On Petition for Review from the Court of Appeals for the Second District of Texas
The petitioner was a former securities broker. He formed a company. A couple of years later, the petitioner began developing the Texas Computer Exchange Network (TEXCEN), a software program intended to operate over a telecommunications network. After successfully establishing TEXCEN’s commercial viability to the first company, the second company and a member of the National Association of Securities Dealers, Inc. (NASD), the petitioner asked the first company to employ TEXCEN in its business. The first company agreed to lease TEXCEN from the petitioner’s company. During the lease negotiations, the petitioner knew that the first company could not use TEXCEN or provide its customers with TEXCEN’s benefits until NASD had reviewed and approved of the software. Despite that knowledge, the petitioner did not disclose to the first company that he intended to lease TEXCEN to the first company for experimental purposes. More than one year after signing the TEXCEN lease, the petitioner filed a provisional application for a patent covering an interactive securities trading system that contained features very similar to TEXCEN. The petitioner’s patent attorney drafted the patent application with the aid of TEXCEN’s software assistance manual, which the petitioner had provided him. The United States Patent and Trademark Office granted the petitioner a patent (the ‘643 Patent). The petitioner filed a patent infringement action against NASD and The NASDAQ Stock Market, Inc. in the United States District Court for the Eastern District of Texas. Minton v. Nat’l Ass’n of Sec. Dealers, Inc., 226 F. Supp. 2d 845, 852 (E.D. Tex. 2002). NASD and NASDAQ moved for summary judgment, alleging the ‘643 patent’s invalidity under the “on-sale bar” provided in section 102(b) of the U.S. Patent Act. On appeal, the Federal Circuit affirmed the federal district court’s denial of reconsideration because the experimental use exception was not timely asserted during trial. The petitioner filed a legal malpractice suit in state court against the respondents, the attorneys who had originally prosecuted his patent infringement litigation in the federal district court. The respondents, in turn, challenged the causation element of the petitioner’s malpractice claim by filing joint no-evidence and traditional motions for summary judgment. Based on the absence of any evidence that the primary purpose of the TEXCEN lease was experimental, the trial court granted the respondent’s no-evidence motions for summary judgment and motions to dismiss and rendered a take-nothing judgment in his favor. The petitioner appealed the judgment to the second appellate court in Fort Worth. Minton v. Gunn, 301 S.W.3d 702 (Tex. App.—Fort Worth 2009, pet. Granted). The appellate court then affirmed the trial court’s judgment, which granted the respondent’s joint motions for summary judgment. The petitioner filed a petition for review, which the instant court granted. The Texas Supreme Court noted that because it determined that the application of the experimental use exception to the on-sale bar was a necessary, disputed, and substantial element of the petitioner’s state-based legal malpractice claim, and because the federal courts were capable of addressing that issue without disrupting the jurisdictional balance existing between state and federal courts, it held that the petitioner’s claim had triggered exclusive federal patent jurisdiction. Accordingly, it did not reach the merits of the petitioner’s claims, and reversed the appellate court's judgment and dismissed the case.