Posts Tagged: "demand letters"

The settlement with MPHJ is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity (PAE). PAEs are companies that obtain patent rights and try to generate revenue by licensing to or litigating against those who are or may be using patented technology. “Patents can promote innovation, but a patent is not a license to engage in deception,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Small businesses and other consumers have the right to expect truthful communications from those who market patent rights.”

The greatest long-term threat to the U.S. patent system does not come from its professional opponents – those large businesses and their political allies who stand to profit from enfeebled patent rights. A deeper harm is caused by unscrupulous patent trolls who use extortionist “demand letters” to victimize small businesses. Yet even as damage caused by demand letters spreads, most legitimate patent licensors whose businesses depend upon continued legislative and public trust stand idly by, doing little or nothing to address it. Well-insulated within the patent industry’s cozy professional bubble, we are, in effect, fiddling like a modern-day Nero while innovation’s Rome burns.

Acknowledging that many of the problems facing the licensing industry was brought about due to bad actors dominating the discussion, Shaer explained that the absence of legitimate patent owners who license real technologies from the debate has also contributed. Rather than self regulating the industry, legitimate patent owners and licensing entities have stayed in the background, which continues to contribute to the negative public perception of the patent system. “We are the first licensing company, to our knowledge, to publicly campaign against patent troll demand letters that we believe are undermining public confidence in the patent system,” Shaer explained.

The Federal Circuit, per Judge Newman and with Chief Judge Prost and Judge Hughes, found that the Federal Circuit lacked jurisdiction to hear the appeal from a decision to remand the case back to State court, citing 28 U.S.C. 1447(d), which makes unreviewable “[a]n order remanding a case to the State court from which it was removed…” Section 1447(d) seems, and the outcome likely unfair, although no one will likely shed a tear for MPHJ.

Bad demand letters are a big problem for U.S. small businesses, costing them millions of dollars in settlement fees and legal costs annually. Patent trolls often operate through shell companies and these bad acting companies send form demand letters to hundreds or even thousands of small businesses at a time, claiming with little or no evidence that they are infringing on patents. These mass demand letters are often misleading and sometimes outright false. This type of activity has been characterized as “extortion-like” by the federal courts, and gives hard working innovators a bad name.

Congress is moving forward with at least some patent reform efforts this year, taking up the Targeting Rogue and Opaque Letters Act of 2014, which is scheduled to be marked up in the House Commerce, Manufacturing, and Trade Subcommittee on July 10, 2014… This draft legislation — creatively dubbed the TROL Act — addresses the sending of abusive and bad faith patent demand letters by clarifying that such activity may violate the Federal Trade Commission Act and authorizing that agency and state attorneys general to bring actions to stop the abusive behavior, among other things.

The Federal Trade Commission testified on consumer protection issues involving patent demand letters, patent assertion entities (PAEs), and proposed legislation to prohibit deceptive patent demand letters. Delivering testimony before the House Subcommittee on Commerce, Manufacturing, and Trade of the Committee on Energy and Commerce, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices at the Federal Trade Commission, provided lawmakers with comments on a draft bill regarding deceptive patent demand letters, and recognized that demand letters raise broader issues about patents and the U.S. patent system.

Congress is on the cusp of passing legislation that is said to be designed to control the so-called “patent troll.” Of course, as belatedly recognized by the person who came up with the moniker “troll” in 1993, Peter Detkin (former Assistant General Counsel at Intel at the time), the word “troll” is often in the eye of the beholder. Indeed nearly every litigator will tell you that term “troll” is commonly used against any opponent in a patent litigation suit, much as Arthur R. Miller asserted that “a frivolous lawsuit is any case brought against your client, and litigation abuse is anything the opposing lawyer is doing.” Miller, Simplified Pleading, Meaningful Days in Court and Trial on the Merits: Reflections on the Deformation of Federal Practice, 88 NYU Law Rev. 286, 302 (2013).

Also rising at an alarming rate are the number of infringement assertions, which can often take the form of a threatening letter that goes over the top and even crosses the line into open misrepresentation… There is no more alarming moment for an accused infringer than the moment the demand letter arrives. While large entities are sued frequently and it is part of doing business in America, a small business receiving a demand letter that alleges patent infringement may be the first time it has faced this reality. An understandable initial reaction is to get in touch with the party sending the demand letter and just explain that you are not infringing. However, if you have been sued by a company legitimately characterized as a patent troll, a lack of infringement may be of no consequence, as the patent troll may continue to require a choice between a license and a more-costly lawsuit defense.

The Main Street Patent Coalition may be the entity with the single most misleading name in the history of misleading organization names…. According to the LA Time, White Castle has 9,600 employees. How exactly is that a small business? … The corporate members of the National Restaurant Association, and the members of the National Retail Federation are some of the largest corporations in the United States. The American Gaming Association membership likewise includes some of the largest corporations in America, including several of the largest banks in the world, including Goldman, Sachs and Morgan Stanley.