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Federal Jurisdiction Proper in a State Law Malpractice Action Where Patent Infringement Is a “Necessary Element” of the State Law Claim

10-1091
January 11, 2011
Freeman, Jeffrey A.

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Last Month at the Federal Circuit - February 2011

Judges: Newman, Bryson (author), Prost

[Appealed from: E.D. Mich., Judge Rosen]

In Warrior Sports, Inc. v. Dickinson Wright, P.L.L.C., No. 10-1091 (Fed. Cir. Jan. 11, 2011), the Federal Circuit held that at least one of Warrior Sports, Inc.’s (“Warrior”) malpractice claims against the law firm of Dickinson Wright, P.L.L.C. (“Dickinson”) required the district court to resolve a substantive issue of patent law, thus conferring the district court with subject matter jurisdiction under 28 U.S.C. § 1338.    

Warrior had previously asserted U.S. Patent No. RE 38,216 (“the ’216 patent”) in a lawsuit against one of its competitors, STX, L.L.C. (“STX”).  STX argued that the ’216 patent was unenforceable due to conduct by two attorneys (who later joined Dickinson) during the reissue proceedings.  Before the district court issued a ruling on unenforceability or infringement, Warrior settled with STX. 

Following the settlement, Warrior filed suit against Dickinson for legal malpractice, citing a number of alleged errors in Dickinson’s handling of the ’216 patent, including the conduct that led to the allegation of inequitable conduct by its competitor, failure to pay a maintenance fee, failure to pursue reinstatement on a timely basis, and failure to properly communicate with Warrior.  Warrior argued that, as a result of the malpractice by Dickinson, it was forced to settle the infringement action against its competitor for much less than the true value of its claim.  Both Warrior and Dickinson requested that the district court hear the malpractice case under 28 U.S.C. § 1338.  However, the district court dismissed Warrior’s lawsuit for lack of subject matter jurisdiction, believing that the alleged acts of malpractice could all be analyzed under state law without reference to patent law.  Dickinson appealed.

On appeal, initially the Court held that the district court’s dismissal of the case for lack of subject matter jurisdiction did not divest the Court of appellate jurisdiction under 28 U.S.C. § 1295(a)(1).  Relying on past precedent, the Court held that, in order to determine the scope of its own jurisdiction, it must decide whether the jurisdiction of a district court whose decision is before it is based on 28 U.S.C. § 1338.  The Court stated that federal jurisdiction under § 1338 exists if the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, holding that “federal courts have exclusive jurisdiction over state law legal malpractice actions when the adjudication of the malpractice claim requires the court to address the merits of the plaintiff’s underlying patent infringement lawsuit.”  Slip op. at 6.

Turning to the merits of the appeal, the Court addressed the issue of whether patent law was a “necessary element” of Warrior’s right to relief.  The Court found that, to prove the proximate cause and injury elements of its malpractice claim, Michigan law requires Warrior to show that it would have prevailed on its infringement claim against STX and would have been entitled to an award of damages as a result.  Thus, because patent infringement was found to be a “necessary element” of Warrior’s malpractice claim, the Court concluded that Warrior’s claim presented a substantial question of patent law conferring § 1338 jurisdiction upon the federal district court.  Likewise, the Court found the remainder of Warrior’s claims to be properly before the district court as a matter of supplemental jurisdiction.  Accordingly, having found the district court had subject matter jurisdiction to hear Warrior’s malpractice claims, the Court reversed the district court’s holding and remanded the case for further proceedings. 

 

Summary authored by Jeffrey A. Freeman, Esq.