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Supreme Court of the United States

OCTANE FITNESS, LLC
v.
ICON HEALTH & FITNESS, INC.

134 S.Ct. 1749

Decided April 29, 2014.

Justice SOTOMAYOR delivered the opinion of the Court.

Section 285 of the Patent Act authorizes a district court to award attorney’s fees in patent litigation. It provides, in its entirety, that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (2005), the United States Court of Appeals for the Federal Circuit held that “[a] case may be deemed exceptional” under § 285 only in two limited circumstances: “when there has been some material inappropriate conduct,” or when the litigation is both “brought in subjective bad faith” and “objectively baseless.” Id., at 1381. The question before us is whether the Brooks Furniture framework is consistent with the statutory text. We hold that it is not.

 


I

A

Prior to 1946, the Patent Act did not authorize the awarding of attorney’s fees to the prevailing party in patent litigation. Rather, the “American Rule” governed: “ ‘[E]ach litigant pa[id] his own attorney’s fees, win or lose....’ ” Marx v. General Revenue Corp., 568 U.S. ––––, ––––, 133 S.Ct. 1166, 1175 (2013). In 1946, Congress amended the Patent Act to add a discretionary fee-shifting provision, then codified in § 70, which stated that a court “may in its discretion award reasonable attorney’s fees to the prevailing party upon the entry of judgment in any patent case.” 35 U.S.C. § 70 (1946 ed.).

 

Courts did not award fees under § 70 as a matter of course. They viewed the award of fees not “as a penalty for failure to win a patent infringement suit,” but as appropriate “only in extraordinary circumstances.” Park–In–Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (C.A.9 1951). The provision enabled them to address “unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force,” which made a case so unusual as to warrant fee-shifting. Ibid.; see also Pennsylvania Crusher Co. v. Bethlehem Steel Co., 193 F.2d 445, 451 (C.A.3 1951) (listing as “adequate justification[s]” for fee awards “fraud practiced on the Patent Office or vexatious or unjustified litigation”).

Six years later, Congress amended the fee-shifting provision and recodified it as § 285. Whereas § 70 had specified that a district court could “in its discretion award reasonable attorney’s fees to the prevailing party,” the revised language of § 285 (which remains in force today) provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” We have observed, in interpreting the damages provision of the Patent Act, that the addition of the phrase “exceptional cases” to § 285 was “for purposes of clarification only.” General Motors Corp. v. Devex Corp., 461 U.S. 648, 653, n. 8 (1983). And the parties agree that the recodification did not substantively alter the meaning of the statute.

In 1982, Congress created the Federal Circuit and vested it with exclusive appellate jurisdiction in patent cases. 28 U.S.C. § 1295. In the two decades that followed, the Federal Circuit, like the regional circuits before it, instructed district courts to consider the totality of the circumstances when making fee determinations under § 285. See, e.g., Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d 688, 691 (C.A.Fed.1984) (“Cases decided under § 285 have noted that ‘the substitution of the phrase “in exceptional cases” has not done away with the discretionary feature’”); Yamanouchi Pharmaceutical Co., Ltd. v. Danbury Pharmacal, Inc., 231 F.3d 1339, 1347 (C.A.Fed.2000) (“In assessing whether a case qualifies as exceptional, the district court must look at the totality of the circumstances”).

In 2005, however, the Federal Circuit abandoned that holistic, equitable approach in favor of a more rigid and mechanical formulation. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (2005), the court held that a case is “exceptional” under § 285 only “when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions.” Id., at 1381. “Absent misconduct in conduct of the litigation or in securing the patent,” the Federal Circuit continued, fees “may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless.” Ibid. The Federal Circuit subsequently clarified that litigation is objectively baseless only if it is “so unreasonable that no reasonable litigant could believe it would succeed,” iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1378 (2011), and that litigation is brought in subjective bad faith only if the plaintiff “actually know[s]” that it is objectively baseless, id., at 1377.

 

Finally, Brooks Furniture held that because “[t]here is a presumption that the assertion of infringement of a duly granted patent is made in good faith[,] ... the underlying improper conduct and the characterization of the case as exceptional must be established by clear and convincing evidence.” 393 F.3d, at 1382.

The parties to this litigation are manufacturers of exercise equipment. The respondent, ICON Health & Fitness, Inc., owns U.S. Patent No. 6,019,710 (′710 patent), which discloses an elliptical exercise machine that allows for adjustments to fit the individual stride paths of users. ICON is a major manufacturer of exercise equipment, but it has never commercially sold the machine disclosed in the ′710 patent. The petitioner, Octane Fitness, LLC, also manufactures exercise equipment, including elliptical machines known as the Q45 and Q47.

ICON sued Octane, alleging that the Q45 and Q47 infringed several claims of the ′710 patent. The District Court granted Octane’s motion for summary judgment, concluding that Octane’s machines did not infringe ICON’s patent. Octane then moved for attorney’s fees under § 285. Applying the Brooks Furniture standard, the District Court denied Octane’s motion. It determined that Octane could show neither that ICON’s claim was objectively baseless nor that ICON had brought it in subjective bad faith. As to objective baselessness, the District Court rejected Octane’s argument that the judgment of noninfringement “should have been a foregone conclusion to anyone who visually inspected” Octane’s machines. The court explained that although it had rejected ICON’s infringement arguments, they were neither “frivolous” nor “objectively baseless.” The court also found no subjective bad faith on ICON’s part, dismissing as insufficient both “the fact that [ICON] is a bigger company which never commercialized the ′710 patent” and an e-mail exchange between two ICON sales executives, which Octane had offered as evidence that ICON had brought the infringement action “as a matter of commercial strategy.” 

ICON appealed the judgment of noninfringement, and Octane cross-appealed the denial of attorney’s fees. The Federal Circuit affirmed both orders. In upholding the denial of attorney’s fees, it rejected Octane’s argument that the District Court had “applied an overly restrictive standard in refusing to find the case exceptional under § 285.” The Federal Circuit declined to “revisit the settled standard for exceptionality.”

We granted certiorari, and now reverse.

II

The framework established by the Federal Circuit in Brooks Furniture is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.

 

A

Our analysis begins and ends with the text of § 285: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” This text is patently clear. It imposes one and only one constraint on district courts’ discretion to award attorney’s fees in patent litigation: The power is reserved for “exceptional” cases.

The Patent Act does not define “exceptional,” so we construe it “ ‘in accordance with [its] ordinary meaning.’ ” In 1952, when Congress used the word in § 285 (and today, for that matter), “[e]xceptional” meant “uncommon,” “rare,” or “not ordinary.” Webster’s New International Dictionary 889 (2d ed. 1934); see also 3 Oxford English Dictionary 374 (1933) (defining “exceptional” as “out of the ordinary course,” “unusual,” or “special”); Merriam–Webster’s Collegiate Dictionary 435 (11th ed. 2008) (defining “exceptional” as “rare”); Noxell Corp. v. Firehouse No. 1 Bar–B–Que Restaurant, 771 F.2d 521, 526 (C.A.D.C.1985) (R.B. Ginsburg, J., joined by Scalia, J.) (interpreting the term “exceptional” in the Lanham Act’s identical fee-shifting provision, 15 U.S.C. § 1117(a), to mean “uncommon” or “not run-of-the-mill”).

We hold, then, that an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.⁶ As in the comparable context of the Copyright Act, “ ‘[t]here is no precise rule or formula for making these determinations,’ but instead equitable discretion should be exercised ‘in light of the considerations we have identified.’ ” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994).

The Federal Circuit’s formulation is overly rigid. Under the standard crafted in Brooks Furniture, a case is “exceptional” only if a district court either finds litigation-related misconduct of an independently sanctionable magnitude or determines that the litigation was both “brought in subjective bad faith” and “objectively baseless.” 393 F.3d at 1381. This formulation superimposes an inflexible framework onto statutory text that is inherently flexible.

For one thing, the first category of cases in which the Federal Circuit allows fee awards—those involving litigation misconduct or certain other misconduct—appears to extend largely to independently sanctionable conduct. See ibid. (defining litigation-related misconduct to include “willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed.R.Civ.P. 11, or like infractions”). But sanctionable conduct is not the appropriate benchmark. Under the standard announced today, a district court may award fees in the rare case in which a party’s unreasonable conduct—while not necessarily independently sanctionable—is nonetheless so “exceptional” as to justify an award of fees.

The second category of cases in which the Federal Circuit allows fee awards is also too restrictive. In order for a case to fall within this second category, a district court must determine both that the litigation is objectively baseless and that the plaintiff brought it in subjective bad faith. But a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award. Cf. Noxell, 771 F.2d, at 526 (“[W]e think it fair to assume that Congress did not intend rigidly to limit recovery of fees by a [Lanham Act] defendant to the rare case in which a court finds that the plaintiff ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons’.... Something less than ‘bad faith,’ we believe, suffices to mark a case as ‘exceptional’ ”).

ICON argues that the dual requirement of “subjective bad faith” and “objective baselessness” follows from this Court’s decision in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993) (PRE ), which involved an exception to the Noerr–Pennington doctrine of antitrust law. It does not. Under the Noerr–Pennington doctrine—established by Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965)—defendants are immune from antitrust liability for engaging in conduct (including litigation) aimed at influencing decisionmaking by the government. But under a “sham exception” to this doctrine, “activity ‘ostensibly directed toward influencing governmental action’ does not qualify for Noerr immunity if it ‘is a mere sham to cover ... an attempt to interfere directly with the business relationships of a competitor.’ ” Id., at 510. In PRE, we held that to qualify as a “sham,” a “lawsuit must be objectively baseless” and must “concea[l] ‘an attempt to interfere directly with the business relationships of a competitor....’ ” In other words, the plaintiff must have brought baseless claims in an attempt to thwart competition (i.e., in bad faith).

In Brooks Furniture, the Federal Circuit imported the PRE standard into § 285. But the PRE standard finds no roots in the text of § 285, and it makes little sense in the context of determining whether a case is so “exceptional” as to justify an award of attorney’s fees in patent litigation. We crafted the Noerr–Pennington doctrine—and carved out only a narrow exception for “sham” litigation—to avoid chilling the exercise of the First Amendment right to petition the government for the redress of grievances. See PRE, 508 U.S., at 56 (“Those who petition government for redress are generally immune from antitrust liability”). But to the extent that patent suits are similarly protected as acts of petitioning, it is not clear why the shifting of fees in an “exceptional” case would diminish that right. The threat of antitrust liability (and the attendant treble damages, 15 U.S.C. § 15) far more significantly chills the exercise of the right to petition than does the mere shifting of attorney’s fees. In the Noerr–Pennington context, defendants seek immunity from a judicial declaration that their filing of a lawsuit was actually unlawful; here, they seek immunity from a far less onerous declaration that they should bear the costs of that lawsuit in exceptional cases.

 


2

We reject Brooks Furniture for another reason: It is so demanding that it would appear to render § 285 largely superfluous. We have long recognized a common-law exception to the general “American rule” against fee-shifting—an exception, “inherent” in the “power [of] the courts” that applies for “ ‘willful disobedience of a court order’ ” or “when the losing party has ‘acted in bad faith, vexatiously, wantonly, or for oppressive reasons....’ ” Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258–259 (1975). We have twice declined to construe fee-shifting provisions narrowly on the basis that doing so would render them superfluous, given the background exception to the American rule, and we again decline to do so here.

 


3

Finally, we reject the Federal Circuit’s requirement that patent litigants establish their entitlement to fees under § 285 by “clear and convincing evidence,” Brooks Furniture, 393 F.3d, at 1382. We have not interpreted comparable fee-shifting statutes to require proof of entitlement to fees by clear and convincing evidence. And nothing in § 285 justifies such a high standard of proof. Section 285 demands a simple discretionary inquiry; it imposes no specific evidentiary burden, much less such a high one. Indeed, patent-infringement litigation has always been governed by a preponderance of the evidence standard, and that is the “standard generally applicable in civil actions,” because it “allows both parties to ‘share the risk of error in roughly equal fashion,’ ” Herman & MacLean v. Huddleston, 459 U.S. 375, 390 (1983).

* * *

For the foregoing reasons, the judgment of the United States Court of Appeals for the Federal Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

Supreme Court of the United States

v.

ALLCARE HEALTH MANAGEMENT SYSTEM, INC.

Decided April 29, 2014.

 
Justice SOTOMAYOR delivered the opinion of the Court.

Section 285 of the Patent Act provides: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285. In Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (2005), the United States Court of Appeals for the Federal Circuit interpreted § 285 as authorizing fee awards only in two circumstances. It held that “[a] case may be deemed exceptional” under § 285 “when there has been some material inappropriate conduct,” or when it is both “brought in subjective bad faith” and “objectively baseless.” Id., at 1381. We granted certiorari to determine whether an appellate court should accord deference to a district court’s determination that litigation is “objectively baseless.” On the basis of our opinion in Octane Fitness, LLC v. Icon Health & Fitness, Inc., –––– U.S. ––––, 134 S.Ct. 1749 (2014) argued together with this case and also issued today, we hold that an appellate court should review all aspects of a district court’s § 285 determination for abuse of discretion.

GUNN v. MINTON

133 S. Ct. 1059 (2013)

ROBERTS, C.J., delivered the opinion for a unanimous Court.

Federal courts have exclusive jurisdiction over cases “arising under any Act of Congress relating to patents.” 28 U.S.C. § 1338(a). The question presented is whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court.

I

In the early 1990s, respondent Vernon Minton developed a computer program and telecommunications network designed to facilitate securities trading. In March 1995, he leased the system—known as the Texas Computer Exchange Network, or TEXCEN—to R.M. Stark & Co., a securities brokerage. A little over a year later, he applied for a patent for an interactive securities trading system that was based substantially on TEXCEN. The U.S. Patent and Trademark Office issued the patent in January 2000.

entitled to a patent if “the invention was ... on sale in [the United States], more than one year prior to the date of the application,” and Minton had leased TEXCEN to Stark more than one year prior to filing his patent application. Rejecting Minton's argument that there were differences between TEXCEN and the patented system that precluded application of the on-sale bar, the District Court granted the summary judgment motion and declared Minton's patent invalid.

Minton then filed a motion for reconsideration in the District Court, arguing for the first time that the lease agreement with Stark was part of ongoing testing of TEXCEN and therefore fell within the “experimental use” exception to the on-sale bar. The District Court denied the motion.

Minton appealed to the U.S. Court of Appeals for the Federal Circuit. That court affirmed, concluding that the District Court had appropriately held Minton's experimental-use argument waived.

Minton, convinced that his attorneys' failure to raise the experimental-use argument earlier had cost him the lawsuit and led to invalidation of his patent, brought this malpractice action in Texas state court. His former lawyers defended on the ground that the lease to Stark was not, in fact, for an experimental use, and that therefore Minton's patent infringement claims would have failed even if the experimental-use argument had been timely raised. The trial court agreed, holding that Minton had put forward “less than a scintilla of proof” that the lease had been for an experimental purpose. It accordingly granted summary judgment to Gunn and the other lawyer defendants.

On appeal, Minton raised a new argument: Because his legal malpractice claim was based on an alleged error in a patent case, it “aris[es] under” federal patent law for purposes of 28 U.S.C. § 1338(a). And because, under § 1338(a), “[n]o State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents,” the Texas court—where Minton had originally brought his malpractice claim—lacked subject matter jurisdiction to decide the case. Accordingly, Minton argued, the trial court's order should be vacated and the case dismissed, leaving Minton free to start over in the Federal District Court.

A divided panel of the Court of Appeals of Texas rejected Minton's argument. Applying the test we articulated in Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U.S. 308, 314 (2005), it held that the federal interests implicated by Minton's state law claim were not sufficiently substantial to trigger § 1338 “arising under” jurisdiction. It also held that finding exclusive federal jurisdiction over state legal malpractice actions would, contrary to Grable 's commands, disturb the balance of federal and state judicial responsibilities. Proceeding to the merits of Minton's malpractice claim, the Court of Appeals affirmed the trial court's determination that Minton had failed to establish experimental use and that arguments on that ground therefore would not have saved his infringement suit.

The Supreme Court of Texas reversed, relying heavily on a pair of cases from the U.S. Court of Appeals for the Federal Circuit. The Court concluded that Minton's claim involved “a substantial federal issue” within the meaning of Grable “because the success of Minton's malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar.” 355 S.W.3d, at 644. Adjudication of Minton's claim in federal court was consistent with the appropriate balance between federal and state judicial responsibilities, it held, because “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., at 646 (citing Immunocept, supra, at 1285–1286; Air Measurement Technologies, supra, at 1272).

Justice Guzman, joined by Justices Medina and Willett, dissented. The dissenting justices would have held that the federal issue was neither substantial nor disputed, and that maintaining the proper balance of responsibility between state and federal courts precluded relegating state legal malpractice claims to federal court.

We granted certiorari.

II

“Federal courts are courts of limited jurisdiction,” possessing “only that power authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). There is no dispute that the Constitution permits Congress to extend federal court jurisdiction to a case such as this one, see Osborn v. Bank of United States, 9 Wheat. 738, 823–824 (1824); the question is whether Congress has done so.

For statutory purposes, a case can “aris[e] under” federal law in two ways. Most directly, a case arises under federal law when federal law creates the cause of action asserted. See American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916) (“A suit arises under the law that creates the cause of action”). As a rule of inclusion, this “creation” test admits of only extremely rare exceptions, and accounts for the vast bulk of suits that arise under federal law. Minton's original patent infringement suit against NASD and NASDAQ, for example, arose under federal law in this manner because it was authorized by 35 U.S.C. §§ 271, 281.

But even where a claim finds its origins in state rather than federal law—as Minton's legal malpractice claim indisputably does—we have identified a “special and small category” of cases in which arising under jurisdiction still lies. In outlining the contours of this slim category, we do not paint on a blank canvas. Unfortunately, the canvas looks like one that Jackson Pollock got to first. See 13D C. Wright, A. Miller, E. Cooper, & R. Freer, Federal Practice and Procedure § 3562, pp. 175–176 (3d ed. 2008) (reviewing general confusion on question).

In an effort to bring some order to this unruly doctrine several Terms ago, we condensed our prior cases into the following inquiry: Does the “state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities”? Grable, 545 U.S., at 314. That is, 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. Where all four of these requirements are met, we held, jurisdiction is proper because there is a “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” which can be vindicated without disrupting Congress's intended division of labor between state and federal courts. Id., at 313–314.

III

Applying Grable's inquiry here, it is clear that Minton's legal malpractice claim does not arise under federal patent law. Indeed, for the reasons we discuss, we are comfortable concluding that state legal malpractice claims based on underlying patent matters will rarely, if ever, arise under federal patent law for purposes of § 1338(a). Although such cases may necessarily raise disputed questions of patent law, those cases are by their nature unlikely to have the sort of significance for the federal system necessary to establish jurisdiction.

To begin, we acknowledge that resolution of a federal patent question is “necessary” to Minton's case. Under Texas law, a plaintiff alleging legal malpractice must establish four elements: (1) that the defendant attorney owed the plaintiff a duty; (2) that the attorney breached that duty; (3) that the breach was the proximate cause of the plaintiff's injury; and (4) that damages occurred. In cases like this one, in which the attorney's alleged error came in failing to make a particular argument, the causation element requires a “case within a case” analysis of whether, had the argument been made, the outcome of the earlier litigation would have been different. To prevail on his legal malpractice claim, therefore, Minton must show that he would have prevailed in his federal patent infringement case if only petitioners had timely made an experimental-use argument on his behalf. That will necessarily require application of patent law to the facts of Minton's case.

B

The federal issue is also “actually disputed” here—indeed, on the merits, it is the central point of dispute. Minton argues that the experimental-use exception properly applied to his lease to Stark, saving his patent from the on-sale bar; petitioners argue that it did not. This is just the sort of “ ‘dispute ... respecting the ... effect of [federal] law’ ” that Grable envisioned.

Minton's argument founders on Grable 's next requirement, however, for the federal issue in this case is not substantial in the relevant sense. In reaching the opposite conclusion, the Supreme Court of Texas focused on the importance of the issue to the plaintiff's case and to the parties before it. 355 S.W.3d, at 644 (“because the success of Minton's malpractice claim is reliant upon the viability of the experimental use exception as a defense to the on-sale bar, we hold that it is a substantial federal issue”); see also Air Measurement Technologies, 504 F.3d, at 1272 (“the issue is substantial, for it is a necessary element of the malpractice case”). As our past cases show, however, it is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim “necessarily raise[s]” a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.

In Grable itself, for example, the Internal Revenue Service had seized property from the plaintiff and sold it to satisfy the plaintiff's federal tax delinquency. 545 U.S., at 310–311. Five years later, the plaintiff filed a state law quiet title action against the third party that had purchased the property, alleging that the IRS had failed to comply with certain federally imposed notice requirements, so that the seizure and sale were invalid. Ibid. In holding that the case arose under federal law, we primarily focused not on the interests of the litigants themselves, but rather on the broader significance of the notice question for the Federal Government. We emphasized the Government's “strong interest” in being able to recover delinquent taxes through seizure and sale of property, which in turn “require [d] clear terms of notice to allow buyers ... to satisfy themselves that the Service has touched the bases necessary for good title.” Id., at 315, 125 S.Ct. 2363. The Government's “direct interest in the availability of a federal forum to vindicate its own administrative action” made the question “an important issue of federal law that sensibly belong[ed] in a federal court.” Ibid.

A second illustration of the sort of substantiality we require comes from Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 41 S.Ct. 243, 65 L.Ed. 577 (1921), which Grable described as “[t]he classic example” of a state claim arising under federal law. 545 U.S., at 312. In Smith, the plaintiff argued that the defendant bank could not purchase certain bonds issued by the Federal Government because the Government had acted unconstitutionally in issuing them. We held that the case arose under federal law, because the “decision depends upon the determination” of “the constitutional validity of an act of Congress which is directly drawn in question.” Id., at 201. Again, the relevant point was not the importance of the question to the parties alone but rather the importance more generally of a determination that the Government “securities were issued under an unconstitutional law, and hence of no validity.” Ibid.

Here, the federal issue carries no such significance. Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton's lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical “case within a case,” it will not change the real-world result of the prior federal patent litigation. Minton's patent will remain invalid.

Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 162 (1989). Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit. See 28 U.S.C. §§ 1338(a), 1295(a)(1). In resolving the nonhypothetical patent questions those cases present, the federal courts are of course not bound by state court case-within-a-case patent rulings. In any event, the state court case-within-a-case inquiry asks what would have happened in the prior federal proceeding if a particular argument had been made. In answering that question, state courts can be expected to hew closely to the pertinent federal precedents. It is those precedents, after all, that would have applied had the argument been made.

As for more novel questions of patent law that may arise for the first time in a state court “case within a case,” they will at some point be decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent; if it does not arise frequently, it is unlikely to implicate substantial federal interests. The present case is “poles apart from Grable,” in which a state court's resolution of the federal question “would be controlling in numerous other cases.” Empire Healthchoice Assurance, Inc., 547 U.S., at 700, 126 S.Ct. 2121.

Minton also suggests that state courts' answers to hypothetical patent questions can sometimes have real-world effect on other patents through issue preclusion. Minton, for example, has filed what is known as a “continuation patent” application related to his original patent. He argues that, in evaluating this separate application, the patent examiner could be bound by the Texas trial court's interpretation of the scope of Minton's original patent. It is unclear whether this is true. The Patent and Trademark Office's Manual of Patent Examining Procedure provides that res judicata is a proper ground for rejecting a patent “only when the earlier decision was a decision of the Board of Appeals” or certain federal reviewing courts, giving no indication that state court decisions would have preclusive effect. See Manual of Patent Examining Procedure § 706.03(w), p. 700–79 (rev. 8th ed. 2012). In fact, Minton has not identified any case finding such preclusive effect based on a state court decision. But even assuming that a state court's case-within-a-case adjudication may be preclusive under some circumstances, the result would be limited to the parties and patents that had been before the state court. Such “fact-bound and situation-specific” effects are not sufficient to establish federal arising under jurisdiction.

Nor can we accept the suggestion that the federal courts' greater familiarity with patent law means that legal malpractice cases like this one belong in federal court. It is true that a similar interest was among those we considered in Grable, 545 U.S., at 314. But the possibility that a state court will incorrectly resolve a state claim is not, by itself, enough to trigger the federal courts' exclusive patent jurisdiction, even if the potential error finds its root in a misunderstanding of patent law.

There is no doubt that resolution of a patent issue in the context of a state legal malpractice action can be vitally important to the particular parties in that case. But something more, demonstrating that the question is significant to the federal system as a whole, is needed. That is missing here.

D

It follows from the foregoing that Grable 's fourth requirement is also not met. That requirement is concerned with the appropriate “balance of federal and state judicial responsibilities.” Ibid. We have already explained the absence of a substantial federal issue within the meaning of Grable. The States, on the other hand, have “a special responsibility for maintaining standards among members of the licensed professions.” Ohralik v. Ohio State Bar Assn., 436 U.S. 447, 460 (1978). Their “interest ... in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been officers of the courts.” Goldfarb v. Virginia State Bar, 421 U.S. 773, 792 (1975). We have no reason to suppose that Congress—in establishing exclusive federal jurisdiction over patent cases—meant to bar from state courts state legal malpractice claims simply because they require resolution of a hypothetical patent issue.

As we recognized a century ago, “[t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subject-matter of the controversy.” New Marshall Engine Co. v. Marshall Engine Co., 223 U.S. 473, 478 (1912). In this case, although the state courts must answer a question of patent law to resolve Minton's legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton's patent. Accordingly, there is no “serious federal interest in claiming the advantages thought to be inherent in a federal forum,” Grable, supra, at 313. Section 1338(a) does not deprive the state courts of subject matter jurisdiction.

The judgment of the Supreme Court of Texas is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
NOTES

1. The two Federal Circuit cases being effectively overruled here, Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L.L. P., 504 F.3d 1262 (2007), and Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (2007), had generated a large amount of controversy over just when some embedded patent issue in a legal malpractice case caused a case to arise under the patent laws. See P. Janicke, The Patent Malpractice Thicket, Or Why Justice Holmes Was Right, 50 Hous. L. Rev. 437 (2012). State and federal courts were in a considerable quandary over the issue. The question seems now to have been settled by Gunn: The cases arise under state law and should be handled by the state courts.

2. One has to wonder how many other cases, where embedded issues of patent law caused a holding that the cases arose under the patent laws, and hence were subject to exclusive federal jurisdiction, will now be open to question under the reasoning in Gunn. See, e.g., Hunter Douglas, Inc. v. Harmonic Design, 153 F.3d 1318, 1331 (Fed. Cir. 1998) (finding arising-under jurisdiction based on issues of patent validity and enforceability embedded in a state-law count for unfair competition by false statements about patent coverage). The court in Hunter Douglas noted four other patent law issues had been held substantial enough, when embedded in state-created causes of action, to confer arising-under jurisdiction in the federal courts: infringement; inventorship; award of attorney’s fees under 35 U.S.C. § 285; and right to revive an unintentionally abandoned patent application. Id. at 1330. One wonders if these rulings are now still good law.

Supreme Court of the United States

v.

MIROWSKI FAMILY VENTURES, LLC.

Justice BREYER delivered the opinion of the Court.

A

We set forth a simplified version of the facts. The parties are Medtronic, Inc., a firm that (among other things) designs, makes, and sells medical devices, and Mirowski Family Ventures, LLC, a firm that owns patents relating to implantable heart stimulators. In 1991 Medtronic and Mirowski entered into an agreement permitting Medtronic to practice certain Mirowski patents in exchange for royalty payments.

In 2007 Medtronic brought this declaratory judgment action in Federal District Court in Delaware. It sought a declaration that its products did not infringe Mirowski's patents and that the patents were invalid. But, as its agreement with Mirowski provided, Medtronic paid all the relevant royalties into an escrow account.

We begin with a jurisdictional matter. An amicus claims that we must vacate the Federal Circuit's decision because that court lacked subject-matter jurisdiction. Amicus agrees with the parties that 28 U.S.C. § 1338(a) gives federal district courts exclusive jurisdiction over “any civil action arising under any Act of Congress relating to patents ” (emphasis added). Moreover, the version of § 1295(a)(1) governing this appeal gives the Federal Circuit exclusive appellate jurisdiction over any case where jurisdiction in the district court “was based, in whole or in part, on section 1338.” But, amicus says, in determining whether this case is a “civil action arising under” an “Act of Congress relating to patents,” we must look to the nature of the action that the declaratory judgment defendant, namely the patentee, Mirowski, could have brought in the absence of a declaratory judgment. And that action, amicus adds (in its most significant argument against jurisdiction), would not be a patent infringement action but, rather, an action for damages for breach of contract, namely an action for breach of the Mirowski–Medtronic licensing contract, in which patent infringement is the central issue. See Brief for Tessera Technologies, Inc., as Amicus Curiae 2–3.

We now turn to the question presented. A patent licensee paying royalties into an escrow account under a patent licensing agreement seeks a declaratory judgment that some of its products are not covered by or do not infringe the patent, and that it therefore does not owe royalties for those products. In that suit, who bears the burden of proof, or, to be more precise, the burden of persuasion? Must the patentee prove infringement or must the licensee prove noninfringement? In our view, the burden of persuasion is with the patentee, just as it would be had the patentee brought an infringement suit.

Simple legal logic, resting upon settled case law, strongly supports our conclusion. It is well established that the burden of proving infringement generally rests upon the patentee. We have long considered “the operation of the Declaratory Judgment Act” to be only “procedural,” leaving “substantive rights unchanged.” And we have held that “the burden of proof” is a “ ‘substantive’ aspect of a claim.” Taken together these three legal propositions indicate that, in a licensee's declaratory judgment action, the burden of proving infringement should remain with the patentee.