Notorious Patent Troll Sues Federal Trade Commission

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."

Comments

No

[Carewolf]

They are right. It is not commerce it is blackmail.

Re:No

[Anonymous Coward]

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

[sirlark]

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

[Tuoqui]

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.

Re:No

[hawkinspeter]

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.

Re:No

[sribe]

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.

Re:No

[hawkinspeter]

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.

Re:No

[Sigma 7]

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 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 standard or industry requirement. Even if there is something novel in that patent, it appears to be buried among the description on something handled by existing technology.

Re:No

[rhazz]

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.

Re:No

[JeffAtl]

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:No

[sirlark]

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 practical use, because the patent will expire sooner without use, the market won't bear inflated prices. I agree about obvious patents though. Allowing obvious patents breaks my system too.

Yes please poke the bear

[Anonymous Coward]

Hopefully it rips your head off.

Re:Yes please poke the bear

[jythie]

*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.

Yeah right

[gstoddart]

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

[gstoddart]

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.

First Ammendment?

[c0lo]

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?

[bluefoxlucid]

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.

bombastic and completely unexpected.

[nimbius]

this could never have been the anticipated action of a poorly regarded yet widely recognized patent troll. In other news

toast nationwide falls jellyjam side down!
the blinky signage never lasts long enough to navigate across the road!
politicians found to be corrupt and unreliable champions of their constituents!
icecream zealously consumed begets raging cranial agony!
religious doctrine conspicuously omits reason when confronted by legitimate debate!
im also beginning to suspect this version of windows is in fact NOT the best version ever...despite what the install screen insists.

Speech act?

[Vintermann]

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.

Fire! Fire"

[Chrisq]

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.

Re:Fire! Fire"

[camperdave]

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

I see. You have to shout "Ready" and "Aim" first.

Anything I want to do is free speech?

[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.

Re:Mafia and the FTC

[MickyTheIdiot]

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!"

Links on the subject

[satch89450]

The patent: http://www.google.com/patents/US7986426

Another view: http://stop-project-paperless.com/wp-content/uploads/2012/04/Patent-US7986426.pdf

Analysis of the patent: http://www.patentbuddy.com/Patent/7986426

The dispute of the patent: http://www.ricoh-usa.com/news/news_release.aspx?prid=1052&alnv=pr

Dispute filing: http://www.sutherland.com/portalresource/Ricoh_institution_decision.pdf

Possible prior art:

http://en.wikipedia.org/wiki/Xerox_DocuShare

http://bitsavers.trailing-edge.com/pdf/xerox/xns/XNSG058504_XNS_Introduction.pdf (1985)