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Swanson beats ‘patent troll’

Minnesota Attorney General Lori Swanson has announced that MPHJ Technology Investments, LLC, which targeted thousands of businesses for using basic office equipment to scan documents to email, will cease “patent trolling” in Minnesota under a settlement with the company.

Under the Assurance of Discontinuance, which is believed to be the first settlement of its kind in the nation between an Attorney General and patent troll, MPHJ Technology must cease its patent enforcement campaign in Minnesota and cannot resume without the permission of the Attorney General.

The settlement also prevents MPHJ Technology from assigning its patents to anyone who does not agree to be bound by these terms.

“Patent trolls shake down small businesses to pay ‘license fees’ they may not owe to avoid threats of costly litigation,” said Attorney General Swanson.

The Attorney General’s Office began to investigate MPHJ Technology for violations of state consumer protection laws last spring, after receiving complaints from several Minnesota small businesses that were targeted by the company.

MPHJ Technology, through its affiliates and law firm, sent a series of increasingly threatening letters to small businesses that alleged infringement of its patents for using basic office equipment to scan documents to email.

The letters pressed businesses to pay a fee of $1,000 to $1,200 per employee for a license in order to avoid litigation.

Many of the letters promised litigation — and some even included a draft lawsuit to be filed in federal court — if the business did not respond or purchase a license.

Patent trolling is a growing problem and was the topic of a presidential news conference on June 7.

Patent trolls purport to buy patents without intending to develop or make a product and often buy patents of dubious value.

Patent trolls then target small businesses with aggressive threats of litigation, often creating shell companies that make it difficult for the business to even know who is threatening to sue them.

While patent trolls take many forms, the most egregious target small businesses that lack the resources to defend themselves against bogus infringement claims.

It can cost hundreds of thousands of dollars to defend a patent infringement claim in court.

In light of these costs, some businesses may choose to purchase a license rather than risk potentially unaffordable litigation, even when they did not infringe on a patent.

Some patent trolls do little or no research to determine whether the alleged infringer actually infringes its patents before making demands, which means some businesses may end up paying for a license even though they don’t infringe on a patent.

One study from Boston University estimated the cost of patent trolling in 2011 at $29 billion.

“While this settlement and court order may affect one patent troller, the practice of ‘patent trolling’ will continue until Congress enacts laws to prohibit such activity,” said Swanson.

MPHJ and its attorneys are currently involved in enforcement actions brought by the Vermont and Nebraska.  Minnesota is believed to be the first state where a “patent troller” has agreed to stop targeting businesses.

Swanson noted that the company ceased activity in Minnesota when she initiated the investigation this past spring and that MPHJ warranted that no Minnesota companies had yet paid it any licensing fees as part of its Minnesota “trolling” campaign.

People may report complaints against patent trolls to the Minnesota Attorney General’s Office by calling (800) 657-3787.