First FTC settlement against Patent Troll

Last month, the Federal Trade Commission announced its first settlement against a “patent assertion entity,” also known as a “patent troll.”  The “troll” in question is MPHJ Technology Investments LLC, which, like most of its kind, acquires patents and then asserts infringement claims against other companies.  MPHJ allegedly sent out more than 16,000 demand letters from dozens of shell companies over the last two years.

According to the complaint, MPHJ purchased patents on networked scanning systems and sent out demand letters to small businesses, alleging that they were infringing on MPHJ’s patents and should purchase licenses.  MPHJ als entered into an agreement with a law firm, which agreed to represent them in asserting and monetizing the patents in exchange for a percentage of the license fees.  MPHJ would send letters from a shell company and then from the law firm over a period of months.  If the company did not respond to their suggested license fees, MPHJ would threaten to sue them for patent infringement.  Despite these threats, MPHJ never filed a single complaint.

MPHJ ist the first patent assertion entity which the FTC has taken action against.  The settlement prevents MPHJ from making further such false representations in its demand letters.

You can read the settlement here.