Landmark Screens, LLC (Landmark), appeals from a judgment of dismissal following the sustaining of a demurrer in favor of respondents Thomas Kohler and his law firm, Morgan, Lewis & Bockius, LLP. Landmark contends that its complaint for legal malpractice in patent prosecution raised no substantial issue of federal patent law and the superior court therefore erred in ruling that it lacked subject matter jurisdiction. We agree with the lower court's ruling on the facts presented and must therefore affirm the judgment.
Because this appeal arises from the sustaining of a demurrer, we summarize the underlying facts as they are stated in the operative pleading, the first amended complaint. "Our only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action. Accordingly, we assume that the complaint's properly pleaded material allegations are true and give the complaint a reasonable interpretation by reading it as a whole and all its parts in their context." (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 [271 Cal.Rptr. 146, 793 P.2d 479].) Our summary further includes judicially noticeable facts contained in the record.
The divisional application was incomplete, however. Kohler failed to include a copy of the specifications and drawings, submitted an obsolete transmittal letter that failed to contain a statement incorporating by reference the specifications and drawings filed with the '096 application, and failed to utilize a "postcard receipt" method by which the PTO could have notified Kohler of the missing portions of the application.
On October 28, 2003, the '096 application was issued as United States Patent No. 6,639,574 (the '574 patent). Because the divisional application was incomplete, however, it could not claim the same January 9, 2002 filing date. Consequently, Landmark alleged, "to the extent any of the subject matter claimed in the '916 divisional application was in public use, sold or offered for sale, or disclosed in a printed publication greater than one year prior to the filing date of the '916 divisional application, including disclosure by the '574 patent, Landmark could now not obtain patent protection on such novel and valuable subject matter."
In February 2004 Kohler left Pennie & Edmonds and joined respondent Morgan, Lewis & Bockius, LLP (MLB). In June 2004 the PTO notified Kohler that the '916 application was incomplete. Kohler failed to disclose this development to Landmark. On August 23, 2004, he filed a petition in an effort to persuade the PTO to grant the divisional application the earlier filing date (Jan. 9, 2002) of the '574 patent.
In its decision the PTO considered 37 Code of Federal Regulations part 1.183 (2009), which permits suspension of its filing rules in "an extraordinary situation, when justice requires." The PTO found no such circumstances and dismissed the petition in late 2004, based on "applicants' failure to exercise
According to the complaint, it was only in December 2004, after receiving the PTO's dismissal decision, that Landmark learned about the incomplete filing of the '916 divisional application and the subsequent petition. Between the June 2004 notification by the PTO and the December 2004 dismissal, Kohler and MLB engaged in a "deceptive course of action" by "actively conceal[ing] from Landmark" the negligent filing of the divisional application. Kohler and MLB continued to represent Landmark until November 2, 2005.
Landmark initiated this action on November 30, 2005, naming as defendants Pennie & Edmonds, MLB, and Kohler in his capacity as partner in each firm. In the first amended complaint, filed December 7, 2005, Landmark alleged legal malpractice, negligence, and breach of fiduciary duty. In the first and second causes of action, Landmark asserted that it had lost "valuable and pioneering patent rights" from defendants' failure to draft the patent claims properly, their failure to file a complete divisional application or correct its inadequacies, and their intentional or negligent failure to inform Landmark about the status of the divisional application. The third cause of action more generally asserted damages resulting from defendants' violation of Landmark's trust and confidence by "failing to properly and diligently perform legal services for Landmark and by intentionally concealing and failing to fully and properly inform Landmark of the status of the '916 divisional application and Defendants' Petition to the PTO."
All of the defendants answered, but only Pennie & Edmonds raised subject matter jurisdiction as an affirmative defense. On September 26, 2006, the superior court granted the motion of Pennie & Edmonds and Kohler to compel arbitration pertaining to the work Kohler had performed while at Pennie & Edmonds. The court stayed the entire action until the conclusion of that proceeding, but it denied MLB's request for joinder in the motion to compel arbitration.
The case against Pennie & Edmonds and Kohler (in his prior capacity as partner there) was resolved by settlement and the stay was lifted on March
On May 21, 2008, the day the demurrer order was entered, Landmark initiated an action against Kohler and MLB in the federal district court for Northern California. This complaint contained the same three causes of action as in the state court lawsuit but added claims of breach of contract and fraud. With respect to the first four, however, the district court granted respondents' motion to dismiss, with leave to amend to allege equitable estoppel. The court ruled that the statute of limitations, Code of Civil Procedure section 340.6, barred these claims and that Landmark had not been under a legal disability such that the statutory period would have been tolled. In particular, the court stated, the defense challenge to the state court's subject matter jurisdiction was not unforeseeable under the law existing before 2005. "Indeed, Plaintiff's claim for malpractice in a patent prosecution necessarily requires a counterfactual analysis of whether a patent might have issued absent the alleged malpractice, and what rights it would have conferred. In short, Plaintiff was on notice of potential infirmities in the Superior Court's jurisdiction." The court permitted amendment of the entire fraud claim as well as the estoppel theory of the other claims.
In January 2009 the district court dismissed the nonfraud causes of action in Landmark's second amended complaint. The court rejected the revised assertions of equitable estoppel and dismissed the malpractice claims as untimely. It declined, however, to dismiss the pleading of fraudulent concealment in the second amended complaint.
1. Standard and Scope of Review
A demurrer is properly sustained when the complaint "does not state facts sufficient to constitute a cause of action," or where the court "has no jurisdiction of the subject of the cause of action alleged in the pleading." (Code Civ. Proc., § 430.10, subds. (e), (a).) "On appeal from a dismissal following the sustaining of a demurrer, this court reviews the complaint
2. Subject Matter Jurisdiction
Respondents Kohler and MLB have not suggested that Landmark's action arises out of federal patent law; unquestionably legal malpractice is a state
Respondents rely on two federal appellate cases, Air Measurement Techs., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P. (Fed.Cir. 2007) 504 F.3d 1262 (AMT) and Immunocept, LLC v. Fulbright & Jaworski, LLP (Fed.Cir. 2007) 504 F.3d 1281 (Immunocept). Landmark, however, urges us to disregard those federal cases and instead follow the result we reached in Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115 [61 Cal.Rptr.3d 221]. We agree with respondents that federal court is the proper forum for this lawsuit.
Both AMT and Immunocept were legal malpractice cases. The action in AMT was filed in a Texas state court, alleging that the defendant attorney had made several errors in the course of patent prosecution and subsequent patent infringement litigation. According to the plaintiff AMT, those errors forced it to settle the patent infringement litigation for far less than fair market value because the underlying defendants had been able to raise plausible defenses of patent invalidity and unenforceability, which would not have been available but for the attorney's errors. (AMT, supra, 504 F.3d at p. 1266.) The defendant law firm removed the lawsuit to federal court, but the plaintiff moved to remand it to Texas. Three years later, they reversed positions, with two defendant law firms requesting remand, over the plaintiff's opposition.
Applying section 1338, the district court denied the motion to remand, and the Federal Circuit Court of Appeals affirmed. Noting that Texas malpractice law would require the plaintiff to prove a "case within a case" in order to show proximate cause, the court concluded that the plaintiff would have had to establish that it would have prevailed in the earlier litigation but for the lawyer's negligence. (AMT, supra, 504 F.3d at p. 1269.) Accordingly, the merits of that patent infringement claim—a substantial question of federal patent law—would have to be adjudicated as a necessary element of the alleged malpractice. The court further acknowledged the concerns expressed in Grable in stating that "[t]here is a strong federal interest in the adjudication of patent infringement claims in federal court because patents are issued by a federal agency. The litigants will also benefit from federal judges who have experience in claim construction and infringement matters." (Id. at p. 1272.)
In Immunocept, the plaintiff company alleged that its attorney had inadequately drafted a patent claim, which narrowed the scope of the patent's protection and thus allowed competitors to copy the claimed methods without risk of infringement. (Immunocept, supra, 504 F.3d at p. 1284.) The court
Landmark maintains that AMT and Immunocept are "rogue" cases that evince "overreaching" by the federal circuit and are not binding on this court. Instead, it argues, we should follow our prior decision in Linear Technology Corp. v. Applied Materials, Inc., supra, 152 Cal.App.4th 115. In that case Linear Technology Corporation (Linear) sued equipment manufacturers that had sold it equipment that was later the source of a patent infringement suit by Texas Instruments, Inc. (TI), against Linear based on its use of the equipment. The focus of the contract claim was respondents' breach of a promise to indemnify Linear and hold it harmless from claims arising from its use of the equipment it had bought from respondents. This court held that Linear's action for breach of contract and related claims did not require adjudication of a substantial question of federal patent law. Determining whether the infringement of the process patents arose from Linear's use of equipment purchased from the respondents entailed "only factual questions—in particular, what was the nature of each patent and was there a causal connection between Linear's use of the processing equipment and its infringement of TI's patents. TI's focus on Linear's conduct (its manufacturing process) also is not controlling. That TI had not named other defendants shows only that TI was uninterested in which tools Linear had used in infringing its process patents; it simply wanted relief for the infringement itself. The subject of the present action is more closely focused on how that infringement came to pass—specifically, whether it arose from the use of respondents' products." (Id. at p. 127.)
Of the three decisions related above, Immunocept is the most comparable, as it concerns claims of malpractice in patent prosecution. That case is not an anomaly, even in the federal circuit, as Landmark suggests; indeed, the same court recently reaffirmed its view that a claim of legal malpractice resulting in patent invalidity was within the jurisdiction of the federal court, as it required analysis of the patent claim and a showing that but for the attorney's error in filing a patent application, the resulting patent would not have been held
Lockwood v. Sheppard, Mullin, Richter & Hampton (2009) 173 Cal.App.4th 675 [93 Cal.Rptr.3d 220] represents one example of this state's application of AMT and Immunocept. It was not a legal malpractice case, however. There the plaintiff inventor sued an attorney and his law firm for making false representations to the PTO in requesting reexamination of the plaintiff's patents. According to the plaintiff, the attorney knew that the PTO would rely on those representations in granting reexamination, resulting in a stay of the plaintiff's pending infringement lawsuits for years while the validity of the patents was redetermined. During that time the plaintiff was unable to enforce his patents and thus had to end his enforcement program and settle the infringement lawsuits. Addressing the jurisdictional issue raised by the plaintiff on appeal, the Second District, Division Four, held that the federal courts had exclusive subject matter jurisdiction over Lockwood's complaint. The court examined AMT and Immunocept and concluded that for Lockwood to prevail on any of his claims, he would have to prove that but for the misrepresentations the PTO would not have granted reexamination. That showing brought into play a substantial question of patent law, as the court would have to "put itself in the position of a `reasonable' patent examiner." (Id. at p. 687.)
Landmark aptly points out, however, that in this case the dispute is not about the adequacy of the divisional application; the issue is only "whether Kohler and MLB committed attorney malpractice by engaging in concealment and a course of deceptive conduct surrounding the already-filed divisional application, denying Landmark its only chance to remedy the situation. That is a question the California courts are capable of deciding without special expertise in patent law and without deciding the scope, validity, and enforceability of actual federal patent rights."
Landmark nonetheless maintains that the cases supporting the superior court's dismissal—in particular, AMT, Immunocept, and, more recently, Touchcom, Inc. v. Bereskin & Parr, supra, 574 F.3d 1403—have departed from "longstanding principles" and have appropriately been criticized in subsequent decisions. Even the federal circuit, Landmark insists, has retreated from its earlier position. Examination of these recent decisions, however, reveals their distinguishing attributes. The basis of the holding in Excelstor Technology, Inc. v. Papst Licensing GMBH & Co. KG, supra, 541 F.3d 1373, for example, was that the defendant had collected two different royalties from
The two Nebraska cases cited by Landmark, New Tek Mfg., Inc. v. Beehner (2005) 270 Neb. 264 [702 N.W.2d 336] (New Tek I) and New Tek Mfg., Inc. v. Beehner (2008) 275 Neb. 951 [751 N.W.2d 135] (New Tek II) are also not helpful. Those decisions arose from a patent that the defendant law firm had allowed to expire. Although the plaintiff was eventually able to revive the patent by paying a late maintenance fee, the plaintiff was left unprotected during the expired period, thus allegedly allowing infringement by a competitor. The Nebraska Supreme Court identified the "precise question" as "whether, absent Beehner's negligence, New Tek would have been successful in an infringement action against [the competitor]." (New Tek I, supra, 702 N.W.2d at p. 346.) The court acknowledged that legal malpractice required a plaintiff to show that it would have prevailed in a patent infringement action against the competitor. But the court regarded this question as one of fact, which state courts could adjudicate. In New Tek II, decided after AMT and Immunocept, the court briefly acknowledged those federal cases and merely repeated its conclusion that it had subject matter jurisdiction over the malpractice claim. (751 N.W.2d at p. 144.)
We thus conclude that the superior court correctly ruled that this action should be adjudicated in federal court because of the substantial patent questions presented in the elements of causation and damages. We disagree with Landmark that on the precise facts before us, ceding jurisdiction to the federal court would upset the balance between federal and state judicial responsibilities. (Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., supra, 545 U.S. at p. 314.)
We further find no viable avenue of relief through reliance on the prospect of alternative theories for recovery of damages. It is true that "a claim supported by alternative theories in the complaint may not form the basis for § 1338(a) jurisdiction unless patent law is essential to each of those theories." (See Christianson v. Colt Industries Operating Corp., supra, 486 U.S. at p. 810.) In Altavion, Inc. v. Konica-Minolta Systems Laboratory, Inc. (N.D.Cal., May 8, 2008, No. C 07-06358 MHP) 2008 WL 2020593, on which Landmark relies, the federal district court was able to identify a theory related to its fraud claim that was unrelated to any question of patent law. Here, however, the complaint does not appear to lend itself to alternative theories that do not call for determination of a substantial federal issue, whether it is the prospect of licensing its invention or the vague suggestion of "its ability to fix Defendants' mistakes" before July 10, 2004. In either case the viability
Landmark protests that affirmance of the judgment here would leave it without a remedy. We cannot provide relief from that predicament. As the district court noted in rejecting Landmark's claim of legal disability, at the time Landmark filed this action there was sufficient authority suggesting that federal court would be the proper forum for resolution of the issues raised. (See, e.g., Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1426-1427 [13 Cal.Rptr.3d 766] [substantial patent law issues raised in allegations of unfair royalty charges, threatened patent infringement litigation, and baseless lawsuits].) Pennie & Edmonds alerted Landmark to the issue of subject matter jurisdiction in its answer, only two months after the first amended complaint was filed. Like the district court, we are not convinced that Landmark was deprived of its ability to file a timely action in federal court.
The judgment is affirmed.
Rushing, P. J., and Premo, J., concurred.