Patent Troll to FTC: We complied with Rule 11, and so we’re suing you.

Dennis has something on the main page, but this complaint by MPHJ Technologies v. FTC presents an interesting issue — if the holder of a presumptively valid patent enforces it, and (allegedly) complies with Rule 11 before doing so, can it violate any federal law?  

Obviously the facts matter a lot, but if, as is alleged, they did all they reasonably could before sending infringement letters and their conclusion of infringement wasn't in bad faith, sanctions or liability would be in appropriate.  The new edition of my book on ethical issues in patent litigation (which should be in print soon!) has chapters on both Rule 11 pre-suit investigations of infringement (and invalidity), as well as the protections afforded by the Constitution to sending C&D letters and the like.  This complaint alleges, to me, facts that cannot be the basis of liability by the patentee.

But stay tuned…

12 thoughts on “Patent Troll to FTC: We complied with Rule 11, and so we’re suing you.

  1. Ned, I don’t know. Class actions are something I know a lot about in narrow areas. I can see preemption issues and who knows what else arising!

    1. Dennis, the courts apparently recognize standing of a state attorney general on parens patriae basis. Do you think that would apply to the class action I propose — on behalf of the accused citizens of the state that they do not infringe?

  2. Ned – I think you risk some conflation with your question, dragging in actual infringement (a federal question) with what the AG’s are actually looking at (unfair business practices).

    Also, would not the AIA (and its joinder provisions) prevent such groupings of parties under a federal question? Sure, that was not the intent of the joinder provision, but I see nothing that says the joinder provision is not to be applied to state AG’s…

  3. David, do you think a state attorney general has standing to bring a DJ class action (having one or more nominal plaintiff infringers) against the patent holder seeking a declaration that the class does not infringe where hundreds or thousands of the state’s citizens were noticed?

    The problem of course is that infringement normally is from infringer to infringer. But if a class is notified, I think a class can be formed. But can the state attorney general help? Does he or she have standing?

  4. Yes, that would have been nice!

    Seriously, I like to wake up and see what’s going on, but my typing/grammar/proofreading skills aren’t so good at that time!

  5. I am just wondering when end-users became a protected class for the otherwise strict liability offense of patent infringement.

    I am also wondering if it is a ‘good thing’ that pre-suit actions are deemed ‘bad’ and now ‘require’ more detail than court notice pleadings. If DJ action brought more of a race to sue (and not attempt to discuss), can the state of New York’s action (especially if followed by other state AG’s) do anything but precipitate a simple “file suit first” (un)foreseen consequence? After all, Until and unless the Goodlatte bill becomes law, notice pleading will be less onerous than the minimum (which really isn’t even a minimum) requirements of New York for simply engaging an entity that might be infringing.

  6. I can speculate both ways. Let me speculate their way (and, with a complaint, that’s what we’re required to do):

    They have a patent that is essential to performance of networks of certain sizes. The research needed, therefore, is to determine (a) does the company have a network and (b) does it have a certain number of employees. In today’s world, the odds of a company over a certain size not having a network are, I would say, near zero.

    With respect to abhorrent actions… so trademark lawyers are bad? (See post below re Starbucks sending a C&D to a bar). Patent lawyers who represent Apple can sue in the ITC and keep out all phones of other makers, and that’s okay, but somebody whose patent only covers end users can’t do the same thing?

    I don’t know the facts, I guess is my main point.

    NOTE: I haven’t had any coffee yet.

  7. Last I checked, so called “bad” people who act within the law are expected to be protected by that law.

    I guess that happens when the country overthrows a more despotic ‘because we fell like it’ type of rule at its inception.

  8. Dennis said that they’d sent demand letters to over 20,000 (!) potential defendants. He didn’t say over how long a period of time that has been happening, but even it’s 10 years that’s still several letters a day, and if it’s only a few years it’s dozens of letters a day on average. Unless they’re incredibly well funded and have literally an army of people to investigate everyone to whom they sent a letter, and don’t need to infiltrate potential defendants to get access to their computer systems, it’s prima facie inconceivable that they actually investigated every party to whom they sent a letter, so they’re not entitled to a presumption of acting legally across the board. I don’t see where the FTC is out of line in that regard.

    As to the “we complied with rule 11″ assertion, aside from providing an empirical boost for proponents of the Goodlatte bill, what happens to that assertion if the courts themselves change the standard? In any event it’s a somewhat specious assertion, as there are situations in which otherwise legal activity is proscribed. I’m allowed to walk down the street or sit on a park bench or go to the theater; but if I make it a point of only walking down the street when you do and staying within 10 feet of you when I do so, and only sitting on park benches where I can see you, and walking into the same theater as you every time you go, it’s called stalking and you can get a court order forbidding me from doing it.

    In Jewish law there’s a concept called “naval b’rshut haTorah”, which is basically the idea that one’s actions are repulsive and therefore impermissible, even though strictly speaking they are within the confines of the law – and this can be a basis for a court refusing to find for a litigant even though strictly speaking the law “is on his side”. While this isn’t a doctrine in US law, I wouldn’t be surprised if the judge were to unknowingly adopt it in some form in dismissing MPHJ’s complaint

    1. “This complaint alleges, to me, facts that cannot be the basis of liability by the patentee.”

      That seems pretty unremarkable, since the complaint was drafted by the patentee.

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