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Gerawan Farming, Inc v. Townsend Townsend and Crew Llp

March 8, 2013

GERAWAN FARMING, INC,
PLAINTIFF,
v.
TOWNSEND TOWNSEND AND CREW LLP, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Jennifer L. Thurston United States Magistrate Judge

ORDER REMANDING THE MATTER TO THE FRESNO SUPERIOR COURT

This case involves a claim of attorney malpractice arising from the creation of five plant patents. On March 7, 2013, the Court held a telephonic conference with the parties, at their request, to discuss the Court's jurisdiction in light of Gunn v. Minton, 568 U.S. ___, ____ S.Ct. ____, ____ L.Ed.2d ____. 2013 WL 610193 (Feb. 20, 2013). The result of the conference was the Court's agreement to consider the issue sua sponte and the parties determined they did not wish to file briefs on the topic.

I.Background

On October 25, 2010, Defendants Rodney Worrell and Worrell & Worrell, removed this matter from the Fresno Court Superior Court. (Doc. 1) Plaintiff opposed the removal and on November 23, 2010, filed a motion to remand the matter. (Doc. 14) On January 20, 2011, the Court issued its order denying the motion to remand. (Doc. 23) In so ordering, the Court found " damages will require resolution of a substantial question of federal law." (Doc. 23 at 6) In particular, the Court found that,

Plaintiff will have to demonstrate that Defendants' use of the trademark in the patent name, rather than simply the characteristics of the word "Prima," was the legal cause of their harm. Plaintiff admits that if it loses the trademark action and the PRIMA mark is invalidated because it is generic, its claimed damages will also include those related to trademark diminution. In this scenario, Plaintiff will have to prove causation by showing that the use of the trademark in the patent name was the cause of the generic finding and resulting invalidation. This will require resolution of substantial questions of federal patent and trademark law.

Id. at 6. Notably, at that time, a companion case, Gerawan v. Prima Bella, 1:10-cv-00148 LJO JLT, was ongoing. In that matter, the defendant claimed, at least in part, that Plaintiff's patent name, PRIMA, was generic such that the patent should be invalidated.*fn1 This lawsuit formed the basis for the claim in the instant matter that Plaintiff's attorneys committed professional negligence in connection with the trademark and the naming of the five plant patents.

In the motion denying remand, the Court found that determining the issues of causation and damages would require "an analysis of federal patent and trademark law." (Doc. 23 at 7.) As a result, the Court concluded, "Therefore, Plaintiff cannot recover for Defendants' alleged negligence without resolving substantial issues of trademark and patent law." Id. Moreover, the Court described its "substantial interest" in hearing the action because unlike a typical professional negligence matter, the standard of care will be determined according to federal law which will require an analysis of federal precedent. Id.

II.The Court may consider its own jurisdiction at any time

The district court has "a duty to establish subject matter jurisdiction over [a] removed action sua sponte, whether the parties raised the issue or not."United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir. 2004); see alsoKelton Arms Condo. Homeowners Ass'n v. Homestead Ins. Co., 346 F.3d 1190, 1192-93 (9th Cir. 2003) (noting a distinction between procedural and jurisdictional defects and holding that a "district court must remand if it lacks jurisdiction"). Consequently, the Sixth Circuit explained that a court "can, in fact must, dismiss a case when it determines that it lacks subject matter jurisdiction, whether or not a party has a filed a motion." Page v. City of Southfield, 45 F.3d 128, 133 (6th Cir. 1995).

III.Gunn v. Minton

On February 20, 2013, the United States Supreme Court decided Gunn v. Minton, 568 U.S. ___, ____ S.Ct. ____, ____ L.Ed.2d ____. 2013 WL 610193 (Feb. 20, 2013). In this case, Minton developed an electronic system to facilitate securities trading. Id. at *3. He leased the system to a third party and a year later, sought a patent. Id. When the patent was issued, Minton-represented by Gunn--sued two defendants for patent infringement. Id. They in turn claimed the patent was invalid because the technology had been "on sale" for more than a year before the patent application was made. Id. After the court granted summary judgment in the defendants' favor, Gunn filed a motion for reconsideration on Minton's behalf in which he claimed that the lease of the technology fell within the "experimental use" exception to the "on sale" bar. Id. When the court determined that the argument had been waived based upon his failure to timely raise it and this determination was affirmed on appeal, Minton sued Gunn in state court for professional negligence. Id.

In the trial court, Gunn convinced the court that the "experimental use" exception did not apply to the leased technology and the court granted summary judgment in Gunn's favor. Gunn, at *3. On appeal, Minton challenged the state court's jurisdiction. Id. 3-4. Minton argued that his case arose under federal law according to 28 U.S.C. § 1338(a) which provides, "[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents." Id. at 4. The court of appeal refused this argument and found that the case did not raise a sufficiently substantial federal interest, therefore, concluded it did not "arise under" federal law. Id.

Nevertheless, the Supreme Court of Texas disagreed and found that there was a substantial federal question because it relied upon the "experimental use" exception to the "on-sale" bar. Gunn, at 4. The court concluded that a determination of Minton's claim in federal court struck the "appropriate balance between federal and state judicial responsibilities" and that "the federal government and patent litigants have an interest in the uniform application of patent law by courts well-versed in that subject matter." Id.

In its analysis, the Supreme Court relied upon its earlier decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005) and determined that a case may arise under federal law if the 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." Gunn, at *6. In concluding that Minton's legal malpractice action did not implicate federal court jurisdiction, the Court noted that though the federal patent question was necessary to Minton's case and was actually disputed, the federal question was not substantial. Id. at *6-7. In short, the Court found that ...


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