Air Measurement Tech v. Akin Gump Strauss Hauer

• Decision Date: 15 October 2007
• Docket Number: No. 2007-1035.,2007-1035.
• Citation: 504 F.3d 1262
• Parties: AIR MEASUREMENT TECHNOLOGIES, INC., North-South Corporation, and Louis Herbert Stumberg, Plaintiffs-Appellees, v. AKIN GUMP STRAUSS HAUER & FELD, L.L.P., Branscomb, P.C, (also known as Mathews & Branscomb, P.C.), Defendants-Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

504 F.3d 1262

AIR MEASUREMENT TECHNOLOGIES, INC., North-South Corporation, and Louis Herbert Stumberg, Plaintiffs-Appellees, v. AKIN GUMP STRAUSS HAUER & FELD, L.L.P., Branscomb, P.C, (also known as Mathews & Branscomb, P.C.), Defendants-Appellants.

No. 2007-1035.

United States Court of Appeals, Federal Circuit.

October 15, 2007.

Paul V. Storm, Storm LLP, of Dallas, TX, argued for plaintiffs-appellees. With him on the brief were Robin L. Barnes and Chris J. Kling. Of counsel was John W. MacPete. Of counsel on the brief were Harrie Samaras, RatnerPrestia P.C., of Valley Forge, PA; Bernard Wm. Fischman, The Ariel House, of San Antonio, TX; and Richard Tinsman, Tinsman & Sciano, Inc., of San Antonio, TX.

E. Joshua Rosenkranz, Heller Ehrman LLP, of New York, NY, argued for defendants-appellants. With him on the brief was Randy J. Kozel.

Before MICHEL, Chief Judge, LOURIE and RADER, Circuit Judges.

MICHEL, Chief Judge.

This is a legal malpractice case between non-diverse parties based on alleged errors by counsel in patent prosecution and patent litigation. The case was filed in state court and then removed to federal court. Akin Gump Strauss Hauer & Feld, L.L.P. and Branscomb, P.C. (collectively "Akin Gump") appeal the interlocutory decision of the United States District Court for the Western District of Texas denying their motion to remand Air Measurement Technologies, Inc., North-South Corporation, and Louis Herbert Stumberg's (collectively "AMT's") lawsuit, which motion asserted want of subject matter jurisdiction under federal patent law, 28 U.S.C. § 1338. Air Measurement Techs., Inc. v. Akin Gump, No. SA-03-CA-0541 (W.D.Tex. Sept. 29, 2006). Because we conclude that the patent infringement question is a necessary element of AMT's malpractice claim and raises a substantial, contested question of patent law that Congress intended for resolution in federal court, we affirm.

I

AMT alleged the following facts in their complaint, which we accept as true for purposes of this appeal. Stumberg and his partner James A. Fulton (now deceased and not a party to the action) developed technology for a safety device for firemen and other emergency personnel who require supplemental oxygen. Integrated into self-contained breathing apparatuses ("SCBA"), the safety device calculates the user's remaining airtime, measures temperature, and computes the amount of time the user can remain safely in a fire environment or other hazardous situation. Notice of Removal ("Complaint") § IV ¶ 1. The device also contains an alarm that sounds if the wearer is motionless for a particular period of time. Id. Stumberg and Fulton formed Air Measurement Technologies, Inc., and North-South Corporation to develop, license, and market the safety device. In 1989, Stumberg engaged patent attorney Gary Hamilton¹ to secure patent protection for the safety device and related technology.

With Hamilton's knowledge, Stumberg and Fulton began marketing a prototype of their invention in 1989. Hamilton filed the first patent application on August 6, 1991, which issued as U.S. Patent No. 5,157,378 ("'378 patent") on October 20, 1992 and is entitled "Integrated Firefighter Safety Monitoring Alarm System." Hamilton also prosecuted continuation applications that issued as U.S. Patent Nos. 5,689,234 ("'234 patent"); 5,910,771 ("'771 patent"); 6,201,475; and 6,310,552. During the course of the patent prosecution, Hamilton was associated with Akin Gump and now practices law with Hamilton & Terrile, L.L.P.

A. Prior Litigation

AMT filed six infringement suits in the Western District of Texas ("prior litigation") against SCBA manufacturers.² Hamilton allegedly belatedly filed the first patent suit in 2000, and Stumberg retained new counsel in 2002 for the pending patent litigation. All six suits settled between 2001 and 2003 for a total of approximately $10 million without a judicial determination of infringement, invalidity, or unenforceability of AMT's patents.

During the course of the prior litigation, AMT, with the help of new counsel, discovered various errors Hamilton allegedly made during patent prosecution and patent litigation. The alleged errors are that Hamilton (1) failed to file the initial patent application within the one year `on sale bar' of 35 U.S.C. § 102(b); (2) failed to disclose two prior patents and other facts during the prosecution of the patent applications; (3) failed to file in a timely fashion the application that resulted in the '771 patent, which contains the broadest claims to the invention; (4) miscalculated the settlement damages in the Draeger prior litigation; (5) failed to inform AMT of his mistakes despite his fiduciary duty to do so; (6) failed to inform AMT adequately of the existence of the prior litigant's defenses of on sale bar and inequitable conduct; and (7) made misrepresentations to AMT. Compl. § IV ¶¶ 5-8, 11.

B. Current Litigation

AMT filed suit against Hamilton³ and several law firms in a Texas state court on May 28, 2003, for legal malpractice, negligence, negligent misrepresentation, and breach of fiduciary duties — all state law claims. AMT alleges that Akin Gump's errors forced them to settle the prior litigation far below the fair market value⁴ of the patents⁵ because the prior litigation defendants were, inter alia, able to raise as defenses invalidity (e.g., on sale bar) and unenforceability (due to inequitable conduct) that would not have existed without attorney error.

Akin Gump removed the case to the Western District of Texas on June 27, 2003, under 28 U.S.C. § 1338, arguing that the resolution of AMT's suit requires the resolution of a substantial question of patent law. Akin Gump counterclaimed for a declaration of invalidity of the patents on various grounds and a declaration that the patents are not, by reason of attorney conduct, unenforceable based on inequitable conduct or invalid based on § 102(b).

AMT filed a motion to remand on July 18, 2003, which the district court denied on September 5, 2003, on the ground that AMT's suit "`necessarily depends on resolution of a substantial question of federal patent law,'" because, in order to prevail, AMT "must establish that their infringement claims were otherwise valid, but that Hamilton's negligence afforded the patent defendants certain defenses under patent law." Air Measurement Techs., Inc. v. Hamilton, No. SA-03-CA-0541, 2003 WL 22143276, at *3, 2003 U.S. Dist. LEXIS 16391, at *13 (W.D.Tex. Sept. 5, 2003) (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988)).

On June 23, 2006, i.e., a little over three years after the removal of the case, the parties changed postures. Branscomb, P.C.⁶ moved to remand the case, asserting that § 1338 subject matter jurisdiction was lacking, and AMT opposed. The district court denied the motion to remand on the ground that it had jurisdiction under § 1338. In so holding, the district court determined that Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), did not veto its jurisdiction and certified the following issue for interlocutory appeal pursuant to 28 U.S.C. § 1292(b):

[w]hether a Texas state-law legal malpractice claim arising out of underlying patent prosecution and patent litigation necessarily raises a question of federal patent law, actually disputed and substantial, that a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.

Air Measurement Techs., Inc. v. Hamilton, No. SA-03-CA-0541, slip op. at 9 (W.D.Tex. Sept. 29, 2006). On October 13, 2006, Akin Gump petitioned for permission to appeal under 28 U.S.C. § 1292(b). We exercised our discretion and granted the petition on November 2, 2006. Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 206 Fed. Appx. 980 (Fed.Cir.2006) (non precedential).

II

This appeal presents an issue of first impression in this court. The issue concerns whether, under the circumstances of this case, the district court properly exercised § 1338 jurisdiction over AMT's legal malpractice suit.⁷ We review the district court's jurisdictional determinations without deference. Bd. of Regents v. Nippon Tel. & Tel. Corp., 414 F.3d 1358, 1362 (Fed.Cir.2005). Where, as here, there is no diversity of citizenship, there must be federal question jurisdiction. See generally 28 U.S.C. §§ 1331, 1332, 1338 (providing district courts with subject matter jurisdiction over diversity and federal question cases). AMT asserts that jurisdiction is proper under § 1338, which provides district courts with exclusive federal jurisdiction over "any civil action arising under any Act of Congress relating to patents." 28 U.S.C. § 1338(a) ("The 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.").

In Christianson, the United States Supreme Court set forth a two-part test for determining whether federal courts have exclusive jurisdiction over a case pursuant to 28 U.S.C. § 1338(a). 486 U.S. at 809, 108 S.Ct. 2166. Section 1338 jurisdiction extends to any case "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 resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims." Id. The parties to this appeal concede that the first part of the Christianson test is inapplicable because the malpractice cause of action asserted by AMT in their complaint is created by state law. Therefore, our analysis concerns whether patent law is a...