ABA Banking Journal - June 2014 - (Page 54)
BY JAMESON CROCKETT
Patent trolls may have
met their match
FTC investigation challenges patent "shakedowns"
regularly heckled by Louie the bully.
Louie never stole my lunch money,
but he liked to commandeer my
Twinkies. My "friends" were not
interested in forming a united front.
His reign of terror ended when my
cousin Lance from Brooklyn, N.Y.,
lived with me for six months. After a
few "conversations" between Lance
and Louie, the bullying magically
stopped. Similarly, the Federal Trade
Commission is trying to stop patent
trolls' torment of small businesses. A
patent troll, like MPHJ Technology
Investments, makes money by sending threatening letters to small businesses, claiming to own patents covering common office equipment. These
letters threaten legal action if businesses do not purchase user licenses.
In 2012, MPHJ mailed three rounds of demand letters to thousands of small
businesses with 20 or more employees, claiming it owned patents covering the
use of scanners and printers with scanning capabilities. The first letter warned
that the recipient was infringing on MPHJ's patents and must buy a license for
$1,000 to $1,200 per employee. The letter claimed that substantial numbers of
businesses had already purchased licenses and avoided legal action. It stated,
"we have had a positive response from the business community to our licensing
program. ... Many companies have responded to this licensing program. ..." Two
subsequent letters on attorney letterhead threatened legal action if the business
did not respond in two weeks.
Enter the FTC. Like Lance, the FTC is having a "conversation" with
MPHJ to ascertain whether MPHJ violated Section 5(a) of the Federal Trade
Commission Act. The FTC has alleged that MPHJ engaged in deceptive practices by misrepresenting its intent to seek imminent legal action. According
to the FTC, MPHJ used the fear of expensive patent litigation that it never
intended to pursue to exhort small businesses into buying licenses. The FTC
also alleged that MPHJ unlawfully deceived 7,336 small businesses when it
falsely claimed that it had negotiated license deals with several companies
because the patent troll had not sold a single license. MPHJ sued the FTC
(MPHJ Technology Investments, LLC v. FTC) arguing that the commission lacked
ABA BANKING JOURNAL
the authority to pursue its enforcement action and petitioned a Texas
federal court to stop the investigation.
It claimed the "infringement notices" were free speech protected by the
The FTC countered that judicial review was premature because
its investigation was ongoing and a
federal district court can only review
a final agency action. The FTC also
argued that the First Amendment
does not protect deceptive speech.
It is too soon to know if the court
will rule for the FTC, but at least
another bully is being challenged.
Jameson W Crockett (jcrockett@
aba.com) is senior counsel I in
ABA's General Counsel's Office.
For a time while growing up, I was
Table of Contents for the Digital Edition of ABA Banking Journal - June 2014
Affordable housing pioneer
Pass the Aspirin
Lines of defense
Top performing community banks
Around the ABA
ABA Banking Journal - June 2014