The US Court of Appeals for the Federal Circuit ruled that provisions in the America Invents Act (AIA) related to federal courts’ jurisdiction over patent claims do not override 28 USC § 1447(d)’s limit on appellate review of a district court’s order to remand a case to state court. Preston et al. v. Nagel et al., Case No. 16-1524 (Fed. Cir., June 1, 2017) (Hughes, J).

Preston filed a complaint against Nagel in state court alleging several state-law claims. Nagel responded by filing counterclaims seeking declarations of non-infringement of several patents held by Nagel. Nagel also removed the case to a federal district court under § 1441 (general removal statute) and § 1454 (patent removal statute). The district court determined that it lacked subject matter jurisdiction because Preston’s claims arose under state law and Nagel did not establish that the counterclaims satisfied the Article III case-or-controversy requirement. The district court granted Preston’s motion to remand the case to state court. Nagel appealed. 

Appellate review of a district court’s order to remand a case to state court is limited by 28 USC § 1447(d), which states:

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.

Thus, according to § 1447(d), a district court order remanding a case to a state court is not reviewable by the Federal Circuit unless the case was removed from federal court under statutory exceptions not applicable in this case.

Nagel argued that an exception to § 1447(d)’s reviewability bar exists when defendants invoke § 1454 (patent removal statute) to remove patent claims over which federal courts have exclusive jurisdiction. As support, Nagel relied on the 2007 Supreme Court of the United States case Osborn v. Haley and argued that the AIA overrides § 1447(d)’s bar. In Osborn, the Supreme Court determined that remands of certified Westfall Act cases (relating to federal employees suing for common law torts that occurred in the course of their official duties) are reviewable, despite § 1447(d)’s bar on appellate review of remand orders. The Federal Circuit concluded that courts should review remand orders ordinarily governed by § 1447(d) only “in the extraordinary case in which Congress has ordered the intercourt shuttle to travel just one way—from state to federal court.” The Court rejected Nagel’s argument that provisions in the AIA made this case similarly “extraordinary.”

Nagel relied on the Supreme Court’s 2002 decision in Holmes Group v. Vornado Air Circulation Systems (IP Update, Vol. 5, No. 6), where the Supreme Court found that the Federal Circuit lacked jurisdiction to hear appeals from cases “in which the complaint does not allege a claim arising under federal patent law, but the answer contains a patent-law counterclaim.” In response to Holmes, Congress included several provisions to strengthen federal courts’ jurisdiction over patent claims:

• A clarification was added that state courts had no jurisdiction over “any claim for relief arising under any Act of Congress relating to patents.”

• The Federal Circuit’s exclusive jurisdiction was extended to include cases with compulsory patent counterclaims.

• A provision was added to permit a party to remove to federal court a case in which any party asserts a patent claim.

Nagel argued that the AIA contained “Holmes Group fix” provisions that were the one-way “intercourt shuttle” that Osborn described. According to Nagel, by depriving the state court of jurisdiction to hear patent claims (including counterclaims) and by creating a removal provision targeted at patent claims (and counterclaims), Congress created a vehicle for a defendant’s patent counterclaims to be heard in federal court alongside a plaintiff’s state-law claims.

The Federal Circuit, however, found that Osborn’s narrow exception did not apply in the AIA context. The Court explained that unlike Osborn, nothing in the AIA “foreclose[d] any jurisdictional inquiry” since the district court had undertaken a threshold inquiry before concluding that it lacked subject matter jurisdiction because Preston’s claims arose under state law and Nagel did not establish that the counterclaims satisfied the Article III case-or-controversy requirement. The Court further noted:

To the extent the AIA prefers that closely related state-law claims and patent-law counterclaims be heard together, it does not follow that we have jurisdiction to review remand decisions that require such claims to be pursued in separate forums. Though hearing the state-law and patent-law claims together may promote important interests such as efficiency and avoiding inconsistent judgments, we are not persuaded that the AIA commands us to favor these interests over § 1447(d) and the presumption of remand non-reviewability. Had Congress sought to permit review of remands like the one at issue here, it certainly knew how to do so . . . we leave it to Congress to grant us reviewability here if it sees fit.