Malpractice claim regarding patent prosecution and litigation sufficient for federal jurisdiction

October 15, 2007
Post by Blog Staff

In a decision today, the Federal Circuit affirmed a district court decision finding that where patent infringement is a necessary element of a malpractice claim arising from alleged patent prosecution errors as well as the mishandling of prior patent litigation, federal question subject matter jurisdiction exists.More detail of Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. after the jump.

The case, which arose as a legal malpractice case between non-diverse parties, was brought by Air Measurement Technologies ("AMT") in state court in 2003 and then removed by Akin Gump Straus Hauer & Feld, L.L.P. ("Akin Gump"), and Branscomb P.C. to federal court. That same year AMT filed a motion to remand which the district court denied on the basis that AMT's suit "necessarily depends on resolution of a substantial question of federal patent law." Interestingly, a little more than three years later, the parties changed posture, with the defendants seeking to remand the case and AMT opposing. The district court once again denied the motion to remand, but certified the issue for interlocutory appeal thereby allowing this non-final decision to be appealed to the Federal Circuit.Exercising its discretion, the Federal Circuit heard the appeal which presents an issue of first impression for the court. In making the determination of whether or not federal question jurisdiction exists, the court was limited to an analysis of the AMT's well-pleaded complaint, and could not consider issues raised as defenses or counterclaims. The court held that AMT's malpractice claim required resolution of a substantial question of patent law as the complaint revealed approximately seven allegations of errors in the context of patent prosecution and litigation including: (1) failure to file the initial patent within the one year "on sale bar"; (2) inequitable conduct based on failure to present two prior patents and other facts during prosecution; and (3) failure to inform AMT of adequately of the prior litigants defenses of on sale bar and inequitable conduct forcing AMT to settle prior litigations far below the fair market value of the patents. The court held that under the so called "case within a case" requirement of the proximate cause element of malpractice, in order to prevail on its malpractice claims, AMT must establish that they would have prevailed in the prior litigation but for the defendant's negligence that comprised the litigation. The district court will thus have to adjudicate, hypothetically, the merits of the infringement case. Because patent infringement is a "necessary element" of AMT's malpractice claim, it presents a substantial question of patent law conferring federal subject matter jurisdiction. Accordingly, the district court's denial of remand was affirmed.To read the full decision in Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., click here.

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