For the half-year to 30 June 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Alberto Bellan, Darren Meale and Nadia Zegze.

Two of our regular Kats are currently on blogging sabbaticals. They are David Brophy and Catherine Lee.

Thursday, 23 May 2013

The Green Mountain state sues a Texas patent troll

This cat can attest that the state of Vermont is not only one of America's loveliest states, with big lakes and green mountains, but one of its quirkiest too. The place has a penchant for electing socialist Senators and hosting "Bread and Puppet" theatre and has a strong independent streak dating from its days as an independent republic.

But into this happy land roamed a Texas cowboy who carried not a six gun, but something more

A new cat-sherriff comes to Vermont
dangerous -- hundreds of demand letters asking small businesses of all stripes to pay a $900-$1200 patent license for each employee who used an image scanner.

"As you can imagine, most businesses, upon being informed that they are infringing someone's patent rights, are interested in operating lawfully and taking a license promptly," wrote the cowboy in one of his many missives.

The cowboy in question is Jay Mac Rust (who can see a picture of him and his chapeau here), who is an American "super lawyer" and counsel for MPHJ, a patent assertion entity that wrangles more than 40 shell companies, all of which have the same address - at a mail service company in the state of Delaware. MPJH's handful patents, one of which issued in 2001, cover basic imaging technology and have not been asserted until last year -- when MPHJ targeted everyone far and wide, including a non-profit organization that assists disabled Vermonters. 

The Green Mountain state ultimately decided enough was enough and this month sued MPHJ and its passel of shell progenies, arguing its behavior amounted to a violation of Vermont laws against unfair and deceitful trade practices. Here, to wit, are some of the alleged unfair acts:

  • Threatening infringement actions despite no evidence that the defendants had in fact infringed the patents
  • Using shell companies to hide the true owner of the patents and encourage quick settlements
  • Implying that defendants' failure to respond to initial letters suggested that they had consulted patent counsel that would cost more than the license demand
And here are of some of the allegedly deceptive ones:
  • Stating that plaintiff would sue if the defendant did not reply in two weeks
  • Stating that the licensing program had received a "positive response from the business community"
  • Saying that the average license price was $900-$1200 per employee and that "most" letter recipients had paid
The IPKat's head is spinning at seeing a major patent matter -- which are always a federal affair in America -- land in a state court, and no less in tiny Vermont. The state government's response is perhaps the most creative one yet to the ongoing problem of patent trolls like Mr. Rust in America, whose activities slurry the good names of patent owners. Other recent ideas include proposed federal laws to expand inexpensive post-grant review and to force patent owners to identify themselves

Merpel muses on starting
her own patent republic
Merpel, though, wonders about jurisdiction issues and whether the good people of Vermont will be able to pin down MPHJ in state court for long. While reining in patent powers seems a laudable goal in this case, it also raises obvious questions of federal pre-emption.

As Vermont is a small and friendly place, this cat, in the course of his day job, decided to ring up the state's head lawyer to ask him about the jurisdiction issue. Sure enough, Attorney General William Sorrell was soon on the line. He explained that the state's legal complaint (read it here) took no issue with the patents themselves but focused instead on the deceitful nature of the letters. Sorrell added that MPJH has been tormenting a wide variety of businesses for years. One of the rural states main industries is craft cheese and dairy products (must visit, notes the IP Kat).

It will be curious if other states take up Vermont's tactics. California is well-known for asserting its robust consumer protection laws and may wish to fight trolls on behalf of Silicon Valley (but wait, says Merpel, the California government also has a booming business in partnering with non-practicing entities to seek patent licenses).

And if that isn't enough Vermont patent news for one day, the governor today signed a novel law -- unrelated to the MPHJ lawsuit -- that vows to protect the state's businesses from "unscrupulous patent trolls."

1 comment:

Roufousse T. Fairfly said...

The asserted patents can be seen here.

US7986426 claims consist of eleven wonderful independent claims.

Can patent "examination" be something else but a cruel joke played on the public?

Subscribe to the IPKat's posts by email here

Just pop your email address into the box and click 'Subscribe':