United States: Federal Courts Do Not Have Jurisdiction Over State Law Malpractice Claims When Issues Of Patent Law Involved Are Not "Substantial"

In NeuroRepair, Inc. v. Nath Law Group, No.13-1073 (Fed. Cir. Jan. 15, 2015), the Federal Circuit vacated the district court's judgments regarding state law malpractice claims, finding that the district court lacked subject matter jurisdiction over the state law claims, and remanded to the district court with instructions to remand the case to California state court.

NeuroRepair,Inc. ("NeuroRepair") initially retained Robert P. Cogan of The Nath Law Group (collectively"Nath") to assist in prosecuting several patent applications. Over time, NeuroRepair became increasingly dissatisfied with what it considered to be slow progress and excessive legal fees. NeuroRepair subsequently requested that Mr.Cogan transfer the case files to another firm. NeuroRepair then filed suit against Nath, alleging various legal malpractice claims. Nath removed the case to federal district court on the ground that it was a "civil action relating to patents." Slip op. at3 (citation omitted). The district court entered judgment in Nath's favor. NeuroRepair appealed,challenging the district court's subject matter jurisdiction.

On appeal, the Federal Circuit applied the four-part test set forth by the Supreme Court in Gunn v. Minton, 133 S. Ct. 1059 (2013),to determine whether NeuroRepair's state law causes of action arose under federal patent law to confer jurisdiction on the district court. The Court held that they did not.

First, the Court considered whether NeuroRepair's claims "necessarily raised" issues of federal patent law. Slip op. at 6. The Court observed that each of NeuroRepair's causes of actions was "created by state, not federal, law" and stated that a patent law issue will necessarily be raised only if it is a necessary element of one of the well-pleaded claims in the complaint. Id. at 7. The Court then explained that NeuroRepair's complaint"sets forth multiple bases in support of its allegation of professional negligence," and, therefore, a court could grant relief without ever reaching a patent law issue. Id. Examining NeuroRepair's remaining claims, the Court similarly determined that NeuroRepair could prevail"under alternate bases that do not necessarily implicate an issue of substantive patent law." Id. at 8.

Second, theCourt considered whether a patent law issue was "actually disputed," as requiredby the second prong of the test. Id. The Court determined that the parties disputed "[w]hether the patentcould have issued earlier and with broader claims." Id.

Third, the Court determined that the patent issues involved were not "substantial" to the federal system to confer jurisdiction. Id. In reaching this conclusion, the Court considered three nonexclusive factors. Under the first factor, the Court determined that there was no pure issue of federal law that was dispositive in the case. Rejecting Nath's arguments, the Court explained that the resolution of NeuroRepair's claims likely turned on "the particular facts and circumstances of the prior art, timely responses to office actions, etc., rather than on the interpretation of federal law." Id. at 9. The Court further explained that the federal law question was, "at most, . . . only one of several elements needed to prevail" on NeuroRepair's claims. Id. at 10. Examining the second factor, the Court rejected Nath's arguments that state court resolution of NeuroRepair's claims would affect numerous other cases. The Court explained that the state court action would likely focus on whether the invention was patentable as initially claimed and "would neither affect the scope of any live patent nor require resolution of a novel issue of patent law." Id. at 11. The Court concluded that it was"unclear how [the state court action] could control numerous other cases or impact the federal system as a whole." Id. The Court then considered whether the government had a direct interest in the availability of a federal forum and held that it did not because the dispute was "between private parties and relates to alleged legal malpractice and other state law claims." Id. at 12-13.

Fourth, the Federal Circuit determined that hearing NeuroRepair's claims in federal court would "disrupt[] the federal-state balance approved by Congress"because "the resolution by federal courts of attorney malpractice claims that do not raise substantial issues of federal law would usurp the important role of state courts in regulating the practice of law within their boundaries." Id. at 13.

Finally, the Court rejected Nath's attempt to distinguish Gunn based on a distinction between alleged malpractice in the patent litigation context as opposed to the patent prosecution context, explaining that "Gunn made no such distinction." Id. at 14.

Accordingly,the Court held that the district court did not have jurisdiction to hear NeuroRepair's claims and vacated and remanded to the district court with instructions to remand to California state court.

Judges: Wallach (author), Chen, Hughes

[Appealed from S.D. Cal., Judge Houston]

This article previously appeared in Last Month at the Federal Circuit - February 2015

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