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Patents The Courts

Notorious Patent Troll Sues Federal Trade Commission 102

Posted by Unknown Lamer from the your-business-is-stupid dept.
Fnord666 writes with news that the notorious scanner patent troll MPHJ Technology caught the eye of the FTC, and decided to file a preemptive lawsuit (PDF) against the Federal government. From the article: As the debate over so-called "patent trolls" has flared up in Congress, MPHJ became the go-to example for politicians and attorneys general trying to show that patent abuse has spun out of control. ... The FTC was going to sue under Section 5 of the FTC Act, which bars deceptive trade practices. MPHJ says that the FTC is greatly overstepping its bounds. The patent-licensing behavior doesn't even amount to 'commerce' by the standards of the FTC Act, because the letters are not 'the offer of a good or sale for service,' argues MPHJ. Furthermore, MPHJ has a First Amendment right to notify companies that it believes its patents are being infringed."
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Notorious Patent Troll Sues Federal Trade Commission More

Notorious Patent Troll Sues Federal Trade Commission

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  • No (Score:5, Insightful)

    by Carewolf ( 581105 ) on Wednesday January 15, 2014 @09:32AM (#45964765) Homepage
    They are right. It is not commerce it is blackmail.

    • Re: (Score:2)

      by TWX ( 665546 )
      Sounds to me like they're risking running afoul of racketeering and extortion laws. I hope that they push the issue that far, it'd be fun to watch.
      • I have to agree, I hope this turns out well.

        • Re:No (Score:5, Interesting)

          by Anonymous Coward on Wednesday January 15, 2014 @10:05AM (#45965123)

          I have to agree, I hope this turns out well.

          Will it, though? If they end up taking that point all the way to the Supreme Court, what will the opposing arguments be?

          On the one hand you'd have the FTC probably arguing that these corporations exist only to prey on the market, that they use and/or abuse a system through which they purport to profit by, essentially, extorting compliance fees, all the while without ever actually creating or selling a product, which is to say, without ever actually *adding* to the system (outside of eventual taxable revenue and personal income).

          But on the other you'd have a company arguing that they have a right to *notify* a "competitor" when they believe their commercial rights have been violated -- and, strictly speaking, don't they? More importantly, *shouldn't* they? The larger issue is the system itself -- this is truly a "don't have the player, hate the game" situation. I hate patent trolls and any such equivalent entities with passion and wish they'd die a fiery death, but if there are any situations where a company has a legitimate gripe with another company "stealing" their products, then the right to send them a "cease and desist/pay us what you owe" letter should exist, right?

          So unless this results in serious reform, which I doubt (and whatever the courts' jurisdictions and power may allow them to do, I doubt even the Justices of the SCotUS would go so far/dare to throw the whole thing away), it'll be a lose-lose situation. We either get a ruling that makes it a lot harder for patent trolls to exist (while also making legitimate infringement harder to fight) or an affirmation of essential rights that would validate patent trolling.

          • Re:No (Score:5, Insightful)

            by sirlark ( 1676276 ) on Wednesday January 15, 2014 @10:53AM (#45965661)
            The best outcome here would be to have a law introduced saying you are not allowed to rent-seek on patents (or any other IP for that matter). You may only hold a patent if you are actively using it yourself. Not a subsidiuary, or parent company. The company that holds the IP must be using it. If the patent is sold off then the buyer must actively start using it within X amount of time, or it becomes invalidated. Researching and development should buy you a couple of years so you can patent early and still take some time to market.

            • Re:No (Score:4, Interesting)

              by hawkinspeter ( 831501 ) on Wednesday January 15, 2014 @11:24AM (#45966021)
              I don't see how that would work out. If a garden shed based inventor comes up with a novel, useful nuclear reactor design and patents it, your law would ensure that he'd have to go into the energy business.

              The real answer is to not allow patents for things that are "obvious" to people knowledgeable in the relevant field. These obvious patents don't help anyone because almost no-one searches through patents to find out how to do things.
              • Even worse is the fact that those searching through the patents are not experts in the field of the patent, nor can they get schooled up on it in a reasonable time. If you have thousands of patents coming in each day, you can't possibly reasonably compare them to the millions (assuming) that have been granted, at least not with any real detail or distinction. "Yea, but this rectangle has rounded corners!" must have been different enough than all the other electronic boxes they've seen before. What's obvious

                • Re:No (Score:5, Insightful)

                  by JeffAtl ( 1737988 ) on Wednesday January 15, 2014 @03:27PM (#45969021)

                  Maybe there should be more options than just "approved" or "rejected". There could be a weaker status than "approved" that forces the burden on the patent holder if it is ever challenged.

              • Re: (Score:3)

                by Sigma 7 ( 266129 )

                The real answer is to not allow patents for things that are "obvious" to people knowledgeable in the relevant field.

                Obvious is a vague term that could be applied retroactivly (in case everyone suddenly learns how to do something from said patent.)

                It might be better to require an invention instead. For example, A method and system for providing online records [google.com] doesn't appear to be much of an invention (both abstract and claim 1 seem to describe any database), and more like attempting to comply with a new sta

                • Yes, obvious is a vague term and that's part of the problem. Maybe you could get 100 average people in a room and ask them how they would solve a particular problem. If more than 2 of them come up with something almost the same as the patent, then it's obvious and not worthy of being a patent.

              • Re: (Score:1)

                by Anonymous Coward

                I don't see how that would work out. If a garden shed based inventor comes up with a novel, useful nuclear reactor design and patents it, your law would ensure that he'd have to go into the energy business.

                What's the problem with that? Society grants patent protection, a monopoly on an idea backed by the force of the government, for the greater benefit of society. If your garden shed inventor isn't using the idea, why should he or she be entitled to that protection?

              • Re: (Score:3)

                by rhazz ( 2853871 )

                I don't see how that would work out. If a garden shed based inventor comes up with a novel, useful nuclear reactor design and patents it, your law would ensure that he'd have to go into the energy business.

                And what's wrong with that? He can use it, or he can sell it to a company that will use it. Either way he profits and the technology is used and society benefits. Maybe he could've made more money licensing it, but I don't see the societal benefit of maximizing this one person's profit when it enables other entities to do so much rent-seeking.

              • No, my law wouldn't require that he go into the energy business. He would have to sell it to someone in the energy business, or actively continue research until he could either go into the energy business himself or could make the patent attractive enough to sell to someone who could use it. What he could *not* do, is come up with a great idea and not share it because he's not in the energy business. He could *not* come with a great idea and demand exorbitant amounts of money for it thereby preventing it's
                • Okay, so you're allowed to sell the patent, but not enforce it if you don't build/sell the invention. That could be a problem when an inventor tries to sell it. The inventor has already made the information in the patent public (by patenting it), but is unable to sue for infringement, so any company can now use that patent for free unless one of the energy companies decides to buy it (for a rock-bottom price) in order to stop the other companies using it.
                  • Why wouldn't it be enforceable. I didn't suggest that it couldn't be enforced, but that the owner couldn't rent-seek on it. He is prefectly free to license others to use his patent, and to sue those using the technology without license. What he's not allowed to do is not licence it anyone, and then sue others for using it IF he isn't using it himself. To continue the nuclear power technology example: The inventor patents some technology improving cooling efficiency by X%, thereby reducing costs etc etc. In
            • The whole point of a patent is to promote science. One awesome way to encourage small inventors to invent, is to allow them to license their invention to someone with the means to produce it. By making it so only active users can hold a patent, you've made it very difficult for the little guy to hold on to patents. And thus you discourage them from inventing.

          • Re:No (Score:4, Insightful)

            by Tuoqui ( 1091447 ) on Wednesday January 15, 2014 @11:20AM (#45965959) Journal

            Just prohibit non-practicing entities from extorting money via patents.

            If you have a patent for a better process for making widgets and you arent in the business of making widgets then you dont get to harass widget making companies.

            • Nope - that's not the problem. The problem is patents that are so obvious that everyone infringes them without even realising it.

              • Nope - that's not the problem. The problem is patents that are so obvious that everyone infringes them without even realising it.

                The idea behind patents is that because of patent protection, I will invent something and publish it as a patent, whereas without patent protection, I wouldn't bother inventing it, so it would never be invented, which would be a loss to society.

                If people infringe on a patent without even realising it, then clearly it would not have been a loss to society if the inventor hadn't invented it. Not if other people create it without even thinking that it might be something special deserving a patent.

                Even if

            • Or in the process of making better widget making devices.

            • So what you are saying is... screw the little guy, hurray for the big companies with money?

          • Re: (Score:3)

            by sribe ( 304414 )

            But on the other you'd have a company arguing that they have a right to *notify* a "competitor" when they believe their commercial rights have been violated -- and, strictly speaking, don't they?

            What if they know good and damned well that their patents are trivial and could never survive a challenge? That is what introduces the fraud aspect.

            • I don't see how a lawyer could argue that it was obvious to the company that the patent was trivial and yet not obvious to the patent office.

      • Sounds to me like they're risking running afoul of racketeering and extortion laws. I hope that they push the issue that far, it'd be fun to watch.

        Unlikely. If they have a non-frivolous legal claim, which it appears they do (they own the patents in question, the patents are considered prima facie valid until invalidated, the people targeted are using the patented technology), then notifying someone of an intent to sue and offering a settlement is not extortion. Think of a similar situation - someone hits your car, causing minor damage to a quarter panel. Since you have a high deductible, you tell them to give you $1k in cash and you'll call it a day w

        • There's one important difference between your example and this case - the number of people targeted. If you're sending out hundreds of letters to people claiming that they damaged your car, then that's extortion.

          • There's one important difference between your example and this case - the number of people targeted. If you're sending out hundreds of letters to people claiming that they damaged your car, then that's extortion.

            Not if hundreds of people did damage your car. In this case, since the hundreds of people are apparently using the patented technology, then the claims are not frivolous, and it's not extortion.

            • Yes, that wouldn't be extortion. However, it's not common for hundreds of people to damage your car, so it's not the best example.

              • Yes, that wouldn't be extortion. However, it's not common for hundreds of people to damage your car, so it's not the best example.

                Conceded.

                How about this - you own a house on a nice plot of land that happens to be near a major sports/concert venue. Game/show day rolls around, and hundreds of people (you have several acres) decide to park on your land, without your permission, damaging your nice lawn with their tires. If you left a letter on each of their windshields demanding $50 to repair your lawn or you'd take them to court for trespassing, that wouldn't be extortion.

        • Unlikely. If they have a non-frivolous legal claim

          That is another huge problem that needs to be addressed though. Companies have used legal threats as a means to extort money from targets who either cannot afford a legal defense or the cost of the defense is greater than the extortion amount.

          The RIAA, MPAA and Directv do this by threatening to sue suspected pirates if they did not give them $3,000.

      • Sounds to me like they're risking running afoul of racketeering and extortion laws.

        This is the sort of behavior that patents were created to enable, so it doesn't sound that way to me.

    • But they buy and sell patents. If the parties that they send these letters to had enough money, I'm sure they could buy the patent in question. Sounds like an open and shut case, surely?

  • Yes please poke the bear (Score:3, Funny)

    by Anonymous Coward on Wednesday January 15, 2014 @09:34AM (#45964789)

    Hopefully it rips your head off.

    • Re: (Score:3)

      by jythie ( 914043 )
      *nods* small companies can easily be bullied into submission by legal threats and bizzar arguments, federal institutions not so much. Granted if you are a multi-billion dollar company you can bully the government into leaving you alone, but I doubt this troll has the resources to make much of a mark.
      • As much as I dislike patent trolls, I think they've got a point with this. Where do you draw the line between patent trolls and other patent holders? This company has a patent (which hasn't been challenged in court yet and so is "valid") and believes that companies are infringing this patent.

        It seems that the FTC is assuming that they are a troll, but what evidence do they have? It does seem as though the FTC is targeting this company unfairly in that they haven't targeted other patent trolls.

        I'd like a

        • Re: (Score:2)

          by jythie ( 914043 )
          I think the difference, at least where the FTC comes in, is the 'deceptive trade practices', probably from complaints registered with them. Until we see some kind of official document from the FTC it is hard to say why this company is being singled out (or if they even ARE being singled out) or what the actual charges are.

          On the other hand, "MPHJ" arguments for why they should be exempt are pretty baseless. Not commerce? Sorry, IP is still commerce. 1st Amendment? Sorry, the government can not stop yo

  • ... trying to show that patent abuse has spun out of control.

    Interesting phrase that. So ... what is considered patent abuse under control? Should be advocating it?

    • No matter what you do patent abuse will always happen. If the rules are set up and enforced properly, though, this will be kept to a minimum. (This is "patent abuse under control.") The situation we have now all but encourages patent trolls to operate and leaves it to the courts to occasionally push them back. (At an expense to the people being targeted by patent trolls.)

  • Yeah right (Score:5, Interesting)

    by gstoddart ( 321705 ) on Wednesday January 15, 2014 @09:39AM (#45964851) Homepage

    The patent-licensing behavior doesn't even amount to 'commerce' by the standards of the FTC Act, because the letters are not 'the offer of a good or sale for service,'

    No, they're an offer for them to pay them money to license your patent, which may or may not even apply or hold up under scrutiny.

    If your business model is holding onto patents and getting people to license them, guess what? That's commerce guys.

    I sincerely hope these guys get some form of smackdown, or charged under the RICO act or something.

    • Re:Yeah right (Score:5, Interesting)

      by gstoddart ( 321705 ) on Wednesday January 15, 2014 @10:12AM (#45965181) Homepage

      And, as a follow on to that, scan to email has been available in printers for at least 10 years now.

      The time to defend that patent was a long time ago.

      I'm of the opinion that by the time I can buy something in Staples, the patent situation isn't my problem. I bought a commercial product in good faith, and don't know or care about the myriad of patents involved.

      If you think the vendor of said product is infringing your patent, take it up with them. This 'go directly to users of the technology with a shakedown letter and a threat of a lawsuit' should bring criminal charges.

      • I had a big ISA card with POTS plugs on the back in a new (at the time) computer with Windows 3.1 that could receive and print faxes. Gosh that was a very long time ago.

      • There is no legal requirement to defend a patent--that's only required for trademarks.

        As the laws are currently written, anyone who infringes the patent can be sued. This includes end users. The EFF has proposed changes to the laws to provide end-user immunity, but those changes have not yet been made. As it stands, your only recourse is to turn around and sue the manufacturer and/or the store for selling you a product and not warning you that you might be liable for patent fees.

    • Re: (Score:1)

      by rhazz ( 2853871 )
      Is there a requirement for a corporate entity to engage in commerce, or otherwise lose their corporate personhood? It would be nice if the individuals involved lost that protection and could be sued/charged directly...

  • Rights / Responsibilities go hand in hand. (Score:1)

    by Anonymous Coward

    You have the right to freedom of speech.
    You have the responsibility not to use that right for illegal purposes.
        You don't have the right to bully.
        You don't have the right to extort or blackmail.
        You don't have the right to criminally falsify purported legal documents.

    You know your patents aren't worth the paper they're printed on, so you don't have the right to get any money from anyone.

  • First Ammendment? (Score:4, Insightful)

    by c0lo ( 1497653 ) on Wednesday January 15, 2014 @09:45AM (#45964927)

    MPHJ has a First Amendment right to notify companies that it believes its patents are being infringed.

    What? Isn't this akin to saying the spam in my inbox is protected by the first ammendment, since the senders have an religious belief/conviction I'd be interested in cheap Viagra?

    • Re:First Ammendment? (Score:4, Interesting)

      by bluefoxlucid ( 723572 ) on Wednesday January 15, 2014 @11:01AM (#45965745) Homepage Journal

      The "First Amendment" is the go-to for anything that involves communication in the US. I have a first-amendment right to show a 9 year old girl my penis--I mean it's just "expression" right? That's the kind of argument being made here: they're free to "express" that their patent is being infringed.

      The problem with that argument is of course the same problem with my extreme example: you can express whatever the hell you want--as above, I expressed the concept of showing my wang to a schoolgirl--but you can't take other actions. You can express that your patent is being infringed; but you can't take legal action if you don't meet the enforceability standards set out by the FTC within their power as granted by the law. That is: if the FTC decides you can't enforce your patent under those conditions, then you can tell people that Company X is using your patented work, you can even claim they're "Violating" it and that the US has all these hair-brained laws about how you can't do anything about it even though it's your god damned right to enforce it.

      What you can't do is slam a legal document on their desk and make them expend resources having their lawyers analyze your claim--since the claim is false, you're harassing them and owe them damages. Continued lawsuits could get you barred from the court systems. "First Amendment Rights" don't go this far, just like they don't go so far as explaining pederasty by physical example.

    • This is essentially what spammers have said for years. "We have a First Amendment right to send anyone any message we want. Anyone who blocks our messages is infringing on our rights." Of course, it breaks down because spammers might have a right to send their messages, but they don't have a right to have people accept/read their messages.

  • Comment removed (Score:5, Funny)

    by account_deleted ( 4530225 ) on Wednesday January 15, 2014 @09:53AM (#45964995)
    Comment removed based on user account deletion

  • Squeal, piggy, squeal!!!! (Score:1)

    by Anonymous Coward

    And may you die a painful death after all that squealing!

  • Speech act? (Score:5, Insightful)

    by Vintermann ( 400722 ) on Wednesday January 15, 2014 @09:57AM (#45965043) Homepage

    Legal notification of infringement is an example of a speech act that does more than convey information. Like giving a marriage vow, signing a painting or entering the password to your net bank, it has a function outside conveying information (formal commitment in the first case, asserting authorship and identity in the next).

    Using free speech as an argument to defend that is idiotic. They might as well argue that they have a constitutional right to lie on their tax forms, or to their shareholders.

    • Anything I want to do is free speech? (Score:3, Funny)

      by Anonymous Coward

      Hitting people in the face is free speech. I have a right to communicate to people that I don't like them, and this is the mode of communication that I prefer.

  • Fire! Fire" (Score:5, Insightful)

    by Chrisq ( 894406 ) on Wednesday January 15, 2014 @09:59AM (#45965055)

    MPHJ has a First Amendment right to notify companies that it believes its patents are being infringed.

    This is the corporate equivalent of shouting "fire" in a crowded theater.You really need to be sure that you are right before shouting.

  • First Amendment is the standard go-to bullshit everyone proclaims right now.
    I mean, seriously? If I threaten your life, it is ok because I have a first amendment right? How about if I'm being racist? What if I prank call 911? How about screaming 'FIRE!' inside a crowed theater? Hey, I was just expressing myself, and I have a first amendment right to do so.

    Yeah, here is some free expression for you: FUCK YOU!

    People should wake up and smell the times, and see that John Locke's idea of "rights" is dead and bur

    • If you're being racist, that's a first-amendment right. If you're being racially discriminatory or you're committing assault or vandalism, that's not. But you're well within your rights to tell someone to go back to Africa (actually they're from the Carribean, so you're also stupid).

      • Re: (Score:2)

        by morcego ( 260031 )

        And still mostly civilized countries don't consider bigotry as "free speech".

        Say you go on air and accuse someone publicly of having committed a crime. Not saying he "might have", saying he actually did. You are going to get sued for it. Are you going to argue "free speech"?

        "Free speech" is not a carte blanche for "irresponsible speech", "bigotry" or "verbal assault". Racist is considered a "hate crime" is most civilized countries. The fact it isn't in the US tells more about the USA than about freedom.

        • Most "civilized" countries also consider it in poor taste to physically defend yourself from attack. I was raised to be "civilized"--they told us in 6th grade if someone is trying to severely injure us, we should cover our head and absolutely never fight back. Those sort of people, they learned to talk around authority and continue behaving hostilely.

          It's uncivil, as well, to intervene where another person is physically threatened. Civil people turn their noses up, maybe call the constable, and retain

  • No name for this was given. Anyone know if this is the same as Operation Panda?
  • Would the mafia collecting protection money not be considered a "good" or "service," then?

    • Brings up a point. It's a legal form of Racketeering.

      "Nice code you have there. It would be a shame if something happened to it!"

  • Is not the patent itself, or even patent holding companies (to some extent).

    What I do have an issue with is those holding companies going after the end users. To me that is double dipping. I purchase a product that does "X" made by "Company Y". Y purchases components and licenses the technology needed to manufacture/perform X, that is the end of it, the patent holder has received his/her pound of flesh.

    Going after End users is essentially asking to be paid multiple times for the same product/technology i

    • I agree, but it's not really double-dipping as company Y should have paid for licenses for its customers as well or provided indemnity for them. I don't agree with the principle, but patents can be licensed for end-users as well as manufacturers.
  • Comment removed based on user account deletion
  • Of course they have the right under freedom of speech to inform companies that their might have been violated.

    And by the same token, every American citizen has the right to call them and tell them they are scumbags. I am not suggesting some slashdotter to find and post the telephone numbers of the company. I am not suggesting all slashdotters call them at all hours of the day to express their opinion on various matters of the world from the scorpion farming in China to speciation chicliad fishes in the la

  • The patent-licensing behavior doesn't even amount to 'commerce' by the standards of the FTC Act, because the letters are not 'the offer of a good or sale for service,' argues MPHJ.

    YAY FOR DUMBASS LAWYERS!

    So if it's not commerce, then they don't need to make any money off their patents, right? It's all for the good of the world?

  • Must be a sad situation being a patent troll that gets people to pause for half a second say "well, your face looks familiar"..

  • Everyone is responding based on knowing that the patent troll's claim of patent violation is probably bogus. But the question is over whether the FTC even has jurisdiction over claims of that type. Whether the claim is bogus doesn't come into effect at that stage--you can't say "the FTC can stop the patent troll's lawsuits because their claim is bad", since whether the claim is bad is something that gets decided in the lawsuit (or in the agreement to avoid the lawsuit).

    Here's an analogy where the claim is

    • In the story of Soddom and Gomora, God destroyed the city because it was a terrible, horrible place. There was a story of an 11 year old girl who gave a starving traveler a piece of bread--she was hanged and skinned alive for showing compassion. The biblical example of the two visiting angels was that the townspeople were of the mind to maliciously rape the visitors--mainly to inflict pain and humiliation. In short, the whole town was rotten to the core and needed to be fenced in and set ablaze.

      There

  • Looks like MPHJ has settled [reuters.com] in New York:

    • "The settlement requires MPHJ to reveal its true identity to targets, describe with "reasonable specificity" its claims, and have a good faith basis for claiming infringements."

    The settlement also appears to provide a mechanism for parties who paid MPHJ to "void their license" with MPHJ and get their money back

    NY AG's press release here. [ny.gov]

    Full text of settlement (Assurance of Discontinuance) here. [ny.gov]

    • Those documents are quite enlightening, Thank you. $1200 per employee for a end-user license: they truly were taking the piss. Obscuring the true identity of the PAE, making false claims about prior licensing, sending "second letters" and "third letters" without having sent the earlier letters, use of NDAs to stifle coordinated resistance... all smell of dodgy trade practises to me. Not surprised that NY , Vermont and the FTC took an interest

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