- Court: United States Supreme Court
- Area(s) of Law: Civil Procedure
- Date Filed: February 20, 2013
- Case #: 11-1118
- Judge(s)/Court Below: Roberts, C.J., delivered the unanimous Court's opinion.
- Full Text Opinion
Respondent created and subsequently leased to a securities brokerage company a computer program designed to facilitate securities trading. One year later Respondent applied for a patent on a similar program, and, upon receiving the patent, sued the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market, Inc., for patent infringement. The trial court held that Respondent’s patent was invalid under the “on sale bar” provision of 35 U.S.C. §102(b) which states 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 granted summary judgment in favor of NASD and NASDAQ. Respondent appealed, introducing a new theory claiming his lease was for experimental use. The district court held that Respondent had waived the experimental-use theory by not arguing it at trial and the Court of Appeals for the Federal Circuit affirmed.
Subsequently, Respondent brought a malpractice suit against Petitioners (Respondent’s attorneys in the patent case) in Texas state court, alleging that Petitioners’ failure to raise the experimental-use argument was fatal to his case and was the proximate cause of his patent invalidation. The trial court ruled in favor of Petitioners pointing out that Respondent had produced no evidence of an experimental use. On appeal to the state appellate court, Respondent switched tactics and argued that because the case underlying his legal malpractice claim “ar[ose] under” federal patent law, that pursuant to 28 U. S. C. §1338, the state trial court lacked subject matter jurisdiction to hear the case and that its decision should be vacated.
The appellate court relied on the third prong of the four part test from Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308 (2005), which held that federal jurisdiction would be appropriate over state law claims 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. The court found that the “federal law issue [was] insubstantial [and that] the exercise of federal jurisdiction over this state-law malpractice claim would disturb the balance between federal and state judicial responsibilities.” The Supreme Court of Texas reversed holding that Respondent’s claim did involve a “substantial federal issue.”
The Supreme Court reversed in favor of Petitioners, stating that the Supreme Court of Texas had misapplied Grable. The court pointed out that in applying the third prong it is not enough that the federal issue be substantially important to the particular parties, but instead must be substantially important to the federal system as a whole, and that “although the state courts must answer a question of patent law to resolve [Respondent]’s legal malpractice claim, their answer will have no broader effects.”