By Kevin E. Noonan --
Malpractice is an ugly word. But patent practitioners may take some comfort in two precedential decisions today from the Federal Circuit, holding that allegations of malpractice in patent prosecution "arise under" patent law and thus provide subject matter jurisdiction in Federal Court under 28 U.S.C. § 1338.
The first of these cases, Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., was an appeal from the interlocutory decision of the U.S. District Court for the Western District of Texas denying plaintiffs' motion to remand the case to state court, on the grounds that the court did not have subject matter jurisdiction on the malpractice cause of action for non-diverse parties. The malpractice claim alleged that counsel "(1) failed to file the initial patent application within the one year 'on sale bar' of 35 U.S.C. § 102(b); (2) failed to disclose two prior patents and other facts during the prosecution of the patent applications; (3) failed to file in a timely fashion the application that resulted in the '771 patent, which contains the broadest claims to the invention; (4) miscalculated the settlement damages in [a] . . . prior litigation; (5) failed to inform AMT of his mistakes despite his fiduciary duty to do so; (6) failed to inform AMT adequately of the existence of the prior litigant's defenses of on sale bar and inequitable conduct; and (7) made misrepresentations to AMT." As a consequence, AMT claimed it was forced to settle several malpractice lawsuits for much less than the patents would have been worth "but for" counsel's malpractice. The claim was originally filed in Texas state court, and had been transferred to federal court on defendants' motion, and the court earlier denied plaintiff's motion to remand on the grounds that "in order to prevail, AMT 'must establish that their infringement claims were otherwise valid, but that Hamilton's negligence afforded the patent defendants certain defenses under patent law.'" Now, the parties had changed their positions, and the court's denial of defendants' motion for remand to state court was the subject of this appeal.
The Federal Circuit affirmed the District Court's denial of defendants' remand motion in an opinion written by Chief Judge Michel and joined by Judges Lourie and Rader; in doing so, the CAFC asserted that this was a question of first impression. In his analysis, Judge Michel applied the two-part test recited by the Supreme Court in Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988). According to the Federal Circuit, "Section 1338 jurisdiction extends 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.'" Under the Federal Circuit's analysis, the question is whether patent law is a "necessary element" of the plaintiff's malpractice claim. Reviewing the complaint, the CAFC found that seven allegations of error constituting malpractice concerned patent prosecution or litigation. Moreover, in order to prevail, the plaintiffs would have to establish that they would have prevailed on the earlier infringement lawsuits "but for" counsel's malpractice. Thus, the District Court would have to, "hypothetically," adjudicate the infringement claim on the merits. Thus, patent law comprised a "necessary element" of the malpractice claim. On this record, the Federal Circuit found that the malpractice claim "arose under" patent law, and thus provided federal question jurisdiction under 28 U.S.C. § 1338. Accordingly, the CAFC affirmed denial of defendants' removal motion.
In the second of these cases, Immunocept, LLC v. Fulbright & Jaworski LLP, the plaintiff appealed a decision of the U.S. District Court for the Western District of Texas on summary judgment that the malpractice claim was barred by the statute of limitations and the claim for damages was too speculative to be recovered under state law. The panel raised sua sponte the question of whether jurisdiction over the malpractice claim (which is clearly a state law matter) could be considered as "arising under" patent law when patent prosecution was basis of the claim. The facts of the case are as follows. The invention involved large pore hemofiltration ("LPHF") technology for treating a number of diseases and disorders, including sepsis, shock, acute renal failure, multiple organ system failure, and systemic inflammatory response syndrome-related diseases. Fulbright and Jaworski was retained to prepare the patent application, which was granted as U.S. Patent No. 5,571,418 on November 5, 1996, Immunocept LLC being named assignee of this patent. Claim 1 of the '418 patent reads as follows:
A method of treating a pathophysiological state caused by a toxic mediator-related disease consisting of hemofiltering blood with a filter, wherein said filter has a molecular weight exclusion limit of 100,000 to 150,000 Daltons and allows for passage of molecules with a molecular weight of about 70,000 Daltons in the presence of whole blood.
Importantly, the transitional phrase "consisting of" was added by amendment during prosecution. Immunocept hired another attorney to pursue additional applications while Immunocept pursued licensing opportunities. These efforts were fruitless, however, since the potential licensees assessed the '418 patent claims to provide insufficient protection based on the closed claim language "consisting of." Immunocept's malpractice claim was based on this limitation of the '418's claims. However, the District Court found that the claim was time-barred by the Texas statute of limitations and that Immunocept's damages claim was too speculative.
The Federal Circuit affirmed in an opinion written by Chief Judge Michel and joined by Judges Lourie and Rader. More important to patent practitioners than the Federal Circuit's decision on the substantive question presented was its determination that the malpractice claim was one "arising under" U.S. patent law and thus within its (and federal District Courts') jurisdiction. The Federal Circuit analyzed federal court jurisdiction under the two-part test enunciated by the Supreme Court in Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg. , 545 U.S. 308 (2005). As stated by the Federal Circuit, the test requires that "a state-law claim 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." Id. at 314. The malpractice claim, a tort, requires under Texas law proof of "proof of duty, breach, causation, and damages." In this case, the basis for the malpractice claim was solely that the patent attorney improperly narrowed the scope of the '418 claims and thus that the patent was unable to be licensed for value. Thus, according to the Federal Circuit, claim drafting and the question of claim scope were necessary elements of the cause of action. Since claim scope defines the scope of patent protection, the court considered it to be "surely" a substantial question of patent law, citing Johnson & Johnston Assocs. v. R.E. Serv. Co. , 285 F.3d 1046 (Fed. Cir. 2002) (en banc). The panel also cited Air Measurement Techs. in support of their decision. The Federal Circuit further justified this outcome on the grounds that "[l]itigants will benefit from federal judges who are used to handling these complicated rules [of claim construction]" and that jurisdiction was consistent with Congressional intent to harmonize U.S. patent law when it enacted the Federal Courts Improvement Act of 1982 (Pub. L. No. 97-164, 96 Stat. 25) that established the Federal Circuit.
Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. (Fed. Cir. 2007)
Panel: Chief Judge Michel and Circuit Judges Lourie and Rader
Opinion by Chief Judge Michel
Immunocept, LLC v. Fulbright & Jaworski LLP (Fed. Cir. 2007)
Panel: Chief Judge Michel and Circuit Judges Lourie and Rader
Opinion by Chief Judge Michel
Additional information regarding these cases can be found at Patently-O .
