By asserting dubious patents against countless small businesses around the country, MPHJ Technology Investments LLC has developed a reputation as one of the most shameless "patent trolls" around. But has it broken the law? The state of Vermont clearly thinks so, and it intends to do something about it.
The Vermont Attorney General’s Office announced Wednesday that it’s brought a civil case against MPHJ in Vermont state court. In a groundbreaking move, state prosecutors allege that MPHJ violated consumer protection laws by making deceptive claims to would-be licenses. (Here’s the complaint, filed on May 8 but sealed until process was served on MPHJ.)
Through a web of shell companies, MPHJ has sent letters to thousands of businesses urging them to pay $1,000 per employee for supposedly infringing its "distributed computer architecture" patents. According to the AG’s complaint, MPHJ’s targets include a home for the developmentally disabled and a nonprofit that helps the disabled with fiscal matters.
That business model has been called a shakedown, because taking a license is typically much cheaper than lawyering up and fighting back. And what gets critics even more worked up is the how basic MPHJ’s patented method is. If you strip away the legal jargon, the patents at issue cover the process of using an off-the-shelf scanner to make PDF documents. One of MPHJ’s own lawyers has said that "99 percent" of the workforce infringes the patent, as Joe Mullin of Ars Technica explained here.
MPHJ acquired the patents in late 2012 from an entity called Project Paperless, which had close ties to the law firm representing it, Hill Kertscher & Wharton. According to the Vermont AG’s complaint, MPHJ’s manager is a lawyer in Waco, Texas named Jay Mac Rust. MPHJ is also represented by Brian Farney of the firm Farney Daniels. In a past interview with Ars Technica, Farney alluded to a "client" but never indicated who his client is.
According to the Vermont AG’s office, MPHJ’s demand letters have been rife with false statements. The entity threatened targets with immediate litigation, even though it’s never brought an infringement case and doesn’t seem to have much desire to do so. MPHJ also allegedly lied about how much it investigated its infringement claims before making its demands. Finally, MPHJ is accused of misrepresenting its conduct through statements like "we have had a positive response from the business community to our licensing program."
The suit comes less than two weeks after Vermont’s legislature passed a unique law targeting "bad faith patent assertions" by trolls, as the Electronic Frontier Foundation noted in a post Wednesday praising the state’s new lawsuit.
You can read more about Vermont’s suit from our colleagues at The National Law Journal.
