In the pantheon of infamous patent trolls, MPHJ is near the top. MPHJ drew attention for their habit of mailing demand letters to anyone they thought might possibly have infringed their scan-to-email patent. This drew so much attention that, ultimately, they were sued by Vermont’s State Attorney General. MPHJ’s tactics were also one of the forces behind the adoption of state laws against bad faith demand letters in the majority of states. (Massachusetts is considering joining the club this year.)
But while state laws against bad faith assertion of patents, action by State Attorneys General, and even a lawsuit by the FTC all contributed to defeating MPHJ’s claims, the final blow to their bottom-feeding tactics came from inter partes review.
MPHJ Threatens Basically Everyone
MPHJ had a very simple business model. If you were a business that used a scanner with a scan-to-email feature (which, these days, is just about any business copier/scanner), they would send you a letter. The letter would say “you need to pay us $1,000 per employee for use of our patent, or sign a letter swearing you don’t ever use scan-to-email, with a penalty of $1,000 per employee if you didn’t tell the truth.”
The small businesses reacted in various ways. Some ignored the letters. Some paid up. But ultimately, it wasn’t reasonable for them to take on the burden of an expensive lawsuit or even a less expensive IPR, given that the amount at stake was always less than the cost of even filing an IPR. However, the way in which they operated did draw attention from the FTC and State Attorneys General, who successfully targeted the way in which MPHJ conducted their campaign. But simply targeting the enforcement approach wasn’t enough to shut down MPHJ.
Manufacturers Take Action
Even though MPHJ agreed to a consent decree with the FTC regarding how they asserted patents, and even with the creation of state laws barring bad faith assertion, the root of the problem remained. MPHJ held a set of patents that should never have been granted, and those patents could still be used to threaten lawsuits. The FTC and state laws couldn’t prevent that. The state and federal consumer protection actions hadn’t discredited the MPHJ patents—only the business model.
But the scanner companies that made the products in the first place could file an IPR. And that’s exactly what they did. Xerox, Ricoh, Lexmark, and HP filed IPR petitions against MPHJ’s patents. And the Patent Office agreed with them—MPHJ’s patents were invalid. When MPHJ appealed to the Federal Circuit, the Federal Circuit agreed with the Patent Office—MPHJ wasn’t the first to invent what their patents claimed.
IPR Protects End Users
In my previous post, I wrote about the Texas Association of Realtors defending its members when a defense might not make sense for a single realtor. The MPHJ case presents another example of exactly this phenomenon.
MPHJ demanded around $1,000 per employee for a license. That means that the amount demanded from any given target was likely lower than the cost of an IPR, much less the cost of litigation, meaning that there was little incentive for any single MPHJ target to fight back. The companies that actually made the scanners that MPHJ claimed infringed might have had the financial incentive to fight back. But if IPR didn’t exist, those companies would have needed their customers to start fighting in court, at which point they could try to individually defend each of the 9,000 customers MPHJ sued. After several years of litigation, the manufacturer might be able to obtain a judgment of invalidity in a trial. Only at that point would other customers be safe.
Instead, they could file an IPR challenging the validity of the MPHJ patents. This enabled manufacturers to defend all small businesses using their products with a single action. IPR’s efficiency allowed the scanner makers to avoid duplication of litigation costs while also allowing them to protect their customers, the end users of the technology.
No one should have to worry that using a product they bought off the shelf at the office supply store in the way it’s designed to be used will result in a demand letter from a patent troll. IPR helps to prevent exactly that situation, allowing manufacturers to protect their end users.