ABA Banking Journal - June 2014 - (Page 54)

legal issues 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 54 | ABA BANKING JOURNAL | JUNE 2014 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 First Amendment. 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. PHOTO: SHUTTERSTOCK.COM For a time while growing up, I was http://www.SHUTTERSTOCK.COM

Table of Contents for the Digital Edition of ABA Banking Journal - June 2014

Chairman's View
Editor's Column
The Economy
Bank Notes
Picture This
Affordable housing pioneer
Pass the Aspirin
Tech Topics
Lines of defense
Top performing community banks
Compliance Clinic
Compliance Inbox
Around the ABA
Legal Issues
First Person

ABA Banking Journal - June 2014

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