IP News

The U.S. Supreme Court disagreed with the Texas Supreme Court's reliance on Air Measurement and Immunocept, and, instead, applied its test from Grable, concluding that Minton's legal malpractice claim is not subject to federal jurisdiction, because it merely involved resolution of a hypothetical patent question. Gunn, 2013 WL 610193, at 5-6. Under Grable, “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Id. at 6. While the Supreme Court found that Minton's legal malpractice claim met the first two prongs of Grable, it found that the claim failed under the third and fourth prongs, because the claim only involved a hypothetical patent question (i.e., resolution of Minton's “experimental use” argument could not change the fact that Minton's patent is invalid) and resolution of a hypothetical patent question is not sufficient justification to establish federal jurisdiction over a state legal malpractice claim. Id. at 6-10.

While the Supreme Court did not overrule the Federal Circuit's precedent in Air Measurement or Immunocept, it seems to have greatly limited federal jurisdiction over legal malpractice claims as well as other state law claims (e.g., contract) arising out of patent infringement lawsuits. Furthermore, the Federal Circuit has already transferred an appeal of a legal malpractice claim to the Fifth Circuit (since the Federal Circuit can only determine whether it has jurisdiction under the Patent Act, a transfer is presumably necessary to determine whether diversity jurisdiction exists under regional circuit law). Sanders v. Flanders, No. 2012-1394 (Fed. Cir. Mar. 1, 2013).

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A New, Tougher SHIELD Act Is Introduced into the House

On Feb. 27, 2013, Representatives Peter DeFazio (D-OR) and Jason Chaffetz (R-UT) introduced H.R. 845, Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (“SHIELD Act of 2013″). The SHIELD Act of 2013 is a revised version of H.R. 6245 (“SHIELD Act of 2012″), which was introduced last August.

The purpose of both proposed SHIELD Acts is to deter non-practicing entities (“NPEs”) from bringing baseless patent litigations by shifting the full costs of litigation to unsuccessful NPEs by inserting 35 U.S.C. ' 285A into the Patent Act. Section 285A of the SHIELD Act of 2012 would have permitted courts to “award the recovery of full costs” of litigation to successful accused infringers if the patentee “did not have a reasonable likelihood of succeeding.” H.R. 6245, 112th Cong. (2d Sess. 2012). However, some believed that the proposed SHIELD Act of 2012 did not go far enough in deterring abusive patent litigation practices, because it was limited to “computer hardware [and] software patent[s]” and provided no effective recourse against judgment-proof patentees. And, the SHIELD Act of 2012 did not make it out of the House Judiciary Committee.

To address these concerns, the proposed SHIELD Act of 2013 revised the 2012 version of the bill by, inter alia: 1) removing the “computer hardware [and] software patent[s]” and “ reasonable likelihood of succeeding” limitations, 2) requiring courts, rather than permitting courts, to award the recovery of full costs, 3) enumerating exceptions to the bill that are designed to limit its application to certain NPEs (the bill specifically excludes original inventors or assignees, entities that practice the patent, and universities and related organizations), and 4) adding a bonding provision that would give accused infringers the right to require certain NPEs “to post a bond in an amount determined by the court to cover the recovery of full costs” and courts may require that such bond be posted before any scheduling order is issued. H.R. 845, 113th Cong. (1st Sess. 2013).

While the removal of the “computer hardware [and] software patent[s]” limitation broadens the reach of the SHIELD Act of 2013 substantially, the other amendments to the bill could fundamentally change the business of patent litigation. By removing the “ reasonable likelihood of succeeding” limitation and making the award of full costs mandatory, Congress would not only be: 1) mandating that any unsuccessful NPE (which does not meet one of the enumerated exceptions) has to pay the accused infringer's full costs of litigation, but also 2) that it would have to be prepared to pay such costs at the start of litigation.

The SHIELD Act of 2013 is pending before the House Judiciary Committee.

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U.S. Senate Confirms Nomination of Richard Taranto to the Federal Circuit

On March 11, 2013, the Senate confirmed in a 91-0 vote, the nomination of Richard Taranto as a judge for the Federal Circuit. Taranto, formerly of Farr & Taranto, will be filling the judgeship vacated by former Chief Justice Paul Michel, who retired in 2010.

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Yankees Successfully Oppose BASEBALLS EVIL EMPIRE

On Feb. 8, 2013, the Trademark Trial and Appeal Board (“TTAB”) sustained the New York Yankees' opposition to Evil Enterprises, Inc.'s registration of the mark “BASEBALLS EVIL EMPIRE,” on the grounds that: 1) there would be a likelihood of confusion under ' 2(d) of the Trademark Act, and 2) the mark falsely suggests a connection with the Yankees under ' 2(a) of the Trademark Act. N.Y. Yankees P'ship v. Evil Enters., Inc., Opp. No. 91192764, slip op. at 25 (Feb. 8, 2013). The TTAB rejected the Yankees' claim that the mark is disparaging under ' 2(a) of the Trademark Act. Id.

Since 2002, when a Boston Red Sox's (a primary rival of the Yankees) executive referred to the Yankees as baseball's “Evil Empire,” the term has been used by “the media, Yankees' fans, and detractors as a reference to the Yankees.” Id. at 6. Evil Enterprises, in 2008, filed the application for the mark with the intention of using it to sell clothing to Yankees' fans. Id. at 5. Meanwhile, the Yankees have never attempted to register or use the term “Evil Empire.” Id. at 6.

The TTAB concluded that a likelihood of confusion existed, because “Evil Empire” is synonymous with the Yankees. Id. at 19-20. Moreover, the TTAB rejected Evil Enterprises' parody claims because the mark would nevertheless be confusingly similar. Id. at 20. Furthermore, the TTAB concluded that the mark falsely suggests a connection with the Yankees, because consumers “would be likely to assume that these goods are connected with the Yankees baseball club when there is no such connection.” Id. at 22. However, while still sustaining the opposition, the TTAB concluded that the mark was not disparaging to the Yankees, because the Yankees and their fans have embraced being baseball's “Evil Empire.” Id. at 24-25.

Howard J. Shire is a partner and Bradley Roush is an associate at Kenyon & Kenyon LLP.

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Federal Courts Do Not Have Exclusive Jurisdiction over Legal Malpractice Claims Arising Out of Patent Infringement Lawsuits

On Feb. 20, 2013, the Supreme Court issued a unanimous opinion in Gunn v. Minton, No. 11-1118, reversing the Texas Supreme Court's ruling that federal courts have exclusive jurisdiction over legal malpractice claims that arise out of patent infringement lawsuits. Gunn had represented Minton, a patentee, in an infringement lawsuit in the Eastern District of Texas, where Minton's patent was declared invalid on summary judgment under the “on sale” bar of 35 U.S.C. ' 102(b), due to a lease that was agreed to more than one year prior to the filing date of Minton's patent application. Gunn v. Minton, No. 2011-1118, 2013 WL 610193, at *3 (Feb. 20, 2013). After the District Court had ruled Minton's patent invalid, Minton moved for reconsideration on the grounds that the leasing arrangement fell within the “experimental use” exception of ' 102(b). Id. The District Court denied the motion for reconsideration, finding that Minton had waived the “experimental use” argument by failing to timely raise it. Id. The Federal Circuit subsequently affirmed the District Court's rulings. Id.

Thereafter, believing that the patent would not have been ruled invalid if his former attorneys had raised the “experimental use” argument, Minton brought a legal malpractice claim in Texas state court. Id. At trial, Minton's former attorneys successfully argued that Minton's patent infringement claims would have failed even if the “experimental use” argument had not been waived. Id. On appeal to the Texas Court of Appeals, Minton argued that the trial court's ruling should be dismissed, because federal courts have exclusive jurisdiction over patent malpractice claims. The Texas Court of Appeals applied the U.S. Supreme Court's test from Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg. , 545 U.S. 308, 314 (2005) and rejected this argument in affirming the trial court. Gunn, 2013 WL 610193, at 4. However, the Texas Supreme Court, relying heavily on the Federal Circuit's precedents in Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. , 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, LLC v. Fulbright & Jaworski, LLP , 504 F.3d 1281 (Fed. Cir. 2007), reversed the Court of Appeals, finding that the success of Minton's legal malpractice claim relied upon a question of federal patent law. Gunn, 2013 WL 610193, at 4.

The U.S. Supreme Court disagreed with the Texas Supreme Court's reliance on Air Measurement and Immunocept, and, instead, applied its test from Grable, concluding that Minton's legal malpractice claim is not subject to federal jurisdiction, because it merely involved resolution of a hypothetical patent question. Gunn, 2013 WL 610193, at 5-6. Under Grable, “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Id. at 6. While the Supreme Court found that Minton's legal malpractice claim met the first two prongs of Grable, it found that the claim failed under the third and fourth prongs, because the claim only involved a hypothetical patent question (i.e., resolution of Minton's “experimental use” argument could not change the fact that Minton's patent is invalid) and resolution of a hypothetical patent question is not sufficient justification to establish federal jurisdiction over a state legal malpractice claim. Id. at 6-10.

While the Supreme Court did not overrule the Federal Circuit's precedent in Air Measurement or Immunocept, it seems to have greatly limited federal jurisdiction over legal malpractice claims as well as other state law claims (e.g., contract) arising out of patent infringement lawsuits. Furthermore, the Federal Circuit has already transferred an appeal of a legal malpractice claim to the Fifth Circuit (since the Federal Circuit can only determine whether it has jurisdiction under the Patent Act, a transfer is presumably necessary to determine whether diversity jurisdiction exists under regional circuit law). Sanders v. Flanders, No. 2012-1394 (Fed. Cir. Mar. 1, 2013).

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A New, Tougher SHIELD Act Is Introduced into the House

On Feb. 27, 2013, Representatives Peter DeFazio (D-OR) and Jason Chaffetz (R-UT) introduced H.R. 845, Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013 (“SHIELD Act of 2013″). The SHIELD Act of 2013 is a revised version of H.R. 6245 (“SHIELD Act of 2012″), which was introduced last August.

The purpose of both proposed SHIELD Acts is to deter non-practicing entities (“NPEs”) from bringing baseless patent litigations by shifting the full costs of litigation to unsuccessful NPEs by inserting 35 U.S.C. ' 285A into the Patent Act. Section 285A of the SHIELD Act of 2012 would have permitted courts to “award the recovery of full costs” of litigation to successful accused infringers if the patentee “did not have a reasonable likelihood of succeeding.” H.R. 6245, 112th Cong. (2d Sess. 2012). However, some believed that the proposed SHIELD Act of 2012 did not go far enough in deterring abusive patent litigation practices, because it was limited to “computer hardware [and] software patent[s]” and provided no effective recourse against judgment-proof patentees. And, the SHIELD Act of 2012 did not make it out of the House Judiciary Committee.

To address these concerns, the proposed SHIELD Act of 2013 revised the 2012 version of the bill by, inter alia: 1) removing the “computer hardware [and] software patent[s]” and “ reasonable likelihood of succeeding” limitations, 2) requiring courts, rather than permitting courts, to award the recovery of full costs, 3) enumerating exceptions to the bill that are designed to limit its application to certain NPEs (the bill specifically excludes original inventors or assignees, entities that practice the patent, and universities and related organizations), and 4) adding a bonding provision that would give accused infringers the right to require certain NPEs “to post a bond in an amount determined by the court to cover the recovery of full costs” and courts may require that such bond be posted before any scheduling order is issued. H.R. 845, 113th Cong. (1st Sess. 2013).

While the removal of the “computer hardware [and] software patent[s]” limitation broadens the reach of the SHIELD Act of 2013 substantially, the other amendments to the bill could fundamentally change the business of patent litigation. By removing the “ reasonable likelihood of succeeding” limitation and making the award of full costs mandatory, Congress would not only be: 1) mandating that any unsuccessful NPE (which does not meet one of the enumerated exceptions) has to pay the accused infringer's full costs of litigation, but also 2) that it would have to be prepared to pay such costs at the start of litigation.

The SHIELD Act of 2013 is pending before the House Judiciary Committee.

'

U.S. Senate Confirms Nomination of Richard Taranto to the Federal Circuit

On March 11, 2013, the Senate confirmed in a 91-0 vote, the nomination of Richard Taranto as a judge for the Federal Circuit. Taranto, formerly of Farr & Taranto, will be filling the judgeship vacated by former Chief Justice Paul Michel, who retired in 2010.

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Yankees Successfully Oppose BASEBALLS EVIL EMPIRE

On Feb. 8, 2013, the Trademark Trial and Appeal Board (“TTAB”) sustained the New York Yankees' opposition to Evil Enterprises, Inc.'s registration of the mark “BASEBALLS EVIL EMPIRE,” on the grounds that: 1) there would be a likelihood of confusion under ' 2(d) of the Trademark Act, and 2) the mark falsely suggests a connection with the Yankees under ' 2(a) of the Trademark Act. N.Y. Yankees P'ship v. Evil Enters., Inc., Opp. No. 91192764, slip op. at 25 (Feb. 8, 2013). The TTAB rejected the Yankees' claim that the mark is disparaging under ' 2(a) of the Trademark Act. Id.

Since 2002, when a Boston Red Sox's (a primary rival of the Yankees) executive referred to the Yankees as baseball's “Evil Empire,” the term has been used by “the media, Yankees' fans, and detractors as a reference to the Yankees.” Id. at 6. Evil Enterprises, in 2008, filed the application for the mark with the intention of using it to sell clothing to Yankees' fans. Id. at 5. Meanwhile, the Yankees have never attempted to register or use the term “Evil Empire.” Id. at 6.

The TTAB concluded that a likelihood of confusion existed, because “Evil Empire” is synonymous with the Yankees. Id. at 19-20. Moreover, the TTAB rejected Evil Enterprises' parody claims because the mark would nevertheless be confusingly similar. Id. at 20. Furthermore, the TTAB concluded that the mark falsely suggests a connection with the Yankees, because consumers “would be likely to assume that these goods are connected with the Yankees baseball club when there is no such connection.” Id. at 22. However, while still sustaining the opposition, the TTAB concluded that the mark was not disparaging to the Yankees, because the Yankees and their fans have embraced being baseball's “Evil Empire.” Id. at 24-25.

Howard J. Shire is a partner and Bradley Roush is an associate at Kenyon & Kenyon LLP.

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