Gunn v. Minton

Facts

In the early 1990's, Vernon Minton developed a computer program and telecommunications network for securities trading, called TEXCEN. In March 1995, he leased the system to R. M. Stark & Co., a securities brokerage. A little over a year later, he applied for a patent on an interactive securities trading system based substantially on TEXCEN. The patent issued in January 2000. Minton then sued the National Association of Securities Dealers (NASD) and the NASDAQ Stock Market for patent infringement in federal district court. Jerry Gunn and the other petitioners represented him. NASD and NASDAQ won summary judgment because the patent was invalid under the on-sale bar. That bar says an inventor cannot get a patent if the invention was on sale more than one year before the application, and the lease to Stark came more than a year before Minton applied. On a motion for reconsideration, Minton argued for the first time that the lease was part of ongoing testing and fell within the experimental-use exception. The District Court denied the motion, and the Federal Circuit affirmed its ruling that the argument was waived. Minton blamed his lawyers' failure to raise the argument earlier for the loss of his patent and sued them for malpractice in Texas state court. The lawyers answered that the lease was not an experimental use, so the infringement claims would have failed anyway. The trial court agreed and granted them summary judgment.

Issues

1. Does a state-law legal malpractice claim over the handling of a patent case arise under federal patent law for purposes of 28 U.S.C. § 1338(a), so that only federal courts may hear it?
2. Is the patent question in such a malpractice case substantial in the relevant sense, meaning important to the federal system as a whole and not just to the parties?

Holding

Minton's state legal malpractice claim, based on his underlying patent case, does not arise under federal patent law for § 1338(a). The patent issue is necessarily raised and actually disputed but not substantial in the relevant sense, and the federal-state balance requirement also fails, so § 1338(a) does not deprive the Texas state courts of subject matter jurisdiction. The Court said such claims will rarely, if ever, arise under patent law.