Katie Johnson

Beware of Patent Troll

By Katie Johnson

You’ve got options if a licensing agent demands a fee for scanning and e-mailing document.

[JULY 1, 2013, UPDATE:
The patent owner described in this article, MPHJ, is taking a break from its patent licensing campaign. At the end of June, the company sent letters saying it was ceasing its enforcement actions against businesses it had previously alleged were violating its patents on multifunction copier-faxing machines. The letters offer two reasons for it's change in policy. First, the digital imaging manufacturer, Canon, has reached an agreement with MPHJ that protects all Canon customers from MPHJ’s patent infringement allegations. Second, entities have filed petitions with the U.S. Patent and Trademark Office to invalidate MPHJ’s patents. The letter concludes: “While this review is underway, we do not anticipate taking any action, having our counsel take any action, or corresponding with you further, with respect to any potential license with you. Accordingly, unless and until you hear from us in writing, you may consider the matter closed.” It appears that particular instance of patent trolling may soon be water under the bridge.---Katie Johnson]

Back to original article:

If your brokerage has been contacted by a company to pay a license for the right to scan a document to e-mail, you’re not alone. Real estate offices around the country have received letters from companies called AllLed, AdzPro, GanPan, and HeaPle, among others, claiming to have the exclusive right to send documents via e-mail from a multifunction copier machine, and demanding that you pay a licensing fee of $900 to $1,200 per employee before you can send a document.

Katie Johnson

Behind these demands is a company called MPHJ Technology Investments Inc., which owns several patents on the process of scanning or copying a document and sending it via e-mail from the same machine.

MPHJ is known as a nonpracticing entity, or patent troll, because it doesn’t produce anything; it merely asserts its rights to exclude others from using its patents. MPHJ has created about forty shell companies, usually with six-letter LLC names, to assert its patent rights.

Escalating Threats

It’s been widely reported that this patent troll has been targeting small and mid-sized businesses in a variety of industries in its effort to generate license fees by sending three standard demand letters through its shell companies. The initial letter is on company letterhead and requests a license fee. If that goes unanswered, a second letter is sent from a Texas law firm called Farney Daniels P.C. seeking a response and threatening legal action. If the second letter is ignored, a third letter is sent from the same firm and it contains a draft complaint that the firm threatens to file if a license agreement is not reached.

There is no evidence that MPHJ knows of any infringement before sending these letters. If you receive a letter, you should discuss your options with your legal counsel. Among the options to consider is:

  • Ignore the letter. We’re not aware of any case that has actually been filed against an alleged infringer.
  • Respond with a request for specifics. Ask why your equipment or software infringes the patents.
  • Deny in writing that there is any infringement.
  • Pay the license fee.
  • Challenge the patent’s validity. After all, the patented process of scanning a document and sending it via e-mail from the same machine is a common, widely accepted practice. To submit a challenge, you can file a declaratory judgment action against the patent troll in which you seek a ruling by a judge on the patents’ validity. One company in Louisiana is trying to do this right now with a lawsuit it filed in federal court in April.

However, a more effective approach might be to file what’s known as an inter partes review with the U.S. Patent and Trademark Office, asking it to invalidate the patents. The manufacturers of the machines that make this patented process possible have taken a great interest in MPHJ’s efforts because it is their customers who are being asked to pay the fee. So, Xerox, Ricoh, and Hewlett Packard have recently filed inter partes reviews.

In addition to these attempts to invalidate the patents, Vermont’s attorney general has recently filed a consumer fraud lawsuit against MPHJ, alleging the patent owner’s aggressive licensing campaign amounts to unfair and deceptive acts. Unfortunately, it could be a long time before there is an outcome to any of these legal proceedings. In the meantime, you’re encouraged to consult with your legal counsel and consider your options if this patent troll finds you.

Learn more in a 6-minute audio podcast presented by NAR Legal Affairs.

Katie Johnson is NAR general counsel. She can be reached at kjohnson@realtors.org.

Comments
  1. Thank You Katie
    I appreciate the heads up.
    Keep us posted

    Kevin Lynch

  2. Thanks for the info . Seems to be a trending topic . Just heard a story on NPR this morning about a guy who is suing people who do podcasts . He says he patented the idea many years ago . He does have the patent but he never described the process. Nonetheless he is suing people who have podcasts for a licensing fee.
    Ta very similar to the MLS using zoom photos of the homes and NAR having to pay a licensing fee.
    Hopefully this will get sorted out in legislation where the end user is not penalized . thanks again for keeping us up to date and informed . Your work is appreciated .

  3. Jim Plante

    I disagree with one of the suggested actions: Ignore it.
    You should never ignore an accusation of wrongdoing. Instead,
    1) Respond at once. Preferably within a few days.
    2) Deny each specific allegation of wrongdoing.
    3) Demand specifics: What equipment do you think we’re using? In what way have we used that specific equipment to infringe your patent? When do you allege that we have done this/these thing(s)? What evidence do you have that an employee, agent, or principal of this firm perpetrated this infringement?

    If you’re gonna do it, you don’t need to talk about it unless notice is required as a matter of law. So do not threaten–not legal action, not physical abuse, nor to marry his sister–do not make threats. Just deny and demand.

  4. Merribeth Burns

    I agree with Jim Plante. If this becomes a widespread issue, the Indiana Attorney General’s office should be made aware of the situation, so they can address the issue and nip it in the bud.

  5. Keith Stephens

    I am wondering – since we all pay dues to NAR – why is NAR not taking an aggressive stand legally in our behalf?

  6. Why should we even give a second thought to this type of letter? If anyone is at fault it is the product manufacturers. NAR should have never made us pay for the mapping software that we lease. NAR just opened the door and encouraged others to try the same thing.

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