There are hundreds of so-called "patent trolls," but MPHJ Technology became one of the most well-known when it sent thousands of letters to small businesses around the country suggesting they should pay around $1,000 per worker for using basic "scan-to-email" functions.
The legal and political blowback since then have made MPHJ truly unique in the patent-licensing world. The sheer mass of the company's demand letters caused it to get sued by attorneys general in Vermont and Nebraska, making it the only patent troll to ever be sued by the government. The company's tactics were denounced in Congress, and it drew the attention of the Federal Trade Commission.
In January, MPHJ took the stunning step of actually suing the FTC. According to MPHJ's complaint, the FTC had threatened to file suit, saying that its letter campaign constituted a deceptive trade practice. That was a violation of its right to talk about and enforce its patents, a right protected under the First Amendment.
On Tuesday, US District Court Judge Walter Smith dismissed the case. He sided with the FTC, finding that the FTC investigation wasn't complete and that the issue wasn't ripe for decision. "Being required to participate in an agency proceeding does not constitute final agency action," he wrote in a 13-page order. To issue a declaration that MPHJ's patent letters didn't violate trade laws "would usurp the fact-finding responsibility vested in the FTC."
Smith acknowledged that MPHJ has a constitutional right to petition the government, and that includes the right to file lawsuits and threaten to file lawsuits. The only exception is when such "petitioning" activity is a "sham." But again, Smith refused to determine whether MPHJ's various letters were a sham or not, as that too would "usurp" the FTC's powers.
"After investigation, the FTC could well determine that no section 5 violation has occurred, meaning that no further agency action would ensue and no Constitutional issues would arise," he noted.
In an e-mailed statement, an MPHJ spokesperson said the company is considering an appeal.
"MPHJ respectfully believes the Court erred in its decision. The FTC had threatened to sue MPHJ in that court, and MPHJ sought only to have the FTC’s claim resolved in that court. It is important to note that MPHJ was willing to litigate the issue in the federal courts, as it is confident that its conduct was lawful, a point recently confirmed by the Nebraska Federal District Court."
Different states, different results
MPHJ's aggressive patent licensing got it sued by both Nebraska and Vermont. It fought back hard in both cases, and the emerging results are about as different as they could be.
In Vermont, MPHJ was sued for violating consumer protection laws. The patent company tried to move the case into federal court and failed. Its appeal failed, too. Now it will have to defend its actions in state court, saying it didn't violate the small state's consumer protection laws.
In Nebraska, by contrast, MPHJ's lawyers keep winning. That state's attorney general Jon Bruning issued a cease and desist order against Activision TV, a different patent troll also sending letters and represented by the same law firm that represents MPHJ, Farney Daniels.
But a federal judge issued an injunction saying that the cease and desists violate MPHJ's right to send its patent letters. The attorney general appealed, then withdrew its appeal. However, the Nebraska federal court still went ahead and granted MPHJ the order it wanted.
On September 2, the Nebraska court found that MPHJ did have a constitutional right to "threaten suit for infringement," using its chosen legal counsel, and that right had been violated by the state's attorney general. It also granted MPHJ attorneys' fees in an amount that has not yet been determined.
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