“Scan-to-email” Patent Troll Loses against FTC

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-pageorder. 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.”

(Source: arstechnica)