FTC Stops Deceptive Patent Demand Letters

In a move reminiscent of the action taken earlier this year by NY Attorney General Eric T. Schneiderman, the Federal Trade Commission last week  announced that MPHJ Technology Investments, LLC, agreed to settle Federal Trade Commission charges that they used deceptive sales claims and phony legal threats in letters that accused thousands of small businesses around the United States of patent infringement. As is typical for FTC settlements, the proposed consent order was published in the Federal Register and public comments have been solicited. The proposed consent order will be subject to public comment for 30 days, continuing through December 8, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form. Although the FTC will accept these comments, in my experience, when an enforcement settlement has gotten to this stage, we can expect the proposed settlement to become final.

The settlement with MPHJ is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity (PAE). Perhaps most significantly, in the announcement of the settlement, the FTC acknowledged that patents promote innovation, which is a simple enough truth. Still given recent FTC inquiry into the industry, this statement from the Obama Administration could signal that the FTC will take actions only against outliers and not the bulk of the industry, which operates legitimately to enforce valid patents.

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When “Patent Trolls” ARE Innovators

The term “patent troll” conjures up all kinds of images and ideas, but what is a patent troll?  Unfortunately, there is really no universally accepted definition of what a patent troll is, although if you are getting sued for patent infringement by a non-practicing entity, you probably think you are being sued by a patent troll.

My view has long been that companies that complain about patent trolls don’t really want them to go away. Patent trolls are extremely valuable to these big tech companies because they are an identifiable and unsympathetic villain, even if they cannot really be defined in any satisfying way. The image of a patent troll can be paraded about Capitol Hill whenever patent reform is being pushed, or even in front of the Supreme Court, which increasingly seems to be interested in taking them into consideration when reaching decisions, despite them not being involved in the case.

I personally hate the term patent troll, which may come as a shock to many because I use it all the time. I use it to attempt to crystalize the issue, because the term “patent troll” has over time become synonymous with “non-practicing entity,” and not all non-practicing entities are bad. In fact, many are good actors that diligently work against long odds to research and develop new technologies, treatments, drugs and therapies we all want.

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Paying Ransom to Patent Trolls Is a Mistake

I have absolutely no problem with enforcing patent rights, and frankly I don’t think it should matter how the patents were acquired, but there is something exceptionally seedy about the use of shell companies going after competitors, or large tech companies selling to known patent trolls. They complain about the troll problem in the halls of Congress on the one hand, but use them to their advantage on the other hand.

The question should be whether there is infringement of a solid patent. If there is a solid patent and there is infringement, then there should be recourse, period. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. False and misleading demand letters prey on unsophisticated businesses.

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Breaking the Cycle – Stand Up and Fight Patent Trolls

The term “patent troll” conjures up all kinds of images and ideas, but there is no universally accepted definition of who is a patent troll. This has led many to recognize that, by and large, if you are being sued for patent infringement, it will likely be your belief that you are being sued by a patent troll. But obviously not everyone who sues for patent infringement is a patent troll, and neither is every plaintiff who loses a patent infringement lawsuit. There will be reasonable assertions that ultimately result in a defendant prevailing for a variety of reasons. Thus, a patent troll really should be identified by litigation tactics. A patent troll is one who is abusing the judicial process and leveraging judicial inefficiencies to obtain unwarranted settlement payments.

In determining whether one is a patent troll, I don’t think it should matter how the patents were acquired. If there is infringement of substantial patents, then there should be recourse. Having said that, it would be naive to pretend that there is not real evil lurking in the patent infringement realm. Stories of $500 to $1,000 offers to settle and avoid patent infringement litigation that would cost millions of dollars to defend abound. Some courts have openly acknowledged what feels like “extortion-like” activity. See Indicia of Extortion and Troll Turning Point? 

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Patent Trolls: In the Eye of the Beholder

The term “patent troll” conjures up all kinds of images and ideas, but what is a patent troll?  Unfortunately, there is really no universally accepted definition of what a patent troll is, which has lead myself and others to recognize that, by and large, if you are being sued for patent infringement, it is your belief that you are being sued by a patent troll. Sadly, who is and who is not a patent troll is largely in the eye of the beholder.

Still, we are not without at least some recognized industry definition. For those who can look past the surface and do not feel that patent owners are evil simply because they own patents, the term “patent troll” is usually a term that is reserved for those who acquire patents from inventors or companies, perhaps through bankruptcy, auction or otherwise, and then turn around and sue giants of industry for patent infringement.  In other words, patent trolls are those who simply acquire patents for the sole purpose of monetizing the patents through licensing regimes and ultimately litigation if a license cannot be obtained. These types of patent acquirers are typically well funded, they are not engaging in any commerce, so they do not fear a patent infringement counter-claim because they are not infringing (or, in fact, doing) anything.

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