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SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1118
_________________
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, 515–516 (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, 808–809 (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, 814, 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.