By Dennis Crouch
MPHJ Technology v. Federal Trade Commission (W.D. Texas 2014)
In a bold lawsuit, patent owner MPHJ has sued the Federal Trade Commission and the Individual FTC Commissioners for "the unlawful interference and threats by the FTC against MPHJ and its counsel directed at stopping or impeding the lawful, proper, and constitutionally protected efforts by MPHJ to identify and seek redress for infringement of its US patents."
MPHJ has been publicly accused by a number of private and governmental entities of "shaking down small businesses" by alleging infringement of the company's patents that apparently cover a scan-to-email system. See US Patent 6,185,590; 6,771,381; 7,477,410; 7,986,426; and 8,488,173.
The basic push-back has been (1) that MPHJ has been going after small companies for infringement and (2) that its demand letters have been sent-out without the proper due diligence to ensure that the receiving entity is actually infringing. In its complaint, MPHJ alleges that:
The FTC's threatened suit is principally based upon the FTC's contention that if any U.S. patent owner threatens suit for infringement, even against a single infringer, and then fails promptly to bring suit for infringement, then that U.S. patent owner has committed an unfair trade practice under Section 5 of the FTC Act unless the patent owner bears the burden and can prove that at the time the threat was made, it intended to bring suit. Here, the FTC contends that MPHJ did not intend to bring suit at the time it allegedly threatened suit, and that such conduct is a violation of Section 5 of the FTC Act unless MPHJ can prove otherwise. Setting aside that the FTC's factual premise is false, and that MPHJ can show that it did intend to bring suit at the time the alleged threats were made, the FTC's legal premise is flawed on multiple grounds.
In the complaint, MPHJ walks through the steps that it took in preparing its demand letters. Basically, MPHJ "concluded that businesses having at least 20 employees would be very likely to have an infringing networked scanning system if they were in certain types of businesses, such as professional services" MPHJ then purchased "the best available commercial databases" of such companies and sent out close to 20,000 demand letters to businesses with fewer than 100 employees across the country and then followed those demand letters with second and third letters.
Following that mass enforcement campaign, the FTC got involved and threatened to sue MPHJ for unfair competition. "As a result, to secure its rights under the U.S. Constitution and federal law, and to stop the improper and ultra vires interference with and impingement of MPHJ's lawful and constitutionally protected patent enforcement rights, MPHJ is forced to file the present suit."