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Statute of Limitations Period for Malpractice Claim Started to Run When Patent Attorney Should Have Recognized Claim Drafting Error

06-1432
October 15, 2007

Decision icon Decision

Last Month at the Federal Circuit - November 2007

Judges: Michel (author), Lourie, Rader

[Appealed from: W.D. Tex., Judge Sparks]

In Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., No. 06-1432 (Fed. Cir. Oct. 15, 2007), the Federal Circuit affirmed the district court’s grant of SJ in favor of Fulbright & Jaworski, L.L.P. (“Fulbright”). In so doing, the Federal Circuit held that (i) a claim scope determination involved in a malpractice claim presented a substantial question of patent law and, thus, federal jurisdiction was proper under 28 U.S.C. § 1338; and (ii) Immunocept L.L.C.’s (“Immunocept”) malpractice claim was barred by the statute of limitations.

The Fulbright law firm was hired to secure patent protection for large pore hemofiltration (LPHF) technology. U.S. Patent No. 5,571,418 (“the ’418 patent”), entitled “Hemofiltration of toxic mediator-related disease,” issued and was assigned to Immunocept. Immunocept subsequently hired Thomas Felger at Baker Botts L.L.P. to prosecute additional patent applications directed to LPHF technology. In the course of this prosecution, Felger reviewed the ’418 patent and its file history, and met with Immunocept to discuss the claims, among other things.

Seeking financial partners to assist with the clinical trials and commercialization of its invention, Immunocept entered into preliminary investment negotiations with a subsidiary of Johnson and Johnson (“J&J”). During the course of due diligence, J&J’s patent attorneys discovered that the ’418 patent suffered from a fatal flaw, namely, the transition phrase “consisting of” in claim 1. J&J’s patent attorneys did not think that the claimed invention would provide adequate protection from competing methods. Thus, J&J terminated discussions with Immunocept.

Alleging 28 U.S.C. § 1338 as its sole jurisdictional basis, Immunocept sued Fulbright for legal malpractice under Texas state law in the Western District of Texas. The district court granted SJ in favor of Fulbright on the grounds that the malpractice claim was barred by the statute of limitations and that damages were too speculative as a matter of law.

On appeal, the Federal Circuit first considered whether federal jurisdiction was proper. Citing Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 809 (1988), the Court explained that section 1338 jurisdiction extends to any case “in which a well-pleaded complaint establishes either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Slip op. at 4-5. This two-part test was later rephrased by the Supreme Court in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 314 (2005), as a determination of whether “a state-law claim necessarily raise[s] 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.” Slip op. at 5 (alteration in original).

The Court noted that Immunocept’s malpractice claim was solely based on its allegation of a claim drafting mistake that provided inadequate patent protection. The Court thus found that the claim drafting error was a necessary element of the malpractice cause of action. The Court reasoned that “[b]ecause patent claim scope defines the scope of patent protection, . . . we surely consider claim scope to be a substantial question of patent law.” Id. at 7 (citation omitted). Moreover, the Court noted that claim scope determination is a legal question that can be complex and litigants would benefit from federal judges who are used to handling complicated claim construction doctrines. Additionally, the Court found that Congress’s intent to remove nonuniformity in the patent law, as evidenced by the Federal Courts Improvement Act of 1982, was further indicium that § 1338 jurisdiction was proper here.

The Court then turned to the district court’s determination that Immunocept’s malpractice action was barred by the two-year statute of limitations. The Court noted that the two-year period for the statute of limitations in Texas starts to run when a “client discovers or should have discovered through the exercise of reasonable care and diligence the facts establishing the elements of a cause of action.” Id. at 8 (citation omitted).

The Court rejected Immunocept’s argument that it was not on notice of the basis of its malpractice case until J&J pointed out flaws in the claim scope. The Court noted that Immunocept’s patent attorney expert testified that the transition “consisting of” drastically limits the scope of a patent, and that anyone would know of the restrictive language simply by reading the claims on the face of the patent. Felger not only read the patent, the Court pointed out, he also analyzed the claim scope, reviewed the file history, and reviewed prior art references cited by the examiner to reject pending claims in the application that gave rise to the ’418 patent.

The Court further rejected Immunocept’s argument that Felger did not reasonably know about the malpractice claim because it hired him to secure additional patents on the LPHF technology, not to investigate the malpractice claim. The Court reasoned that “[t]he relevant inquiry is not whether Felger was hired to investigate malpractice, but whether he knew or should have known facts later establishing a malpractice claim . . . .” Id. at 9. The Court concluded that, “based on the blatantly restrictive transitional phrase and Felger’s review of the patent, file history, prior art, and claim scope, Felger should have reasonably known that ‘consisting of’ drastically narrowed the scope of the claims . . . , thereby starting the statute of limitations clock.” Id. at 10.

Lastly, the Federal Circuit rejected Immunocept’s argument that Felger’s knowledge could not be imputed to it because Felger did not have a duty to communicate his knowledge of a malpractice claim to Immunocept. The Federal Circuit explained that the imputation analysis involves determining whether an attorney was acting within the scope of his authority or employment when he discovered or reasonably should have discovered the critical information. “Noticeably absent from the imputation rule,” the Court noted, “is a requirement that the attorney have a duty to disclose information to the client.” Id. at 10. Moreover, the Court found that Immunocept waived the duty to communicate argument because it was not argued below.

The Court further held that Felger, as a patent attorney, clearly acted within the scope of his authority when he reasonably should have discovered the facts about the narrowed claim scope. The Federal Circuit thus affirmed the district court’s holding that Immunocept’s malpractice claim was barred by the statute of limitations.