To the extent there's a poster child for patent abuse, it's MPHJ, the infamous "scanner troll." This week's revelations show us for the first time just how much damage the patent troll has caused. Hint: it's a lot.
MPHJ owns a handful of patents, which it claims covers the basic technology for scanning documents to email. You read that right—simply scanning documents to email.
On Monday, MPHJ sued the Federal Trade Commission (FTC) in federal court in Texas. Apparently, the FTC has been investigating MPHJ since this summer, using its subpoena power, which allows it to get information that ordinary citizens cannot. In December, it presented MPHJ with a draft complaint and, according to MPHJ, threatened to file suit if MPHJ would not enter into a consent judgment (a kind of settlement agreement).
- MPHJ has sent letters to approximately 16,465 small businesses nationwide.
- MPHJ sent more than 9,000 letters claiming that "most businesses, upon being informed that they are infringing someone's patent rights, are interested in operating lawfully and taking a license promptly" and that "[m]any companies have responded to this licensing program in such a manner." The letters also claimed that the price for a license—either $1,000 or $1,200 per employee—was reached through the responses of "many companies." However, when the first 7,366 of those letters were sent, MPHJ hadn't sold a single license though its "licensing program."
- Of the 16,465 letters that MPHJ sent, it only received 17 (yes, 17!) licenses. Yet the price of these 17 licenses was thousands of small businesses going through the stress and expense of facing a threat of patent litigation.
- MPHJ began sending letters in September 2012. It did not file an infringement suit until November 18, 2013—after it had been sued by the states of Nebraska and Vermont.
In other words, this is run-of-the-mill extortion, or an attempt to get a quick buck out of small businesses. And not just some small businesses—essentially every small business. MPHJ believes that as long as a business has at least 20 employees and works in certain fields, such as the vaguely defined "professional services," it "very likely" infringes. And if a business has at least 100 employees, no matter what kind of industry it's in? Then, according to MPHJ, it, too, "very likely" infringes. You read that right. Every. Business. In. America.
So what's going on here isn't just about MPHJ and its desire to squeeze money from wherever it can (there are some unsurprising and troubling hints that MPHJ is using the letters to pressure the scanner manufacturers to pay them to lay off their consumers—just another layer of mob-like behavior). Think, for a second, about the proposition that one party can claim that its patents (in this case five—four of which come from the same family) tie up every American business that uses basic scanning technology. Clearly, the patent system isn't working. The patents are too broad and vague, and there is no evidence that they somehow advanced scanning technology. And when these patents end up in the hands of parties like MPHJ, they become tools for abuse.
Congress is close to passing good legislation that would help curb the patent troll disaster, but would largely fail to address the underlying problem of patent quality. The good news is that the Supreme Court has at least two cases on its calendar this term that will get at the heart of the patent quality issue. We'll be filing briefs in those cases asking the Court to set the patent system back to its original moorings—one that is supposed to promote innovation and progress instead of squelching it.