## Facts

- American Well Works Co. manufactured and sold a pump, claiming it was patented or patent-pending and commercially successful.
- Layne & Bowler Co. and an individual defendant allegedly told customers and the market that American Well Works’ pump (or parts) infringed defendants’ patent rights.
- Defendants allegedly filed infringement suits against some users of American Well Works’ pump and threatened to sue all users, despite allegedly lacking probable cause.
- American Well Works sued for damages based on the alleged false and malicious disparagement of its product and resulting injury to business and reputation, seeking compensatory and punitive damages.

## Issues

1. Whether a damages action based on allegedly false statements and threats to sue for patent infringement “arises under” federal patent law so as to fall within exclusive federal jurisdiction.
2. Whether removal to federal court was proper when the complaint pleaded a state-law business tort and patent questions would arise, if at all, as a defense.

## Decision

- The Supreme Court reversed the dismissal.
- The Court held the action did not arise under federal patent law; a suit for business damages caused by threats of patent litigation is not, by itself, a suit under the patent laws.
- The Court concluded that the alleged wrong (product disparagement/interference with business) depended on the law of the state where the conduct occurred, not federal patent law.
- Because the complaint stated a state-law claim, the federal court lacked jurisdiction on the asserted patent-law theory, and the case belonged in state court.

## Legal Principles

- Federal-question jurisdiction depends on the plaintiff’s well-pleaded statement of its own cause of action.
- A case arises under the law that creates the cause of action; state-created tort claims do not become federal cases merely because they involve patents in the background.
- Anticipated defenses, including a defense that the statements were true because infringement existed, do not supply federal jurisdiction.
- State courts may adjudicate state-law claims for business injury based on patent infringement accusations and threats, even if patent issues may be litigated incidentally.

## Conclusion

The Court held that a business-damages claim grounded in allegedly wrongful infringement accusations and litigation threats is a state-law tort action rather than a federal patent suit, so it does not confer exclusive federal jurisdiction and was improperly removed and dismissed.


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