A common practice in the ” patent infringment claim industry,” including some practitioners here in southern Arizona, has been put on notice with a recent action by the Federal Trade Commission. The “patent infringment claim industry” takes many forms but centers around a company or individual obtaining a patent, usually on an internet based process such as document delivery. The companies then troll (search ) the internet for likely users of related services and then send a claim of some form of patent infringement demanding that they license their software or use their service.infringment claim.
Following a public comment period, the Federal Trade Commission has approved a final order settling charges that a company and its law firm used deceptive sales claims and phony legal threats in letters that accused thousands of small businesses around the United States of patent infringement. The order bars the company, MPHJ Technology Investments, LLC, and its law firm from making deceptive representations when asserting patent rights.
The settlement with MPHJ, announced in November 2014, is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity. Patent assertion entities are companies that buy the rights to patents and try to generate revenue by licensing to or litigating against those who are or may be using patented technology.
According to the FTC’s administrative complaint, MPHJ bought patents relating to network computer scanning technology, and then told thousands of small businesses that they were likely violating the patents and should purchase a license. MPHJ sent letters that falsely represented that many other companies had already agreed to pay thousands of dollars for licenses, the complaint alleges. Additional letters were sent in the name of MPHJ’s law firm, Farney Daniels, P.C., that falsely threatened the recipients with patent infringement lawsuits, according to the complaint.
Under the final order, MPHJ, Farney Daniels, and MPHJ’s owner, Jay Mac Rust, are prohibited, when asserting patent rights, from making false or unsubstantiated representations that a patent has been licensed in substantial numbers or has been licensed at particular prices. The order also prohibits misrepresentations that a lawsuit will be initiated and about the imminence of such a lawsuit.
The Commission vote approving the final order was 5-0.