United States Court of Appeals 

for the Federal Circuit 

__________________________ 

USPPS, LTD., 

Plaintiff-Appellant, 

v. 

AVERY DENNISON CORPORATION, 

Defendant-Appellee, 

and 

RENNER, OTTO, BOISSELLE & SKLAR, LLP 

AND NEIL DUCHEZ, 

Defendants-Appellees. 

__________________________ 

2011-1525 

__________________________ 

Appeal from the United States District Court for the 

Western District of Texas in case no. 07-CV-0963, Chief 

Judge Fred Biery. 

______________________ 

Decided: April 17, 2012 

_______________________ 

JAMES E. WILLINGHAM, JR., Law Offices of Jim Willingham, P.C., of San Antonio, Texas, argued for plaintiffappellant. 

J. DANIEL HARKINS, Cox Smith Matthews Incorporated, of San Antonio, Texas, argued for defendant-
USPPS LTD v. AVERY DENNISON CORP 2

appellee Avery Dennison Corporation. Of counsel on the 

brief was LESLIE SARA HYMAN, Pulman, Cappuccio, Pullen 

& Benson, LLP, of San Antonio, Texas. 

VAUGHAN E. WATERS, Thornton, Biechlin, Segrato, 

Reynolds & Guerra, L.C., of San Antonio, Texas, argued 

for defendants-appellees Renner, Otto, et al. 

__________________________ 

Before PROST, MAYER, and O’MALLEY, Circuit Judges. 

Opinion for the court filed PER CURIAM. Concurring 

opinion filed by Circuit Judge PROST. Concurring opinion 

filed by Circuit Judge O’MALLEY, in which Circuit Judge 

MAYER joins. 

PER CURIAM

USPPS, Ltd. (“USPPS”) appeals the order of the 

United States District Court for the Western District of 

Texas dismissing its claim for breach of fiduciary duty 

and fraud. See USPPS, Ltd. v. Avery Dennison Corp., No. 

SA-07-CA-963-FB, 2010 U.S. Dist. LEXIS 81707 (W.D. 

Tex. June 4, 2010). We affirm. 

BACKGROUND

The report of the magistrate judge, which was 

adopted by the district court, provides a comprehensive 

summary of this case’s long and tortuous history, and we 

therefore provide only a brief synopsis of the pertinent 

facts. See USPPS, Ltd. v. Avery Dennison Corp., No. SA07-CA-963-FB, 2010 U.S. Dist. LEXIS 84450 (W.D. Tex. 

Mar. 18, 2010) (“Magistrate Report”). In 1999, Joe Pat 

Beasley filed an application with the United States Patent and Trademark Office (“PTO”), seeking patent protection for personalized postage stamps. See U.S. Patent 

Application No. 09/326,712 (the “’712 application”). 
3 USPPS LTD v. AVERY DENNISON CORP

Beasley originally retained the Litman Law Offices, Ltd. 

(“Litman”) to represent him at the PTO. In March 2001, 

the PTO issued a notice of allowance on the ’712 application. 

Two months later, Beasley entered into a licensing 

and manufacturing agreement with Avery Dennison 

Corporation (“Avery”). This agreement specified that 

Avery would “assume responsibility for prosecution of 

Beasley’s patent application” and would “pay all future 

patent prosecution expenses in the [’712 application].” In 

May 2001, Beasley executed a “Revocation and Power of 

Attorney” which discharged Litman and appointed attorneys from Renner, Otto, Boisselle & Sklar, L.L.P. 

(“Renner”) to prosecute his application. Beasley informed 

Daryl L. Lansdale, an attorney with Fulbright & Jaworski, L.L.P. (“Fulbright”),1 “that he sent the [’712 application] to Avery or ‘Avery Dennison’s attorneys’ to prosecute 

so [that] Avery would be the one paying the prosecution 

fees.” Magistrate Report, 2010 U.S. Dist. LEXIS 84450, at 

*44 (footnote omitted). Lansdale responded by telling 

“Beasley that ‘having his own attorneys, who [were] 

familiar with the patents, continue to review the patents, 

probably was in his best interest.’” Id. (footnote omitted).2

When Neil DuChez, a Renner attorney, analyzed the 

prosecution file for the ’712 application, he discovered 

 1 Fulbright represented USPPS until February 

2003. 

2 Beasley asserted that he had “no recollection of 

ever being advised by [Lansdale] to retain separate counsel to represent [him] in the prosecution of the patents,” 

but he does not deny that this conversation occurred. 

App’x Exhibit G; see Magistrate Report, 2010 U.S. Dist. 

LEXIS 84450, at *52-53. 
USPPS LTD v. AVERY DENNISON CORP 4

that it contained relevant prior art that had not been 

disclosed to the PTO. Accordingly, DuChez filed a supplemental information disclosure statement disclosing 

this prior art and a second patent application (the “continuation application”). On July 16, 2001, the PTO issued 

a second notice of allowance on Beasley’s ’712 application. 

In July 2001, Beasley transferred ownership of the 

’712 application to USPPS.3 On August 2, 2001, USPPS 

and Avery entered into an agreement under which: (1) 

Avery would market personalized postage stamps; (2) 

USPPS would purchase personalized postage stamps 

exclusively from Avery; and (3) Avery would pay USPPS a 

royalty equal to five percent of sales of the personalized 

stamps to third parties. 

In April 2002, the PTO vacated its notice of allowance 

for the ’712 application. As part of a “quality review 

process,” the PTO determined that the claims of the ’712 

application were not patentable over a prior art reference, 

see U.S. Patent No. 5,923,406, which the PTO had independently discovered. In May 2002, the PTO likewise 

rejected Beasley’s continuation application as unpatentable over the prior art. 

Soon thereafter, Terry Kerr, USPPS’ president, sent 

email messages to Al Green, an Avery vice-president, 

complaining about the “lack of follow up” on USPPS’ 

intellectual property matters and Avery’s failure to include USPPS in decisions related to prosecution of the 

patent applications. Magistrate Report, 2010 U.S. Dist. 

LEXIS 84450, at *18-19. In the fall of 2002, the PTO 

issued final rejections on both the ’712 and the continuation applications. In December 2002, Beasley called 

Avery and spoke with Julie Hauger, who worked for 

 3 Beasley serves as chairman of USPPS. 
5 USPPS LTD v. AVERY DENNISON CORP

Avery’s president. Hauger reported that Beasley complained that Avery had “mismanaged” his patent application and had “caused him to lose his patent.” Id. at *21 

(internal quotation marks omitted). On December 17, 

2002, Green sent Beasley and Kerr an email stating that 

he thought the chance of overcoming the PTO’s final 

rejections was “remote” and that he was “unable to come 

up with any further claim language which would overcome the [PTO’s] objections.” Id. (internal quotation 

marks omitted). 

In January 2003, Beasley complained to Matthew 

Mellis, an Avery vice-president, about Avery’s handling of 

patent issues. According to Mellis, Beasley asserted that 

Avery had “mishandled” the patent applications and “had 

deliberately prevented him from obtaining a patent on 

personalized postage stamps.” Id. at *22 (footnote and 

internal quotation marks omitted). On February 14, 

2003, USPPS sent Avery a memorandum entitled “A 

Million Dollar Opportunity Damaged.” This memorandum stated that USPPS had “sustained significant monetary and other damages” as a result of Avery’s “actions 

and omissions.” It further stated that Avery’s “lack of 

action and mismanagement of our Intellectual Property 

has resulted in the rejection of our patent after we had 

twice received an approval for issuance of the patent.” 

In the spring of 2003, the PTO issued notices of abandonment on both patent applications. DuChez forwarded 

these PTO notices to Beasley in May 2003. Avery thereafter notified USPPS that it intended to sell personalized 

postage stamps without further payment of royalties after 

the royalty agreement between Avery and Beasley expired by its own terms in August 2004. In September 

2004, Beasley brought suit against Avery and Renner, 

alleging negligence, breach of fiduciary duty, and fraud. 

His complaint was dismissed, however, after the district 
USPPS LTD v. AVERY DENNISON CORP 6

court concluded that Beasley lacked standing to sue 

because he had transferred title to the patent applications 

to USPPS. Beasley subsequently appealed to the United 

States Court of Appeals for the Fifth Circuit, but his 

appeal was dismissed for want of prosecution. Beasley v. 

Avery Dennison Corp., No. 07-51311, 2008 U.S. App. 

LEXIS 28075 (5th Cir. Feb. 7, 2008). 

On November 27, 2007, USPPS filed suit against 

Avery, Renner, and DuChez (collectively “the defendants”), alleging breach of fiduciary duty and fraud.4 

USPPS alleged that Avery had made representations 

“that Beasley as owner of the patent was the client of 

[Renner] with regard to the prosecution of his patent,” 

and failed to inform “USPPS that Avery Dennison (not 

Beasley or USPPS) was the client.” Magistrate Report, 

2010 U.S. Dist. LEXIS 84450, at *5 (internal quotation 

marks omitted). USPPS asserted that “it relied on the 

representations that Beasley was the client of Renner and 

DuChez when firing [Litman] and allowing Renner and 

DuChez to take over the patent prosecution,” when in fact 

“Beasley and USPPS had no legal representation in the 

prosecution of the patent which caused injury and damages.” Id. (footnote omitted). 

On May 30, 2008, the district court issued an order 

dismissing USPPS’ complaint as barred by the applicable 

four-year statute of limitations. On appeal, however, the 

United States Court of Appeals for the Fifth Circuit 

reversed. The court noted that when reviewing a trial 

court’s dismissal under Federal Rule of Civil Procedure 

12(b)(6), it was required to “accept all well-pleaded facts 

 4 USPPS subsequently amended its complaint, adding new “collusive action claims,” including conspiracy 

and aiding and abetting fraud and breach of fiduciary 

duty. Magistrate Report, 2010 U.S. Dist. LEXIS 84450, at 

*6. 
7 USPPS LTD v. AVERY DENNISON CORP

as true.” USPPS, Ltd. v. Avery Dennison Corp., 326 F. 

App’x 842, 843 (5th Cir. 2009). Applying that standard, 

the court determined that it could not “definitively say 

that the discovery rule and fraudulent concealment 

exceptions” to the running of the limitations period did 

not apply to postpone the accrual date of USPPS’ claim. 

Id. at 851. 

On remand, a magistrate judge, at the close of limited 

discovery, granted the defendants’ motion for summary 

judgment. The magistrate judge concluded that: (1) 

neither the discovery rule nor the fraudulent concealment 

doctrine served to postpone the accrual of USPPS’ claims; 

and (2) there were no genuine issues of material fact on 

the causation element of USPPS’ claims for fraud and 

breach of fiduciary duty. On June 4, 2010, the district 

court adopted the report and recommendations of the 

magistrate judge. 

USPPS then again appealed to the United States 

Court of Appeals for the Fifth Circuit. The Fifth Circuit 

issued an order transferring the case to this court, explaining that “the Federal Circuit has exclusive jurisdiction of an appeal where the district court’s jurisdiction 

was based, in whole or in part, on 28 U.S.C. § 1338.” 

USPPS, Ltd. v. Avery Dennison Corp., 647 F.3d 274, 277 

(5th Cir. 2011) (citations and internal quotation marks 

omitted) (“Transfer Order”). The court stated that “the 

Federal Circuit [has] held that a Texas state-law claim of 

attorney malpractice in a patent infringement case ‘arises 

under’ patent law for purposes of § 1338.” Id. at 278-79. 

It noted, moreover, that Davis v. Brouse McDowell, L.P.A., 

596 F.3d 1355, 1359-62 (Fed. Cir. 2010), held that this 

court has jurisdiction over state-law malpractice claims 

where the alleged malpractice involves “a question of 

patentability [even] where no patent ha[s] actually issued.” Transfer Order, 647 F.3d at 280. Because USPPS 
USPPS LTD v. AVERY DENNISON CORP 8

could not “prove causation without proving the patentability of its invention,” the Fifth Circuit determined that 

federal patent law was a necessary element of its claims. 

Id.; see Christianson v. Colt Indus. Operating Corp., 486 

U.S. 800, 808-09 (1988) (emphasizing that section 1338 

jurisdiction “extend[s] only to those cases in which a wellpleaded 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”). 

The Fifth Circuit acknowledged that the decision to 

transfer USPPS’ state-law tort claim to this court raised 

an important “federalism inquiry,” Transfer Order, 647 

F.3d at 278 n.1, and that the transfer would be appropriate only if the patent issue presented in USPPS’ state-law 

claim rose “to the level of creating a substantial federal 

interest such that the Federal Circuit has exclusive 

appellate jurisdiction.” Id. at 278; see Grable & Sons 

Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 

314 (2005) (emphasizing that “the question is, does a 

state-law claim necessarily raise a stated federal issue, 

actually disputed and substantial, which a federal forum 

may entertain without disturbing any congressionally 

approved balance of federal and state judicial responsibilities”). The court concluded, however, that because of 

the “strong federal interest” in uniformity in the patent 

law that “exclusive federal jurisdiction was intended to 

ensure,” the patent issues raised in USPPS’ appeal “involve[d] a sufficiently substantial federal interest to 

permit federal jurisdiction over a state-law tort.” Transfer Order, 647 F.3d at 282. 
9 USPPS LTD v. AVERY DENNISON CORP

DISCUSSION

I. Jurisdiction 

In Davis, an inventor sued her attorney, asserting 

that he had “committed malpractice by performing various acts of negligence in connection with the preparation 

and filing of” her U.S. patent applications and that this 

negligence “cost her the opportunity to secure patents on 

her inventions.” 596 F.3d at 1360, 1361. We concluded 

that the district court had properly exercised section 1338 

jurisdiction over Davis’ state-law malpractice claim 

because unless she could show that her inventions were 

patentable, her attorney’s “negligence could not have 

caused her to suffer any damages.” Id. at 1361; see 28 

U.S.C. § 1338 (providing that federal district courts “shall 

have original jurisdiction of any civil action arising under 

any Act of Congress relating to patents”). In short, 

because demonstrating that her inventions were patentable was “a necessary element of one of [her] legal 

malpractice claims,” Davis, 596 F.3d at 1362, Davis’ “right 

to relief necessarily depend[ed] on resolution of a substantial question of federal patent law,” id. at 1359 (citations 

and internal quotation marks omitted). 

A similar analysis applies here. USPPS alleges that 

the defendants’ malfeasance caused it to be denied a 

patent on personalized postage stamps. Unless USPPS 

can demonstrate that its invention was patentable over 

the prior art, however, it cannot establish that the defendants’ actions “caused [it] to suffer any damages.” Id. at 

1361. Accordingly, applying Davis, the Fifth Circuit 

concluded that the exercise of section 1338 jurisdiction 

was appropriate. 

Davis arguably raises important questions related to 

the “congressionally approved balance of federal and state 

judicial responsibilities,” Grable, 545 U.S. at 314, but we 
USPPS LTD v. AVERY DENNISON CORP 10

are bound by that decision unless it is overruled by an en

banc court. See Tex. Am. Oil Corp. v. U.S. Dep’t of Energy, 44 F.3d 1557, 1561 (Fed. Cir. 1995) (en banc) (“This 

court applies the rule that earlier decisions prevail unless 

overruled by the court en banc, or by other controlling 

authority such as intervening statutory change or Supreme Court decision.”). Moreover, USPPS had already 

brought two appeals before the United States Court of 

Appeals for the Fifth Circuit before its case was transferred here. For this court to refuse to adjudicate the 

merits of USPPS’ appeal at this stage of the proceedings 

would subject the parties to precisely the sort of “jurisdictional ping-pong” the Supreme Court has cautioned 

against. Christianson, 486 U.S. at 818. As the Court 

made clear, “[u]nder law-of-the-case principles, if the 

transferee court can find the transfer decision plausible, 

its jurisdictional inquiry is at an end.” Id. at 819. 

II. Timeliness

We conclude that the district court correctly determined that USPPS’ complaint was untimely.5 Under 

Texas law, a plaintiff must bring a cause of action for 

fraud or breach of fiduciary duty no later than four years 

after the date it first accrues. Tex. Civ. Prac. & Rem. 

Code § 16.004(a). “In most cases, a cause of action accrues when a wrongful act causes a legal injury, regardless of when the plaintiff learns of that injury or if all 

resulting damages have yet to occur.” Provident Life & 

Accident Ins. Co. v. Knott, 128 S.W.3d 211, 221 (Tex. 

2003). Here, the alleged legal injury suffered by USPPS 

 5 On appeal, USPPS contends that the district court 

erred when it concluded that USPPS failed to present 

evidence sufficient to raise genuine issues of material fact 

on the causation element of its breach of fiduciary duty 

and fraud claims. We need not reach this issue, however, 

because we conclude that USPPS’ suit is time-barred. 
11 USPPS LTD v. AVERY DENNISON CORP

occurred no later than May 2003, when the PTO issued 

final notices of abandonment on both of USPPS’ patent 

applications. USPPS did not file suit, however, until 

November 27, 2007, more than four years after this injury 

occurred. 

Texas law provides two exceptions to the rule that the 

statute of limitations begins to run when a legal injury 

occurs. First, under the “discovery rule” a cause of “action 

does not accrue until the plaintiff knew or in the exercise 

of reasonable diligence should have known of the wrongful 

act and resulting injury.” S.V. v. R.V., 933 S.W.2d 1, 4 

(Tex. 1996). Second, under the “fraudulent concealment” 

doctrine the accrual of a claim “is deferred because a 

person cannot be permitted to avoid liability for his actions by deceitfully concealing wrongdoing until limitations has run.” Id. at 6. 

A. The Discovery Rule 

The discovery rule provides a “very limited exception” 

to the running of the limitations period. Computer Assocs. 

Int’l v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1996). It 

serves to defer the accrual of a claim when “the alleged 

wrongful act and resulting injury were inherently undiscoverable at the time they occurred but may be objectively 

verified.” S.V., 933 S.W.2d at 6. An injury will be deemed 

“inherently undiscoverable if it is by nature unlikely to be 

discovered within the prescribed limitations period despite due diligence.” Id. at 7; see Colonial Penn Ins. Co. v. 

Mkt. Planners Ins. Agency, Inc., 157 F.3d 1032, 1034 (5th 

Cir. 1998). 

As the district court correctly concluded, the discovery 

rule is not available to defer the accrual of USPPS’ claim. 

By May 2003, at the latest, USPPS knew that it had lost 

the right to obtain a patent on personalized postage 

stamps and had concluded that this loss was due to 
USPPS LTD v. AVERY DENNISON CORP 12

wrongdoing on the part of the defendants. Soon after the 

PTO rejected USPPS’ applications as unpatentable over 

the prior art, USPPS wrote to Avery to complain of 

Avery’s “lack of follow-up” regarding USPPS’ intellectual 

property. Magistrate Report, 2010 U.S. Dist. LEXIS 

84450, at *18 (internal quotation marks omitted). In 

December 2002, Beasley called Hauger, who worked for 

Avery’s president, complaining that Avery had “mismanaged” his application and had caused him to “lose his 

patent” for personalized postage stamps. Id. at *21 

(internal quotation marks omitted). Two months later, 

USPPS sent Avery a memorandum captioned “A Million 

Dollar Opportunity Damaged.” This memorandum stated 

that Avery’s “lack of action and mismanagement of 

[USPPS’] Intellectual Property has resulted in the rejection of our patent after we had twice received an approval 

for issuance of the patent.” Id. at *25 (internal quotation 

marks omitted). Thus, by May 2003, when the PTO 

issued final notices of abandonment on both of USPPS’ 

applications, USPPS had not only concluded that it had 

lost a “million dollar opportunity” when it forfeited its 

patent rights, but also believed that this loss was the 

result of “mismanagement” and “lack of follow-up” on 

Avery’s part. Because USPPS knew, or should have 

known, by May 2003 that it had suffered an actionable 

injury as a result of the defendants’ alleged wrongdoing, 

the discovery rule does not serve to defer the accrual of its 

claim. See Exxon Corp. v. Emerald Oil & Gas Co., 348 

S.W.3d 194, 202 (Tex. 2011) (“Causes of action accrue and 

statutes of limitations begin to run when facts come into 

existence that authorize a claimant to seek a judicial 

remedy.”). 

USPPS argues that although it might have determined, by May of 2003, that Avery and Renner acted 

negligently in prosecuting the ’712 application, it was not 
13 USPPS LTD v. AVERY DENNISON CORP

until 2004 that it discovered that the defendants acted 

fraudulently and in breach of their fiduciary obligations. 

As the Texas Supreme Court has said, however, “the 

discovery rule does not linger until a claimant learns of 

[the] actual causes” of his injury. PPG Indus., Inc. v. 

JMB/Houston Ctrs. Ltd., 146 S.W.3d 79, 93 (Tex. 2004). 

USPPS knew by May 2003 not only that it had suffered 

an injury—the loss of its patent rights—but also had come 

to the conclusion that this loss was due to misconduct on 

the part of the defendants. Regardless of whether USPPS 

believed that the defendants had acted negligently, or 

with fraudulent intent, USPPS’ cause of action accrued 

when it learned that it had suffered an actionable injury. 

Id. (emphasizing that a claim accrues regardless of 

whether a party knows the “specific cause” of his injury); 

Bayou Bend Towers Council v. Manhattan Constr. Co., 

866 S.W.2d 740, 743 (Tex. App. 1993) (explaining that “all 

that is required to commence the running of the limitations period is the discovery of an injury and its general 

cause, not the exact cause in fact and the specific parties 

responsible”). Under Texas law, when a party learns that 

he has suffered a loss as a result of “the wrongful conduct 

of another,” he has a duty to investigate the cause of that 

loss and to file suit in a timely manner. KPMG Peat 

Marwick, L.L.P. v. Harrison Cnty. Hous. Fin. Corp., 988 

S.W.2d 746, 749 (Tex. 1999). 

B. The Fraudulent Concealment Doctrine 

 USPPS argues that it “had no patent attorney or legal 

representation in the prosecution of its patent,” and that 

“[t]his lack of legal representation resulted in the loss of 

the patent.” It contends, moreover, that the fraudulent 

concealment doctrine serves to toll the statute of limitations because, due to Avery’s alleged misrepresentations 

and fraud, USPPS did not learn until 2004 that Renner 

was working for Avery and not for USPPS. This reason-
USPPS LTD v. AVERY DENNISON CORP 14

ing is not persuasive. The equitable doctrine of fraudulent concealment tolls the statute of limitations in situations in which “a defendant is under a duty to make 

disclosure but fraudulently conceals the existence of a 

cause of action from the party to whom it belongs . . . .” 

Borderlon v. Peck, 661 S.W.2d 907, 908 (Tex. 1983); see 

also Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358, 366 

(5th Cir. 2000). This doctrine, however, “only tolls the 

running of limitations until the fraud is discovered or 

could have been discovered with reasonable diligence.” 

BP Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 67 (Tex. 

2011). Here, USPPS knew, or should have known, by at 

least May 2003, that Renner was working as Avery’s 

attorney in prosecuting the ’712 application. Pursuant to 

the 2001 agreement between Beasley and Avery, Avery 

agreed to “assume responsibility” for prosecution of the 

’712 application. Magistrate Report, 2010 U.S. Dist. 

LEXIS 84450, at *44. Beasley then informed Lansdale, 

an attorney from a law firm that represented USPPS 

until February 2003, “that he sent the [’712 application] 

to Avery or ‘Avery Dennison’s attorneys’ to prosecute so 

[that] Avery would be the one paying the prosecution 

fees.” Id. (footnote omitted). Lansdale responded by 

telling “Beasley that having his own attorneys, who [are] 

familiar with the patents [and] continue to review the 

patents, probably was in his best interest.” Id. (footnote 

and internal quotation marks omitted). 

USPPS’ argument that it was unaware that Renner 

worked for Avery and not for USPPS is undermined by 

the fact that USPPS never signed a retainer agreement 

with Renner and never paid legal fees to Renner for its 

work in prosecuting the ’712 application. Instead, Renner 

sent monthly bills to Avery for its work prosecuting the 

’712 application and Avery paid Renner. As early as May 

2002, USPPS was complaining to Avery that Avery had 
15 USPPS LTD v. AVERY DENNISON CORP

“restricted” communications between USPPS and 

DuChez, the Renner attorney prosecuting the ’712 application. Id. at *46. USPPS asserted that Avery had 

prevented DuChez “from communicating with [USPPS] on 

the same time frame” that he communicated with Avery. 

Id. (internal quotation marks omitted). Given that Avery 

was paying Renner’s fees and had acted to restrict communications between Renner and USPPS, USPPS knew, 

or in the exercise of due diligence should have known, 

that Renner was acting as legal counsel to Avery in the 

prosecution of the ’712 application. 

A “plaintiff must, of course, exercise reasonable diligence to discover what has been hidden from him by the 

defendant and the period of tolling may not extend beyond 

the time the plaintiff actually acquired knowledge of the 

facts or should have acquired such knowledge by the 

exercise of reasonable diligence.” Leonard v. Eskew, 731 

S.W.2d 124, 128 (Tex. App. 1987). Even assuming arguendo that the defendants failed to disclose the fact that 

Renner was working for Avery, the statute of limitations 

was tolled only until such time as USPPS, in the exercise 

of reasonable diligence, should have discovered that fact. 

CONCLUSION

Accordingly, the order of the United States District 

Court for the Western District of Texas is affirmed. 

AFFIRMED 
United States Court of Appeals 

for the Federal Circuit 

__________________________ 

USPPS, LTD., 

Plaintiff-Appellant, 

v. 

AVERY DENNISON CORPORATION, 

Defendant-Appellee, 

and 

RENNER, OTTO, BOISSELLE & SKLAR, LLP 

AND NEIL DUCHEZ, 

Defendants-Appellees. 

__________________________ 

2011-1525 

__________________________ 

Appeal from the United States District Court for the 

Western District of Texas in case no. 07-CV-0963, Chief 

Judge Fred Biery. 

__________________________ 

PROST, Circuit Judge, concurring. 

Our jurisdiction over this case is not disputed, and we 

all agree that the Fifth Circuit’s transferring the case to 

this court was appropriate. Judge O’Malley’s concurrence, however, uses this case as a vehicle to criticize this 

court’s previous decisions which have held that we have 

jurisdiction over certain patent-related malpractice cases. 
USPPS LTD v. AVERY DENNISON CORP 2

Respectfully, I am reluctant to weigh in on a question 

that was not presented in this case and therefore, obviously, never briefed or argued. Nor am I persuaded by 

Judge O’Malley’s arguments that our case law contradicts 

Supreme Court precedent. Indeed, the concurrence in the 

denial of the petition for rehearing en banc in Byrne v. 

Wood, No. 2011-1012, 2012 U.S. App. LEXIS 6021, at *2-8 

(Fed. Cir. Mar. 22, 2012) (Dyk, J. concurring), discussed 

at length why our case law comports with Supreme Court 

precedent. In particular, it observed that the “substantive patent law issues” implicated in these patent-based 

malpractice cases “necessarily make[] the issues ‘substantial’ within the meaning of Christianson [v. Colt Industries Operating Corp.], 486 U.S. [800,] 809 [1988], and 

indicate[] a ‘serious federal interest’ in federal adjudication within the meaning of Grable & Sons Metal Prods., 

Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 313 (2005).” Id.

at *4. 
United States Court of Appeals 

for the Federal Circuit 

__________________________ 

USPPS, LTD., 

Plaintiff-Appellant, 

v. 

AVERY DENNISON CORPORATION, 

Defendant-Appellee 

and 

RENNER, OTTO, BOISELLE & SKLAR, LLP AND

NEIL DUCHEZ, 

Defendants-Appellees. 

__________________________ 

2011-1525 

__________________________ 

Appeal from the United States District Court for the 

Western District of Texas in case no. 07-CV-0963, Chief 

Judge Fred Biery. 

__________________________ 

O’MALLEY, Circuit Judge, with whom MAYER, Circuit 

Judge joins, concurring. 

Although I agree that the district court properly 

granted summary judgment in favor of defendants in this 

matter, I write separately to address the significant 

federalism concerns raised by our exercise of jurisdiction 

over these purely state law claims. See Slip Op. at 9 

(“Davis arguably raises important questions related to the 

“congressionally approved balance of federal and state 
USPPS LTD v. AVERY DENNISON CORP 2

judicial responsibilities . . . .’” (citations omitted)). I 

concur rather than dissent because, as the majority notes, 

our current case law extends our jurisdictional reach to 

the plaintiff’s claims in this case. Specifically, because 

Plaintiff’s fraud and breach of fiduciary duty claims 

require the plaintiff to prove that its invention would 

have received patent protection absent the defendants’ 

allegedly unlawful conduct, our case law compels that we 

exercise subject matter jurisdiction over it. See Davis v. 

Brouse McDowell, L.P.A., 596 F.3d 1355 (Fed. Cir. 2010) 

(extending jurisdiction over a state law malpractice claim 

where the plaintiff would have to prove that, but for her 

attorney’s missed patent application filing deadline, her 

invention would have been patentable). Our case law 

turns what would otherwise be a “clearly wrong” transfer 

decision into one that is “plausible,” thus requiring this 

court to accept the transfer and resolve the merits of the 

appeal. Christianson v. Colt Industries Operating Corp., 

486 U.S. 800, 817-19 (1988). 

Our case law requiring the exercise of jurisdiction 

over state law claims such as those at issue here conflicts 

with Supreme Court precedent, however, and should be 

revisited. See Byrne v. Wood, Herron & Evans, LLP, 2011 

WL 5600640, *5 (Fed. Cir. Nov. 18, 2011) (“Although we 

must adhere to our precedent, we believe this court 

should re-evaluate the question of whether jurisdiction 

exists to entertain a state law malpractice claim involving 

the validity of a hypothetical patent . . . .” (emphasis in 

original)); see also Byrne v. Wood, Herron & Evans, LLP, 

No. 2011-1012, 2012 U.S. App. LEXIS 6021 (Fed. Cir. 

Mar. 22, 2012) (O’Malley, J., dissenting from denial of 

petition for rehearing en banc). This case exemplifies the 

mischief our jurisdictional over-reaching has caused in 

situations where a state law claim involves an underlying 

patent issue. Indeed, in objecting to a state court dis-
3 USPPS LTD v. AVERY DENNISON CORP

missal of a state law malpractice claim based on our case 

law, three dissenting Texas Supreme Court justices 

identified this very case as emblematic of the problems 

created by this court’s case law. Minton v. Gunn, 355 

S.W.3d 634, 653 (Tex. 2011) (Guzman, J., dissenting) 

(“[T]he Supreme Court's fears have already been realized 

in USPPS. . . . “[T]he reach of the Federal Circuit's section 

1338 reasoning is uncabined, and can potentially sweep 

any state law case that touches on substantive patent law 

(or, for that matter, the other areas of law covered by 

section 1338, such as copyright and trademarks) irrevocably into federal court.”). 

I. 

USPPS, Ltd. (“USPPS”) filed suit in United States 

District Court for the Western District of Texas, citing 

diversity jurisdiction under 28 U.S.C. § 1332 as the sole 

basis for federal jurisdiction. USPPS asserted only state 

law claims for fraud and breach of fiduciary duty. No one 

disputes that these are purely state law claims for which 

federal law does not create a cause of action. 

All parties to the case proceeded under the assumption that diversity jurisdiction provided the only basis for 

federal jurisdiction. Indeed, when the district court 

initially granted defendants’ motion to dismiss, USPPS 

appealed to the United States Court of Appeals for the 

Fifth Circuit. See USPPS, Ltd. v. Avery Dennison Corp., 

No. 08-50664, 326 Fed. Appx. 842 (5th Cir. June 17, 

2009). Defendants did not challenge the correctness of 

that appellate route, and the Fifth Circuit did not expressly consider whether it possessed jurisdiction over the 

appeal. Instead, the Fifth Circuit reversed and remanded 

the action back to the district court. Id. at 851. 

It was not until the second appeal that the Fifth Circuit requested supplemental briefing on whether the 
USPPS LTD v. AVERY DENNISON CORP 4

Federal Circuit possesses exclusive appellate jurisdiction, 

ultimately concluding that jurisdiction is proper in this 

court and transferring the appeal here. See USPPS, Ltd. 

v. Avery Dennison Corp., 647 F.3d 274, 275-76 (5th Cir. 

2011). As the majority notes, the Fifth Circuit relied 

heavily on three of our recent decisions in which we held 

that state law malpractice claims relating to an underlying patent matter properly “arose under” the patent laws. 

Id. at 278-281 (relying on Davis, 596 F.3d at 1361-62; Air 

Measurement Techs., Inc. v. Akin Gump Strauss Hauer & 

Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007); Immunocept, 

LLC v. Fulbright & Jaworski, LLP, 504 F.3d 1281 (Fed. 

Cir. 2007)). Specifically, the Fifth Circuit explained that, 

“[a]s in Davis, USPPS cannot prove causation without 

proving the patentability of its invention,” because 

“[o]therwise, the cause of USPPS’s loss of patent protection would be based on the simple fact that its invention 

could not be patented, and not on any breach of fiduciary 

duty by [defendants].” Id. at 280. The Fifth Circuit also 

relied on one of its prior decisions from 1997, which 

contained only a limited jurisdictional analysis but which 

the Fifth Circuit found was “nevertheless binding.” Id. at 

282 (citing Scherbatskoy v. Halliburton Co., 125 F.3d 288 

(5th Cir. 1997)). Accordingly, the Fifth Circuit transferred the appeal to this court. 

Having considered and decided the issue, the Fifth 

Circuit’s decision that exclusive jurisdiction rests with the 

Federal Circuit is the law of the case. See Christianson, 

486 U.S. at 817. This court, however, does not “exceed its 

power in revisiting that jurisdictional issue” and is 

“obliged to decline jurisdiction” if it concludes that the 

Fifth Circuit’s decision is “clearly wrong.” Id. Viewing 

the matter from a clean slate, without any Federal Circuit 

precedent on this issue, the Fifth Circuit’s transfer decision is “clearly wrong.” Indeed, in the absence of our 
5 USPPS LTD v. AVERY DENNISON CORP

current case law, I would dissent and find that the case 

should proceed in the Fifth Circuit. That is true even 

considering the Supreme Court’s warning against “jurisdictional ping-pong.” Id. at 818. The principles that 

underlie the Supreme Court’s concern about re-transfers – 

conserving private and public resources and maintaining 

public confidence in the judiciary – weigh in favor of 

keeping the case in the Fifth Circuit. That court already 

resolved the merits of one appeal in this matter, and the 

scope of its decision in that first appeal is at issue in the 

matter before us. See Appellant’s Br. 7 (quoting from the 

Fifth Circuit’s first decision and arguing that “the summary judgment evidence supports USPPS’s knowledge as 

described in the [First Amended Complaint] used by [the 

Fifth Circuit] to reverse the district judge’s ruling on the 

motion to dismiss based on limitations.”). It is inefficient 

and unproductive for this court to hear the same case 

upon which the Fifth Circuit already has ruled. 

Under correct application of Supreme Court case law, 

even a cursory review of the case reveals that it does not 

invoke jurisdiction under 28 U.S.C. § 1338 and, by extension, our appellate jurisdiction under § 1295. 

II. 

Federal courts may exercise federal question jurisdiction over state law claims only in the rare case where a 

federal issue is “actually disputed and substantial,” and 

where doing so will not upset “any congressionally approved balance of federal and state judicial responsibilities.” Grable & Sons Metal Prods., Inc. v. Darue Eng’g & 

Mfg., 545 U.S. 308, 314 (2005). Thus, courts must consider whether: (1) a federal issue is a necessary element of 

a state law claim; (2) a federal issue is actually disputed; 

(3) a federal issue is substantial; and (4) exercising federal 

jurisdiction will disturb the balance of federal and state 
USPPS LTD v. AVERY DENNISON CORP 6

judicial responsibilities. Grable, 545 U.S. at 314. The 

claims in this case fail at least the last two factors of this 

analysis, and, therefore, jurisdiction under Sections 1338 

and 1295 is lacking. See Byrne, 2012 U.S. App. LEXIS 

6021, at *10 (“In choosing to exercise jurisdiction over 

malpractice claims arising out of patent matters, we have 

ignored the latter two parts of the inquiry.”). 

As to the third factor, the purported “patent” issue in 

this case is not “substantial” under Grable for several 

reasons. First, determining whether USPPS likely could 

have obtained a patent in light of the specific prior art the 

United States Patent and Trademark Office cited is a 

case-specific, factual inquiry, and requires only application, not interpretation, of the federal patent laws. See

Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 

677, 701 (2006) (distinguishing Grable on the ground that 

it presented a “nearly ‘pure issue of law,’” unlike the “factbound and situation-specific” claim at issue in the case 

before it (citation omitted)); Byrne, 2012 U.S. App. LEXIS 

6021 (same); Bennett v. Sw. Airlines Co., 484 F.3d 907 

(7th Cir. 2007) (“What the Court said about Grable in 

Empire Healthchoice can be said here too. We have a factspecific application of rules that come from both federal 

and state law rather than a context-free inquiry into the 

meaning of a federal law.”). 

Second, allowing a regional circuit court to decide this 

matter does not pose a threat to the uniformity of patent 

law because: (1) any patent issue that is decided will not 

affect the underlying patent rights, it will merely inform 

an element of the plaintiff’s state law claim; (2) such a 

decision will not have binding effect on other patent cases; 

and (3) this is a private dispute that does not impair a 

federal agency’s ability to vindicate its rights in a federal 

forum. See Byrne, 2012 U.S. App. LEXIS 6021, at *33 

(“Further, patent-related malpractice claims do not impli-
7 USPPS LTD v. AVERY DENNISON CORP

cate any underlying patent rights themselves, and instead 

require consideration of patent law only to inform the 

state law standards of causation or damages.”). See also

Adventure Outdoors, Inc. v. Bloomberg, 552 F.3d 1290, 

1301 (11th Cir. 2008) (“[T]he state court interpretation of 

the gun statutes will not be controlling in numerous other 

cases because it will not have precedential effect in the 

federal system”); Mikulski v. Centerior Energy Corp., 501 

F.3d 555, 570 (6th Cir. 2007) (en banc) (“While the federal 

government may have an interest in the uniform application of regulations that relate to the collection of taxes, it 

has only a limited interest in private tort or contract 

litigation over the private duties involved in that collection.”). 

Finally, determining whether USPPS likely could 

have obtained a patent absent defendants’ allegedly 

unlawful acts does not resolve this matter; rather, it is 

only one piece of the causation element of USPPS’s claim. 

Thus, federal court jurisdiction is neither necessary nor 

appropriate because the patent law issue presented is not 

substantial by any measure. See Empire Healthchoice, 

547 U.S. 677, 701 (distinguishing Grable because the 

federal issue in Grable was “both dispositive of the case 

and would be controlling in numerous other cases”); 

Byrne, 2012 U.S. App. LEXIS 6021, at *36 (“The fact that 

the patent issue in a malpractice action is not the sole, 

dispositive issue in the case strongly cuts against the 

conclusion that it is a ‘substantial’ one.”). 

Not only is § 1338 jurisdiction lacking because the 

patent issues in USPPS’s claims are not “substantial,” 

§ 1338 jurisdiction also does not lie because exercising 

jurisdiction would upset the balance of federal and state 

judicial responsibilities. See Grable, 545 U.S. at 313-14 

(explaining that the exercise of federal jurisdiction is 

“subject to a possible veto,” even where a state law claim 
USPPS LTD v. AVERY DENNISON CORP 8

contains a contested and substantial federal question, if 

exercising jurisdiction is not “consistent with congressional judgment about the sound division of labor between 

state and federal courts”). While it is true that there is a 

strong federal interest in the adjudication of patent 

infringement actions, states have a similarly strong 

interest in regulating attorney misconduct within their 

borders. Indeed, state courts are the traditional arbiter of 

such misconduct, which is governed by long-standing 

common law principles of negligence, fraud and breach of 

fiduciary duty. Where, as here, the resolution of any 

patent law issue will relate to hypothetical circumstances 

and neither result in a finding of either infringement or 

invalidity nor have any precedential effect in any patent 

law action, the federal interest is marginal at best. See

e.g., Adventure Outdoors, 552 F.3d at 1301 (“state court 

interpretation of the gun statutes . . . will not have precedential effect in the federal system.” (citing Tafflin)). 

This case demonstrates the far-reaching nature of our 

flawed reasoning in patent-related malpractice cases. In 

this case, the Fifth Circuit extended our case law to 

encompass the exercise of jurisdiction over claims for 

fraud and breach of fiduciary duty, thus confirming that 

our decisions in patent-related malpractice actions will 

continue to draw more state law causes of action into 

federal court. In other words, 

the Supreme Court's fears have already been realized in USPPS. There, the Fifth Circuit adopted 

the reasoning applied by the Federal Circuit in 

Air Measurement and Immunocept to reach the 

same outcome in a fraud and breach of fiduciary 

duty case involving patent law. [citation omitted] 

Put another way, the reach of the Federal Circuit's section 1338 reasoning is uncabined, and 

can potentially sweep any state law case that 
9 USPPS LTD v. AVERY DENNISON CORP

touches on substantive patent law (or, for that 

matter, the other areas of law covered by section 

1338, such as copyright and trademarks) irrevocably into federal court. 

Minton v. Gunn, 355 S.W.3d 634, 653 (Tex. 2011) 

(Guzman, J., dissenting). See also Singh v. Duane Morris 

LLP, 538 F.3d 334, 340 (5th Cir. 2008) (explaining that 

the argument for extending federal jurisdiction over 

malpractice claims involving a federal issue “reaches so 

broadly that it would sweep innumerable state-law malpractice claims into federal court.”). Left unchecked and 

unrevised, our case law will continue to upset the balance 

of federal and state judicial responsibilities. 

III. 

Although resolution of the jurisdictional question in 

this case is clear under a correct application of Supreme 

Court precedent, we are not working from a clean slate. 

Under our law as it now stands, the Fifth Circuit’s decision meets the low threshold under Christianson of being 

“plausible,” and we must accept the transfer and resolve 

the merits of this case. Christianson, 486 U.S. at 819 

(“Under law-of-the-case principles, if the transferee court 

can find the transfer decision plausible, its jurisdictional 

inquiry is at an end.”). For these reasons and those 

spelled out in my decision from this court’s order denying 

rehearing en banc in Byrne, I concur in the result, but 

believe our case law in this area is wrong.