According to the FTC’s complaint, MPHJ Technology Investments LLC acquired patents relating to network computer scanning technology. Nothing wrong with that. But then it sent letters to thousands of small businesses asserting that they were likely infringing its patents and so needed a license. Perhaps nothing wrong with that (if true). But, MPHJ also allegedly falsely represented that other companies had already paid thousands of dollars for licenses.
The FTC also alleged that MPHJ’s law firm, Farney Daniels, P.C., authorized letters on its letterhead be sent to about 4,800 small businesses. Those letters threatened a patent suit if the recipient did not respond to the letter within a two-week letter, and included a purported complaint for patent infringement. However, the FTC alleged that there was no intention—and no preparations—to file those suits, and none were filed.
The FTC filed a complaint to stop this, available here. The agreement containing a consent order (which it seems is subject to public comment) is available here. It would impose $16,000 in fines for every inappropriate letter. In addition, it prohibits these communications (sorry for the auto numbering errors).
- that a particular Patent has been licensed to a substantial number of licensees,
- that a particular Patent has been licensed at particular prices or within particular price ranges, or
- otherwise concerning the results of licensing, sales, settlement, or litigation of a particular Patent,
unless the representation is non-misleading and, at the time such representation is made, Respondents possess and rely upon competent and reliable evidence sufficient to substantiate that the representation is true;
B. Make any representation in a Patent Assertion Communication, expressly or by implication, about the licenses for a Patent or the responses of recipients of Patent Assertion Communications unless the representation is non-misleading, and, at the time the representation is made, Respondents possess and rely upon competent and reliable evidence that substantiates that the representation is true;
C. Make any representation in a Patent Assertion Communication, expressly or by implication, that Respondents or an Affiliate have taken any action with respect to the filing of a Lawsuit, including initiating a Lawsuit, unless the representation is true and non-misleading; or
D. Make any representation in a Patent Assertion Communication, expressly or by implication, that Respondents or an Affiliate will take any action with respect to the filing of a Lawsuit, including
- that they will initiate a Lawsuit;
- that they will initiate a Lawsuit if the recipient of a Patent Assertion Communication does not agree to a license, pay compensation, or otherwise respond to the Patent Assertion Communication as requested;
- that they will initiate a Lawsuit imminently or within a specified time; or
- that they will initiate a Lawsuit imminently or within a specified period of time if the recipient of a Patent Assertion Communication does not agree to a license, pay compensation, or otherwise respond to the Patent Assertion Communication as requested;
unless at the time such representation is made, Respondents have decided to take such action and possess and rely upon competent and reliable evidence sufficient to substantiate that they are prepared to and able to take the action necessary to make the representation true. Evidence that an action was not taken because of a change in circumstances or information obtained subsequent to making a representation covered by this Subpart I.D, including a change in the decision by a client on whose behalf a representation was made on whether to initiate a lawsuit, shall be considered in determining whether a representation was substantiated at the time it was made.
Provided that, for purposes of Subpart I.D of this order, a statement made in a Patent Assertion Communication that Respondents
(1) believe the recipient of the letter is or may be infringing a patent; (2) believe the recipient does or may need a license to a Patent; or
(3) reserve their rights under the Patent with respect to the recipient’s conduct
shall not be considered, in and of itself, to be a representation that Respondents will initiate a Lawsuit.
Of course, this is a good development, though probably not of enormously broad impact.
The FTC’s press release is here.
Hi David, as noted by ID, you should probably correct the story above it possible.
The fines would only be levied in the event of a future breach of the final consent order, but your summary above makes it sound as if they are fined, now, under the consent order for past acts.
Where does the consent order impose any fine? It seems to me that MPHJ is merely agreeing to go forth and sin no more.
That is according to the press release itself, if I recall. I didn’t scan for it in the document — assumed it was accurate.
The offenses MPHJ was accused of could have resulted in such fines. But there is nothing regarding fines in the agreement. I make it out to be a slap on the wrist.
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