HOLMES v. VORNADO: A RADICAL CHANGE IN APPELLATE JURISDICTION


Joseph Etra[*]


Abstract
In a recent decision, The Holmes Group, Inc. v. Vornado Air Circulation Systems, 
Inc., the United States Supreme Court altered the treatment of patent cases at 
the appellate level, and, in doing so, significantly limited Federal Circuit 
jurisdiction.  Prior to this decision, the Court of Appeals for the Federal 
Circuit heard both appeals of cases involving patent claims and those that 
involved only patent counterclaims.  With the Holmes decision, the Supreme Court 
relied on the well-pleaded complaint rule to hold that appellate jurisdiction 
could only be based on claims on the face of the plaintiff’s complaint and, 
thus, not the defendant’s counterclaims.  This decision will likely produce far-
reaching effects in the world of patent litigation.  In order to explore its 
possible monumental impact, this Note traces the development of the law prior to 
Holmes, and analyzes the Holmes decision in light of that history, finally 
concluding with a discussion of the holding’s actual and likely ramifications.
      
[*1]      
Introduction

	Through Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.[1] the 
United States Supreme Court handed down an important decision regarding 
appellate jurisdiction over cases including patent law claims.  Ordinarily, 
appeals of district court decisions are heard by the court of appeals of the 
circuit containing the district court.  In cases involving patent claims, 
however, appeals were generally heard by the Court of Appeals for the Federal 
Circuit.  Congress formed this special court in 1982,[2] granting it exclusive 
jurisdiction over all cases involving patent claims.  Even cases without patent 
law claims were appealed there if they contained patent law counterclaims.  Such 
was the law until Holmes.[*2]
      In Holmes, the Supreme Court held that due to the well-pleaded complaint 
rule, appellate jurisdiction could only be based on claims on the face of the 
plaintiff’s complaint.  Thus, the defendant’s counterclaims could not form the 
basis of appellate jurisdiction.  This Note traces the evolution of the law 
leading up to Holmes, analyzes the Supreme Court opinions in that case, and 
discusses the actual and likely ramifications of the change in law.
	Part I reviews the pre-Holmes evolution of jurisdiction over cases with 
patent law counterclaims.  Beginning with the Federal Circuit’s assertion of 
jurisdiction in dicta in Schwarzkopf Development Corp. v. Ti-Coating, Inc.,[3] and 
including the possibly contradictory Supreme Court decision in Christianson v. 
Colt Industries Operating Corp.,[4] this section concludes with the Federal 
Circuit’s en banc rejoinder in Aerojet-General Corp. v. Machine Tool Works,[5] and 
DSC Communications Corp. v. Pulse Communications, Inc.[6] 
      After the law at the time of Holmes has been elucidated, Holmes itself is 
introduced and discussed in Part II.  Included are the facts of the case, the 
procedural history leading up to the Supreme Court’s decision, and the opinions 
of the various justices.  Finally, Part III attempts to clarify both what has 
actually happened in the wake of the Supreme Court’s Holmes decision and what 
might logically occur in the near future.  Resultant problems, actual and 
potential, are presented and solutions and alternatives are suggested and 
discussed.
	

I. A Brief History of the Law Prior to Holmes

	Prior to the Supreme Court’s decision in Holmes, a case’s counterclaims 
were sufficient to create Federal Circuit jurisdiction.  While the Supreme 
Court’s only foray into the issue arguably mandated a contrary outcome,[7] the 
Federal Circuit has consistently asserted its jurisdiction over such cases.  The 
most important milestones in the development of pre-Holmes jurisdiction over 
cases with patent counterclaims are discussed below.[*3]


A. Schwarzkopf Development Corp. v. Ti-Coating, Inc.

	In Schwarzkopf Development, the first case to deal with the issue of 
appellate jurisdiction based on counterclaims, the Federal Circuit asserted in 
dicta that a patent law counterclaim was sufficient to give it jurisdiction over 
a case.[8]  Schwarzkopf Development owned two patents on coated cement carbide 
elements and granted a non–exclusive license to Ti-Coating.  After no royalties 
were paid, Schwarzkopf sued in a New York State Court to collect the amount due 
under the license.  Ti-Coating successfully removed the case to the United 
States District Court for the Southern District of New York based on diversity.  
There, they asserted several defenses including patent invalidity, 
unenforceability, misuse, and noninfringement.  Ti-Coating also counterclaimed, 
inter alia, for a declaratory judgment that the patents were invalid, 
unenforceable, and not infringed.  All of the counterclaims were subsequently 
dismissed on Schwarzkopf’s unopposed motion and the court awarded damages to the 
plaintiff.  Ti-Coating appealed to the Federal Circuit.[9]
      The Federal Circuit was forced to decide whether it had jurisdiction over 
the appeal.  Schwarzkopf argued that, since the cause of action did not arise 
under § 1338,[10] the Federal Circuit did not have jurisdiction.  Ti-Coating, on 
the other hand, asserted that the Federal Circuit had jurisdiction based on its 
counterclaims.  In formulating its decision, the court ruled out several 
theories on which it might have jurisdiction.  According to the court, royalties 
under a patent licensing agreement do not “arise under” patent law and are not 
sufficient to bring a suit within § 1338.[11]   Further, though they may lead to 
the application of patent law, defenses also cannot “arise under” patent law.[12]  
Regarding counterclaims, however, the court made a contrary statement.  It 
stated:
      
Adjudication of a patent counterclaim is the exclusive province of federal 
courts.  The patent counts of Ti-Coating’s counterclaim, for declaratory 
judgment of patent invalidity, noninfringement, and unenforceability, are within 
the jurisdiction of the district court under § 1338.  Under 28 U.S.C.  § 
1295(a)(1), when the district court’s jurisdiction is based in part on[*4] 
§ 1338, the appeal of the entire case, not solely the patent claims, lies in 
this court.  Thus appellate jurisdiction over suits involving a § 1338 
counterclaim is assigned to the Federal Circuit.[13]

However, citing the House Report, the court stated that “immaterial, 
inferential, and frivolous” allegations of patent questions would not create 
appellate jurisdiction since they would not be sufficient to create lower court 
jurisdiction.[14]  Thus, the Federal Circuit decided that as the counterclaims 
were dismissed during the pleading stage and not subject to appeal, their 
“transient appearance” in the case was insufficient to create jurisdiction, 
thereby rendering this a contract case with federal jurisdiction based solely on 
diversity. Accordingly, the Federal Circuit transferred the appeal to the Second 
Circuit.[15]
	Despite the outcome of Schwarzkopf, this case was the definitive word on 
counterclaim-induced appellate jurisdiction for the next two years. It was 
undisputed that the Federal Circuit was the appropriate forum for such cases. 
This arguably changed with the Supreme Court’s decision in Christianson.


B. Christianson v. Colt Industries Operating Corp.

      Two years later, in Christianson, the Supreme Court was faced with similar 
issues as in Schwarzkopf.  Colt held many patents relating to the M16 rifle and 
its parts.  Various specifications essential to mass production, however, were 
kept as trade secrets, disclosed only as necessary to those who signed non-
disclosure agreements.[16]    While employed at Colt, Christianson was one such 
person.  After he left Colt, however, he started a company, ITS, which required 
the use of Colt’s proprietary information to sell M16 parts.  This prompted Colt 
to sue Christianson and ITS, among others, asserting patent infringement.  Even 
after Colt withdrew its claims, Colt notified ITS’s customers of the 
misappropriation of trade secrets and discouraged them from doing business with 
ITS.[17]  In response, Christianson filed suit under the Clayton and Sherman Acts.  
He later added a claim for state law tortious interference with a business 
relationship.  When Christianson moved for summary judgment of liability, he 
argued that Colt’s patents were invalid on enablement and best mode grounds,[18] 
and as such, the trade secrets that should have been disclosed lost state law 
protection.  The district court granted this motion.  Colt appealed to the 
Federal Circuit, which decided that it did not have jurisdiction, and 
transferred the case to the Seventh Circuit.  That court decided that the 
transfer was incorrect and returned it to the Federal Circuit.  Despite 
maintaining that it[*5] did not have jurisdiction, the Federal Circuit addressed the 
merits of the case in the “interest of justice” and reversed the district court 
decision.  Certiorari was granted to determine whether the Federal Circuit was 
correct to assert jurisdiction over the case.[19]   
      As this case was an appeal of an antitrust action with patent defenses and 
grounds for liability, the judges dealt with jurisdiction under § 1338.[20]  
Citing its own precedent, the Supreme Court argued that in order for the Federal 
Circuit to assert jurisdiction, the cause of action must be based on an issue of 
patent law:
      
In interpreting § 1338’s precursor, we held long ago that in order to 
demonstrate that a case is “arising under” federal patent law “the plaintiff 
must set up some right, title or interest under the patent laws, or at least 
make it appear that some right or privilege will be defeated by one 
construction, or sustained by the opposite construction of these laws.” Pratt v.  
Paris Gas Light & Coke Co., 168 U.S. 255, 259, 42 L.Ed. 458, 18 S.Ct. 62 
(1897).  Our cases interpreting identical language in other jurisdictional 
provisions, particularly the general federal-question provision, 28 U.S.C. § 
1331…, have quite naturally applied the same test.[21]

Further, the Court argued, just as the well-pleaded complaint rule applies to 
district court jurisdiction, linguistic consistency requires extending the same 
rule to § 1338 cases.[22]  According to the Court, § 1338 jurisdiction can be 
accomplished in two ways.  The first is if the cause of action is federal patent 
law.  The second is if the plaintiff’s right to relief cannot be decided except 
based on a substantial issue of patent law.[23]
      The Supreme Court further limited § 1338 jurisdiction.  Citing Franchise 
Tax Board v. Construction Laborers Vacation Trust,[24] it argued that “a case 
raising a federal patent-law defense does not, for that reason alone, ‘arise 
under’ patent law, ‘even if the defense is anticipated in the plaintiff’s 
complaint, and even if both parties admit that the defense is the only question 
truly at issue in the case.’”[25]  Further, even if the plaintiff alleges a theory 
dependent on patent law, there is no § 1338 jurisdiction if there are other 
unrelated, non-patent theories upon which the plaintiff could be entitled to the 
relief sought.[26]  Applying this analysis to the facts at hand, the Supreme Court 
found that the[*6] Federal Circuit was correct in its assertion that it lacked 
jurisdiction since there were theories of recovery independent of patent law.[27]
      Justice Stevens, in a concurrence joined by Justice Blackmun, argued that 
the majority opinion[28] seemed to suggest that only the original complaint and 
not subsequent amendments and pretrial dismissals should be taken into account 
in determining appellate jurisdiction.[29]  This, he argued, was illogical.  Cases 
in which all the patent counts were dropped pre-trial would go to the Federal 
Circuit while cases in which the patent claims were added later and formed the 
basis of the decision would go to the regional circuits.  This, Justice Stevens 
opined, could not have been what Congress intended.  Instead, he argued, all of 
the plaintiff’s pleadings should be taken into account when determining 
appellate jurisdiction.[30]
	While this decision dealt with appellate jurisdiction based on defenses 
and potential grounds for liability but not counterclaims, there were those who 
felt that it contradicted the Federal Circuit’s position in Schwarzkopf.  Like 
defenses, counterclaims are found in the defendant’s answer and not on the face 
of the plaintiff’s complaint.  Thus, the same logic that the Supreme Court used 
in Christianson would also foreclose Federal Circuit jurisdiction based solely 
on counterclaims.  This lack of clarity remained until the Federal Circuit’s 
opinion in Aerojet.[*7] 


C. Aerojet-General Corp. v. Machine Tool Works

	The Federal Circuit, sitting en banc, revisited the issue of appellate 
jurisdiction based on counterclaims soon after Christianson in Aerojet.  
Alleging that Machine Tool Works (MTW) knowingly made false statements that 
Aerojet misappropriated trade secrets from MTW, Aerojet filed suit.  The grounds 
of the suit included unfair competition, interference with prospective 
advantage, false representation, and Aerojet sought declaratory judgment that 
trade secrets were not misappropriated.[31]  Among MTW’s allegations was a 
compulsory counterclaim that Aerojet infringed MTW’s patents.  The district 
court stayed the action and ordered arbitration on the claims and counterclaims.  
Aerojet appealed to the Federal Circuit.[32]
	Chief Judge Markey, writing for the court, began by specifying the 
parameters of the situation to which its opinion was intended to apply.  He 
stated that “[This opinion] deals only with cases in which a nonfrivolous 
compulsory counterclaim for patent infringement has been filed in an action 
originally and properly brought in a federal district court and with the court 
to which appeals in such cases should be directed.”[33]
Thus, the decision was specifically reserved on the issue of permissive 
counterclaims.[34][*8]
      The decision then reviewed pre-Christianson statements allowing Federal 
Circuit jurisdiction based on counterclaims to determine whether the Supreme 
Court altered jurisdiction over such cases.[35]  It decided that the Court did 
not.  The Federal Circuit interpreted Christianson to stand for the proposition 
that a patent law defense is insufficient to create Federal Circuit jurisdiction 
in the absence of a patent law claim or counterclaim.  The application of the 
well-pleaded complaint rule in the absence of patent counterclaims was not 
inconsistent with Federal Circuit jurisdiction in cases where such claims did 
exist.  In Aerojet, the counterclaim would have “arisen under” the patent laws 
if it had been filed as a complaint in a separate suit. The Federal Circuit 
therefore held it would be incongruous to deny jurisdiction over the same claim 
simply because it was a counterclaim.[36]  Further, MTW’s counterclaim constituted 
a well-pleaded claim with an independent jurisdictional basis.  The Supreme 
Court held in Christianson that jurisdiction is based on claims, not issues[37]— 
and a counterclaim is a claim.  It becomes part of the suit early enough to 
still allow a clear jurisdictional picture.  Furthermore, district courts 
previously looked to counterclaims to create federal question jurisdiction. Even 
when a complaint is dismissed, suits have gone forward on the basis of 
counterclaims.  The Federal Circuit further argued that the well-pleaded 
complaint rule is intended to prevent “potentially serious federal-state 
conflicts.”[38]  This does not apply here, as the only issue is which federal 
appellate court has jurisdiction.  Therefore, the Federal Circuit determined 
that Christianson did not foreclose Federal Circuit jurisdiction based on 
counterclaims.[39]
      In its decision, the court suggested a major policy reason for giving the 
Federal Circuit jurisdiction.  Congress’ stated goal in creating the court was 
to foster national uniformity in the area of patent law.  Allowing the Federal 
Circuit jurisdiction based on the complaint and compulsory counterclaims worked 
toward this end.  While clearly not every suit involving patents was intended to 
go to the Federal Circuit, cases including well-pleaded, non-frivolous claims 
were.  Congress never mentioned the well-pleaded complaint rule.  Since the rule 
would frustrate Congressional intent, it should not be[*9] strictly applied.  As 
such, the Federal Circuit concluded that appellate jurisdiction could be based 
on non-frivolous, compulsory counterclaims.[40]


D. DSC Communications Corp. v. Pulse Communications, Inc.

	In DSC Communications, the Federal Circuit expanded their holding in 
Aerojet to non-frivolous, permissive counterclaims.  DSC sued Pulse asserting 
copyright infringement, misappropriation of trade secrets, and tortious 
interference with business expectancy.  Pulse counterclaimed accusing DSC of 
patent infringement.  The lower court decided in favor of the defendant on the 
plaintiff’s claims and the plaintiff on the counterclaim.[41]  Both parties 
appealed.  The Federal Circuit decided that it had jurisdiction, stating:

[W]e see no sufficient basis in the language or purpose of section 1295(a)(1) to 
distinguish between compulsory and permissive counterclaims…. We therefore hold 
that any counterclaim raising a nonfrivolous claim of patent infringement is 
sufficient to support this court’s appellate jurisdiction.[42] 

This doctrine, that the Federal Circuit has jurisdiction over the appeal of 
cases involving patent law counterclaims, remained law until Holmes.


II. The Holmes Decision

	With the Holmes decision, the Supreme Court unanimously held that the 
regular circuit courts, as opposed to the Federal Circuit, was the proper forum 
for the appeal of cases with patent law counterclaims.[43]  Three justices, in two 
separate concurrences, favored narrower bases for the decision than the 
majority. This section discusses the facts and procedural history of Holmes as 
well as the differing opinions of the justices. 


A. Facts of Holmes

      Vornado Air Circulation Systems, Inc. (“Vornado”) manufactures fans 
featuring spiral grills.  In 1992, they sued a competitor, Duracraft, alleging 
trade dress infringement (“Vornado I”).[44]  The district court issued a 
preliminary injunction enjoining Duracraft[*10] from manufacturing fans with spiral 
grills as Vornado requested,[45] but the Court of Appeals for the Tenth Circuit 
reversed, arguing that trade dress protection was inapplicable since the grill 
design was a “significant inventive aspect” of a utility patent owned by 
Vornado.[46]
	On November 26, 1999, Vornado filed a complaint with the International 
Trade Commission (“ITC”) seeking to prohibit the Holmes Group (“Holmes”) from 
importing fans and heaters with spiral grills based on, among other things, the 
trade dress that had been held unenforceable in Vornado I.  Shortly thereafter, 
Holmes filed an action in Kansas, a jurisdiction within the Tenth Circuit, 
seeking a declaratory judgment that its products did not infringe Vornado’s 
trade dress and an injunction preventing Vornado from accusing it of 
infringement.  Vornado included a compulsory counterclaim for patent 
infringement in its answer.  Holmes then moved for summary judgment on the trade 
dress issue.  The court granted this motion, rejecting the argument that a 1999 
opinion by the Court of Appeals for the Federal Circuit[47] constituted “change of 
law” and finding collateral estoppel to exist based on Vornado I.[48]  Over 
Holmes’ jurisdictional objections, Vornado appealed this decision to the Court 
of Appeals for the Federal Circuit, which vacated the district court’s opinion 
and remanded for a determination as to whether the United States Supreme Court’s 
resolution of the circuit split would constitute “change in the law.”[49]  Holmes 
petitioned the Supreme Court for certiorari to determine whether the Federal 
Circuit had the jurisdiction to entertain the appeal.[50]  Certiorari was 
granted[51] as to the first[52] and third questions[53] posed by the petition.


B. The Supreme Court’s Decision in Holmes[*11]
      
      While the Supreme Court was unanimous in finding that the Federal Circuit 
did not have jurisdiction, there are three separate opinions that differ in 
significant regards.  Justice Scalia, writing for a majority of six justices, 
treated this case as if its outcome were obvious based on general jurisdictional 
rules and Supreme Court precedent.  He advocated determining whether there is 
Federal Circuit jurisdiction by applying the same type of test used for 
establishing federal jurisdiction.  In concurrence, Justice Stevens also felt 
that the outcome was clear based on precedent, but called for a slightly 
modified test since the Federal Circuit is an appellate rather than a district 
court.  Justice Ginsburg, writing for herself and Justice O’Connor, concurred in 
judgment but advocated an approach to appellate jurisdiction that was very 
different from that of the majority.
      
      
1. The Well-Pleaded Complaint Rule

   	There are several different bases upon which the jurisdiction of federal 
courts is based.  One of the more common is “federal question jurisdiction,” 
codified as 28 U.S.C.  § 1331.  The courts have found that this section’s use of 
the phrase “arising under” raises “a welter of issues regarding the 
interrelation of federal and state authority and the proper management of the 
federal judicial system.”[54]  One of the best-known explanations of the phrase, 
that of Justice Oliver Wendell Holmes, is that “[a] suit arises under the law 
that creates the cause of action.”[55]  However, this better describes the 
majority of cases where federal jurisdiction is present rather than being a hard 
and fast rule as to when it is not.  If we were to follow Justice Holmes’ rule 
as written, we would mistakenly think that a case would not “arise under” if the 
complaint required determining the meaning and application of Federal law but 
the claims were state claims.  Consequently, we determine “arising under” using 
the well-pleaded complaint rule.[56]
      The Supreme Court has summarized the rule as follows:

Whether a case is one arising under the Constitution or a law of the United 
States, in the sense of the jurisdictional statute, …must be determined from 
what necessarily appears in the plaintiff’s statement of his own claim in the 
bill or declaration, unaided by anything alleged in anticipation of defenses 
which it is thought the defendant may interpose.[57] 

In short, if the plaintiff’s complaint provides sufficient grounds, there is 
federal jurisdiction.  There are two ways in which this can be accomplished.[58]  
The first is Justice[*12] Oliver Wendell Holmes’ test, that federal law creates the 
cause of action.[59]  The other test is based on an old Supreme Court decision, 
Smith v. Kansas City Title & Trust Co.[60]  If the vindication of the plaintiff’s 
rights necessarily turns on some construction of federal law, there is federal 
jurisdiction.  As long as one cause of action set forth in the plaintiff’s 
complaint requires the resolution of a federal issue and cannot be decided on 
other grounds, this test is satisfied.


2. The Scalia Majority

      In the majority opinion, Justice Scalia opined that the well-pleaded 
complaint rule applies to Federal Circuit jurisdiction, and not just to original 
federal jurisdiction.[61]  28 U.S.C. § 1295(a)(1),[62] which deals with Federal 
Circuit jurisdiction, references claims based on § 1338(a)[63] which grants 
original jurisdiction over patent, copyright and[*13] trademark actions to federal 
district courts.  Section 1338 uses the same operative language as § 1331, the 
general federal jurisdiction statute.[64]   Justice Scalia stated that because 
linguistic consistency requires the Court to use the same standard, the “well-
pleaded complaint” rule should determine jurisdiction over patent actions as 
well.[65]  To do otherwise would be an “unprecedented feat of necromancy.”[66]
      Under the holding in Holmes regarding the Federal Circuit, the well-
pleaded complaint rule requires that the determination whether the case arises 
under patent law be based solely on the plaintiff’s complaint.  Federal patent 
law must provide the cause of action or the plaintiff’s relief must depend on a 
substantial question of patent law.[67]  The answer is not taken into account in 
determining jurisdiction.  As the answer is where the counterclaims appear, they 
may not be the basis for jurisdiction.  Justice Scalia identifies three reasons 
for this.  First, the plaintiff is always the master of the complaint and can 
tailor it to avoid federal jurisdiction.[68]  To allow the defendant to control 
the forum by adding a counterclaim is contrary to this idea.  Second, federal 
jurisdiction based on counterclaims would produce an undue amount of removal 
jurisdiction, undermining the “independence of state governments.”[69]  Finally, 
regarding appellate jurisdiction, allowing patent law to be different from other 
areas of federal jurisdiction would be confusing and would undermine the well-
pleaded complaint rule.[70]
   While Justice Scalia recognized that Congress intended to foster uniformity 
of federal patent law by creating the Federal Circuit, he argued that 
maintaining linguistic consistency and applying the well-pleaded complaint rule 
are the more important concerns.[71]  Consequently, the regional circuits once 
again will have to deal with patent issues.


3. The Stevens Concurrence

      While Justice Stevens also favored the use of the well-pleaded complaint 
rule, he advocated taking into account more than just the complaint.  Unlike 
original jurisdiction that deals with the case from its inception, appellate 
jurisdiction takes place after additional pleadings are filed and decisions 
rendered.  Thus, the time to determine[*14] appellate jurisdiction is at the time of 
the appeal, not the time of the complaint.[72]  All pleadings filed by the 
plaintiff should be taken into account.  Such an interpretation remains true to 
the ideals of the well-pleaded complaint rule while taking into account the 
nature of the appellate system.  Amended claims dealing with patents would 
create Federal Circuit jurisdiction, while the dropping of the original patent 
claims would eliminate it.  This, Justice Stevens argued, would be 
appropriate.[73]  
	Like the majority position, Stevens’ concurrence allows regional circuits 
to hear appeals with patent counterclaims.  Justice Stevens felt, however, that 
permitting courts other than the Federal Circuit to deal with patent issues 
would benefit the system.[74]  Conflicts between circuits would show the Supreme 
Court what areas of law need to be clarified and would lead them to grant 
certiorari to appropriately ripe cases.  Further, the regional circuits have 
less institutional bias[75] than the Federal Circuit, and this would lead to a 
fresh perspective on the law.[76]


4. The Ginsburg Concurrence

	While concurring in the judgment, Justices Ginsburg and O’Connor took a 
very different approach in dealing with Federal Circuit jurisdiction in general.  
Unlike the other two factions, Justice Ginsburg argued that the logic set forth 
in Aerojet[77] is convincing and, thus, a counterclaim that “arises under” is 
sufficient to cause any consequent appeal to be sent to the Court of Appeals for 
the Federal Circuit.  Further, the stated Congressional interests of eliminating 
forum shopping and fostering uniformity are also fostered by this position.[78][*15]
	The test advocated by Justices Ginsburg and O’Connor is simple and 
straightforward.  If a patent law claim is actually adjudicated, the Federal 
Circuit has jurisdiction over the appeal.[79]  As the patent claims in Holmes 
were stayed and only the trade secret issues were dealt with in the instant 
case, the circuit with jurisdiction over non-patent cases, i.e. the regional 
circuit, had jurisdiction.[80]  


III. The Post-Holmes World


A. What Actually Has Happened

	Since the Supreme Court’s decision, several types of cases have cited the 
majority opinion.  The Federal Circuit has applied it to patent cases.[81]  The 
Supreme Court of Indiana has expanded the decision to apply to federal 
jurisdiction over patent and copyright cases.[82]  Further and less significantly 
for this note,[83] Holmes has been cited as a recent affirmance of the well-
pleaded complaint rule and the proposition that counterclaims cannot be the 
basis for jurisdiction.[84]  Some specific examples follow.
      The Federal Circuit has had several situations in which to apply this 
landmark case.  In Medigene v.  Loyola University of Chicago, the parties 
consented to transfer the appeal to the Court of Appeals for the Seventh Circuit 
in light of Holmes.[85]  The next[*16] mention was in a concurrence written by Judge 
Dyk in Vardon Golf Co., v.  Karsten Manufacturing Corp.[86]  He briefly commented 
that despite Holmes, uniformity of law is important and this has an effect on 
choice of law.[87]  In Telecomm Technical Services, Inc. v. Siemens Rolm 
Communications, the case was transferred to the Eleventh Circuit since the 
patent law claims were only present in the counterclaims.[88]  In BBA Nonwovens 
Simpsonville, Inc. v.  Superior Nonwovens L.L.C.[89]  and Golan v. Pingel 
Enterprises,[90] the Federal Circuit asserted that it did have jurisdiction based 
on the plaintiffs’ complaints under Holmes.  Thus, the Holmes decision has been 
followed.
      The Supreme Court of Indiana also applied the Holmes holding in Green v. 
Hendrickson Publishers.[91]  It opined that since a counterclaim cannot create 
Federal Circuit jurisdiction and, similarly, cannot create original federal 
jurisdiction, the state courts can hear patent law claims included in the 
answer and/or counterclaims.  Since § 301 of the Copyright Act states that 
copyright claims “arising from” it have federal jurisdiction, a counterclaim is 
insufficient to create jurisdiction.[92]  This allows the state courts to judge 
issues of federal copyright law.[93]  Prior to Holmes, state courts very rarely 
dealt with federal patent and copyright law counterclaims.  Although 
counterclaims could not be grounds for removal of the case to the federal court 
system[94] and state courts dealt with patent law defenses,[95] § 1338 provides the 
federal courts with exclusive jurisdiction[*17] over patent claims.  Because 
counterclaims are treated like separate actions regarding jurisdiction,[96] state 
courts may deal only with those with which they would have been able to deal had 
they been asserted in the plaintiff’s complaint.[97]  If there was exclusive 
federal jurisdiction over a counterclaim, it would have been dismissed with 
leave to refile as a separate suit in federal court.[98]  As noted by the Supreme 
Court of Indiana in Green, this is no longer so.[99]  Since counterclaims do not 
“arise under” at all, they cannot be the basis for federal jurisdiction.[100]  
Thus, following the precedent set in Indiana, state courts may now deal with 
patent claims.[101][*18]


B. Issues Raised by the Decision

      The Holmes decision and its aftermath raise many issues and potential 
problems.  Regional circuits and state courts will now have the opportunity to 
deal with substantive patent law claims.  If regional circuit courts of appeals 
weigh in on substantive patent issues frequently, it may lead to choice of law 
problems.  No guidelines have been given as to what law should and will be used 
by the courts that have not been dealing with such issues and, for that matter, 
the district courts that have.  Forum shopping and races to the courtroom are 
likely to become rampant.  Multiple suits emerging from the same facts and 
situations might also occur.[102]   As a result, this may lead to great costs and 
strains on the judicial system.  Holmes also left several loose ends that still 
need to be decided via litigation.  As such, Holmes leaves the future of patent 
litigation in the United States very uncertain.


1. Choice of Law

      As mentioned above, assuming that regional circuit courts of appeals weigh 
in on substantive patent issues frequently, the implications of the Holmes 
decision include choice of law problems.  One factor that parties will consider 
in deciding whether to avoid the Federal Circuit is the regional circuits’ 
choice as to whose law will be applied to patent appeals.  It is clear from the 
Holmes opinions that the regional circuit courts are free to disagree with both 
new Federal Circuit decisions and precedents.  While Justice Scalia only implied 
this,[103] Justice Stevens stated it outright.  Explaining the potentially 
beneficial effects of circuit court decisions free from the institutional bias 
of the Federal Circuit, Justice Stevens opined that the resulting conflicts 
would highlight issues for the Supreme Court to review.[104]  However, it is 
unclear whether this invitation to create new precedent will be accepted.
      There are several possibilities as to which circuit’s law the various 
regional circuits will use.  Different circuits might choose different 
approaches.[105]  Prior to the[*19] creation of the Federal Circuit in 1982, the 
appellate courts regularly heard patent cases, creating precedents of their 
own.[106]  It is possible that they will pick up where they left off and apply 
their own pre-1982 precedents.  Another possibility is that the regional 
circuits will use Federal Circuit law, as the district courts have been 
doing.[107]  To do otherwise would make the job of a district court judge very 
difficult; in order to know which circuit’s law to use, he would have to try to 
predict which court would hear the appeal.  It is also possible that the 
regional circuits will adopt only the Federal Circuit precedents handed down 
prior to Holmes[108] and establish their own precedents for new issues.  The final 
possibility is for the regional circuits to afford no precedential effect to 
previous decisions and treat each appeal as if it presents novel issues, 
creating new precedents.  Under such circumstances, the prior decisions of the 
other circuits might be used only for advisory purposes.  No matter which one or 
more of the four possibilities is actually used, unnecessary complexity will 
likely arise.
      A more significant problem is likely to occur with the use of regional 
circuit law for non-patent law claims within the cases.  One of the areas where 
this is expected to be evident is with antitrust law.  The Holmes decision is 
good for antitrust lawyers since the Federal Circuit has been viewed as pro-
patent and anti-antitrust.[109]  In a position paper from Townsend and Townsend 
and Crew LLP, one attorney commented: 
      
Some lawyers regard the Federal Circuit as hostile to patent antitrust claims.  
Decisions such as Intergraph v.  Intel seem to support this view.  I would 
expect those lawyers to be looking for opportunities to frame claims that will 
be considered by the regional circuits on appeal, rather than by the Federal 
Circuit.  Now that the Supreme Court has spoken, the[*20] regional Circuits are back 
in the ball game on patent antitrust issues.  Thus I would expect to see 
considerably more activity in this area over the next few years, which may rein 
in some of the more aggressive patent licensing programs.[110]

Since antitrust cases often have patent counterclaims,[111] the ability to go to 
another circuit is good news for lawyers trying such cases.  Following Holmes, 
Telcomm Technical Services, Inc. v. Siemens Rolm Communications, an antitrust 
case, was transferred to a regional circuit.[112]
	Another area fraught with problems will be choice of law in situations 
where rules laid down by the Federal Circuit differ from those laid down by the 
Supreme Court, particularly when the Federal Circuit has a more stringent rule 
than that laid down by the Supreme Court.  While the Supreme Court’s limitation 
is certainly binding on the regional circuits, those courts have no obligation 
to follow the stricter rule of the Federal Circuit.  This problem will also 
arise in circumstances where the Federal Circuit has ignored Supreme Court 
decisions, as in the area of claim construction.  Markman v.  Westview 
Instruments, decided by the Supreme Court,[113] would be binding on all courts 
while the Federal Circuit’s narrower decision on the same matter, Cybor Corp. v. 
FAS Technologies,[114] would not.  


2. Forum Shopping and the Rush to the Courtroom

      In addition to affecting the judiciary, Holmes also creates issues for the 
litigating parties.  While the choice of law issue applies to courts, for 
litigants Holmes creates the problem of forum shopping.  Forum shopping concerns 
the plaintiff’s choice of where to bring the case and which claims to include.  
Prior to the formation of the Federal Circuit, when the various appellate courts 
decided patent cases, choosing the forum constituted a pivotal element of any 
case.  For example, the Eighth Circuit almost never upheld a patent’s validity, 
making it a favorite forum for accused infringers.[115]  Now, following Holmes, 
there will again be variety in the applied law and forum shopping will return 
with renewed vigor.  Chief Judge H. Robert Mayer of the Federal Circuit agrees 
that Holmes is likely to foster forum shopping and may return the state of 
patent law to that[*21] existing before the Federal Circuit’s creation.[116]  
Similarly, attorney Steven Lippman noted:

On a relatively narrow issue of law, the Supreme Court has continued the 
criticism of the Federal Circuit’s unique role in the oversight of patent law.  
The Court’s failure to adopt a pragmatic interpretation of Congress’ grant of 
exclusive appellate jurisdiction of the Federal Circuit on patent issues, risks 
a return to the day of Circuit-shopping.[117]

Accordingly, cases most probably will be filed within circuits that are 
favorable on the particular issues of the case.  Careful pleading will be in 
vogue as plaintiffs’ attorneys attempt to artfully tailor the complaint to 
guarantee or avoid the Federal Circuit.
	The “race to the courthouse” will also be present.  As only the plaintiff 
can control jurisdiction, the two sides will each try to be the one to file 
first and reap the benefits of controlling the suit.[118]  More hastily filed 
suits and increased litigation may result.  The ordinary incentive to negotiate 
settlements and resolve matters out of court will be offset by the risk of 
losing the first-filer advantages and ending up in an unfavorable jurisdiction.  
Despite the fact that suits are expensive, parties are unlikely to continue 
talks that are not going well when doing so could come at a high cost if the 
opponent sues first.[*22]  


3. Separate Suits Emerging From the Same Facts and Situations
	
      The problem of multiple suits emerging from the same matter could also 
arise in the wake of Holmes.  While compulsory counterclaims are lost if not 
asserted, permissive counterclaims can be withheld and used as grounds for a 
separate suit.  As patent holders want their claims adjudicated with the option 
of appeal to the Federal Circuit, they will likely file a separate patent suit 
instead of bringing permissive counterclaims in a case that will go to a 
different circuit.  This will further backlog the judicial system and increase 
expenses.  Furthermore, there will likely be a large number of disagreements at 
the appellate level over whether a counterclaim was compulsory and a second suit 
may be estopped.
	Another possible manifestation of the multiple suit problem is competing 
suits.  Each party will attempt to file in a jurisdiction favorable to its 
cause.  The judges will then have to determine whether to follow the first-filed 
rule or whether other considerations require a different outcome.  There will 
also be tenuous claims of jurisdiction in a particular, favorable venue leading 
to many more Rule 12 motions to dismiss.  In all likelihood, there will be 
substantially more suits and issues to litigate as a result of Holmes.


4. Delays, Poor Decisions, Uncertainty in the Bar

      A serious strain on resources may result from the Holmes decision.  
Regional circuit judges and state judges are ill equipped to deal with technical 
matters.  They are familiar with neither the technologies nor the precedents in 
the area.  Almost none of them have dealt with patent issues and it is unlikely 
that they wish to start now.  Consequently, it will take significantly more time 
and effort on the part of the parties and the jurists to successfully conclude a 
case in a reasonable amount of time.  As one attorney commented, “The clear 
losers in this case are the appellate judges around the country who thought that 
with the creation of the Federal Circuit they would not have to hear another 
patent case – with all the esoteric questions of law and technology that tend to 
come with them.”[119]  This inexperience and dislike of patent cases will likely 
lead to large numbers of incorrect and/or poor decisions.  Consistency may also 
suffer as the judges may not understand the technical science of the patents and 
the Supreme Court most probably will not have the time or inclination to rectify 
anything but the most egregious of problems.
      Time delays may also result.  Patent appeals will take a long time to be 
heard as the regional circuits and state courts will be hearing the cases in 
addition to their already full dockets.  Additional delays are likely to result 
from the inexperience of the judges in dealing with these matters.  These delays 
will be inherently problematic for patent holders.  Since technology is 
constantly improving, there is a limited window for exploiting a given patent.  
While the validity, enforceability, etc. of a patent are tied up in[*23] litigation, 
the owner is unable to take full advantage of her intellectual property.  As 
such, increasing the length of suits poses serious problems.
      Additionally, Holmes presents problems for attorneys.  Before Holmes, a 
lawyer could count on the fact that Federal Circuit law would be used for 
patents and many other related areas.  Only a limited knowledge of regional 
circuit law was necessary.  Now attorneys will have to be well-versed and 
experienced to practice in front of multiple circuits, even at the district 
court level.  Patent prosecutors and licensing agents will have to take into 
account the law of multiple circuits in drafting their work.  They too can no 
longer count on Federal Circuit rules being applied.  
      
      
5. History Shows That Problems are Likely

      While only time will tell who is correct, an analysis of past cases in 
light of the Holmes decision could prove to be a good indicator as to the 
effects it will have on patent litigation.  To this end, a one month period 
between the Aerojet and Holmes decisions was randomly selected and the fact 
patterns of twenty-six cases from this time period involving patent infringement 
were scrutinized to determine which could be artfully pleaded such that an 
appeal would have gone to a regional circuit or state court rather than the 
Federal Circuit.[120]  No causes of action unsupported by the facts at hand were 
considered.[121]  Although eighteen of the cases (69%) could not have been pleaded 
to avoid the Federal Circuit,[122] eight (31%) could have been so pleaded and are 
addressed below.[123][*24]  
      One such case is Unique Coupons, Inc. v. Northfield Corp.[124]  Unique 
accused Northfield of infringing its patents.[125]  Northfield counterclaimed that 
the patents were invalid, that their product did not infringe, that the patents 
were unenforceable and that Unique engaged in federal and state unfair trade 
practices.[126]  While the plaintiff’s infringement claim and most of the 
counterclaims were clearly patent related, the unfair trade practice claim was 
not.  Northfield based this cause of action on allegations supposedly made by 
Unique to Northfield’s customers that the Model 3200 coupon inserter infringed 
their patents and that they would sue anyone who would buy it.[127]  In a 
responsive brief, Northfield further explained that the statements in question 
alleged that they were violating an earlier injunction pertaining to the Model 
1600 by marketing the Model 3200.[128]  In a post-Holmes world, this suit could 
have been artfully pleaded to avoid the Federal Circuit.  Northfield could have 
preemptively sued Unique alleging state and federal unfair trade practices.  As 
the accused statements were that they were violating an injunction, whether or 
not they were infringing Unique’s patent was truly irrelevant.  To win, 
Northfield would have to prove the statements false – that the Model 3200 was 
not subject to the earlier injunction – not that the Model 3200 did not infringe 
the patents, thereby avoiding the Federal Circuit on appeal. 
      A second case where the Federal Circuit could have been avoided is 
Townshend v. Rockwell International Corp.[129]  Townshend invented the technology 
underlying 56K modems.[130]  In October 1997, he sued Rockwell and Conexant in San 
Mateo Superior Court alleging state law violations, including unfair 
competition, misappropriation of trade secrets, breach of contract, and breach 
of confidence.  Patents on the technology were issued to Townshend in September 
and November 1998.  In 1999, he filed a patent infringement action against 
Conexant and dismissed the state action without prejudice.[131]  Besides claiming 
infringement of his three patents, he also asserted the four state law[*25] claims.  
Conexant counterclaimed that Townshend had engaged in inequitable conduct and 
patent misuse.  Additionally, it alleged that he and 3M (the owner of the 
patents) engaged in federal and state antitrust by obtaining invalid patents 
necessary to the operation of 56K modem chipsets, fraudulently procuring an 
industry standard requiring the use of their products, and denying the 
technology to the competition.  Conexant further explained that Townshend and 3M 
lobbied the International Telecommunications Union (ITU) to adopt a standard 
including Townshend’s technology but failed to tell them that they were suing to 
protect necessary elements of the proposed standard.[132]  As Townshend had four 
state law claims prior to being awarded the patents, he certainly could have 
maintained a trade secret suit and avoided the Federal Circuit.
      On March 20, 2000, the United States District Court, Eastern District of 
Louisiana issued an order in the Superior Merchandise case.[133]  Based on a 
patent for decorative beads, Superior sued MGI for patent infringement and trade 
dress infringement under Section 43 of the Lanham Act.  The defendants 
counterclaimed alleging patent invalidity and state law unfair competition.[134]  
The trade dress and unfair competition claims each could have been a basis to 
avoid the Federal Circuit.[135] 
      Another case that could have been artfully pleaded is Bristol-Myers Squibb 
Co. v. Ben Venue Labs.[136]  Bristol-Myers Squibb (“Bristol”) sued multiple drug 
companies alleging infringement of their patents covering methods for the use of 
Taxol, an anticancer drug.  The defendants counterclaimed on multiple grounds.  
First, they accused Bristol-Myers Squibb of unfair competition under state 
law.[137]  Second, based on Bristol’s statements during Congressional hearings, 
the defendants claimed that they relinquished their patent monopoly and were, 
therefore, estopped from asserting it.[138]  Additionally, the defendants claimed 
violations of the Sherman Act and Walker Process[139] counterclaims.  More 
specifically, they alleged that Bristol improperly obtained exclusive licenses 
to government patents by employing a “blatantly incorrect” interpretation of 
their Cooperative Research and Development Agreement (CRADA) and secured orphan 
drug exclusivity to block a competitor’s product that was approaching the[*26] 
market.[140]  Further, the defendants claimed that Bristol secured their patents 
through fraud and inequitable conduct and attempted to enforce these sham 
patents (Walker Process counterclaims).[141]  Finally, the defendants 
counterclaimed for a declaratory judgment of noninfringement, invalidity, and 
unenforceability of the asserted patents.[142]  As the estoppel and non-Walker 
Process antitrust counterclaims would not have been basis for Federal Circuit 
jurisdiction, this suit could have been pleaded in such a way as to direct its 
appeal to a regional circuit court of appeals.[143] 
      Whiteside Biomechanics, Inc. v. Sofamor Danek Group, Inc.[144] could also 
have avoided the Federal Circuit.  This is a trade secrets case involving the 
patents resulting from both the secrets allegedly disclosed by the plaintiff, 
Whiteside, to the defendants, Danek and Danek’s subsequent work.  Whiteside 
claimed breach of common law duty, unfair competition, misappropriation of trade 
secrets, misappropriation of trade secrets through acquisition by improper 
wrongful means and breach of confidence, and requested correction of 
inventorship on three of Danek’s patents.[145]  The defendants counterclaimed on 
six grounds – patent infringement, correction of inventorship of a patent, 
breach of common law duty, unfair competition, misappropriation of trade 
secrets, and misappropriation of trade secrets through acquisition by improper 
wrongful means and breach of confidence.[146]  Were this case to be pleaded based 
solely on trade secret law, resultant appeals would avoid the Federal Circuit.
      Similarly, in Hardwood Line Manufacturing Co. v. Whyco Technologies, 
Inc.,[147] the plaintiff could have avoided Federal Circuit jurisdiction.  
Hardwood sued Whyco alleging patent infringement, trademark infringement, and 
unfair competition.[148]  Thus, if Hardwood had omitted the patent infringement 
claim, it would have been a trademark suit that would have gone to a regional 
circuit court of appeals.[149]
      Windsor Industries, Inc. v. Pro-Team, Inc[150] is another case that could be 
selectively pleaded to ensure the regional circuit heard the appeal.  Windsor 
filed a[*27] declaratory judgment against Pro-Team alleging that its vacuums do not 
infringe Pro-Team’s design patent.  The defendants counterclaimed alleging 
patent infringement, trade dress infringement, dilution of trademark, and injury 
to business reputation in violation of 15 U.S.C. § 1125.[151]  If Pro-Team had 
filed an action based solely on the trade dress and Lanham Act claims, there 
would have been no appellate jurisdiction for the Federal Circuit under § 1295.
      Similarly, in the Southern District of New York, System Management Arts 
(“Smarts”) sued Avesta Technologies (“Avesta”) alleging patent infringement, 
unfair competition, breach of contract, interference with contractual relations 
and unjust enrichment.  These claims were based on Avesta’s software and 
confidential information supposedly appropriated by Avesta’s Chief Technical 
Officer.[152]  Counterclaims were filed for a declaratory judgment, Lanham Act 
unfair competition, patent misuse, common law unfair competition, and state law 
violations.[153]  Smarts allegedly initiated the lawsuit to prevent Avesta from 
bringing a competing product to market.  Further, Smarts and its president were 
said to have publicized false information about the lawsuit to Avesta’s 
detriment.[154]  The Federal Circuit could have been avoided had Smarts sued 
asserting only trade secret misappropriation.
      If this study proves representative, those who theorized that Holmes would 
have a significant effect on appellate jurisdiction over patent claims will be 
proven correct.  From the results of this representative sampling—that 31% of 
cases could be artfully pleaded—it seems that the regional circuits and state 
courts will frequently be faced with counterclaims of patent law. The resultant 
issues are, thus, quite significant.  While there is no evidence that the cases 
discussed would have been artfully pleaded to avoid the Federal Circuit, the 
mere fact that it could have be done is troublesome.  As long as the possibility 
exists and litigants occasionally take advantage of it, the foreseen problems 
may ensue. 


C. Unresolved Issue: Amendments

      It is unclear whether anything other than the plaintiff’s original 
complaint should be taken into account in determining jurisdiction.  In 
Christianson, the majority equated the basis for Federal Circuit jurisdiction 
with that of the district courts.  In rejecting Colt’s contention that the 
appropriate basis was the case actually litigated, the court favored an “ex ante 
hypothetical assessment of the elements of the complaint that might have been 
dispositive.”[155]  While the majority specifically refrained from deciding the[*28] 
effect of amended complaints,[156] Justice Stevens pointed out that the “ex ante 
hypothetical assessment” might suggest “that whether patent claims are properly 
before the Federal Circuit on appeal should be determined by examining only the 
initial complaint and not by ascertaining whether a patent claim in fact was 
litigated in the case.”[157]  Justice Stevens disagreed with this as well as the 
majority’s insistence that appellate jurisdiction is determined the same way as 
original jurisdiction.  He demonstrated his point with an example.  If a 
plaintiff filed a complaint alleging patent infringement and antitrust 
violations but dropped the infringement claim in advance of trial, it makes 
sense for the appeal to go to a regional circuit.  If, however, the original 
complaint contained only an antitrust claim and the plaintiff later asserts a 
patent infringement claim that was actually litigated, the appeal would 
logically go to the Federal Circuit.  As such, Justice Stevens argued, appellate 
jurisdiction should be based on the plaintiff’s claims that are tried – whether 
contained in the original or amended complaint – and not on those that are 
dropped.[158] 
	A similar uncertainty comes up in the majority of Holmes.  The court again 
reserved judgment on the effect of amendments.[159]  Justice Stevens pointed out 
that the court’s opinion relied solely on cases involving removal jurisdiction 
of the district courts.[160]  This, like the majority’s statements in 
Christianson, might be taken as an endorsement to use only the plaintiff’s 
original complaint in determining appellate jurisdiction. Therefore, Justice 
Stevens reiterated his examples and arguments from Christianson and expressed 
his disagreement with the majority to the extent that its opinion encourages 
ignoring which of the plaintiff’s claims was actually litigated.[161]
	The resolution of this issue is critical.  Consideration of only the 
original complaint will afford the plaintiff unreasonable leeway.  As Justice 
Stevens argued, “[t]hat approach would enable an unscrupulous plaintiff to 
manipulate appellate court jurisdiction by the timing of the amendments to its 
complaint.”[162]  If a plaintiff wishes to avoid Federal Circuit jurisdiction, he 
could omit the patent law claims from the original complaint and include them in 
an amended complaint.[163]  Similarly, to get Federal Circuit jurisdiction for a 
non-patent suit, a patent law claim could be included in the original[*29] complaint 
and dropped.[164]  This forum manipulation could be advantageous to the plaintiffs 
and would be harmful to the system.
	If, on the other hand, amendments are taken into account, the well-pleaded 
complaint rule would differ on the appellate level. This would be contrary to 
the court’s arguments for “linguistic consistency” and identical application of 
the well-pleaded complaint rule on district and appellate levels.  Were the 
Court to alter this by allowing the use of additional documents and a later 
point of fixing jurisdiction, it would be acting contrary to its own arguments 
in Holmes.  Faced with the alternative, Justice Scalia might himself be forced 
into a “feat of interpretive necromancy.”[165]


D. What Should Be Done?

	There are several possible reactions in the wake of Holmes.  On the one 
hand, there is an urge to do nothing, to wait and see whether the foreseen 
problems really materialize.  If they do, solutions could be worked out to deal 
with what actually occurs.  This inertial response, however, brings with it the 
risk of mayhem.  
      There are several suggestions as to what can actively be done.  One 
suggestion calls for taking advantage of the second prong of the Christianson 
test.[166]  If a question of patent law is necessary for relief, the Federal 
Circuit has jurisdiction.[167]  The defendant-patent holder can stretch this and 
argue that in virtually all cases involving patents,[*30] regardless of whether the 
main issue is one of patent law, the case cannot be decided without patent 
law.[168]  This argument, however, is unlikely to succeed unless an appellate 
court applies this principle.  It is possible, though unlikely, that the Federal 
Circuit will support this approach in order to maintain its goal of 
uniformity.[169]  A regional circuit desperate to get these cases off its docket 
might also aggressively apply the second prong of the Christianson test.
	A second suggestion is for Congress to take action.  The Supreme Court has 
destroyed the uniformity that Congress attempted to foster in forming the 
Federal Circuit.  As such, there are those who think that Congress will mitigate 
the effects of Holmes through legislation.[170]  As one attorney commented:

The original intent of Congress in forming the Federal Circuit was to establish 
some continuity and consistency when settling patent law disputes.  This 
decision is contrary to Congress’ clear mandate to have the Federal Circuit 
settle patent law disputes.  Now it’s just a question of how long it will take 
for a bill to be introduced which will reestablish the Federal Circuit’s 
jurisdiction over patent law disputes.[171]

      Not everyone, however, feels that Holmes will have much problematic effect 
on appellate jurisdiction over patent claims.  As Neil Smith, an attorney at 
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, said, “I think it’s more saying 
the Federal Circuit will not be getting other-issue cases than it is saying 
regional circuit courts will get patent cases.  Legitimate patent infringement 
cases will still go to the Federal Circuit.”[172]  Similarly, David Bassett of 
Hale & Dorr wrote that very few cases will be affected by the Holmes holding, 
since most actions and counterclaims will either be sufficiently related to 
“arise under” due to a dependence on federal patent law, or sufficiently 
unrelated to allow the defendant to file the counterclaim separately.  Very few 
cases will fall in[*31] between.[173]  Thus, there are those who argue that Holmes will 
have little effect on the Federal Circuit’s jurisdiction over patent 
counterclaims.


IV. Conclusion

	Holmes has radically changed appellate jurisdiction by taking jurisdiction 
over cases with patent law counterclaims that lack patent claims away from the 
Federal Circuit. As many cases can be artfully pleaded to avoid the Federal 
Circuit, litigants, as well as courts, will be faced with many decisions.  
Choice of law issues will have to be addressed by the regional circuits and 
state courts.  Judges who have had minimal dealings with patent issues will 
likely need to learn on the job.  Cases are likely to take longer to litigate.  
Forum shopping and races to the courthouse may become frequent.  Congressional 
response to this decision, which is clearly contrary to their intent, is 
uncertain.  Tremendous uncertainty regarding the future of patent litigation 
exists.  The coming years should prove particularly interesting.

---

   [*]  J.D. expected May 2004.  The author would like to thank Professor Harold 
Edgar for his comments and suggestions.

   [1] 535 U.S. 826 (2002).

   [2] Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25 
(1982).

   [3] 800 F.2d 240 (Fed. Cir. 1986).

   [4] 486 U.S. 800 (1988).

   [5] 895 F.2d 736 (Fed. Cir. 1990).

   [6] 170 F.3d 1354 (Fed. Cir. 1999).

   [7] See Christianson, 486 U.S. 800.

   [8] Schwarzkopf, 800 F.2d at 244.

   [9]  Id. at 240—42. 

   [10] 28 U.S.C. § 1338 (2003).
   
Patents, plant variety protection, copyrights, mask works, designs, trademarks, 
and unfair competition
(a) The district courts shall have original jurisdiction of any civil action 
arising under any Act of Congress relating to patents, plant variety protection, 
copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of 
the states in patent, plant variety protection and copyright cases.
(b) The district courts shall have original jurisdiction of any civil action 
asserting a claim of unfair competition when joined with a substantial and 
related claim under the copyright, patent, plant variety protection or trademark 
laws.
(c) Subsections (a) and (b) apply to exclusive rights in mask works under 
chapter 9 of title 17 [17 USCS §§ 901 et seq.], and to exclusive rights in 
designs under chapter 13 of title 17 [17 USCS §§ 1301 et seq.], to the same 
extent as such subsections apply to copyrights. 

   [11] Schwarzkopf, 800 F.2d at 244.

   [12] Id. (citing Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 
(1916) (“A suit arises under the law that creates the cause of action.”)); see 
also C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 879 (Fed. Cir. 1983) (“It is 
well settled that a case cannot ‘arise under’ federal law where the claim is 
merely a defense to a state court action.”).

   [13] Schwarzkopf, 800 F.2d at 244.

   [14] Id.

   [15] Id. at 245.

   [16] Christianson, 486 U.S. at 804.

   [17] Id. at 805.

   [18] Both requirements of 35 U.S.C. § 112 (2003).

   [19] Christianson, 486 U.S. at 806—07. 

   [20] 28 U.S.C. § 1338 (2003).

   [21] Christianson, 486 U.S. at 807—08.

   [22] Id. at 808—09.

   [23] Id. at 807—08.

   [24] 463 U.S. 1, 14 (1983).

   [25] Christianson, 486 U.S. at 809.

   [26] Id. at 810 (“[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.”).  For example, in this case, there was an 
alternative theory of liability.  Colt could have been liable for monopolization 
under § 2 of the Sherman Act if they had given Christianson permission to use 
their trade secrets.  In contrast, if the only theory supporting Christianson’s 
position was that Colt’s trade secrets were unprotectable since their patents 
were invalid, then the case would have arisen under patent law. On the other 
hand, in Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1329 
(Fed. Cir. 1998), overruled in part on other grounds, Midwest Indus., Inc. v. 
Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999), there was no other 
theory for liability in the complaint.  As such, there was jurisdiction. See 
infra note 167 and related text for further discussion. 

   [27] As the Court stated in Christianson: 
   
The patent-law issue, while arguably necessary to at least one theory under each 
claim, is not necessary to the overall success of either claim.  Examination of 
the complaint reveals that the monopolization theory that Colt singles out … is 
only one of several, and the only one for which the patent-law issue is even 
arguably essential.  In fact, most of the conduct alleged in the complaint could 
be deemed wrongful quite apart from the truth or falsity of Colt’s accusations.  
Since there are “reasons completely unrelated to the provisions and purposes” of 
federal patent law why petitioners “may or may not be entitled to the relief 
[they] see[k]” under their monopolization claim,…the claim does not “arise 
under” federal patent law.  [P]etitioners could have supported their group-
boycott claim with any of several theories having nothing to do with the 
validity of Colt’s patents.  Once again, the appearance on the complaint’s face 
of an alternative, non-patent theory compels the conclusion that the group-
boycott claim does not “arise under” patent law.

       486 U.S. at 810—813 (quoting Franchise Tax Bd., 463 U.S. at 26).   

   [28] While agreeing that the majority left open the issue of whether an 
amendment to Fed.R.Civ.P. 15 can be grounds for jurisdiction, Justice Stevens 
argued that the majority’s rejection of Colt’s argument (that Congressional aims 
would be better served if Federal Circuit jurisdiction was based on the case 
actually litigated) demonstrated that they felt that only the original complaint 
should be taken into account.  Id. at 813—15.  

   [29] Id. at 822.

   [30] Id. at 823—24.

   [31] 895 F.2d at 737.

   [32] See id. at 738 n.2 (based on 28 USC § 1292(c)(1), Federal Circuit 
jurisdiction over appeals from interlocutory appeals is limited to cases where 
the court would have jurisdiction over an appeal from the final judgment in the 
underlying suit).

   [33] Id. at 739.

   [34] Federal Rules of Civil Procedure, Rule 13 deals with counterclaims. It 
states:

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim 
which at the time of serving the pleading the pleader has against any opposing 
party, if it arises out of the transaction or occurrence that is the subject 
matter of the opposing party's claim and does not require for its adjudication 
the presence of third parties of whom the court cannot acquire jurisdiction. But 
the pleader need not state the claim if (1) at the time the action was commenced 
the claim was the subject of another pending action, or (2) the opposing party 
brought suit upon the claim by attachment or other process by which the court 
did not acquire jurisdiction to render a personal judgment on that claim, and 
the pleader is not stating any counterclaim under this Rule 13.
(b) Permissive Counterclaims. A pleading may state as a counterclaim any claim 
against an opposing party not arising out of the transaction or occurrence that 
is the subject matter of the opposing party's claim.

Fed. R.Civ.P. 13.  The courts and commentators have attempted to clarify when a 
compulsory is compulsory. In Vivid Tech., Inc. v. Am. Sci. & Eng’g., Inc., the 
Federal Circuit stated:

Fed.R.Civ.P. 13(a) requires that a party plead a counterclaim that "arises out 
of the transaction or occurrence that is the subject matter of the opposing 
party's claim," lest the subject of the counterclaim be deemed waived or 
abandoned. Rule 13(a) recognizes that when disputed issues arise from the same 
operative facts, fairness as well as efficiency require that the issues be 
raised for resolution in the same action. See 6 Charles Alan Wright, Arthur R. 
Miller & Mary Kay Kane, Federal Practice and Procedure § 1417, at 129 (2d 
ed.1990) ("failure to plead a compulsory counterclaim bars a party from bringing 
a later independent action on that claim").  Professor Wright identifies four 
tests, any one of which can render a counterclaim compulsory: (1) whether the 
legal and factual issues raised by the claim and counterclaim are largely the 
same; (2) whether, absent the compulsory counterclaim rule, res judicata would 
bar a subsequent suit on the counterclaim; (3) whether substantially the same 
evidence supports or refutes both the claim and counterclaim; or (4) whether 
there is a logical relation between the claim and counterclaim. See id. § 1410, 
at 52—58.

       200 F.3d 795, 801 (Fed. Cir. 1999).

   [35] See Xeta, Inc. v. Atex, Inc., 825 F.2d 604 (1st Cir. 1987) (Transferring 
case to the Federal Circuit since the defendant included a viable and legitimate 
patent infringement counterclaim); In re: Innotron Diagnostics, 800 F.2d 1077 
(Fed.Cir. 1986) (Joined suits (one of which is patent), like counterclaims, 
still “aris[ing] under” § 1338); Schwarzkopf. 800 F.2d at 244 (If the patent 
counterclaim were still part of the suit, it would “arise under” § 1338 and the 
Federal Circuit would have jurisdiction.).

   [36] Aerojet, 895 F.2d at 742.

   [37] Christianson, 486 U.S. at 811.

   [38] Franchise Tax Bd., 463 U.S. at  9—10.

   [39] Aerojet, 895 F.2d at 741.

   [40] Id. at 741—42.

   [41] DSC Communications, 170 F.3d at 1357.

   [42] Id. at 1359.

   [43] Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 
830 (2002).

   [44] Vornado Air Circulation Sys., Inc. v. Duracraft Corp., 58 F.3d 1498 (10th 
Cir. 1995).

   [45] 1994 WL 1064319, at *34 (D. Kans. Mar. 4, 1994).

   [46] Vornado, 58 F.3d at 1510 (“We hold that where a disputed product 
configuration is part of a claim in a utility patent, and the configuration is a 
described, significant inventive aspect of the invention, see 35 U.S.C. 112, so 
that without it the invention could not fairly be said to be the same invention, 
patent law prevents its protection as trade dress, even if the configuration is 
nonfunctional.”).

   [47] See Midwest Indus., 175 F.3d at 1364 (expressly rejecting Vornado I and 
holding that trade dress protection could exist despite the product 
configuration being claimed as a significant inventive element of a patent).

   [48] 93 F. Supp. 2d 1140, 1142—46 (D. Kan. 2000).

   [49] 13 Fed.Appx. 961 (Fed. Cir. 2001).

   [50] It is interesting to note that it is unlikely that the Tenth Circuit 
would have decided differently under these circumstances.

   [51] 534 U.S. 1016 (2001) (mem.).

   [52] “Does 28 U.S.C. § 1295(a)(1) divest regional circuits of jurisdiction to 
decide appeals of final decisions of district courts in cases wherein the well-
pleaded complaint of the prevailing plaintiff does not allege any claim arising 
under federal patent law?”  Petition for Writ of Certiorari, 2001 WL 34092086, 
at *ii, Holmes Group, Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826 
(2002) (No. 01-408).

   [53] “Did the Court of Appeals for the Federal Circuit err in concluding that 
this action “arises under” federal patent law for purposes of 28 §§ 1295(a)(1) 
and 1338(a)?”  Id.   

   [54] Franchise Tax Bd., 463 U.S. at 8.

   [55] American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260 (1916).

   [56] Franchise Tax Bd., 463 U.S. at 9—10.

   [57] Id. at 10 (quoting Taylor v. Anderson, 234 U.S. 74, 75—76 (1914)).

   [58] Specifically, the Court stated: 
   
Under our interpretations, Congress has given the lower federal courts 
jurisdiction to hear, originally or by removal from a state court, only those 
cases in which a well-pleaded complaint establishes either that federal law 
creates the cause of action or that the plaintiff’s right to relief necessarily 
depends on resolution of a substantial question of federal law. 

Id. at 27—28; see also Christianson., 486 U.S. at  808—09 (1988).  There, the 
Court stated:

§ 1338(a) jurisdiction likewise extend[s] only to those cases in which a well-
pleaded complaint establishes 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.

   [59] American Well Works, 241 U.S. at 260.

   [60] In Smith, the Court stated: 
  
The general rule is that where it appears from the bill or statement of the 
plaintiff that the right to relief depends upon the construction or application 
of the Constitution or laws of the United States, and that such federal claim is 
not merely colorable, and rests upon a reasonable foundation, the District Court 
has jurisdiction under this provision.

255 U.S. 180, 199 (1921).  There is significant scholarly discussion of the 
apparent contradiction between Smith and Moore v.  Chesapeake & Ohio R. Co., 291 
U.S. 205 (1934).  See Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 814 
n.12 (1986) for a discussion and possible resolution.

   [61] Holmes, 535 U.S. at 830.

   [62] 28 U.S.C. § 1295 (1982) states: 
   
  (a) The United States Court of Appeals for the Federal Circuit shall have 
exclusive jurisdiction—
   (1) of an appeal from a final decision of a district court of the United 
States, the United States District Court for the District of the Canal Zone, the 
District Court of Guam, the District Court of the Virgin Islands, or the 
District Court for the Northern Mariana Islands, if the jurisdiction of that 
court was based, in whole or in part, on section 1338 of this title, except that 
a case involving a claim arising under any Act of Congress relating to 
copyrights, exclusive rights in mask works, or trademarks and no other claims 
under section 1338(a) shall be governed by sections 1291, 1292, and 1294 of this 
title; 

   [63] See 28 U.S.C. § 1338.  

   [64] 28 U.S.C. § 1331 (1928) (“The district courts shall have original 
jurisdiction of all civil actions arising under the Constitution, laws, or 
treaties of the United States.”).

   [65] Holmes, 535 U.S. at 830.

   [66] Id. at 833 (“It would be an unprecedented feat of interpretive necromancy 
to say that § 1338(a)’s ‘arising under’ language means one thing (the well-
pleaded-complaint rule) in its own right, but something quite different 
(respondent’s complaint-or-counterclaim rule) when referred to by § 
1295(a)(1).”).

   [67] As by federal original jurisdiction.  This is a reaffirmance of the test 
set forth in Christianson.

   [68] Holmes, 535 U.S. at 831.

   [69] Id. at 832.

   [70] Id.

   [71] Id.

   [72] Id. at 839.

   [73] Id. at 837.

   [74] Prof. Janice M. Mueller of John Marshall Law School argues that there is 
an additional element to Justice Stevens’ opinion:

The tenor of Justice Steven’s [sic] concurring opinion in Holmes Group suggests 
that the Court may have intended to rein in the Federal Circuit’s choice-of-law 
trend towards applying its own law, rather than that of the relevant regional 
circuit, on non-patent issues bound up with patent law, as in the CSU v. Xerox 
antitrust case.

Janice M. Mueller, “Interpretive Necromancy” or Prudent Patent Policy?, The John 
Marshall Law School Center for Intellectual Property Law News Source, Fall 2002, 
at 26.  Prof. Mueller bases this argument on comments made by James W. Dabney, 
the counsel for Holmes, at the oral argument. He pointed out that non-patent 
related Federal Circuit law gave great incentive to parties to find some way to 
direct appeals there.  While Professor Mueller presents an interesting view, 
there does not appear to be any support for it from Justice Stevens’ opinion 
itself.

   [75] Holmes, 535 U.S at 839 (According to Justice Stevens, because the Federal 
Circuit deals with patents on a regular basis, there might be a pro-patent bias 
to their decisions, especially those dealing with the interrelation of patent 
and non-patent law.).

   [76] Id.

   [77] See supra Section I, Part C.

   [78] Holmes, 535 U.S. at 839.

   [79] Justice Scalia points out that this was rejected in Christianson.  Id. at 
n.3.  

   [80] Id.

   [81] Additionally, in Morgan v. Principi, 327 F.3d 1357, 1363 (Fed. Cir. 
2003), the court cited Holmes for the proposition that the task of a court 
interpreting a statute is to determine what the words mean regardless of 
Congressional intent.  Holmes has also been cited by the Seventh Circuit as part 
of a discussion as to whether the existence of a third-party complaint affects 
the court’s subject matter jurisdiction over the original suit. Adkins v. 
Illinois Central RR Co., 326 F.3d 828, 836 (7th Cir. 2003). 

   [82] Green v.  Hendrickson Publishers, 770 N.E.2d 784 (Ind.  2002).

   [83] Because this is just a reaffirmance of a well-established legal 
principle, it will not be discussed further.

   [84] Mattel, Inc. v. Lehman, 49 Fed.Appx. 889, 890 (Fed. Cir. 2002); Flanders 
Diamond USA, Inc. v. Nat’l. Diamond Syndicate, Inc., 2002 WL 31681474, at *2 
(N.D.Ill. Nov. 27, 2002); R.F.  Shinn Contractors, Inc. v. Shinn, 2002 WL 
31942135, at *2 (M.D.N.C. Nov. 8, 2002); Spagnuolo v.  Port Auth. of New York 
and New Jersey, 245 F.Supp.2d 518, 520 (S.D.N.Y. 2002); In re: Tamifloxacin 
Citrate Antitrust Litigation, 222 F.Supp.2d 326, 330 (E.D.N.Y. 2002); In re: 
Buspirone Patent Litigation, 210 F.R.D. 43, 52 (S.D.N.Y.  2002); United Mutual 
Houses, L. v. Andujar, 230 F.Supp.2d 349, 350 (S.D.N.Y. 2002); MDCM Holdings, 
Inc. v. Credit Suisse First Boston Corp., 216 F.Supp.2d 251, 259 (S.D.N.Y. 
2002); In re: Adelphia Communications Corp., 285 B.R. 127, 139 (Bankr.S.D.N.Y. 
2002); Castillo v. Texas CanA, 2002 WL 1733727, at *2 (N.D.Tex. July 25, 2002); 
Data Recognition Corp. v. Scan Optics, Inc., 2003 WL 1962252 (Minn.App. Apr. 29, 
2003); Integra Bank, N.A. v. Greer, 2003 WL 21544260, at *3 (S.D.Ind. June 26, 
2003); Dallas County, Texas v. Teter, 2003 WL 21801468, at *1 (N.D.Tex. Aug. 1, 
2003); McNair v. Monsanto Co., 279 F.Supp.2d 1290, 1313 (M.D.Ga.  2003); Wells 
Fargo Bank Northwest, N.A. v. Taca Int’l Airlines, S.A., 2003 WL 22047886, at *3 
(S.D.N.Y. Aug. 29, 2003); see also Hampshire Paper Corporation v.  Highland 
Supply Corp., 2002 WL 1676285, at *1 (D.N.H.  July 18, 2002) which uses Holmes 
to determine choice of law.  

   [85] 41 Fed.Appx. 450 (Fed. Cir. 2002).

   [86] 294 F.3d 1330, 1335—1336 (Fed. Cir. 2002).

   [87] Id.  at 1336.  Judge Dyk stated: 
   
[W]e apply Federal Circuit law to non-patent issues … “the disposition of 
nonpatent law issues is affected by the special circumstances of the patent law 
setting in which those issues arise”… We do so in order to “promot[e] uniformity 
in the field of patent law…”  Although the recent decision of the Supreme Court 
in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., … may make that 
uniformity more elusive, it is still important.

Id. (internal citation omitted)

   [88] 295 F.3d 1249, 1251—52 (Fed. Cir. 2002). 

   [89] 303 F.3d 1332, 1336 (Fed. Cir. 2002).

   [90] 310 F.3d 1360, 1366—67 (Fed. Cir. 2002).

   [91] 770 N.E.2d 784 (Ind. 2002).

   [92] 17 U.S.C. § 301 (1976).

   [93] This, of course, is true only where the plaintiff’s claim for relief does 
not turn on the interpretation of federal law.

   [94] See Rath Packing Co. v. Becker, 530 F.2d 1295, 1303 (9th Cir. 1975) 
(Judge Rich, sitting by designation).

   [95] See Lear, Inc. v. Adkins, 395 U.S. 653, 674—76 (1969) (State court may 
decide patent validity in ruling on breach of licensing agreement); New Marshall 
Engine Co. v. Marshall Engine Co.,  223 U.S. 473, 475 (1912) (“The Federal 
courts have exclusive jurisdiction of all cases arising under the patent laws, 
but not of all questions in which a patent may be the subject-matter of the 
controversy.  For courts of a state may try questions of title, and may construe 
and enforce contracts relating to patents.”); Pratt v. Paris Gaslight & Coke 
Co., 168 U.S.  255, 259 (1897); see also Geni-Chlor Intern., Inc. v. Multisonics 
Dev. Corp., 580 F.2d 981, 983 (9th Cir. 1978) (“It is well established that 
notwithstanding the substantial federal interest in patent matters, enforcement 
and construction of patent contracts can be the business of state courts, even 
though a question arising under the patent laws is presented. Federal courts 
assume jurisdiction only when the Case ‘arises under’ the patent laws.”).

   [96] See Citadel Holding Corp. v. Roven, 603 A.2d 818, 824 (Del. 1992) 
(Counterclaims “represent separate causes of action.”); Delaware Chem., Inc. v. 
Reichhold Chem., Inc., 121 A.2d 913, 918 (Del. Ch. 1956) (A counterclaim “has 
all the characteristics of an independent action.”); Pleatmaster, Inc. v. Conso. 
Trimming Corp., 156 N.Y.S.2d 662, 666 (N.Y. Sup.  1956) (“A counterclaim is 
equivalent to an affirmative action brought by a litigant and the relief 
requested is of the same nature as the judgment demanded in a complaint.”). 

   [97] See Schwarzkopf, 800 F.2d at 244 (“Adjudication of a patent counterclaim 
is the exclusive province of the federal courts.”); Am. Home Prod. Corp. v. 
Norden Laboratories, Inc., 1992 Del. Ch. LEXIS 262, *9 (Del.Ch. Nov. 4, 1992) 
(“[T]here is no corresponding authority for state courts to exercise ancillary 
jurisdiction over counterclaims which, if brought as independent actions in 
state court, would have to be dismissed as being within the exclusive 
jurisdiction of the federal courts.”); Western Elec. Co. v. Components, Inc., 
1970 Del. Ch. LEXIS 114 (Del. Ch. Dec. 7, 1970); Carbon Activation U.S., Inc. v. 
Gen. Carbon Corp., 278 A.D.2d 442, 444 (N.Y.App.Div. 2000) (“[Defendant’s] claim 
for…the alleged pirating of his invention sounds in patent infringement, and 
such a claim may be brought only in Federal court…”); Pleatmaster, at 666; 
Superior Clay Corp. v. Clay Sewer Pipe Ass’n., 215 N.E.2d 437, 440 (Ohio C.P. 
1963) (“[F]rom a complete consideration of the amended counterclaim, it is 
apparent that the cause of action is for an alleged infringement of defendant’s 
patent rights.  Therefore the District Court of the United States has exclusive 
jurisdiction of the subject matter.  This court does not have jurisdiction.”); 
Van Prod. Co. v. General Welding and Fabricating Co., 213 A.2d 769, 772 (Pa. 
1965) (“It is established beyond question that the district courts of the United 
States have exclusive, original jurisdiction of all civil actions arising under 
the patent laws: 28 U.S.C. § 1338(A).  See also Sears, Roebuck & Co. v. Stiffel 
Co., 376 U.S. 225, (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 
U.S. 234 (1964).  As recognized by this Court in Slemmer’s Appeal, 58 Pa. 155 
(1868), if the validity of a patent or patentability is the principal issue 
involved, then the jurisdiction of the federal courts is exclusive.”).

   [98] Green, 770 N.E.2d at 787 (“As to the jurisdiction of a state court to 
entertain such a claim, at the time this case arrived at our Court we regarded 
the federal authorities cited in this opinion as requiring us to force 
bifurcated litigation by finding exclusive federal jurisdiction over the Greens’ 
counterclaim.”).

   [99] Id. at 793.

   [100] Id. at 793—79.

   [101] As a result, it is possible that the patentee will file a separate suit 
in federal court as opposed to filing a counterclaim.  One action, generally the 
second one to be filed, would be stayed if the issues overlap.   This will lead 
to added expense and awkwardness.  Little good could come from this.  As Joseph 
Hosteny wrote: 

[S]ince there won’t be any removal from state court based on a patent 
counterclaim, two suits – one state and one federal – may now take the place of 
a single suit.  This sounds a bit like the reverse of supplemental jurisdiction; 
instead of consolidating a dispute in front of one judge, the Vornado decision 
may give rise to two suits, especially if the party, which wants to claim breach 
of contract, or breach of a license, or unfair competition, has a quick trigger 
finger.  In my experience, a single dispute before more than one judge has a 
much better chance of being prolonged and intractable.

  Joseph Hosteny, What’s Going on Out There?,  Intel. Prop. Today, Sept. 2002, 
at 36.

   [102] In other words, if the defendants would not like the designated 
appellate jurisdiction, they would file their permissive counterclaims elsewhere 
as a separate suit.

   [103] Holmes, 535 U.S. at 832—33. 

   [104] Id. at 838.

   [105] The Federal Circuit has its own system as to choice of law.  In Atari, 
Inc. v. JS&A Group, Inc., 747 F.2d 1422, 1440 (Fed. Cir. 1984) (en banc), the 
court set forth its general policy.  The court applies its own law to patent 
issues to promote uniformity within subject matter within its exclusive 
jurisdiction.  The law of the source circuit is used regarding non-patent 
issues.  This avoids the possibility that the litigants and courts will have to 
select from competing authorities based on where the appeal would end up.  
Further, this policy minimizes forum shopping.
  Since patent issues are intertwined with the rest of the case, this ruling has 
been adapted as the court felt necessary.  Midwest Indus., 175 F.3d at 1359—60, 
contains many examples of the court expanding the use of its own law.  

   [106] See Radio Steel & Mfg. Co. v. MTD Prod. Inc., 566 F. Supp. 609, 614 (D. 
Ohio 1983) (“[T]he true predecessors of the new court in regard to appeals from 
decisions of district courts in patent cases are the other circuit courts.”), 
reversed in part on other grounds, 731 F.2d 840 (Fed. Cir. 1984).
  
   [107] The Federal Circuit suggested this approach when the regional circuits 
had to make occasional patent decisions pre-Holmes. In  Atari, the court stated:

…[I]t may well be that regional circuits will be required, in comparatively rare 
instances, to decide questions of substantive law in the three listed fields.  
In such instances, the regional circuits may find the body of decisions of this 
court a useful reference, in light of the considerations here expressed 
concerning the burden of conflicting views on the district courts.

    747 F.2d at 1440, n.15.

   [108] Holmes was decided on June 3, 2002.

   [109] See CSU, L.L.C. v. Xerox, 203 F.3d 1322 (Fed.  Cir.  2000) (showing the 
Federal Circuit’s hostility to antitrust—if a patent is legally acquired, it is 
lawful to refuse to sell or license the invention);  cf. Image Tech. Serv., Inc. 
v. Eastman Kodak Co., 125 F.3d 1195, 1214—20 (9th Cir.  1997) (allowing rebuttal 
of the presumption).

   [110] Townsend and Townsend and Crew LLP, First Mover Advantage, Intell. Prop. 
Update (July 2002) at  http://www.townsend.com/files/first_mover.pdf  (quoting 
Roger Cook, a partner in Townsend and Townsend’s San Francisco office).

   [111] Walker Process Equip. Inc. v. Food  Mach. & Chem. Corp., 382 U.S. 172 
(1965) (allowing antitrust counter-claims in an action for patent infringement).

   [112] 295 F.3d 1249 (Fed. Cir. 2002).

   [113] 517 U.S. 370 (1996).

   [114] 138 F.3d 1448 (Fed. Cir. 1996).

   [115] See United States Court of Appeals for the Federal Circuit 20th 
Anniversary Judicial Conference, 217 F.R.D. 548 (2002) (statement made by Donald 
Dunner).

   [116] Anne M. Maner, The Facts Behind the Decision in Holmes Case May Result 
in Conflicts in Substantive Patent Law, 24 Nat. L. J. 45,  B11 (2002).

   [117] See Breaking News, at http://www.jaffeassociates.com/NewsService/i317-s2.html 
(June 3, 2003)  (quoting Steven Lippman of Oblon, Spivak, McClelland, 
Maier & Neustadt, P.C).  Joshua R. Rich, an attorney at McDonnell Boehnen 
Hulbert & Berghoff, commented similarly: 

The Federal Circuit was created for the purpose of harmonizing patent precedent 
because the regional appellate courts had reached widely divergent decisions in 
identical situations.  Before the Federal Circuit, the situation had created 
races to the courthouse in which where a case was first filed was almost as 
important as the merits of the case itself.  The Holmes decision revives that 
possibility by allowing non-patent claims arising out of the same facts or 
occurrences as a patent infringement counterclaim to dictate which regional 
appellate court will decide the appeal of the case…Thus, the Holmes decision 
undermines the efforts of the patent bar to reach precedential uniformity 
through the Federal Circuit.

US Supreme Court Reverses Patent Decision (June 4, 2002), at 
http://www.aplf.org/mailer/issue21.html.

   [118] See, e.g.,  John Allcock & Stanley J.  Panikowski III, Supreme Court 
Limits Federal Circuit Jurisdiction, Gray Cary Online News (Oct. 2000) at 
http://www.gcwf.com/gcc/GrayCary-C/News--Arti/Newsletter/ip/0210/supremectdecision_article.html 
(The jurisdiction and possible outcome of some suits will depend on who files 
first.  For example, in Holmes itself, if Holmes filed a declaratory trade 
dress suit and Vornado filed a patent counterclaim, then the Tenth Circuit had 
jurisdiction; if Vornado had filed a patent suit and Holmes had filed a 
declaratory trade dress counterclaim, then the Federal Circuit would have had 
jurisdiction.); see also Townsend and Townsend and Crew LLP, supra note 116 
(“There is clearly a first mover advantage in framing the issues and choosing 
the appropriate venue in which to proceed.  Holmes put Vornado on the defensive 
by taking the initiative on the trade dress issue, and in effect, quashed any 
discussion whatsoever on the patent issue by staying out of the Federal 
Circuit court.”).

   [119] Brenda Sandburg, High Court Limits Patent Reach of Federal Circuit, 
Broward Daily Bus. Rev., June 7, 2002 at A10. 

   [120] From the period spanning February 1990 to June 2002, the month of March 
2000 was analyzed. While this was the month that Holmes was decided on a 
district court level, this is purely coincidental.  Holmes itself was not used 
as part of the study. 
  A twenty-seventh opinion, McCook Metals L.L.C. v. Alcoa Inc., 192 F.R.D. 242 
(N.D.Ill. 2000) was excluded since the facts of the case were not included in 
the opinion. 
  Many of the opinions listed only the facts necessary for deciding the motion 
at hand.  In a few cases, more information was available by looking at other 
opinions from the same suit.  If this lack of information had any effect on this 
analysis, it decreased the number of cases that could be artfully pleaded since 
additional information would have added rather than subtracted potential causes 
of action.
  For the same reason, only the cases that could be artfully pleaded are 
discussed. Just as insufficient facts made it difficult to determine whether 
cases could have avoided the Federal Circuit, there is equally as little 
evidence to the contrary.

   [121] In other words, the ability to sue on unfair competition, tortious 
interference with a business relationship, and other non-patent grounds were not 
assumed.

   [122] Canady v.  Erbe Elektromedizin Gmbh, 99 F.Supp.2d 37 (D.D.C. 2000); 
Cordis Corp. v. Advanced Cardiovascular Sys., Inc., 2000 WL 376416 (D.Del. Mar. 
31, 2000); Camo-Clad, Inc. v. Latent Image, Inc., 2000 WL 343324 (N.D.Ill. Mar. 
31, 2000); Softview Computer Pros. Corp. v. Haworth, Inc., 2000 WL 351411 
(S.D.N.Y. Mar. 31, 2000); Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 92 
F.Supp.2d 857 (E.D.Wis. 2000); Robotic Vision Sys., Inc. v. View Eng’g., Inc., 
2000 WL 33911304 (C.D.Cal. Mar. 29, 2000); Hilgraeve Corp. v. Symantec Corp., 90 
F.Supp.2d 850 (E.D.Mich. 2000); Sandisk Corp. v. Lexar Media, Inc., 91 F.Supp.2d 
1327 (N.D.Cal. 2000); Somfy, S.A. v. Springs Window Fashions Div., Inc., 2000 WL 
336511 (N.D.Ill. Mar. 28, 2000); Nat’l Research Labs. v.  Eppert Oil Co., Inc., 
104 F.Supp.2d 851 (S.D.Ohio 2000); Knowles Elecs., LLC v.  Microtronic U.S., 
Inc., 2000 WL 310305 (N.D.Ill. Mar. 24, 2000); Alpha Enters., Inc. v. Tomato 
Land Display Sys., Inc., 92 F.Supp.2d 733 (S.D.Ohio 2000); Ecrix Corp. v. 
Exabyte Corp., 191 F.R.D. 611 (D.Colo. 2000); CenterForce Techs., Inc. v. Austin 
Logistics, Inc., 2000 WL 652943 (D.Del. Mar. 10, 2000); PTS Labs LLC v.  Abbott 
Labs., 2000 WL 521722 (N.D.Ill. Mar. 17, 2000); Eli Lilly & Co. v. Zenith 
Goldline Pharms., Inc., 101 F.Supp.2d 1139 (S.D.Ind. 2000); Maytag Corp. v. 
Whirlpool Corp., 88 F.Supp.2d 894 (N.D.Ill. 2000); Boler Co. v. Neway Anchorlok 
Int’l. Inc., 92 F.Supp.2d 671 (N.D.Ohio, 2000).

   [123] Unique Coupons, Inc. v. Northfield Corp., 2000 WL 343225 (N.D.Ill. Mar. 
30, 2000); Townshend v.  Rockwell Int’l. Corp., 2000 WL 433505 (N.D.Cal. Mar. 
28, 2000); Superior Merch. Co., Inc. v. M.G.I.  Wholesale, Inc., 2000 WL 322779 
(E.D.La. Mar. 27, 2000); Bristol-Myers Squibb Co. v. Ben Venue Labs., 90 
F.Supp.2d 540 (D.N.J. 2000); Whiteside Biomechanics, Inc. v. Sofamor Danek 
Group, Inc., 88 F.Supp.2d 1009 (E.D.Mo. 2000); Hardwood Line Mfg. Co. v. Whyco 
Techs., Inc., 2000 WL 294832 (N.D.Ill. Mar. 21, 2000); Windsor Indus., Inc. v. 
Pro-Team, Inc., 87 F.Supp.2d 1129 (D.Colo. 2000); Sys. Mgmt. Arts, Inc., 87 
F.Supp.2d 258.

   [124] 2000 WL 631324 (N.D.Ill. May 16, 2000).

   [125] Id. at *1.

   [126] Id. at *1—2.

   [127] Id. at *1. 

   [128] Id. at *1. 

   [129] 2000 WL 433505 (N.D.Cal. Mar. 28, 2000).

   [130] Id. at *1.

   [131] Id.

   [132] Id. at *2.

   [133] Superior Merchandise Co., Inc. v. M.G.I. Wholesale, Inc., 2000 WL 
322779, at *1 (E.D.La. 2000).

   [134] Id. at *1—2.

   [135] Note, however, that both were dismissed in the earlier opinion Superior 
Merchandise Co., Inc. v. M.G.I. Wholesale, Inc., 1999 WL 977365, at *8 (E.D.La. 
Oct. 26, 1999). As such, it would not have been advantageous to avoid dealing 
with the patent. Nonetheless, it could have been done.

   [136] 90 F.Supp.2d 540 (D.N.J. 2000).

   [137] Bristol-Myers Squibb Co. v. Ivax Corp., 77 F.Supp.2d 606, 608 (D.N.J. 
2000) (this claim is founded on the same allegations as the Walker Process 
counterclaims).

   [138] Id. at 616 (Defendants “assert that Bristol promised during 
congressional hearings in 1991 and 1993 ‘that it would not bar all competition 
in the market for paclitaxel-based drugs and that its monopoly in the 
paclitaxel-based drug market was limited to … non-patent exclusivity.’”).

   [139] Walker Process Equip., Inc. v. Food Mach. & Chem. Co., 382 U.S. 172 
(1965) (acquisition of a patent via inequitable conduct can create an antitrust 
violation under the Sherman Act and opens one up to treble damages for 
willfulness under the Clayton Act).

   [140] Bristol-Myers Squibb Co., 77 F.Supp.2d at 611.

   [141] Id.

   [142] Id. at 617.

   [143] All of the counterclaims other than the Walker Process and unfair 
competition claims were thrown out. See Bristol-Myers Squibb Co., 77 F.Supp.2d 
at 606.  Still, the case could have been pleaded to avoid the Federal Circuit. 
Further, if the defendants had filed the suit, Bristol would likely have 
counterclaimed for patent infringement leading the defendants to amend their 
complaint with the patent related claims.

   [144] 88 F.Supp.2d 1009 (E.D.Mo. 2000).

   [145] Id. at 1010.

   [146] Id. at 1010. 

   [147] 2000 WL 294832 (N.D.Ill. Mar. 21, 2000).

   [148] Id. at *1.  It is a Rule 12(b) motion filed by the defendant prior to 
filing an answer.  Thus, there are no counterclaims.

   [149] In this case, Hardwood would have lost nothing by selective pleading—the 
patent infringement claim was thrown out anyway. 

   [150] 87 F.Supp.2d 1129 (D. Col. 2000).

   [151] Id. at 1129—30.

   [152] Sys. Mgmt. Arts, Inc,. 87 F.Supp.2d 258.

   [153] Id. at 260.

   [154] Id. at 270.

   [155] Christianson., 486 U.S. at  813.

   [156] Id. at 814—15 (“We need not decide under what circumstances, if any, a 
court of appeals could furnish itself a jurisdictional basis unsupported by the 
pleadings by deeming the complaint amended…”) (Stevens, J., concurring).

   [157] Id. at 822. 

   [158] Id. at 823.

   [159] Holmes, 535 U.S. at 834 (2002).

   [160] Id. at 835 (Stevens, J., concurring).

   [161] Id.

   [162] Id. (quoting Christianson, 800 U.S. at 824 (Stevens, J., concurring.)). 

   [163] Assuming that the amendment is made reasonably early in the case, there 
would be no reason for the court to disallow it.

   [164] This would only work if there were sufficient grounds to make the patent 
claim part of a well-pleaded complaint.

   [165] Holmes, 535 U.S. at 833.

   [166] This prong is cited but not discussed by Holmes, 535 U.S. at 830.

   [167] See, e.g., Christianson, 486 U.S. at 808—09 (“[Section] 1338(a) 
jurisdiction likewise extend[s] only to those cases in which a well-pleaded 
complaint establishes that the plaintiff’s right necessarily depends on 
resolution of a substantive question of federal patent law, in that patent law 
is a necessary element of one of the well-pleaded claims.”); US Valves, Inc. v. 
Dray, 212 F.3d 1368, 1372 (Fed. Cir. 2000) (“To show that Dray sold valves in 
contravention of U.S. Valves’ exclusive right to such sales, U.S. Valves must 
show that Dray sold valves that were covered by the licensed patents. Since some 
of the valves that Dray sold were of the sliding ring variety, a court must 
interpret the patents and then determine whether the sliding ring valve 
infringes these patents.  Thus, patent law is a necessary element of U.S. 
Valves’ breach of contract action.”); 3D Sys., Inc. v. Aarotech Labs., Inc., 160 
F.3d 1373, 1377 n.2 (Fed. Cir. 1998) (“Regarding 3D’s state law trade libel 
claim, we note that federal jurisdiction would also be proper pursuant to 28 
U.S.C. § 1338(a) as ‘arising under any Act of Congress relating to patents’ in 
that whether 3D libeled the defendants by accusing them of infringing 3D’s 
patents necessarily depends on resolution of a substantial question of federal 
patent law.”); Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 
1329 (Fed. Cir. 1998), overruled in part on other grounds; Midwest Indus., 175 
F.3d at 1359  (“[W]e hold that this count, as pleaded, arises under section 
1338(a).  First, the action satisfies the well pleaded complaint rule, for a 
required element of the state law cause of action—a falsity—necessarily depends 
on a question of federal patent law, in that either certain claims of the 
Harmonic patents are invalid or all of the claims are unenforceable… Second, all 
the theories upon which Hunter Douglas could prevail depend on resolving a 
question of federal patent law, because Hunter Douglas does not plead, in its 
complaint, any other basis for a falsity on the Defendants’ part.”); Additive 
Controls & Measurement Sys., Inc. v. Flowdata, Inc., 986 F.2d 476, 478-9 (Fed. 
Cir. 1993) (“Adcon must prove that Flowdata’s infringement accusations are false 
before it can recover for business disparagement … Adcon’s right to relief 
necessarily depends upon resolution of a substantial question of federal patent 
law.”). 

   [168] A permissive approach could be taken toward determining whether or not 
patent law is necessary to permit the plaintiff to get relief.  While some areas 
(like licenses) have been specifically excluded from this sort of use by the 
courts, see, e.g., Luckett v. Delpark, Inc., 270 U.S. 496, 502 (1926), others 
(like unfair competition) have not. 

   [169] See supra note 42 and related text. 

   [170] The Ad Hoc Committee appointed by the Board of Governors of the Federal 
Circuit Bar Association suggested adding the italicized phrase to § 1338(a) to 
read as follows:

The district courts shall have original jurisdiction of any civil action 
involving any claim for relief arising under any Act of Congress relating to 
patents, plant variety protection, copyrights and trademarks. Such jurisdiction 
shall be exclusive of the courts of the states in patent, plant variety 
protection and copyright cases. 

  Report of the Ad Hoc Committee to Study Holmes Group, Inc. v. Vornado Air 
Circulation Systems, Inc., 12 Fed. Cir. B.J. 713, 714 (2003).

   [171] Breaking News, supra note 123 (quoting Bernard Rhee of Powell, 
Goldstein, Frazer & Murphy).[this cite need further works]

   [172] Brenda Sandburg, High Court Limits Patent Reach of Federal Circuit, 
Broward Daily Bus. Rev., June 7, 2002 at A10. 

   [173] David Bassett, Recent Decisions on Patent and Copyright Jurisdiction, 
Hale & Dorr e-mail alert August 14, 2002, at 
http://www.hutchlaw.com/downloads/techlaw/09_25_2002_Techlaw.doc.

Vol. V	The Columbia Science and Technology Law Review	2004