Patent Troll Told That It Can't Sue The FTC For Merely Investigating Its Shakedown Scam

from the making-quick-work-of-it dept

We've written a bunch of times about the "scanner patent troll" MPHJ (which also goes by a bunch of other names, because that's how patent trolls roll). This was the company that claimed to have a patent on a network connected scanner that allowed people to email a scan. It sent out letters to tons of companies demanding between $900 and $1200 per employee for merely owning a modern scanner. While the company is a bit sketchy and hard to track down, reporter Joe Mullin more or less outed lawyer Jay Mac Rust as the "brains" of the operation.

The details were so egregious that MPHJ became the poster child for the absolute worst in patent trolling. Vermont sued the company for shaking down local businesses, and the FTC began an investigation into a short list of patent trolls, with MPHJ's name at the very top.

In response, MPHJ... sued the FTC, claiming that it had a First Amendment right to shakedown companies with bogus threats and demand letters.

That lawsuit has gone over about as well as you might expect, with a court dismissing it a few days ago. The court basically says the FTC is allowed to investigate, and MPHJ's claim is ridiculous:
May Plaintiff derail the FTC administrative process by bringing this declaratory judgment action? The short answer is, "No."
Basically, the court ticks off each of MPHJ's objections and points out that the FTC is allowed to run its investigation, and MPHJ can't claim that merely being investigated is somehow a violation of its rights. MPHJ, of course, now claims it is thinking about appealing this ruling:
MPHJ respectfully believes the Court erred in its decision. The FTC had threatened to sue MPHJ in that court, and MPHJ sought only to have the FTC's claim resolved in that court. It is important to note that MPHJ was willing to litigate the issue in the federal courts, as it is confident that its conduct was lawful, a point recently confirmed by the Nebraska Federal District Court.
Of course, the whole point of the ruling is that the FTC has to be allowed to complete its investigation before MPHJ can challenge it in court. As for the situation in Nebraska, MPHJ is correct that a court in Nebraska did say that the company has a constitutional right to send shake down letters, but even if that's true, it doesn't mean the FTC isn't allowed to investigate what's happening.
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Filed Under: first amendment, ftc, investigation, lawsuits, patent trolls
Companies: mphj

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  1. identicon
    Anonymous Coward, 22 Sep 2014 @ 2:53pm

    this sounds similar to the ISDS 'scams' that are going on/will be going on shortly, given that every 'Trade Deal' the USA instigates contains that part now

    reply to this | link to this | view in thread ]

  2. icon
    DannyB (profile), 22 Sep 2014 @ 3:06pm

    But think of the economy!

    If the FTC is allowed to run wild and investigate any shakedown scam, whenever it pleases, the scammers won't make money! Think of how this will hurt the global economy!

    The money made by scammers counts towards the GDP and global economic growth. Just as breaking the window of a shop keeper causes the window glass company to make money and grow the economy using money that the shop keeper would not have spent on something else like his heating bill.

    reply to this | link to this | view in thread ]

  3. identicon
    Antidirt, 22 Sep 2014 @ 3:20pm


    Mike, is there such a thing of a patent you are in favor of? Just admit it Mike, you hate ALL patents. This one is no exception and is proof of your agenda that's being funded by Google to hate on IP.

    reply to this | link to this | view in thread ]

  4. identicon
    jackn, 22 Sep 2014 @ 3:49pm

    These are happy days.

    reply to this | link to this | view in thread ]

  5. icon
    trparky (profile), 22 Sep 2014 @ 5:38pm

    Re: (Parody)

    Owning a patent doesn't at all give you the right to go ahead and bash someone over the head with it or demand "protection money".

    I understand that companies need to recoup their R&D costs by licensing out their patents to companies that choose to license the patent and paying royalties to the company that owns the patent. I have absolutely no problem with this, that's how patents are supposed to work. They are supposed to be licensed out and royalties are paid. But when you start doing the kind of shit that MPHJ and other patent trolls do, you step over the line and you become no better than a mob boss. "Pay up or you get cement shoes!"

    A lot of these companies that patent trolls sue don't even get the chance to license the patents, they're simply swept into the court room.

    Now if a company decides to not pay royalties and continues to use the patent without licensing it, then the owner of the patent has every right to file a lawsuit. But filing a lawsuit without even giving the third-party a chance to properly license the patent is when you quite simply become a patent troll.

    reply to this | link to this | view in thread ]

  6. identicon
    Anonymous Coward, 22 Sep 2014 @ 6:20pm

    Re: (Parody)

    That's not a parody; that's a recreation.

    reply to this | link to this | view in thread ]

  7. identicon
    Anonymous Coward, 23 Sep 2014 @ 5:22am

    Re: Re: (Parody)

    More like plagiarism

    reply to this | link to this | view in thread ]

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