The other day, I came across the Seventh Circuit’s decision in ABS Global v. Genus PLC (available here) and nearly fell out of my chair. While I knew a non-Federal Circuit appellate court could have jurisdiction over a case involving claims of patent infringement, I hadn’t seen it happen in real life for a long time. 28 U.S.C. § 1295(a)(1) specifies that “[t]he United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction . . . of an appeal from a final decision of a district court of the United States . . . in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents[.]” But here was a non-Federal Circuit appellate court issuing a substantive opinion on patent law. How can that happen?
In short, where a defendant asserts a non-compulsory counterclaim for patent infringement, the Federal Circuit lacks jurisdiction to hear the appeal:
Because it is rare for our court to see a patent case, we take a moment to examine our appellate jurisdiction. The Federal Circuit has exclusive jurisdiction over any “appeal from a final decision of a district court of the United States . . . [1] in any civil action arising under, or [2] in any civil action in which a party has asserted a compulsory counterclaim arising under” the Patent Act (“the Act”). 28 U.S.C. § 1295(a)(1). We lack appellate jurisdiction if either basis for the Federal Circuit’s exclusive jurisdiction was present in the district court, regardless of the claims brought on appeal.
Our first inquiry is whether, applying the well‐pleaded complaint rule, this case arose under the patent laws. For patent cases, the well‐pleaded complaint must establish[] either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law, in that patent law is a necessary element of one of the well‐pleaded claims. In our case, ABS’s complaint had nothing to do with patent law: it invoked only federal antitrust law and state law. Thus, . . . this is not a case that arises under the patent laws, and the first potential source of the Federal Circuit’s jurisdiction does not apply.
The second possibility—jurisdiction through a compulsory counterclaim—requires more attention. Patent issues entered this case when Sexing Tech filed a counterclaim asserting patent infringement. If that counterclaim was compulsory, this appeal belongs in the Federal Circuit; if it was permissive, it is properly in this court. Section 1295(a) incorporates the standard of Federal Rule of Civil Procedure 13(a) for determining whether a counterclaim is compulsory. In applying Rule 13(a), the Federal Circuit examines (1) whether the legal and factual issues raised by the claim and counterclaim are largely the same; (2) whether substantially the same evidence supports or refutes both the claim and the counterclaim; and (3) whether there is a logical relationship between the claim and the counterclaim. Our test adds a few additional points: we require that the claim (1) exist at the time of pleading, (2) arise out of the same transaction or occurrence as the opposing party’s claim, and (3) not require for adjudication parties over whom the court may not acquire jurisdiction.
The difference between these standards is immaterial for this case. Sexing Tech’s claim existed at the time of pleading, and it does not require any additional parties, and so we need to assess only the “transaction or occurrence” requirement. To determine whether a claim arises from “the same transaction or occurrence,” this circuit uses the “logical relationship” test, which requires us to examine the factual allegations underlying each claim. The patent and antitrust claims in this case are quite different. ABS’s antitrust claims hinge on Sexing Tech’s competitive practices, such as the use of evergreen clauses in its contracts and other allegedly coercive applications of market power. ABS did contend that Sexing Tech pooled patents for anticompetitive reasons, but the pooling of patents is distinct from questions of infringement and validity. Any relation between the patent and antitrust claims is minor. In fact, patent counterclaims are frequently permissive in antitrust cases. To hold otherwise “would be to hold that the holder of a patent, which is presumptively and facially valid . . . must immediately counterclaim with any and every and even, perhaps, every potential claim of infringement against that plaintiff or else lose such claims forever.” The patent counterclaims in this case were permissive, and thus the appeal falls outside of the Federal Circuit’s exclusive jurisdiction and is properly in this court.
(citations and quotations omitted).
And there you have it.