Counterclaims, the Well-Pleaded Complaint, and Federal Jurisdiction
50 Pages Posted: 20 Apr 2004 Last revised: 6 Apr 2009
The United States Supreme Court recently decided, in Holmes Group, Inc. v. Vornado Circulation Systems, Inc., that the United States Court of Appeals for the Federal Circuit's exclusive appellate jurisdiction over a case could not rest solely on a counterclaim for patent infringement. This decision represents a significant departure from over ten years of established Federal Circuit patent law that even if the only patent claim present in a case was a counterclaim, the Federal Circuit still had appellate jurisdiction over the case. Federal Circuit jurisdiction over such cases made sense, considering the Federal Circuit was created by Congress to be the exclusive venue for patent appeals. In reaction to the Supreme Court's decision in Holmes, many commentators have discussed this change in the Federal Circuit's appellate jurisdiction and its effects on patent law.
Notably, none of these commentators have discussed the fundamental holding at the core of the Court's decision - that federal law counterclaims cannot form the sole basis for federal question jurisdiction. This rule of law, arguably, is a natural application of the already established well-pleaded complaint rule. However, the Holmes decision's revisiting of how one determines arising under jurisdiction presents a much needed opportunity to reexamine how the contours of federal question jurisdiction is determined. Specifically, the well-pleaded complaint rule and its application to federal law counterclaims, which lay at the base of the Holmes decision, should be reconsidered. Such a discussion is needed, considering that regional circuit courts and district courts, before and after Holmes, have had to determine the proper scope of federal question jurisdiction in cases where the only federal law claim is presented in a counterclaim. Even a state supreme court, after Holmes, has discussed the ramifications of well-pleaded complaint rule as applied to counterclaims on the interrelationship between federal and state jurisdiction over a federal claim.
This Article examines the well-pleaded complaint rule as applied to federal law counterclaims. The Supreme Court's decision in Holmes is used as a springboard to discuss the well-pleaded complaint rule, counterclaims, and federal question jurisdiction, going beyond the Holmes decision's discussion of the Federal Circuit and patent law. The Article evaluates the well-pleaded complaint rules impact on a federal district court's original federal question jurisdiction and removal jurisdiction over cases where the only federal law claim is presented in a counterclaim. Implications for certain areas of exclusive federal jurisdiction are also examined. Finally, the policy consequences of excluding counterclaims from the federal question analysis are considered, and the Article suggests potential statutory responses.
Keywords: Jurisdiction, Federal Jurisdiction, Counterclaims, Arising Under, Well-Pleaded Complaint, Holmes, Litigation
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