House Punts on Patent Trolls, Asks FTC to Deal With the Problem
June 7, 2013 6:54 PM
Meanwhile states take the fight to settle-or-sue trolls themselves
among veteran legal experts
that the patent and copyright systems
Much of the human genome is "patented"
by biotech firms
preventing cancer research
and other medical progress. Big electronics companies like Apple, Inc. (
patenting things like "rectangular body with curved edges"
and suing their rivals. Meanwhile, all these big players are
also under attack
from the bottom
by "patent trolls"
companies that produce nothing, buy up collections of intellectual property, and sue those who do produce via shell companies.
I. Congress to FTC: Help Us Fight the Trolls
When it comes to the latter problem -- the so-called patent trolls -- some members of Congress are feeling pressure from their corporate sponsors who paid their way into office. Under fire to take some sort of action, Congress appears uneager to pass new laws to explicitly attack the patent assertion entities (PAEs) (a euphemism for "patent troll").
Reps. Judy Chu
(R-Tex.) have urged the
U.S. Federal Trade Commission
to use its ambiguously defined powers to examine whether PAEs are behaving abusively and crack down on them with fines or lawsuits, if necessary.
Rep. Judy Chu (D-Calif.) [Image Source: Getty Images]
Rep. Chu dropped the euphemism and called a troll a troll,
, "We can't let patent trolls hide under the bridge any longer—we must expose them of their deceptive practices. Patent trolls abuse the marketplace for financial gain and target end users who have every right to enjoy the products and services they purchased. The FTC has a role to play in ensuring every American consumer is protected from those who use wrongful business practices to make a quick buck."
Yet with five IP reform bills introduced or drafted, Congress still has yet to take any real action against the trolls. The
last piece of major legislation
that affected the
U.S. Patent and Trademark Office
(USPTO) was the "
America Invents Act of 2011
". Since then efforts -- particularly those focused on the trolls -- have stalled as Congress was afraid that passing changes could hurt a fragile economy.
II. Vermont Takes a Stand Against Top Troll
While some companies like Apple engage in so-called "mild trolling" -- patenting ambiguous claims and then using them anti-competitively -- "true" trolls (PAEs) are known for filing lawsuits against dozens, or even hundreds of companies relying on the fact that it costs more to fight the charges in court and get them dismissed than it does to settle.
One proposed solution has been to pass legislation to make it easier for the defendants to collect legal fees in cases where the lawsuits are determined by a court to have been inappropriate.
However, until those efforts stick, some states are taking matters into their own hands.
In Vermont a company called MPHJ Technology Investments (via its "Project Paperless" campaign) sent letters to "thousands" of nonprofits and businesses threatening to sue them over violations of its patent (
U.S. Patent No. 7,986,426
) on scanning documents into email. The "troll", who has never actually gone to court yet, is demanding up to $1,200 USD per employee (but settling for smaller sums). The scanning threat/extortion scheme is one of several settle-or-sue campaigns by the over 40 shell companies owned by MPHJ.
"Troll" company MPHJ claims to "own" an exclusive patent on scanning and sending email.
[Image Source: eHow]
that the patents appear to be predated by dozens of near-identical patents.
In response to this threat, the Vermont legislature hurried through a "consumer protection" bill (
Vermont Consumer Protection Act
9 V.S.A. §§ 2451
) granting the state the ability to countersue trolls for abusive behavior. The bill was passed last month. That same day Vermont's Attorney General William Sorrell
against MPHJ noting that, "[The company] performed little, if any due diligence to confirm that the targeted businesses were actually infringing its patents prior to sending these letters."
Rep. Blake Farenthold
"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer
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