Supreme Court Hears Oral Arguments In Legal Malpractice, Patent Case

Supreme Court Hears Oral Arguments In Legal Malpractice, Patent Case

WASHINGTON, D.C. - (Mealey's) Allegations that a group of attorneys committed legal malpractice by failing to plead an experimental use defense in a patent infringement case do not constitute a "substantial" question of federal law, counsel for the attorneys told the U.S. Supreme Court on Jan. 16 (Jerry W. Gunn et al. v. Vernon F. Minton, No. 11-1118, U.S. Sup.).

(Transcript available. Document #16-130122-017T.)

 

According to Jane Webre, representing petitioners Jerry W. Gunn, James E. Wren, William C. Slusser and Michael E. Wilson, "there were no actual patent rights" at issue in respondent Vernon F. Minton's legal malpractice lawsuit because "those [patent rights] were already fully, finally, irrevocably determined" in Minton's underlying patent lawsuit 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 [U.S. Patent and Trademark Office] PTO in a patent application, or on any subsequent Federal court deciding a real patent case," Webre added.

On-Sale Bar

Minton, an inventor and patent owner, alleged that the attorneys were negligent in their representation of him in an infringement action against the National Association of Securities Dealers Inc. (NASD) and the NASDAQ Stock Market Inc. The case, filed in 2002 in the U.S. District Court for the Eastern District of Texas, was rejected on summary judgment based on the on-sale bar, a decision which the Federal Circuit U.S. Court of Appeals later affirmed.

According to Minton, the defendants failed to plead or brief an experimental use defense, an exception to the on-sale bar that would have allowed Minton's invention to be marketed or sold for testing purposes. The trial court sided with the attorneys, however, and rendered a take-nothing verdict. Minton appealed to the Second District Texas Court of Appeals, but in the interim the Federal Circuit decided Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. (504 F.3d 1262 [Fed. Cir. 2007]) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P. (504 F.3d 1281 [Fed. Cir. 2007]), both of which counsel that federal courts have exclusive jurisdiction over all legal malpractice suits involving underlying patent matters. Accordingly, Minton moved to dismiss his appeal for lack of jurisdiction. A split appellate panel denied Minton's motion and affirmed the trial court's judgment.

Minton prevailed, however, at the Texas Supreme Court, which in a December 2011 decision found that Minton's claim was in fact subject to exclusive federal jurisdiction. Central to the ruling was a holding that the federal patent issue presented by Minton is a "necessary, disputed, and substantial" aspect of the lawsuit. The attorneys and their law firms filed a petition for writ of certiorari with the Supreme Court, which granted the request in October after holding three conferences on the case. Among the questions posed by the case are "Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005), for 'arising under' jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts?"

'Total Disregard'

At oral argument, Webre said the Federal Circuit's rulings "improperly conflate the question of necessity of a federal issue with the question of whether that issue is substantial," representing a "total disregard [of] 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," Webre added.

When asked by Justice Sonia Sotomayor whether an allegation of malpractice involving the PTO would qualify for "arising under" jurisdiction, Webre answered in the negative. Though such a scenario would "be a more substantial federal question than the one presented here," Webre nonetheless said no "arising under" jurisdiction exists because "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," Webre replied.

Disputed, Substantial Issues

By contrast, Thomas M. Michel, representing Minton, urged the Supreme Court to affirm. The state district court "made holdings about . . . whether . . . the experimental use exception is a question of law or a question of fact," as well as a determination that "knowledge of the buyer is conclusive, rather than a factor" to be considered, Michel argued.

"Those are all . . . disputed, substantial issues of federal patent law," he added.

To reverse the Texas Supreme Court could also burden the PTO, Michel warned, because the agency "will have to take . . . as guidance" the state district court's injection of a "brand-new requirement" that an expert witness must testify to establish an experimental use testing exception. In addition, Michel said a reversal would free state courts to choose whether they will interpret and apply Federal Circuit precedent; should they choose not to, it could subject patent attorneys to varying standards and regulations on a state-by-state basis. Justice Antonin Scalia was not persuaded by the argument, however, asking Michel, "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," Scalia added.

Minton is represented by Michel and Robley E. Sicard of Griffith, Jay & Michel in Fort Worth, Texas; Coyt Randal Johnston, Robert L. Tobey and Coyt Randal Johnston Jr. of Johnston Tobey in Dallas; Theodore F. Shiells of Shiells Law Firm in Dallas; Gregory W. Carr of Carr in Frisco, Texas; and Daniel R. Ortiz of Charlottesville, Va. The petitioners are represented by Webre of Scott, Douglass & McConnico of Austin, Texas.

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