Category: Patent Litigation

Out of the Fire, But Still in the Frying Pan for Farney Daniels: Judge Grants Preliminary Injunction Against Nebraska AG’s Office

Scott R. Bialecki
Here is the latest in Activision’s quest to use Farney Daniels as its patent litigation counsel.  (For those unfamiliar with the issue, see my prior postings, which discuss various states’ reactions to this firm’s efforts to enforce patent rights for a particular patent troll across the country.)  This past Monday, the Nebraska U.S. District Court Judge granted Activision’s request for a preliminary injunction against the Nebraska AG’s Office.  Specifically, the Court prohibited the AG from:

[T]aking any steps to enforce the cease and desist order issued to Farney Daniels on July 18, 2013, in any manner that would prevent or impede the Farney Daniels firm from representing Activision in connection with licensing and litigation of U.S. patents owned by Activision with respect to companies based in, or having operations in, Nebraska.

However, this injunctive relief has no bearing on the AG’s ability to continue to investigate Farney Daniels for violations of the State’s Consumer Protection Act and the Court reserved the AG’s right to revisit the injunction should its investigation uncover a claim of bad faith by Farney Daniels. Some may tout this as a great victory for Farney Daniels, but it wasn’t a great surprise. The Nebraska AG’s Office conceded that it wouldn’t oppose Farney Daniels attorneys’ requests to appear in the Activision matter because that matter pre-dated its cease and desist order, which only applied to future actions.  Although Farney Daniels can now file new actions on behalf of Activision against Nebraska-based entities, it’s unclear that there is any desire to do so. Further, the Nebraska AG is still free to investigate any new claim asserted by Farney Daniels.  As such, this firm will continue to operate under the watchful eye of the State and is not out of the woods yet.

The Patent Troll Debate Continues: Enter Activision

Scott R. Bialecki
As I previously posted, the Nebraska Attorney General’s Office issued a cease and desist letter barring any new patent infringement actions in Nebraska to a law firm that has a history of representing a so-called “patent troll” against Nebraska-based businesses.  Last week, it was reported that Activision TV filed suit in U.S. District Court in Omaha over the AG’s ability to restrict the law firm’s patent enforcement activities within the state.  Activision allegedly wants to retain the law firm to litigate a patent infringement action against Lincoln-based, Pinnacle Bank and claims that the Nebraska AG overstepped its authority. The Nebraska AG previously reported that the law firm was the subject of a prior investigation. Thus, it will be hard pressed to back down from the fight. It will be interesting to see how the Court rules given that the AG’s Office was acting under its authority to investigate and protect its consumers.

Further Trouble For Patent Trolls

Scott R. Bialecki
In what has been described as a “first of its kind” settlement, a so-called patent troll, MPHJ Technology Investments, LLC (“MPHJ”), has allegedly agreed to an “assurance of discontinuance” with the Minnesota Attorney General’s Office regarding its patent enforcement efforts in the State of Minnesota. Pursuant to the agreement, MPHJ has agreed to “cease its patent enforcement campaign” in Minnesota and not resume such activities without the AG’s consent.  Further, MPHJ cannot assign the patents-at-issue to any third party who does not agree to be bound by such terms. The settlement was allegedly the result of investigations stemming from mass mailings threatening patent infringement against several small businesses in Minnesota.  Interestingly, this is the same law firm and patent troll that the Attorney Generals’ Offices in Vermont and Nebraska dealt with over the last year. The states are clearly sending a message to patent trolls and to those law firms that represent them.  When I worked at the Federal Trade Commission many years ago, the state Attorney Generals’ Offices worked hard to coordinate their enforcement efforts. It seems as though they are even more in sync today.  As I have previously suggested, if your client receives what appears to be a baseless, mass-mailed cease and desist letter, it may want to consult the Attorney General’s Office within your state.

Patent Trolls Take Note: Vermont Takes A Stand

Scott R. Bialecki
On Wednesday, the Vermont Attorney General’s Office brought suit against an alleged patent troll, MPHJ Technology Investments, LLC, for violation of Vermont’s Consumer Protection Act.  The Vermont AG claims that the troll engaged in “unfair and deceptive acts” by sending numerous, threatening letters via a host of shell companies to small businesses and not-for-profit organizations in Vermont.  The Defendant claims to have a patent on the process of scanning documents and attaching them to email via a network. At first glance, the suit complains of, among other things, tactics that are fairly commonplace in this arena:
  • threatening litigation when the Defendant was neither prepared or likely to bring a litigation;
  • targeting small businesses that were unlikely to have the resources to fight patent-litigation; and
  • sending letters threatening infringement without independent evidence of infringement.
However, this is probably not what caught the attention of the Vermont AG’s Office.  Rather, the numerous complaints by small, Vermont-based businesses and the pursuit of not-for-profit organizations, such as one providing home care to developmentally disabled Vermonters, probably provided the impetus for the State to take action. The AG claims that various deceptive statements were made in what appears to have been an aggressive letter writing campaign, including:
  • Defendant’s licensing program had received a positive response from the business community;
  • Many or most businesses were interested in promptly purchasing a license from Defendant;
  • The fair price of a license was $900-$1200 per employee (when the average license fee was under $900 in total);
  • The shell companies had exclusive enforcement rights; and
  • Defendant would sue the target business if it did not respond within two weeks (when Defendant and/or its shell companies had never sued anyone anywhere in the U.S., much less in Vermont).
Ordinarily, you don’t see a state becoming involved in private patent infringement disputes.  However, one can understand Vermont’s involvement because of the numerous complaints by those without adequate resources to respond, especially the local, not-for-profit agencies servicing disabled Vermonters. In spite of the foregoing, it’s not likely that we’ll see other states take action against patent trolls engaging in aggressive patent infringement campaigns against mainstream companies. The states don’t have the resources or the stake in the fight to get involved.  Nonetheless, if one of your clients is a small business that receives a baseless infringement letter, it might be worthwhile to check in with your state’s AG’s Office.  If enough companies have received similar threatening suits in your state, the AG’s Office may follow Vermont’s lead and consider taking action.

What’s “Reasonable” Under Section 273?

Scott R. Bialecki
The America Invents Act significantly expanded the “Prior Use” defense under 35 U.S.C. § 273 to patent infringement.  Prior thereto, the defense was limited to use against claims of business method patents. Now, a litigant may assert this affirmative defense if it commercially used, in good faith, a process, machine, manufacture, or composition of matter that is asserted to infringe the patent-at-issue. While this sounds good on paper, there is a catch. If it is shown that a defendant failed to have a “reasonable” basis for asserting this defense, the “court shall find the case exceptional for the purpose of awarding attorneys’ fees under section 285.”  35 U.S.C. § 273(f)(emphasis added).  The problem is that the Courts have failed to address what “reasonable” means.  Thus, companies facing patent infringement claims must decide whether it’s worth the risk. If they don’t produce enough information to sustain the defense, they might have to pay the patentee’s attorneys’ fees- a remedy generally available only in instances of willful infringement.