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Resources > Articles > Federal Circuit Court of Appeal No Longer has Per Se Jurisdiction over Patent Appeals

By Jennifer Levine

The Supreme Court Limits the Federal Circuit's Jurisdiction in Patent Cases.

On June 3, 2002, the United States Supreme Court decided The Homes Group, Inc. v. Vornado Air Circulation Systems, Inc., 122 S. Ct. 1889 putting to rest any doubts as to whether the Federal Circuit Court of Appeals has exclusive jurisdiction over patent appeals. As the Court explained in its opinion, the Federal Circuit has jurisdiction over patent appeals only if a patent issue is raised in the plaintiff's initial complaint.

In this case, the plaintiff, a manufacturer of fans and heaters, became embroiled in a dispute with a competitor over one of its fan grill designs. Prior to the commencement of the action at bar, the competitor had sued, and lost, in federal court on allegations of trade dress infringement. Subsequently, the competitor, undaunted by it recent loss, lodged a complaint with the International Trade Commission ("ITC") claiming that the plaintiff's sale of the subject fans violated the competitor's patent and trade dress.

The ITC filing prompted the plaintiff to file an action with the U. S. District Court for the District of Kansas seeking declaratory judgment that its products did not infringe the competitor's trade dress. The competitor, in response, asserted a compulsory counterclaim alleging patent infringement. The Kansas District Court granted the declaratory judgment and stayed the proceedings regarding the counterclaim pending an appeal of the declaratory judgment. The case went up on appeal to the Federal Circuit, which rejected a challenge to its jurisdiction and reversed the District Court.

In its unanimous decision, the Supreme Court reversed the Federal Circuit's assertion of jurisdiction over the matter. The Court concluded that the Federal Circuit did not have jurisdiction because no patent law issues were raised in the original complaint filed by the plaintiff. The Court carefully analyzed the two statutes having to do with patent jurisdiction, 28 U.S.C § 1295 (giving original jurisdiction to federal district courts), and 28 U.S.C § 1338 (giving appellate jurisdiction to the Federal Circuit) before reaching its decision. As the Court noted, the language used in both § 1295 and § 1338 is identical to that of 28 U.S.C. § 1331, giving original jurisdiction to federal district courts for issues "arising under" the United States Constitution. The entire opinion concentrated on the "arising under" language.

The Court explained that the phrase "arising under" invokes the well-pleaded-complaint rule, a well-established doctrine that requires a court to consider only the plaintiff's original complaint in determining the law an action "arises under." The Court cited prior cases that have held that "arising under" jurisdiction cannot be premised on allegations made in a counterclaim. The Court reasoned that, because a counterclaim is a component of an answer, a counterclaim cannot establish "arising under" jurisdiction.

Additionally, the Court addressed several policy issues in reaching its decision. First, it explained that the plaintiff's right to choose the forum is of great importance and should be protected. Second, to have found otherwise, the class of removable cases would have been significantly expanded and created an additional burden for federal courts. Third, the court's interpretation of the well-pleaded-complaint rule should be consistent, because it is a "quick rule of thumb," helpful in resolving jurisdictional issues.

Finally, in the alternative, the court addressed consistency. In interpreting the identical "arising under" language from different statutes, the court reasoned that it was only logical to extend the application of the well-pleaded-complaint rule to § 1338. Again, stressing that the Federal District will only have appellate jurisdiction over cases where a plaintiff alleges patent infringement in the original complaint.

Not only will this decision end the paradigm that the Federal Circuit is solely responsible for maintaining uniformity in patent law, but it will also greatly diminish the eleven Circuit Courts of Appeals' ability to shy away from the responsibility of setting future patent precedent.