Rising Confusion About "arising Under" Jurisdiction in Patent Cases

• Publication year: 2019

Rising Confusion About "Arising Under" Jurisdiction in Patent Cases

Paul R. Gugliuzza

RISING CONFUSION ABOUT "ARISING UNDER" JURISDICTION IN PATENT CASES

Paul R. Gugliuzza^*

Abstract

By statute, all cases "arising under" patent law must be heard exclusively by the federal courts (not state courts) and, on appeal, by the Federal Circuit (not the twelve regional circuits). But not all cases involving patents "arise under" patent law. As recently as 2013, the Supreme Court ruled that the mere need to apply patent law in, for example, a malpractice case involving a patent lawyer, is insufficient to trigger exclusive jurisdiction. Rather, the Court held, for a case that does not involve claims of patent infringement to arise under patent law, the patent issue must be "important ... to the federal system as a whole."

Despite the Supreme Court's holding that "fact-bound and situation-specific" patent issues do not warrant exclusive jurisdiction outside of infringement cases, the lower courts' precedent in this area remains unsettled. The Federal Circuit has, at times, tried to resurrect its older case law extending exclusive jurisdiction to practically any patent-related tort, contract, or antitrust case. But, in other decisions, the Federal Circuit has constricted jurisdiction so dramatically that the Fifth Circuit recently refused to accept a case transferred to it by the Federal Circuit, deriding the Federal Circuit's jurisdictional ruling as not just wrong but "implausible." All of this uncertainty incentivizes costly and wasteful procedural maneuvering in a field where litigation is already expensive.

This Article is the first to chronicle the rising confusion about the scope of the federal district courts' and the Federal Circuit's exclusive jurisdiction over cases arising under patent law. The Article critiques the case law emerging in the lower federal courts and proposes a jurisdictional rule that is both clear and consistent with Supreme Court precedent: For a case that does not involve claims of patent infringement to nevertheless arise under patent law, it must

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present a dispute about the content of federal patent law or a question about the interpretation or validity of the federal patent statute; questions about the validity or scope of a particular patent are not sufficient.

In arguing for this new approach, the Article also engages broader questions about the jurisdictional structure of patent litigation. Among other things, it suggests that the courts or Congress should rethink longstanding doctrine that makes the test for Federal Circuit appellate jurisdiction identical to the test for exclusive original jurisdiction in the district courts. Exclusive district court jurisdiction entirely precludes state courts from shaping their own state's law, so federal courts should be hesitant to exercise jurisdiction over a tort or contract claim simply because there is a patent lurking in the background. But when a patent-related case is properly in federal district court, the Federal Circuit's expertise in patent law and ability to provide uniformity counsel in favor of giving the court a broad scope of appellate jurisdiction.

Introduction.............................................................................................461

I. The Federal Courts' Subject Matter Jurisdiction: Over Patent Cases and Otherwise.......................................................469

A. "Arising Under" Jurisdiction: The Basics ............................... 470
B. "Arising Under" Jurisdiction in Patent Cases......................... 475

II. Rising Confusion About "Arising Under" Jurisdiction in Patent Cases...................................................................................477

A. Undermining the Supreme Court.............................................. 477
B. Confusion and Its Consequences.............................................. 485
C. Getting Jurisdiction Right, Sometimes ..................................... 498

III. Reducing Confusion About "Arising Under" Jurisdiction in Patent Cases..............................................................................499

A. A Clearer Rule .......................................................................... 500

1. Only Questions of Patent Law Trigger "Arising Under" Jurisdiction Over Non-Patent Claims ................................ 500
2. Objections and Responses .................................................. 504

B. Delinking District Court and Federal Circuit Jurisdiction ...... 510
C. The Panel Dependency of Federal Circuit Jurisdictional Rulings...................................................................................... 514

Conclusion.................................................................................................518

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Introduction

The federal district courts have exclusive subject matter jurisdiction over cases "arising under" patent law.¹ The U.S. Court of Appeals for the Federal Circuit has exclusive appellate jurisdiction over those same cases.² At first blush, this regime seems simple: State courts may not hear patent cases, only federal courts can. And when there is an appeal in a patent case, it goes to the Federal Circuit, not one of the twelve regional circuits. Yet subject matter jurisdiction in patent cases is, surprisingly, one of the thorniest issues in all of civil procedure.

In a 2013 opinion holding that legal malpractice claims against patent attorneys do not fall within the federal courts' exclusive jurisdiction, Chief Justice Roberts noted that, in deciding the jurisdictional issue, "we do not paint on a blank canvas."³ "Unfortunately," he continued, "the canvas looks like one that Jackson Pollock got to first."⁴ In an earlier Supreme Court case on the scope of the Federal Circuit's appellate jurisdiction, the Court had to step in to stop what it called a "game of jurisdictional ping-pong" in which the dispute had been transferred from the Federal Circuit to the Seventh Circuit and back again to the Federal Circuit,⁵ with each court "adamantly disavow[ing] jurisdiction" and each court "insist[ing] that the other's jurisdictional decision [was] 'clearly wrong.'"⁶

Despite frequent Supreme Court decisions on patent jurisdiction and recent congressional amendments to the relevant statutes,⁷ confusion persists. Indeed, as the title of this Article suggests,⁸ it seems to be getting worse. In February 2019, in a decision that attracted widespread attention from both patent lawyers

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and scholars, the Fifth Circuit refused to decide an appeal that had been transferred to it by the Federal Circuit, deriding the Federal Circuit's ruling declining jurisdiction as not just wrong but "implausible" and transferring the case back to the Federal Circuit.⁹ A month later, the Federal Circuit, despite numerous "flaws" it identified in the Fifth Circuit's transfer opinion, reluctantly accepted jurisdiction, seemingly ending this particular match of jurisdictional table tennis.¹⁰ But the harsh words the Fifth Circuit and Federal Circuit traded about each other's understanding of the relevant jurisdictional doctrine—as well as clear and persistent conflicts in the Federal Circuit's own jurisdictional precedent¹¹ —suggests that the Supreme Court, or perhaps the Federal Circuit en banc, will eventually have to step in to alleviate the rising confusion over arising under jurisdiction in patent cases.¹²

To be sure, in many patent disputes, subject matter jurisdiction is not seriously contested. A case in which a plaintiff asserts a claim of patent infringement, for example, plainly arises under patent law.¹³ The same goes for claims seeking declaratory judgments that a patent is invalid or not infringed.¹⁴ Infringement and declaratory judgment claims are actually created by federal

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patent law,¹⁵ so there is no question that cases containing those claims fall within the federal courts' and the Federal Circuit's exclusive jurisdiction.¹⁶ But confusion occurs because many cases that do not include claims for patent infringement nevertheless implicate patent law and therefore potentially "arise under" patent law for jurisdictional purposes.¹⁷ For example, plaintiffs often base antitrust claims on patent-related conduct.¹⁸ Though patent-related antitrust claims are usually (but not always) asserted under federal statutes such as the Sherman Act, claims created by state law can raise patent issues, too.¹⁹ Common examples include suits for breach of a patent licensing contract,²⁰ tort claims based on false allegations of patent infringement,²¹ and malpractice claims against lawyers who litigated a prior infringement dispute or who prosecuted a patent.²²

Under current law, it is often unclear whether these patent-related cases "arise under" patent law for the purpose of triggering the federal district courts' and the Federal Circuit's exclusive jurisdiction. For several decades, the Federal Circuit held that cases involving claims created by state law or by a federal law besides the Patent Act nevertheless arose under patent law any time the case required the court to apply patent law.²³ Almost all claims for breach of a patent license agreement met that lenient standard because those cases usually focus on questions about patent scope (which determines the extent of the defendant's obligation to pay royalties) and validity (because a ruling of invalidity can nullify the defendant's obligation to pay any royalties at all). The same goes for most tort claims involving patent enforcement conduct because they usually

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hinge on whether a patentee's allegations of infringement were accurate. Similarly, patent-related malpractice claims ask what would have happened in patent infringement litigation or patent prosecution but for the attorney's alleged negligence—a question that plainly requires the court to apply federal patent law.

In a prior article,²⁴ I argued that...