Federal Jurisdiction — State Legal Malpractice Claim Asserting Fiduciary Duty Theory Dependent on Manual of Patent Examination Procedure and C.F.R. Arises under Patent Law

From Carter v. ALK Holdings, Inc., 2010 U.S. App. LEXIS 10456 (Fed. Cir. May 24, 2010):

On December 13, 2007, the district court *** imposed sanctions of $ 30,356.89 pursuant to Rule 11 against "Plaintiff's counsel." *** The court emphasized that Count VIII "attempted to manufacture a federal cause of action by couching a garden-variety malpractice claim in terms of patent law."***

Count VIII alleged a "breach of fiduciary duty by John Doe I in violation of 35 U.S.C. et seq., 37 CFR et seq., and the Manual of Patent Examination Procedure (MPEP)." ... The district court found that "[t]he gravamen of Count VIII is that Defendant John Doe I breached the fiduciary duty owed to Plaintiff by representing two parties with conflicting interests and by sacrificing the interests of one party for another." ... In evaluating this claim, the district court stressed its concern that the claim constituted an attempt "to manufacture a federal cause of action by couching a garden-variety malpractice claim in terms of patent law." ... In the district court's view, "[h]owever Plaintiff's counsel couches it, no federal cause of action exists for breach of fiduciary duty under federal patent law or the MPEP." ***

Resolution of whether Count VIII is a frivolous federal claim requires us to determine if Count VIII arises under 28 U.S.C. § 1338(a). Section 1338(a) provides that "[t]he district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases." The Supreme Court has instructed that a district court's jurisdiction under § 1338(a) "extend[s] only to those cases 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 the resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808-09, 108 S. Ct. 2166, 100 L. Ed. 2d 811 (1988).

Myers & Kaplan contends that the district court erred by failing to recognize that, even though malpractice is a claim under state law, the claim here is dependent on federal law. This is so, Myers & Kaplan asserts, because the court must measure the scope of John Doe I's fiduciary duty to his clients as a patent practitioner under the Patent Act, the Code of Federal Regulations ("CFR"), and the Manual of Patent Examining Procedure ("MPEP").

The principles discussed in Christianson have been applied in a number of our cases involving state malpractice claims where we have concluded that a state malpractice claim arises under federal law because federal law is a necessary element of the claim. In Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262, 1269 (Fed. Cir. 2007), we held that the question of patent infringement was a necessary element of a legal malpractice claim stemming from prior litigation. In Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281, 1283-84 (Fed. Cir. 2007), we held that the district court had jurisdiction over a state malpractice claim based on alleged errors in patent prosecution because the determination of the scope of a patent claim involved a substantial question of federal patent law.

[Footnote 6] See also Univ. of W. Va Bd. of Trustees v. Vanvoorhies, 278 F.3d 1288, 1295 (Fed. Cir. 2002) (holding that § 1338 jurisdiction exists where breach of duty to assign a patent requires resolution of whether the disputed patent application is a continuation-in-part of a prior application); U.S. Valves, Inc. v. Dray, 212 F.3d 1368, 1372 (Fed. Cir. 2000) (holding that a breach of contract claim requiring resolution of whether all valves sold by licensor were covered by licensed patents provides § 1338 jurisdiction); Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1329 (Fed. Cir. 1998) (holding that a state law claim of injurious falsehood presents a substantial question of patent law where plaintiff had to prove patent invalidity), overruled on other grounds by Midwest Indus., Inc. v. Karavan Trailers, Inc. , 175 F.3d 1356, 1359 (Fed. Cir. 1999).

Similarly, federal law is a necessary element of Count VIII. Count VIII alleged that the patent prosecuting attorney, John Doe I, breached his fiduciary duties under the patent laws and regulations, including the CFR and the MPEP, by representing two inventors with conflicting interests. The standards for practice before the PTO are governed by federal law, as both the Supreme Court and we have previously recognized. Sperry v. Fla. ex rel. Fla. Bar, 373 U.S. 379, 385-86, 83 S. Ct. 1322, 10 L. Ed. 2d 428, 1963 Dec. Comm'r Pat. 211 (1963); Augustine v. Dep't of Veterans Affairs, 429 F.3d 1334, 1340 (Fed. Cir. 2005).

The PTO's standards are codified in the CFR and in the MPEP. The CFR regulates practice before the PTO, and the MPEP incorporates language from the CFR. For example, 37 C.F.R. § 10.66, which is incorporated into Section 404 of the MPEP, limits a patent practitioner's ability to represent parties with conflicting interests. Specifically, 37 C.F.R. § 10.66(a) generally requires a patent practitioner to "decline proffered employment if the exercise of the practitioner's independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the practitioner in representing differing interests." Similarly, 37 C.F.R. § 10.66(b) generally prohibits a practitioner from continuing "multiple employment if the exercise of the practitioner's independent professional judgment in behalf of a client will be or is likely to be adversely affected by the practitioner's representation of another client, or if it would be likely to involve the practitioner in representing differing interests." In addition, 37 C.F.R. § 11.18 governs representations to the PTO by practitioners and non-practitioners. Specifically, 37 C.F.R. § 11.18(b)(1) requires that, when a party files a patent application or other document with the PTO, that person certifies that "[a]ll statements made therein of the party's own knowledge are true, all statements made therein on information and belief are believed to be true." A practitioner who fails to comply with these PTO standards may receive a suspension or disbarment. See 35 U.S.C. § 32.

Here, the determination of John Doe I's compliance with the MPEP and the CFR is a necessary element of Carter's malpractice cause of action because the CFR and the MPEP establish John Doe I's expected fiduciary duties to his clients. Count VIII thus involves a substantial question of federal patent law and is not frivolous.

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