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American Well Works Co. v. Layne & Bowler Co.

Supreme Court of the United States · 1916 · Civil Procedure

Civil ProcedureFederal Question JurisdictionArising Under JurisdictionPatent-related Business Tortsfederal questionarising underpatent lawsstate-law cause of action

Facts

The plaintiff alleged that it owned, manufactured, and sold a pump, had or had applied for a patent for it, and that the pump was known as the best in the market. It claimed the defendants falsely and maliciously libeled and slandered its title to the pump by telling others that the plaintiff's pump and parts infringed the defendants' pump and patent rights. The defendants also allegedly brought suits against some users of the plaintiff's pump and threatened to sue all who used it. The plaintiff sought actual and punitive damages for injury to its business.

Issue

Whether a suit seeking damages for injury to business caused by defendants' statements and threats that the plaintiff's pump infringed defendants' patent is a suit arising under the patent laws of the United States. Put differently, does the possibility that patent validity or infringement may arise as a defense make the plaintiff's action one under federal patent law?

Rule

A suit arises under the law that creates the cause of action. A state-law action for damages to business caused by threats to sue under the patent laws, or by statements that a patent is being infringed, does not arise under the patent laws merely because patent validity or infringement may be involved in justification or defense.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Ohio, Mercer Valve Systems sells industrial filters. Its competitor, North Shore Flow Devices, sent letters to Mercer’s customers in Cleveland and Toledo stating that Mercer’s filters infringe North Shore’s federal patent and warning that users would be sued if they kept buying them. Mercer filed in Ohio state court for damages for lost sales and harm to goodwill under Ohio business-tort law.

Does Mercer’s suit arise under federal patent law for purposes of subject-matter jurisdiction?

Explanation. The suit does not arise under patent law merely because patent infringement is mentioned in the alleged misconduct. The plaintiff’s claim is for business injury caused by the defendant’s statements and threats to customers. Under the governing rule, a suit arises under the law that creates the cause of action, and here that is state tort law. Any contention that the statements were justified because infringement was real is a defense, not part of the plaintiff’s case. (Derived from American Well Works Co. v. Layne & Bowler Co. (1916).)