In general, only the Federal government and Federal courts have jurisdiction over patent matters. However, the Federal government does not have effective tools for protecting individuals and small businesses from abusive and unjustified bullying by patent owners. A small business often cannot afford to defend against a threat of patent litigation and agrees to pay license fees, regardless of the merit of the claim.
In the absence of Federal regulation, the states are filling the gap.
The State of Vermont, of all places, is the pioneer. Vermont enacted a new state consumer protection law to shield its citizens from bad faith patent infringement claims. The Vermont attorney general filed suit to enforce the new law against MPHJ Technology Investments LLC, which claims to own patents to the technology of scanning to e-mail. MPHJ sent letters to thousands of small businesses, demanding licensing fees of $900 to $1200 per worker. According to court filings by the Vermont attorney general, the demand letters include several false statements and MPHJ allegedly performed no investigation to determine whether the recipients of the letters were infringing the patents. The litigation is ongoing.
Minnesota’s attorney general subsequently extracted an agreement from MPHJ not to send demand letters in that state unless the letters are first approved by the Minnesota attorney general. This result appears to be a complete victory for Minnesota.
Nebraska’s attorney general followed the lead of Vermont and Minnesota, but in a ham-fisted manner, without a targeted law and without a defendant as unsympathetic as MPHJ. Nebraska’s attorney general took aim not MPHJ, but at its Texas-based lawyers, Farley Daniels LLP. Farley Daniels sent out patent infringement demand letters in Nebraska on behalf of a different client, Activision TV, which manufactures and sells flat panel displays. The Nebraska attorney general then sent a letter to Farley Daniels ordering the law firm to stop patent enforcement in Nebraska
Farley Daniels promptly added the Nebraska attorney general as a defendant in a pending Nebraska patent infringement lawsuit by Activision TV. The Federal judge ruled that Farley Daniels could continue to file and prosecute patent infringement cases in Nebraska. The judge did not decide whether Farley Daniels could continue to send cease-and-desist letters. The Nebraska attorney general subsequently acknowledged that his complaint is not with Activision TV, which appears to actually make and sell products.
Draft bills are under discussion in Congress to deal with the issue of abusive patent enforcement. The draft bills would require patent owners to present much more information to defendants in the complaint. In a provision that risks throwing out the baby with the bathwater, the draft bill requires that the losing party in patent infringement litigation pay the attorneys fees of the prevailing party. The legislation is being circulated for discussion, but is in a very early stage.
–Robert Yarbrough, Esq.