Malpractice Is Malpractice: State Court Jurisdiction for Patent Attorney Professional Negligence Claims

What's the difference between a patent holder who suffers harm from third-party infringement and a patent holder who suffers harm from his own attorney's malpractice?  The latter can pursue his claim in state court, according to a March 9 Business Court decision.

In Revolutionary Concepts, Inc. v. Clements Walker PLLC, the inventor of an "automated audio video messaging and answering system" and the current holder of the patent sued a patent agent, three patent attorneys, and a law firm for malpractice in failing to take certain actions before the United States Patent & Trademark Office ("USPTO").  Specifically, Plaintiffs alleged that Defendants failed to file certain paperwork that cost Plaintiffs their ability to patent their invention in foreign jurisdictions, including Japan and the European Union.  Defendants moved to dismiss for lack of subject matter jurisdiction, arguing that the claims lay within the exclusive jurisdiction of the federal courts. 

Further complicating matters, shortly after filing the Business Court lawsuit, Plaintiffs filed a separate lawsuit in the Western District of North Carolina, Carter v. Ozoeneh (W.D.N.C. No. 3:09-CV-614), to determine the ownership of the patent at issue.  The defendant in the federal lawsuit is an individual who was listed as a co-inventor on a prior patent application for the technology at issue.  Plaintiffs sought to amend the federal complaint to add one of the attorney defendants from the Business Court lawsuit along with Lawyers Mutual for claims of racketeering, maintenance, unfair competition, and tortious interference.  On September 16, 2009, Magistrate Judge David Cayer denied the motion to amend and recommended that the District Judge dismiss other claims against John Doe defendants, but the ownership claims remain in the federal lawsuit.

As for the jurisdictional issue in the Business Court lawsuit, Judge Tennille held that Plaintiffs' malpractice claim was not within the exclusive jurisdiction of the federal courts.  The Court examined cases from several jurisdictions, some of which permitted malpractice claims to proceed in state court and others of which held them to be exclusively federal claims.  The distinction depended on whether federal patent law was an essential element of the Plaintiffs' claims.  In Revolutionary Concepts, it was not:

In this Court’s view, the case sub judice is different.  The Complaint in this case does not raise an issue which requires the determination of the validity, scope or infringement of a United States patent.  Furthermore, the Complaint does not raise an issue requiring determination of what the USPTO would do under certain circumstances, nor does it involve regulation of the conduct of counsel appearing before the patent office.  The Complaint clearly raises issues of what the validity and scope of potential foreign patents would have been and perhaps issues of infringement of potential foreign patents that were allegedly lost.

The loss of the foreign patent rights is based upon a breach of the standard of care, quintessentially a state law claim.  Every malpractice action will require determination of a standard of care.  It is unlikely that any standard of care can be assessed without some reference to compliance with the proper procedures in the USPTO.  This Court does not read the Federal Circuit decisions to hold that any case by a patent owner against its patent counsel will fall within the exclusive jurisdiction of the federal courts.  Where federal jurisdiction will promote uniformity of claim construction, consistency in validity, scope and infringement of U.S. patents, or promote uniform regulation of patent counsel conduct before the USPTO, federal jurisdiction is mandated.  Where the issues involve foreign patent rights and issues of whether a lawyer complied with a standard of care, federal jurisdiction is not mandated.

The Court also noted that Plaintiffs voluntarily dismissed a claim for breach of contract in the prosecution of the patent before the USPTO.  In contrast to the foreign registrability issues of the malpractice claim, the breach of contract claim would have implicated federal law enough to confer exclusive federal jurisdiction over the lawsuit.  After the dismissal of that claim, however, whatever exclusivity may have existed previously no longer did.

 

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