The federal and state governments are all invested in trying to curb patent trolling activities and for the first time, an attorney general (AG) has attempted to sue an alleged patent troll under the Consumer Protection Act.
The Vermont AG is trying to take down MPJH Technology Investments, LLC after the company sent hundreds, if not thousands, of demand letters indicating that businesses are infringing on its patents. MPJH is demanding $1,000 per employee for the companies to avoid a lawsuit. Well, a lawsuit is just what MPJH is getting.
Many are questioning whether the AG’s strategy is wise and whether it will ultimately be successful. The initiation of the lawsuit is unsurprising to most Vermonters, especially given MPJH’s activities and the AG’s aggressive track record in protecting consumers in Vermont.
Moreover, MPJH made a large tactical mistake: it decided to target non-profit organizations that assist the disabled. Any Vermonter who knows Attorney General Bill Sorrell recognizes that MPJH has essentially gotten between a bear and her cub.
The success of the lawsuit will depend on whether or not the AG can overcome a claim by MPJH that Vermont’s law regarding consumer protection is preempted by federal law and/or the constitution. It is well established that a patentee has a right to notify third-parties of infringement, and allowing the sending of demand letters will hopefully allow people to avoid litigation by negotiating before a lawsuit is filed.
There is also general protection under the First Amendment that protects the right to petition the government and correspondingly, to send a letter indicating an intent to sue or to seek administrative relief.
However, the right to send a letter is not unlimited – the letter cannot contain inaccurate, false, or misleading statements. The constitution and federal law simply do not protect bad-faith demands—demands that are obviously attempts to wrongfully gain competitive advantage or to harass. From a patent law perspective, a patentee has no right to send a demand letter if no reasonable person, in the patentee’s position, could expect to win the lawsuit.
In this case, the AG will have to deal with the fact that proof of infringement is not required before a patentee can assert its rights, even if the patentee is mistaken about the scope of protection for the patent. Another significant hurdle for the AG will be offering clear and convincing evidence that MPJH had no reasonable basis to believe that the Vermont businesses and non-profits infringed its patents as MPJH interpreted its patents so broadly.
MPJH has its own problems. There are many aspects of its letters that appear to be objectively inaccurate, including how many businesses have taken a license, its willingness to litigate, its unsubstantiated threats (if you don’t respond to the letter, MPJH appears to never have followed up on its threats), and the amount that businesses have paid for licenses to MPJH.
The MPJH patents have all now been challenged at the U.S. Patent and Trademark Office by the makers of the scanning equipment, e.g., Xerox, HP, and Ricoh. Those proceedings should take less than a year to complete and may outpace the AG’s lawsuit. If (or when) those patents are found invalid, MPJH’s case will be significantly weakened.
Ultimately, this case will have substantial ramifications on state activities to protect Vermont businesses and to other states to curb patent troll activities. If the AG loses, it is unlikely that any patent troll could be found acting in bad faith without blatant activities such as attempts to license an invalid patent. If the AG wins, expect other states to follow and the law describing “bad faith” to further develop. Either way, this case is one to watch.
Justin McCabe is an intellectual property attorney at the law firm of Dunkiel Saunders Elliott Raubvogel & Hand, PLLC in Burlington, Vermont, www.dunkielsaunders.com. Justin writes about IP issues at www.greenmountainip.com.
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