Patent trolls have been a growing problem for all types of businesses, and real estate companies haven’t been spared. Recently, a patent troll sent thousands of letters through several affiliated legal entities to brokerages and other companies threatening lawsuits for using multifunction office machines (copier, scanner, and fax machine, all in one) for which it owns patents. The company has since retreated a bit, in part because of claims that have been filed with regulators challenging the scope of its patents, but the broader problem persists.
For that reason, NAR joined with dozens of other organizations in a letter to federal lawmakers today, calling on them to move forcefully against this type of abusive business practice. (Patent trolls purchase broad patents and then make money by requiring users to pay a licensing fee for using products or services that allegedly use the patented technology or face a lawsuit.)
“Managing frivolous patent suits unfortunately has become an expensive distraction for a large cross section of American businesses,” the groups say in the letter. “Instead of focusing on innovation, job creation, and economic growth, we are forced to deal with legal games that have serious consequences.”
Several lawmakers have introduced legislation to curb patent abuses, and President Obama has also moved on the administrative front, but comprehensive legislation is really what’s required to curb the practice. And that’s what NAR is calling for in the letter with its partners. “Meaningful reforms . . . would make it more difficult for patent trolls to continue their destructive business model,” the groups say.
It will be a challenging road for the industry to get these abusive practices behind it, but the word is getting out that change is needed, and that’s an important start.
For questions about this issue, send an e-mail to NAR policy analyst Melanie Wyne at email@example.com.
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.
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.
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 associate counsel. She can be reached at firstname.lastname@example.org.