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The U.S. Supreme Court condensed 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? 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, 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’ intended division of labor between state and federal courts.
A client developed a computer program to facilitate securities trading. More than a year after he leased the system, he obtained a patent and sued a securities dealers' association and a stock market for patent infringement. After summary judgment against the client based on patent invalidity was upheld, he filed a legal malpractice claim in state court based on his attorneys' failure to raise an experimental use argument. His former attorneys argued that the infringement claims would have failed even if the experimental-use argument had been timely raised, and the trial court agreed. On appeal, the client claimed that the federal district courts had exclusive jurisdiction over claims like his under 28 U.S.C.S. §1338(a), which provides for exclusive federal jurisdiction over any case “arising under any Act of Congress relating to patents.” The Texas Court of Appeals rejected the argument and determined that the client had failed to establish experimental use. On appeal, the Texas Supreme Court found that the client's malpractice claim involved a substantial federal issue such that the state court lacked subject matter jurisdiction under 28 U.S.C.S. § 1338(a). The case was elevated to the Supreme Court of the United States on a writ of certiorari.
Did Texas state courts have jurisdiction over the matter?
The U.S. Supreme Court held that resolution of a federal patent question was necessary to the client's legal malpractice claim and that a federal patent issue was actually disputed in the legal malpractice claim. However, the federal issue was not substantial in the relevant sense because the federal patent issue was posed in a merely hypothetical sense: if his lawyers had raised a timely experimental-use argument, would the result in the underlying patent infringement proceeding have been different? This issue was not important to the federal patent system as a whole.