up a little bit and look at the Federal Circuit's evolved perception of its own exclusive jurisdiction.
In the early years of the Federal Circuit in 1984, the first Chief Justice -- the first chief judge of the court, Chief Judge Markey, in the Atari case that is cited at page 21 of the amicus brief filed by the American Intellectual Property Lawyers Association, the Federal Circuit wrote,
"Congress was not concerned that an occasional patent law decision of a regional circuit court or of a State court would defeat its goal of increased uniformity in the national law of patents. "
That was the view of the Federal Circuit's own jurisdiction in 1984.
But in the time evolved, the Federal Circuit has changed its perception of its own jurisdiction and that's why we are here today.
In 2007, the Federal Circuit went awry and -- and changed the standard that no longer follows what this Court articulated in Grable.
They have improperly conflated the necessity and substantiality components of the -- of an appropriate Grable analysis, and they totally disregard a proper balance of the State and Federal interests.
The Federal Circuit announced that there's an interest in -- Federal interest in uniformity of patent law, and then that was that.
That was the end of the inquiry.
There is no balance if you don't look at the State interest on the other side.
And in legal malpractice cases in general and in Mr. Minton's claim in particular, there are substantial State interests.
There is the general interest, the right of a State to develop its own State claims, its own State law and its own State courts.
But there is also a State interest in governing the relationship between attorney and client that happens through the legal malpractice process.
But specifically with regard to Mr. Minton's claim, one of his primary theories in this case, in the legal malpractice case, is that the attorney's error with regard to bringing up the experimental use doctrine deprived him of the opportunity to make a lucrative settlement with the NASD in the underlying patent litigation.
Well, the question of exactly how you prove whether and to what extent the NASD would have paid a settlement and for how much in the underlying case is a matter of tremendous dispute right now.
That is an evolving issue in the -- in the legal malpractice jurisprudence of the State of Texas.
In fact, in the month of December 2012, the Supreme Court of Texas heard argument in a case called Elizondo v. Krist that addresses that precise issue: How do you prove that NASDAQ would have paid him $100 million if only these lawyers had raised this issue earlier?
And yet, if Mr. Minton's claims are hailed into Federal court because of the fact-bound and situation-specific application of the experimental law doctrine, the Federal courts would be -- to that important issue that the State courts really need to resolve.
Justice Antonin Scalia: Ms. Webre, is there any binding effect of a Federal determination here on State law, and is there any binding effect of any State determination here on Federal law?
Jane Webre: No, Your Honor.
Justice Antonin Scalia: If it was left to the State, would what the States say about patent law be binding in any Federal cases, and, vice versa, if it went to the Federal jurisdiction, would anything that the Federal court says about -- about State tort law be binding on State courts?
Jane Webre: In neither direction would any decision be binding.
The State -- any decision in a State court on a legal malpractice matter regarding issues of patent law would not be binding in any way on the Federal courts or on the PTO in handling any of the patent applications, prosecution of patents.
Justice Antonin Scalia: That -- that being so, your -- your last argument about the Federal government messing up -- you know, State tort law in an area that -- that is currently very much in the fore in the -- in the decisions of the Texas Supreme Court, that doesn't really carry a lot of weight, except in this single case.
I mean, they are not going to mess up Texas law in that regard.
They may get this case wrong, but--
Jane Webre: You are right that it will not substantially adversely impact Texas State law, but that's an illustration of a substantial State interest.
In a way, it's akin to the issue in Grable, because the -- the embedded issue in Grable that justified this Court reaching down and grabbing a State law claim and bringing it up into Federal court wasn't just that the issue was disputed, the construction of that statute was unresolved; but that it needed resolving.
It needed resolving by a court whose decision could be precedential so then it's resolved from then on.
And so the question of how do you prove a settlement is an issue that needs resolving by a court who's going to advance the jurisprudence.
Justice Antonin Scalia: --What about the Federal issue?
Doesn't that need resolving?
Jane Webre: There are no Federal issues that need resolving here, because it's solely a question of the application of these specific facts in this affidavit to the doctrine.
There's -- there's no overarching question of patent law that needs resolving.
Justice Anthony Kennedy: Let me ask this question: Suppose you have two cases, hypothetical, case A, case B, both involve the experimental use doctrine in Federal patent law.
In case A, it's a very weak argument; it's most unlikely it's not going to apply.
Case B, very strong argument, experimental use doctrine applies.
Any difference in the removability in those two cases?
Jane Webre: I don't believe so, Your Honor, because the question isn't the significance to the particular claim.
The question is the Federal issue.
Is there a--
Justice Anthony Kennedy: Well, if -- if you say -- since you're going to say it -- I mean, if it's a “ substantial ” Federal issue, then it's substantial in hypothetical B but not in hypothetical A?
Jane Webre: --Well, it's perhaps more necessary.
But -- and maybe what I need to do is back up a little bit and discuss what I think are the factors for a court to look at when deciding whether or not an embedded Federal issue is a substantial one.
In looking at this Court's articulation in the Grable case and the Empire Healthchoice case, the issues that the Court looked at, one was the nature of the Federal -- of the Federal question itself, the Federal issue, is it a constitutional issue.
Justice Sonia Sotomayor: So does that mean that if the claim in the malpractice action is that the PTO acted unconstitutionally -- assume that set of facts -- how does that change your analysis?
Jane Webre: That would be a more substantial Federal question than the one presented here, but I submit that it would not be sufficient to warrant “ arising under ” jurisdiction here, because it is -- it involves only a hypothetical actual set of patent rights.
No judgment that can happen in a State legal malpractice case actually impacts any patent rights.
Let's say Mr. Minton won a judgment from a State legal malpractice court saying it was the negligence, that you would have won the experimental use exception, your patent would have been declared valid, and so he has a judgment from a State court saying, The loss of your patent was the result of a negligence and not because it was actually invalid.
That doesn't give him a valid patent.
He cannot take that judgment and then sue somebody and say, Look, look, I've got a patent.
Justice Sonia Sotomayor: So go back to -- you were going through a list of questions, and I posited, let's assume that the malpractice claim does involve a constitutional question.
Jane Webre: --Yes.
Justice Sonia Sotomayor: Then what other factors--
Jane Webre: --Well, the -- the -- in the continuum constitutional issues would be more substantial, statutory issues would be a little less substantial.
In fact, this Court grappled with that in the Grable case and said, We're not going to draw a hard and fast line on statutory issues, but then in the Empire HealthChoice opinion, the Court noted that this is a non -- the issue -- the Federal issue there was nonstatutory, and so therefore, let's not make a Federal case out of it.
So in that continuum, that would be one factor to look at.
Another factor to look at would be, is the Federal issue, the legal issue undisputed or uncertain?
Not necessarily the application of these particular facts to the legal issue, because there really isn't a Federal interest in how this affidavit is construed or not, but in -- in the resolution of the legal issues, as in Grable, is the question of law disputed or uncertain, and the corollary to that is, does it need resolving, because that was the situation in the Grable case.
But just because an issue is novel doesn't ipso facto make it a -- a substantial issue.
This Court in the Merrell Dow case discussed that.
Justice Antonin Scalia: Why -- why do all -- why do all of these issues cut in your favor in all cases involving malpractice?
I mean, you're urging not just that your client win here, but you want us to adopt a general rule that malpractice suits involving patent rights can never, ever, come under “ Federal arising ” under jurisdiction.
Isn't that -- isn't that what you want us to say?
Jane Webre: Yes, Your Honor.
Justice Antonin Scalia: So the burden would be on you to show that every one of these factors in all of those cases is always going to cut in your favor.
That -- what, that they will never involve a constitutional issue?
That they will never, ever determine future patent decisions?
Jane Webre: Well, Your Honor, I -- I urge that because I think that's the only appropriate application of the Grable test to legal malpractice cases.
And it's not that--
Justice Antonin Scalia: Well, I like -- I like bright-line rules.
In fact -- you know, I thought Holmes had it right.
It doesn't arise under unless the cause of action is a Federal cause of action.
But once we've gone down -- down the road of Grable, I don't -- you're -- you're proving a negative.
The burden is on you to prove a negative, that there is no situation that can arise in -- in malpractice cases involving patents where the Federal issue would justify arising.
A hard road to hoe.
Jane Webre: --I think there are two reasons.
There are two reasons why that's the only appropriate way to apply the Grable test to legal malpractice cases, and both of them involve the lack of precedent from the case.
One is it can never involve actual patent rights.
The consequence of a judge's--
Justice Sonia Sotomayor: --How about fraud on -- a claim of fraud on -- that the malpractice was fraud on the PTO?
Lawyer loses that.
It's been litigated.
Isn't it res judicata, and won't it affect the patent or might it not affect the patent in a patent action?
Jane Webre: --No, Your Honor, it would not.
It would not affect the patent office either as a matter of res judicata or as a matter of issue preclusion, non-mutual issue preclusion or as a matter of jurisprudential precedence.
For a couple of reasons.
One is that as a starting point, the -- the question of attorney misconduct can affect the issuance of a patent before the patent office, but that would happen not in the context of a legal malpractice claim, but in the context of the actual prosecution of the patent before the PTO itself.
So the PTO would have made a -- its own determination and granted or not granted limited sanction, whatever action it is the PTO takes in -- before -- in a proceeding before itself, the PTO would be deciding that.
So a legal malpractice case would only be subsequent to that.
So, in -- in the first instance, the PTO gets to decide that.
From a res judicata standpoint, the PTO's patent review manual, the Manual of Examination of Patents provides that res judicata effect is only given to decisions by either the Board of Patent Review or Interferences, the United States District Court for the District of Columbia, and the Federal circuit.
No State courts make that list.
So from a res judicata standpoint, only going right up the chain is going to bind the PTO.
And from an issue preclusion standpoint, the PTO would never be a party, could never be a party to a -- a legal malpractice claim and, therefore, would not be bound by any State court decision.
And what's kind of a funny--
Justice Sonia Sotomayor: I find that somewhat hard to follow.
Let's assume in adjudicating a medical -- a malpractice claim, the State court finds that the attorney suppressed information.
It's a finding of fact.
He has this information in his or her file, and they didn't disclose it.
I'm not quite sure how the PTO ignores that litigation.
Jane Webre: --The PTO may not ignore it.
Justice Sonia Sotomayor: Or the district court does, if it gets to review that in a later action.
Jane Webre: --Well, but--
Justice Sonia Sotomayor: I'm only raising this question to address Justice Scalia's point.
You're asking for an absolute rule, and I posited a situation where I think it's not so clear that a State court finding might not have an effect.
So, do we have to go to your absolute rule?
Jane Webre: --No, Your Honor, you do not have to go to my absolute rule.
I think that the absolute rule is the -- the most sensible and appropriate application of the Grable test to State law legal malpractice claims, and it has the added benefit of certainty.
It -- it doesn't roll us back to the Justice Holmes' rule.
Justice Antonin Scalia: I guess you might argue that even if it fails the Grable test in a couple of isolated cases, we should still adopt that rule, because the benefits of having a clear rule that doesn't have to be litigated in every -- every case outweigh the fact that one or two might -- might not come out that way if we applied Grable.
Jane Webre: Well--
Justice Antonin Scalia: Because we're making it up anyway, right?
Jane Webre: --Well, Your Honor, I -- I would take it a step further than that, because I think that any actual impact of -- of what you're positing, Justice Sotomayor, is so ephemeral.
The idea that -- that the PTO will look at a fact-finding in a legal malpractice case, and oh, goodness, I didn't realize there was this suppression of evidence, I'm now going to dig further.
Well, that's such a speculative and ephemeral possibility, it doesn't disrupt the fabric of patent jurisprudence, patent law in any way, and it doesn't tie the hands of the PTO in any way.
It doesn't bind the PTO in any future consideration of a continuation patent or any other related continuation in part patent.
Justice Anthony Kennedy: Let -- let me ask you this: The Brighton Miller treatise is rather complimentary of Grable, and said it brought considerable certainty to the area.
I was pleased to hear that because I'm not sure that it's true.
But can you just tell me, as an -- as an empirical matter, does “ arising under ” for removal jurisdiction cases consume a tremendous amount of time in litigation in the Federal courts?
Jane Webre: Well, it -- it does a couple of things.
First is, it consumes a lot of time of the courts and the litigants in removing and then getting remanded again and it -- as is discussed in the--
Justice Anthony Kennedy: --What I mean is the argument over “ arising under ” over jurisdiction.
Jane Webre: --There are, on this issue of the legal malpractice cases, in the wake of the Federal Circuit's opinions, the Air Measurement case and Immunocept case in 2007, scores and scores and scores of courts, State and Federal courts, have been grappling with this precise jurisdictional issue.
I think this case is about the fifth or sixth cert petition that came up to this Court on this jurisdictional question.
I think there are three or four behind us in queue, and there continues to be uncertainty in the lower courts on this precise issue.
And it really presents for this Court a question of is “ arising under ” jurisdiction truly a lenient standard, as the Federal court has articulated.
Now, it's true that the entire body of State law legal malpractice cases arising out of patent representation is not going to overwhelm the Federal court.
It's not going to--
Justice Anthony Kennedy: So my question was even broader.
Let's say we resolve legal malpractice.
Then we will have products liability with a particular product, and then we will have some food and agriculture cases.
It goes on and on.
Jane Webre: --I think that is a -- that is a -- that's a substantial issue.
But, like Justice Scalia said, that -- you know, this Court departed from Justice Holmes' construct some years ago.
But I think that there is the opportunity in this case to provide a great deal of certainty, to provide absolute certainty vis -- vis legal malpractice cases because of their unique hypothetical aspect.
The consequence of the judgment affects no rights.
But second, in reaffirming, rearticulating the Grable test, emphasizing the importance and the separateness of the substantiality inquiry, emphasizing the importance of the federalism aspect, this Court has a great opportunity to resolve a lot of uncertainty.
And if there are no further questions, I would like to reserve the remainder of my time.
Chief Justice John G. Roberts: Thank you, counsel.
Is that correct, “ Michel ”?
ORAL ARGUMENT OF THOMAS M. MICHEL ON BEHALF OF THE RESPONDENT
Thomas M. Michel: It is, Your Honor.
Mr. Chief Justice, and may it please the Court:
This case is about whether a State court has subject matter jurisdiction over a State law patent malpractice claim that rests entirely on an issue of patent law that is only heard in Federal court, and when that issue is dispositive, central to the case, has issues of first impression in them, has no State analogue in any other area of the law, and whether in the deciding issues of questions of law and will not disturb the balance between State and Federal judicial responsibility.
Justice Ruth Bader Ginsburg: What about other areas of exclusive Federal jurisdiction where the claim if you are stating it initially would have to go into Federal court and not State court?
Say, an antitrust claim, a copyright claim.
Is what you're saying about patents, does that go for every area where initial jurisdiction is exclusively in the Federal court?
Thomas M. Michel: No, Your Honor, it does not.
Justice Ruth Bader Ginsburg: Then what's the difference between, say, antitrust and patent?
Thomas M. Michel: There are many differences, Your Honor.
First, antitrust has a State analogue.
The Texas Supreme Court in Coca-Cola v. Harmer, 218 Southwest--
Justice Sonia Sotomayor: Then immigration law.
Thomas M. Michel: --Yes.
Justice Sonia Sotomayor: Don't get in the weeds.
Take immigration law.
Thomas M. Michel: Yes.
Now, once again, the issues -- immigration law may be a different area where there is exclusive Federal court jurisdiction in that area, possibly.
But once again, the analysis and the application in immigration law from a malpractice case may give rise in that area.
Justice Antonin Scalia: Excuse me.
I guess I just don't understand this.
Is it the case that there is “ arising under ” jurisdiction only when the Federal cause of action presented is one over which Federal courts have exclusive jurisdiction?
Thomas M. Michel: --That--
Justice Antonin Scalia: Is that the rule?
Thomas M. Michel: --I believe in part.
Justice Antonin Scalia: Any Federal statute that can be sued upon both in Federal courts and in State courts, but as to which Federal courts are the dispositive adjudicators, you say that that does not come within this “ arising under ” rule?
Thomas M. Michel: Does not come within this Court's doctrinal holdings in Grable and Empire because we have a Federal balancing and State balancing issue.
And as we've articulated, when Congress has articulated--
Justice Antonin Scalia: You have a case for that, that says if a suit could be brought in State court even though it involves a dispositive Federal question as to which this Court would be the -- you know, the last interpreter, it cannot possibly come within “ arising under ” jurisdiction?
Have you got a case for that?
Thomas M. Michel: --I'm sorry, Your Honor.
I don't know if I followed your question.
Justice Antonin Scalia: Do you have a case which says that when a Federal question is presented in a case over which Federal courts have jurisdiction but also State courts have jurisdiction, although, needless to say, the Federal courts would be dispositive on the issue, such a case cannot come within the “ arising under ” jurisdiction?
Thomas M. Michel: No, I don't think anything that expressly.
But the A&P--
Justice Antonin Scalia: I would find it extraordinary for that to be the rule.
Thomas M. Michel: --Well, you can't isolate it.
That rule is more complicated because it is the application of the Grable standard that's the analysis.
Justice Anthony Kennedy: But getting back, Justice Ginsburg simply made the point, I had thought, that you place a good deal of reliance on the fact that there is exclusive jurisdiction.
And her question to me pointed out how far-reaching this case might be because it could involve patents, copyright, all other areas of exclusive jurisdiction.
If that is going to be your special rule, it's not so confined as you suggest.
That's all that question meant to me.
Certainly you could have cases where there is concurrent jurisdiction, 1983, in which we'd have the same problem.
Thomas M. Michel: I think -- I think the factors that go into determining the -- one of the grounds that has been articulated by Grable and the balancing for Merrell Dow is the number of cases that would come into Federal court, and it is a doctrinal decision.
It is a doctrinal rule.
Justice Sonia Sotomayor: So patent law cases of malpractice are smaller in number than copyright cases--
Thomas M. Michel: Patent law cases--
Justice Sonia Sotomayor: Immigration and other exclusive jurisdictions, so that's okay to remove, but those others aren't?
Thomas M. Michel: Those--
Justice Sonia Sotomayor: --Does that make a whole lot of sense?
Thomas M. Michel: --That is the articulation in Grable, Your Honor.
Justice Sonia Sotomayor: Well, how about a different one, the one that's being proposed by your adversary, which is define “ substantial ” as to how it affects Federal law, which I think was the bottom line -- or the development of Federal law, the bottom line of Grable.
And she says -- you dispute this in your brief -- that it doesn't affect the invalidated patent, that there's no way that a judgment on the malpractice is going to be used in a continuation patent dispute because it's not one of the listed preclusive courts.
So, how does a ruling affect patent law?
Thomas M. Michel: Sure.
In many ways, Your Honor.
First, the test is uniformity under Grable, uniformity of patent law, Federal law, not whether the--
Justice Sonia Sotomayor: Why is -- who's going to follow it?
Thomas M. Michel: --In many situations.
For example, she conflates, Petitioners conflate, res judicata with issue preclusion.
That goes back to your earlier question, Justice Sotomayor, and that issue preclusion will have an affect, and as in fact--
Justice Ruth Bader Ginsburg: Issue preclusion applies only to someone who was a party.
Thomas M. Michel: --Correct.
That would only apply to the inventor; it would not apply to the PTO.
It can only be used against in this case Mr. Minton.
And in fact, patent counsel in this case under the rules of the Federal Circuit under patent law and the Patent Manual disclosed the State court's rulings in this case to the Patent Office during its continuing patent.
The State district court judge made a scope and claim decision.
So, Justice Sotomayor, back to your question--
Justice Ruth Bader Ginsburg: But that certainly is not binding.
Whatever the State -- whatever the State court says as a matter of patent law has no binding effect on that question coming into Federal court.
Thomas M. Michel: --It does.
Justice Ruth Bader Ginsburg: No.
Thomas M. Michel: Under this Court's decision Marrese v the Academy of Orthopedic Assertions -- Surgeons, a State court's decision is entitled to issue preclusion even in Federal forum.
And so that is why -- also the patent -- the continuation patent could be declared invalid for failing to disclose that information.
We are not saying it's binding on the PTO, but it is an issue of issue preclusion as against Minton that would be in front of the PTO and is in front of the PTO as we speak.
Justice Antonin Scalia: Is that -- my goodness, but you are going to have a purely hypothetical State decision here.
The State will have held that -- you know, if he had said this, the result would have been something else.
And you think that that precludes the issue when it arises in real life?
And you say since the State court made that hypothetical determination it precludes me from arguing it in real life?
Thomas M. Michel: Yes.
It is a factor--
Justice Antonin Scalia: Do you have any cases like that?
It seems to me a rather weird, weird situation.
I mean, maybe it could, but it's strange.
Thomas M. Michel: --Well, it is a matter of issue preclusion.
This Court -- that is the danger of allowing these patent law issues to proceed in State court.
This court -- the State district court in this case entered a brand-new issue of Federal interpretation -- Petitioners and Respondents totally disagree as to whether this is a fact-specific case or whether this case involves issues of law.
And in fact, we contend it involves issue of first impression.
In this case, the State district court made holdings about issues of whether the question of the experimental use exception is a question of law or a question of fact.
It made -- the requirement that experimental use had to go to a required claim element as opposed to a claimed element.
It made the determination, and the Court of Appeals made the legal determination that knowledge of the buyer is conclusive, rather than as a factor.
Those are all issues of not only disputed substantial issues of Federal patent law that both parties submitted briefings in the trial court and the court of appeals 70 pages long disputing the legal--
Justice Sonia Sotomayor: Besides the parties--
Thomas M. Michel: --Yes.
Justice Sonia Sotomayor: --how else does it affect the development of patent law?
Thomas M. Michel: The--
Justice Sonia Sotomayor: Who else is going to follow--
Thomas M. Michel: --They're--
Justice Sonia Sotomayor: --this malpractice determination?
Thomas M. Michel: --It's going to have a really profound effect on patent law practitioners who are uniquely situated and work in parcel -- and interlocking with the Patent Office.
It is the patent lawyers who draft the patents, it is the patent lawyers who present them to the Patent Office, they are the ones who engage when they need to be amended or refined or narrowed or broadened.
Justice Antonin Scalia: They knew -- they knew these were controverted issues.
You say that they are controverted issues.
So they would have been alerted to a problem anyway, and they certainly would not accept a State court determination as authoritative resolution of that problem.
Thomas M. Michel: The patent--
Justice Antonin Scalia: --the patent attorneys.
I mean, you--
Thomas M. Michel: --No, the Patent Office will have to take that as guidance, because their new taskmaster will not be following Federal patent law because in this case, the Court injected a brand-new requirement that was never held by a patent lawyer, that you had to have an expert witness testify to establish your experimental use testing exception.
That's never been held anywhere in Federal patent law.
So now, who's the patent lawyer going to be looking to for guidance?
The exclusive Federal courts?
The Patent Office?
Guidance from the Federal circuit?
No, they are going to have their backs watched by the State courts, saying, Uh-huh -- you know what, I'm going to impose a new legal obligation on you, and you are going to be held for malpractice.
And that's not--
Justice Ruth Bader Ginsburg: What would happen -- what would happen if that came up in an ordinary litigation in Federal court, and the Federal circuit ultimately decided the question, the State court was entirely wrong about this; you don't need a witness.
Well, that's the end of it, right?
Once the Federal court decides the question, then whatever the State judge thought was the Federal law is gone.
Thomas M. Michel: --No, that's exactly the problem.
State courts aren't bound by the Federal circuit's holding.
There will be no Federal review of substantial issues of Federal law.
Zero, unless this Court is going to--
Justice Antonin Scalia: --Excuse me.
The State courts are not bound by the Federal court's holding?
You mean State courts can resolve patent questions, contrary to what the Supreme Court of the United States says the law is?
Thomas M. Michel: --No, not contrary.
That was the point I was going to make.
Not contrary to the holdings of the United States Supreme Court, contrary to the Federal circuit's holding.
And in fact, the Fort Worth Court of Appeals did not follow the Federal circuit's holding in this area.
Justice Elena Kagan: Are you saying, Mr. Michel, that what the State courts are going to do is to say that, notwithstanding that the Federal circuit has ruled on a matter, and notwithstanding that the lawyer has complied with the rule as articulated by the Federal circuit, that nonetheless, they will be held to have committed malpractice because they didn't comply with the State's rule?
Is that what you think the State judges are really going to do?
Thomas M. Michel: I think the State judges are going to try to possibly apply Federal circuit holdings, and in this case, they did not.
They injected a new holding, which established a new liability for the patent lawyers; which is not reviewable unless this Court were to grant certiorari review.
And so that then leaves the only review on these materials -- these are going to be substantial issues of--
Justice Sonia Sotomayor: So what you're arguing, they're going to make a mistake, and because we might not accept certiorari, that's binding on everybody else--
Thomas M. Michel: --It's--
Justice Sonia Sotomayor: --in the State--
Thomas M. Michel: --No.
It's binding on the State court practitioners in that State who get sued for legal malpractice.
And it's that interrelationship between the lawyers who are drafting patents--
Justice Elena Kagan: What if a lawyer says to the -- you know, I complied with all the Federal law -- all the rules in the Federal circuit, I complied with.
Thomas M. Michel: --Yes.
Justice Elena Kagan: You are suggesting that the State court is going to say, Too bad, you committed malpractice anyway because you didn't comply with our hypothetical law about patents.
Thomas M. Michel: They did that in this case.
Chief Justice John G. Roberts: I guess it's not their hypothetical law.
They would be saying, This is what we think the Federal law requires, and while we're happy -- or not happy -- but it's interesting that the Federal circuit thinks something else, but that doesn't bind us.
Thomas M. Michel: --Correct, correct.
And it's not just hypothetical.
The hypothetical doesn't mean insubstantial.
Justice Antonin Scalia: Why is that worse than the fact that if it goes to Federal court, all of the lawyers in the State in all malpractice cases are going to be supposedly bound by the Federal court's holding as to State issues of malpractice?
I mean, it seems to me it's Twiddle Dum or Twiddle Dee, whichever court system you go to, you are going to terrorize the lawyers of that State on the basis of an opinion of a court that is not dispositive on those issues.
So I don't know why--
Thomas M. Michel: --I think we disagree.
Here, when you try -- for example, in the patent infringement case, the sole trial is going to be the patent infringement.
You are going to try the Federal lawsuit, Your Honor, Justice Scalia -- you are trying that patent infringement lawsuit in State court, in the “ case within the case ” analysis.
The Federal rules, that's what is so troubling about--
Justice Antonin Scalia: --And you are trying the malpractice lawsuit, the State practice malpractice lawsuit, in Federal court.
Thomas M. Michel: --Correct.
But the application and the rules governing it are by Federal law.
The rules in this case -- in particular, the substantial issue of the experimental use exception, the only issue was saved was the experimental use exception.
We disagree, but just because the State court makes an opinion and a holding, it doesn't have real-world effect.
It really does.
It's not an advisory opinion.
And there needs to be a distinguishment between the side issue the Petitioners are saying they are trying to get you focus on this one micro-issue of whether it will affect an actual patent -- as to whether it will affect patent law.
And it will affect patent law, and it will affect the application of patent law.
And so what you're going to have is you're going to have two diverging systems.
You're going to have -- actually, you will have one on the Federal side and then you will have 50 jurisdictions espousing what they think the law is of patent law, and not being bound by the Federal circuit.
The judge makes a--
Justice Ruth Bader Ginsburg: Anytime -- anytime we allow patent questions -- as you already pointed out, a lot of patent questions come up in State courts litigations, contract litigations.
Every time you have a patent question, then must the case go to the Federal court, in your view?
Thomas M. Michel: --No, that is not our position.
Justice Ruth Bader Ginsburg: So what is the dividing line between patent questions that belong in State court and patent questions that belong only in Federal court?
Thomas M. Michel: For example, not every malpractice case -- it will be the “ case within the case ” doctrine in a patent case that will go to Federal court.
For example, failure to communicate a settlement offer does not have a case within the case.
In a business transaction, it doesn't have the case within the case analysis.
So those malpractices arising from them will not go to Federal court.
Breaches of fiduciary duty for divestiture of fees does not have a causation element.
Justice Antonin Scalia: So you are talking about a patent case that has a patent issue, whether it's a contract case, a tort case, a malpractice case -- if it has a patent issue, you think it has to go to Federal court.
Thomas M. Michel: We do not.
Justice Antonin Scalia: Well, then I repeat Justice Ginsburg's question, how do you decide which of those do and which of those don't?
Thomas M. Michel: I think this is a case in point.
This case is on all fours with Grable.
There is no exception.
The only distinguishing factor is this hypothetical argument of the case within the case analysis.
Justice Ruth Bader Ginsburg: Why does it stay within the line -- you have said not every patent question that comes up in a State court.
It -- to say you can start over in Federal court.
What patent questions -- now, let's not talk about breach of fiduciary duty -- generally, what patent questions are properly adjudicated in the State court as part of a lawsuit?
Thomas M. Michel: Well, the -- the distinction is, for example, in a licensing case, in a patent case, where you -- those cases are brought in Federal -- I mean -- I'm sorry -- brought in State court -- our -- our request here is following Grable, that what will go to Federal court are legal malpractice cases arising from substantial issues of Federal patent law that have that case within the case analysis.
And it's that narrow, extremely narrow window of cases.
This is not “ Katie, bar the door ”.
We set forth the empirical numbers.
They are going to be microscopic.
But what they do have is Grable's test.
Every element that Grable articulated, this case meets.
It does involve substantial issues of first impression.
Justice Ruth Bader Ginsburg: What was the substantial Federal matter in Grable?
Thomas M. Michel: The issue of the IRS, whether personal service had to be given under an IRS--
Justice Ruth Bader Ginsburg: That was in the control, the actions of the Federal agency, of IRS.
Thomas M. Michel: --Correct.
Justice Ruth Bader Ginsburg: And you have no consequence for that here.
Thomas M. Michel: We do have rules that will govern the law on experimental use exception.
Justice Ruth Bader Ginsburg: You have--
Thomas M. Michel: And that would govern the application in Federal court.
That's why it should be in Federal court, to govern how the agency -- and whether a patent -- and this suit goes to -- directly affects patents.
This is going to patent validity.
Justice Ruth Bader Ginsburg: --But the Federal court -- you said before that whatever the Federal Circuit says, the State doesn't have to follow it the next time there's a case in State court.
But the Federal court is certainly not going to follow what the State says on experimental use.
Thomas M. Michel: It does.
I will tell you, the reason why it does, it's in the doctrine of collateral estoppel.
It affects the inventor.
It's affecting the inventor in this case.
This holding of the State district court and the State court of appeals are now before the Patent Office.
Justice Sonia Sotomayor: --I'm sorry.
How does it -- the patent's invalid.
Thomas M. Michel: I'm sorry?
Justice Sonia Sotomayor: The patent's invalid.
Nothing the Court does here is going to change that invalidity.
That's what I don't understand.
Thomas M. Michel: Correct.
Justice Sonia Sotomayor: He's not going to get his patent back from this action.
Thomas M. Michel: That's correct.
Justice Sonia Sotomayor: He's going to get money for losing it, maybe.
Thomas M. Michel: Correct.
Justice Sonia Sotomayor: So how does it affect the patent?
Thomas M. Michel: There is a pending continuation patent.
Justice Sonia Sotomayor: We're back to that issue, okay.
Thomas M. Michel: Yes, but that is a collateral estoppel issue.
Let me -- let me give up another scenario because in a different role when the patent is not declared invalid and instead there is a finding of non-infringement, and that's what gives rise to the legal malpractice case.
Then you go to State court, and in that situation the determination of -- of infringement will be raised as a basis for legal malpractice against the lawyer in the malpractice case.
Then the lawyers raise, as within the “ case within the case ” exception, is that, oh, the patent was invalid.
So then in that situation, a State district court will be rendering an opinion on a live patent, and then that will be binding on the inventor and will affect real live actual patents, and it does affect patents before the Patent Office.
Petitioner said we -- it's not an issue of res judicata.
They cite a rule.
That's not our argument.
It's an issue of issue preclusion.
It's also the duty and the obligation of the lawyer to disclose that judicial discussion to the Patent Office.
Otherwise his continuation patent could be declared invalid for inequitable conduct, for not disclosing material information.
Justice Ruth Bader Ginsburg: And your -- your distinction between other areas of Federal jurisdiction where the Federal law controls and patent is what?
Justice Sotomayor brought up immigration law--
Thomas M. Michel: Yes.
Justice Ruth Bader Ginsburg: --copyright law.
Why don't they -- why doesn't what you said work the same way in those fields?
Thomas M. Michel: I think there are -- there are distinctions in the area of patent law versus any other area of the law mainly because as we get to the State -- this goes to the analysis of the State/Federal balance.
That's why the exclusive Federal court jurisdiction.
That's why exclusive nationwide jurisdiction in patent law in the Federal Circuit is different than any other area of the law.
It is that balancing test that we are required to engage in.
That's why it's unique from antitrust, trademark, civil rights, securities, employment.
Those have concurrent jurisdiction.
They may not have an agency involved.
For example, bankruptcy initially sounds like it's exclusively Federal court issues, but when you look underneath the bankruptcy, there is core proceedings and there's non-core.
Non-core are concurrent; those could be heard in State court.
Secondly, those underlying issues in bankruptcy typically involve State property right issues anyway.
So they are really applying whether somebody has a perfected security interest lien, whether somebody has a justified debt, whether -- things of that nature.
So rather than in any other area of law, these other areas, even if they are exclusive in Federal court jurisdiction, some of those underlying issues are basically based on who the party is.
And they are still applying underlying State issues.
Justice Ruth Bader Ginsburg: So your case turns on the Federal Circuit having exclusive appellate jurisdiction?
Thomas M. Michel: That is one of the most defining factors on the State/Federal balance of judicial responsibility.
Our understanding of that analysis of the federalism and also the articulation of, just as we have showed up -- Petitioners said a whole ton of cases were going to come in.
We supported statistics that the numbers will be very small.
But the distinguishing factor because of the balancing test that we are required to--
Justice Ruth Bader Ginsburg: But if there's a large Federal interest, I mean, that's a -- you're saying that there is in the Federal state balance -- the Federal balance, it's on the Federal side.
If there is that large Federal interest, is it surprising that the government hasn't come into this case if there's such a Federal interest to be protected?
Thomas M. Michel: --No, I think the Federal government -- I can't -- I can't speculate to -- for that, Justice Ginsburg.
There could be just many reasons why they didn't come in on this case, just like they don't come in on many other cases.
But the Federal interest here in the national uniformity, I think, has been well stated both by this Court and the Federal circuit.
Justice Ruth Bader Ginsburg: There's a difference between you and your colleague on what “ substantial ” means.
Thomas M. Michel: Yes.
Justice Ruth Bader Ginsburg: And she says it doesn't just mean necessary, essential in this particular litigation, but as in the Grable case and the Kansas City Title & Trust has larger ramifications for many other cases, not just this case and whether there's going to be issue preclusion as to this particular inventor.
Those -- I don't see an issue in this case comparable to those.
Thomas M. Michel: I think there are -- there are a number of issues of -- of greater importance than just this case.
The question is the ongoing conflict in Federal patent law on whether the experimental use Exception is a question of law or a question of fact.
The Federal circuit has gone both ways on that, whether the issue of buyer knowledge is a conclusive factor or whether it is just one of 13 factors.
Justice Ruth Bader Ginsburg: Whether they -- those questions will come to the Federal circuit and they'll decide it and then they'll be settled.
Thomas M. Michel: Well, we would hope they would be settled, but then we're going to have this whole other body of law out there in State courts that aren't bound by the Federal court to answer those questions.
And those will govern the practice of patent -- patent lawyers.
Justice Ruth Bader Ginsburg: How likely is that in practice, that once the Federal circuit weighs in, that the State judges will go their own way?
Thomas M. Michel: I think it's a very real possibility.
Justice Antonin Scalia: My experience is that Federal judges, including this Federal judge, are not interested in -- in getting into the weeds of patent law, and if -- if they could rely on a decision of the Federal circuit, they would do that just as fast as they can.
Thomas M. Michel: --You -- you would -- you would think so.
It doesn't appear to be the case.
Because in this case, we had holdings that experimental testing had to be on a required claim element.
There is also an issue in this case of whether you had to have an expert witness testify to prove up the experimental use exception.
Nowhere held in Federal law.
The problem is these judges often will never have handled a patent law in their career.
This will go to some judges who have been in family law, got elected at the district court, and will never have decided or looked at a patent law case.
Justice Ruth Bader Ginsburg: Would that be the same thing for antitrust, be the same for copyright?
Thomas M. Michel: --But the articulation isn't the same.
There are other -- in antitrust, there are State analogs, the judges are familiar with applying it.
In fact, the State of Texas in Coca-Cola v. Harmar stated that there's a high interest in its own State interest -- I mean, antitrust laws.
The same with trademark.
Trademark is concurrent jurisdiction.
The limited area that applies these factors, going back to the balancing test, is extremely narrow.
Patent law is unique in that area of almost any other area of law.
We think the Texas Supreme Court got this decision right, and we request that the Court follow Grable and apply Grable to the case at hand.
Chief Justice John G. Roberts: Thank you, counsel.
Ms. Webre, you have four minutes remaining.
REBUTTAL ARGUMENT OF JANE WEBRE ON BEHALF OF THE PETITIONERS
Justice Antonin Scalia: Ms. Webre, can I ask you about the question presented?
The way you presented it to us, it -- it was as though we're -- we're reviewing whether the Federal circuit was right to reject Grable in -- in whatever the names of those opinions are.
But in fact, that's not the situation at all.
The Texas Supreme Court here applied Grable.
And I think just the way you would want it applied.
So your -- your -- your contention is simply they didn't apply it correctly.
Isn't that right?
Jane Webre: I disagree, Your Honor.
The Texas Supreme Court didn't properly apply Grable.
What they applied was the Federal circuit's improper departure from Grable.
In two ways.
One is they conflated necessity with substantiality and that comes, in the Federal circuit's jurisprudence, that comes from a sound bite from the earlier Christiansen case where the -- the -- the line goes something like, there is a substantial Federal issue because it is necessary to the parties' claim.
And so it conflates necessity with substantiality, and the -- the Texas Supreme Court followed the Federal circuit's construct.
They said, We're applying Grable, we're looking at substantiality, but then they did exactly what the Federal circuit did.
And ditto with -- with the Federalism balance.
They pointed to the needs of Federal interest in the uniformity of patent law and that was the end of the inquiry.
And I think that that is a measure of the deference that the Supreme Court of Texas, as other State courts would do, the deference they grant to the Federal circuit in deciding the question of appropriate scope of patent jurisprudence and the relative importance of the -- the uniformity of patent law.
And so we arrive to you from the Supreme Court of Texas, but truly presenting the -- the appropriateness of the Federal circuit's redone application of the Grable test.
Justice Sonia Sotomayor: Could you answer the one point your adversary raised that gives me pause, a lot of pause.
He says a ruling on patent law of how you should or should not behave in a State malpractice claim will affect all of the lawyers who practice in your State, because each of them will have to do or not do whatever that malpractice ruling was because that's what the State is going to -- State courts will follow in the future.
So it will change those lawyers' behaviors in Federal court.
Jane Webre: Your Honor, I think that that is such a speculative road to go down.
What is it the lawyers are going to do different?
Justice Sonia Sotomayor: They are going to present an expert all of the time when they don't need to.
Jane Webre: --They are going to do some extra work and make an extra belt along with the suspenders that they are required to do.
And where is the harm in that?
And where is the undermining of the uniformity of patent law if a lawyer in a real patent case--
Justice Sonia Sotomayor: But you can think of an example where -- not perhaps on the facts of this case, but where a State court's ruling could in fact establish a code of behavior that's not just belts and suspenders, that's something else.
Jane Webre: --Your Honor, I think that -- that spinning out a hypothetical on that would be truly speculative.
It's hard to imagine a situation where it would be contrary or intentioned with what the Federal courts would hold.
Particularly since it's -- I agree with Justice Scalia's construct that the State courts are going to try to apply appropriate Federal law--
Chief Justice John G. Roberts: What about just the flip side of this case?
Let's suppose they said, No, you don't need an expert.
So it's not belt and suspenders; it's neither belt nor suspenders.
That's going to affect the conduct of the lawyers in the State in the way that would be disruptive of the uniformity of Federal patent law.
Jane Webre: --If an expert is required under Federal jurisprudence, then an expert is required in a real patent case.
And if the State court makes the mistake in an occasional case here or there, then a lawyer practicing in a real patent case, in a real case in Federal court, needs to make sure that they are complying with the requirements.
And if you're going to--
Chief Justice John G. Roberts: Well, right, the requirements of the Federal law.
The question is there's going to be a different interpretation of what that means in the State court and in the Federal circuit.
Jane Webre: --Well, Your Honor, if there is a conflict, then what you're supposed to follow is the jurisprudence of the courts who -- before whom you are practicing.
If the Federal circuit or Federal district court has said something about patent law, then that's what the lawyers should follow in prosecuting a patent case.
And a lawyer who decides, I'm going to disregard the Federal circuit standards on that question -- expert required, whatever it is -- and instead follow the Fort Worth court of appeals on this issue, I submit that the lawyer does so at his peril, and that doesn't undermine the appropriate uniformity of patent law.
Chief Justice John G. Roberts: Thank you, counsel.
The case is submitted.