Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES NEWS: New York Attorney General reaches settlement of deceptive practices suit against “patent troll”, (Jan 15, 2014)

By Thomas Long, J.D.

New York Attorney General Eric T. Schneiderman announced yesterday that the Office of the Attorney General (OAG) has reached a settlement of deceptive business practices claims against MPHJ Technology Investments, LLC, a so-called “patent troll.” The investigation focused on MPHJ’s alleged use of deceptive and abusive tactics when it contacted hundreds of small and medium-sized New York businesses in an effort to strong-arm them into paying MPHJ for patent licenses of dubious value.

The settlement resolves the OAG’s investigation into MPHJ’s conduct and imposes requirements on MPHJ when communicating with New York businesses in the future. The requirements imposed on MPHJ in the settlement should be viewed as the minimum standards that “patent trolls” seeking to contact New York businesses must follow to avoid liability for unlawful deceptive practices, the OAG said.

“So-called ‘patent trolls’ exploit loopholes in the patent system and have become a scourge on the business community,” said Schneiderman. “They drain critical resources from small and medium-sized businesses that would otherwise be available for reinvestment and job creation, which are sorely needed across New York. State law enforcement can’t cure all the ills of the federal patent system, but the guidelines established in today’s settlement will put an end to some of the most abusive tactics by placing the industry on notice that these deceptive practices will not be tolerated in New York.”

“Patent trolls”—also called “patent assertion entities”—do not manufacture products or develop inventions; rather, they buy patents owned by others and then pursue a business model of threatening and filing lawsuits against businesses they claim infringe the acquired patents. According to the OAG, MPHJ had contacted hundreds of businesses in New York, asserting that their use of an ordinary commercial scanner on a computer network with an email system infringed its patents. MPHJ allegedly targeted small and medium-sized businesses in an effort to extract small, often nuisance-value license payments from them.

MPHJ allegedly created the false impression that it had conducted a meaningful, individualized analysis of each targeted company, when, in fact, MPHJ merely sent form letters to companies of a certain size and industry classification. In addition, MPHJ falsely told businesses that most other businesses it had previously contacted had acquired licenses when in fact only a handful of businesses had done so. The OAG alleged that MPHJ falsely threatened to sue hundreds of businesses if they did not respond to its letters within two weeks. In fact, MPHJ had never filed a patent lawsuit against a New York business.

As redress, the settlement requires MPHJ to allow any licensees that received deceptive letters to void their license with it and receive a full refund. The settlement also prohibits MPHJ from further contacting certain small businesses it previously targeted.

News: ConsumerProtection StateUnfairTradePractices NewYorkNews