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Federal courts have jurisdiction over legal malpractice claims in patent infringement cases.

Premier Networks, Inc v Stadheim & Grear, Ltd, No. 1-08-1133, 2009 WL 3762952 (1st D 2009)

On November 10, 2009, the Illinois Appellate Court, First District, affirmed the decision of the Circuit Court of Cook County finding, in a legal malpractice suit, that the contingent fee arrangement between the parties was not void, and that jurisdiction over the malpractice claim rested exclusively with the federal courts.

The plaintiff owned patent number 4,303, 805 (the "805 patent") and believing that Lucent Technologies (Lucent) was infringing its patent, hired the defendant law firm to bring suit against Lucent. The parties entered into a written contingency fee arrangement, whereby the defendant would "provide all legal representation concerning certain specified patents, including the 805 patent, in return for 40% of all future income derived from those patents, plus costs." Premier at 'F2. The defendant law firm brought the lawsuit on behalf of the plaintiff, but the federal district court granted summary judgment in favor of Lucent, finding no patent infringement.

Shortly after, plaintiff filed a legal malpractice complaint alleging that (1) the defendant failed to use scientific evidence provided by the plaintiff in the federal case against Lucent; (2) this was legal malpractice; and (3) but for the alleged malpractice, plaintiff would have prevailed in the lawsuit against Lucent. In addition, the plaintiff also alleged that the contingent fee arrangement entered into between the parties was void. The circuit court dismissed the legal malpractice claim for lack of jurisdiction and found the contingent fee arrangement not void. The plaintiff appealed.

On appeal, the plaintiff argued that the contingent fee arrangement was void, since it violated Rule L5(a) of the Illinois Rules of Professional Conduct (Conduct Rules), which requires a lawyer's fee be reasonable. In addition, plaintiff alleged that the fee arrangement violated Rule 1.8 of the Conduct Rules, which concerns conflicts of interest between clients and lawyers. The appellate court held that the plaintiff misapprehended which rule applied in the case. The proper Conduct Rule was 1.8(1)(2) which controls contingent fee arrangements in a civil case and requires the fee arrangement to be reasonable. Not only did the plaintiffs not allege any facts to support their assertion that the fee was unreasonable, they also failed to allege that the 40% contingent fee was in violation of any statute.

Next the appellate court determined whether the circuit court properly dismissed the plaintiff's legal malpractice claim for lack of jurisdiction. The court stated that the legal malpractice lawsuit represented a "case within a case," since a plaintiff must establish that, but for the defendant's malpractice, the plaintiff would have won the underlying case. To resolve this issue, the circuit court would need to determine questions of patent law. Thus, the issue was "whether a legal malpractice action, ordinarily cognizable in state court, must yield to federal jurisdiction" when the malpractice action required a substantial resolution of patent law issues upon which the legal malpractice claim was based. Id at * 4.

The court recognized that the federal court had exclusive jurisdiction over patent cases pursuant to Article I of the Constitution and 28 USC 5 1338(a) (2006). This extends even to cases where the plaintiff's right to relief necessarily depends on the resolution of a substantial question of patent law. To resolve the case, the appellate court turned to a recent California appellate court case, in which an inventor sued a law firm for legal malpractice stemming from the law firm's defense of a patent lawsuit. Lockwood v Shepard, Mullin, Ritcher & Hampton, 173 Cal App 4th 675, 683, 93 Cal Rptr 3d 220, 225 (2009). The California appellate court concluded that to resolve the malpractice suit a court would necessarily have to determine substantial issues of patent law. Id. The Illinois appellate court agreed, holding that where "issues of legal malpractice are necessarily inextricably bound to determinations of substantive issues of patent law, jurisdiction rests exclusively with the federal court." Premier at * 6.
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Publication:Illinois Bar Journal
Date:Jan 1, 2010
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