02/20/15

Neurorepair, Inc. v. The Nath Law Group: Jurisdiction over Patent Prosecution Malpractice


Category: Civil Procedure  
 
 
 
By: Jesus Hernandez, Blog Editor/Contributor 
 
TitleNeurorepair, Inc. v. The Nath Law Group, No. 2013-1073 (Fed Cir. Jan. 15, 2015).
IssueThe question before this court is whether a California state court malpractice case involving patent law representation was properly removed to a federal court.
Neurorepair, Inc., at *2.
HoldingBased on Gunn v. Minton, this court vacates and remands the district court’s judgments with instructions to remand the case to California state court [because: A. NeuroRepair’s suit would not “necessarily raise” issues of patent law; B. At least one patent law issue is actually disputed; C. The patent issue in NeuroRepair’s suit is not “substantial”; and D. if cases such as NeuroRepair’s were heard in federal court, it would disrupt the federal-state balance].
Id. at *2 (text added).
 
 

Procedural HistoryPlaintiff-appellant NeuroRepair, Inc. (“NeuroRepair”) appeals from a final judgment of the United States Dis- trict Court for the Southern District of California granting partial summary judgment in favor of defendants- appellees The Nath Law Group and Robert P. Cogan (collectively, “Defendants”) on July 12, 2011, as well as the district court’s orders (1) denying NeuroRepair’s motion for reconsideration on August 19, 2011, (2) granting Defendants’ motion in limine with respect to lost licensing opportunity of March 12, 2012, (3) entering judgment on September 26, 2012, in favor of Defendants, and (4) denying NeuroRepair’s motion for reconsideration on July 1, 2013, and all related post-judgment costs.
Neurorepair, Inc., at *2.

  

Legal Reasoning (WALLACH, Chen, Hughes)
Background
In December 2005, NeuroRepair retained Robert Cogan, an attorney with The Nath Law Group, to assist in the prosecution of certain patent applications. Over time, NeuroRepair became increasingly dissatisfied with what it viewed as slow progress and excessive legal fees, and in August 2007 NeuroRepair requested that Mr. Cogan transfer the relevant files to another law firm, Welsh & Katz, to continue prosecution before the United States Patent and Trademark Office (“USPTO”). In September 2007, Defendants filed a request to withdraw from representation of NeuroRepair before the USPTO, but continued to assist NeuroRepair with other matters.
Neurorepair, Inc., at *3.
NeuroRepair filed suit against Defendants in the San Diego Superior Court on March 20, 2009, alleging professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise. Defendants removed the case to federal district court on May 7, 2009, on the ground that it was “a civil action relating to patents.” J.A. 55. After the district court entered judgment in Defendants’ favor on September 26, 2012, NeuroRepair timely filed this appeal challenging the district court’s subject matter jurisdiction.
Id. at *3.
Analysis
Jurisdiction over federal casesAt issue in this case is whether the district court would have had original jurisdiction under 28 U.S.C. § 1338,1 which gives federal district courts original jurisdiction over “any civil action arising under any Act of Congress relating to patents.” 28 U.S.C. § 1338(a).2 In Christianson v. Colt Industries Operating Corp., the Supreme Court held a claim may “aris[e] under” the patent laws even where patent law did not create the cause of action, provided the “well-pleaded complaint establishes . . . that the plaintiff’s right to relief necessari- ly depends on resolution of a substantial question of federal patent law.” 486 U.S. 800, 808–09 (1988).
Neurorepair, Inc., at *4-5.
Gunn decision; Articulation of four step test
In its recent decision in Gunn v. Minton, the Court made clear that state law legal malpractice claims will “rarely, if ever, arise under federal patent law,” even if they require resolution of a substantive question of federal patent law. 133 S. Ct. at 1065. The Court reasoned that while such claims “may necessarily raise disputed questions of patent law,” those questions are “not substantial in the relevant sense.” Id. at 1065, 1066. The Court emphasized that “[b]ecause of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense” and that “[n]o matter how the state courts resolve that hypothetical ‘case within a case,’ it will not change the real-world result of the prior federal patent litigation.” Id. at 1066–67.
Id. at *5.
The Court in Gunn explained that its earlier decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), is properly viewed as setting forth a four-part test to determine when federal jurisdiction over a state law claim will lie. Gunn, 133 S. Ct. at 1065. Under this test, a cause of action created by state law may nevertheless “arise under” federal patent law within the meaning of 28 U.S.C. § 1338(a) if it involves a patent law issue that 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.” Id. Although the events in the present matter transpired prior to the decision in Gunn, the Supreme Court’s interpretation of federal civil law “must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate [the Supreme Court’s] announcement of the rule.” Harper v. Va. Dep’t of Taxation, 509 U.S. 86, 97 (1993).
Id. at *6.
A. NeuroRepair’s suit would not “necessarily raise” issues of patent lawNeuroRepair’s suit fails Gunn’s jurisdictional test. An issue of patent law is “necessarily raised” if “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.” […] NeuroRepair’s claims of professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise are each created by state, not federal, law. […] because NeuroRepair’s complaint sets forth multiple bases in support of its allegation of professional negligence, a court could find NeuroRepair is entitled to relief based on this allegation without ever reaching a patent law issue.
Id. at *6-7.
B. At least one patent law issue is actually disputedAlthough a court would not necessarily be required to reach the patent law issues that underlie the causes of action alleged by NeuroRepair, at least one patent law issue is actually disputed by the parties. NeuroRepair claims Defendants’ wrongdoing hindered its ability to timely obtain patents of the same scope it would have obtained but for Defendants’ delay and mishandling.
Id. at *8.
C. The patent issue in NeuroRepair’s suit is not “substantial”
The Supreme Court has described three nonexclusive factors that may help to inform the substantiality inquiry, none of which is necessarily controlling. See MDS (Can.) Inc. v. Rad Source Techs., Inc., 720 F.3d 833, 842 (11th Cir. 2013); see also Mikulski v. Centerior Energy Corp., 501 F.3d 555, 570 (6th Cir. 2007). First, a substantial federal issue is more likely to be present if a “pure issue of [federal] law” is “dispositive of the case.” Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 700 (2006). Second, a substantial federal issue is more likely to be present if the court’s resolution of the issue will control “numerous other cases.” Id. Third, a substantial federal issue is more likely to be present if “[t]he Government . . . has a direct interest in the availability of a federal forum to vindicate its own administrative ac- tion.” Grable, 545 U.S. at 315.
Id. at *9.
i. No pure issue of federal law is dispositivei. No pure issue of federal law is dispositive
NeuroRepair asserts Defendants’ wrongdoing caused harm by, among other things, hindering its ability both to pursue the patent applications in a timely and effective manner and to obtain patents of the same scope it would have obtained but for Defendants’ delay and mishandling. Although resolution of these assertions could involve the application of substantive patent law principles, it is not clear from the record that any particular substantive patent law issue or issues would need to be resolved. Both claim scope and timing of issuance are likely to depend primarily 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.
ii. The court’s decision is unlikely to control numerous other casesIf a federal court finds a defendant liable for infring- ing a valid patent notwithstanding a prior state court determination of invalidity, it is self-evident the state court decision did not “control” the later federal court case. Moreover, to the extent a state court must address issues of substantive patent law, the court is likely to focus on whether the invention was patentable as initially claimed, as reflected in the assertions of Appellees them- selves. See id. at 26 (arguing “the claims as initially presented were not patentable”) (emphasis added). Any determination of validity of claims that ultimately did not issue constitutes a hypothetical matter that would not affect the scope of any live patent. […] If the state court action would neither affect the scope of any live patent nor require resolution of a novel issue of patent law, it is unclear how it could control numerous other cases or impact the federal system as a whole.
Id. at *10-11.
iii. The government does not have a direct interest in the availability of a federal forum to vindicate
its own administrative action
Appellees assert state court jurisdiction “would be a recipe for inconsistency,” Appellees’ Br. 28, and “[i]f state courts start ruling on issues of this nature, subsequent patent prosecutions and litigation arising out of those patents will be difficult, to say the least,” id. at 26. These vague assertions, which do not contain citations to authority, do not convincingly establish the USPTO or any other government agency has a “direct interest” in the outcome of this dispute, which is between private parties and relates to alleged legal malpractice and other state law claims. Grable, 545 U.S. at 315.
Id. at *12-13.
D. If cases such as NeuroRepair’s were heard in federal court, it would disrupt the federal-state
balance
In sum, federal jurisdiction is lacking here under Gunn because no federal issue is necessarily raised, because any federal issues raised are not substantial in the relevant sense, and 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, disrupting the federal-state balance approved by Congress.
Id. at *13.
Conclusion
For these reasons, this court VACATES AND REMANDS TO THE DISTRICT COURT WITH INSTRUCTIONS TO REMAND THE CASE TO CALIFORNIA STATE COURT
Neurorepair, Inc., at *15.

 

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