FTC: MPHJ Can Continue to Send Demand Letters for Use of Scan Patents

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jay mac rust

Jay Mac Rust, Chief Litigator of MPHJ Technology Investments

MPHJ Technology Investments issued a press release today stating that it had reached an agreement with the U.S. Federal Trade Commission that concludes the FTC’s investigation into MPHJ’s scan patent-enforcement activities. Under the agreement, MPHJ continues to have the right to enforce its patents by contacting companies it suspects of infringing upon its scan patents, and there’s no restriction impairing its right to enforce its patents. The agreement includes MPHJ’s “commitment” that letters it and its law firms send will continue to be “accurate, and requires no material revisions to the company’s letters.”

The settlement, which was released for a 30-day public comment period, calls for MPHJ and its law firm “to refrain from making false representations in asserting patent rights.”

In the last several years, MPHJ has sent out thousands of demand letters to businesses across the United States, claiming that use of an MFP’s scan technology infringes on MPHJ’s scan patents. The letters typically demand that the business pay MPHJ $1,000 per worker or else face a lawsuit

The FTC’s principal allegation was that MPHJ and its law firms said they would file patent-infringement litigation against recipients of the letters, but then failed to do so. MPHJ “strongly maintains” it did intend to bring suit against these companies, but said it didn’t do so because of “intervening patent reviews” challenging certain MPHJ patents. The FTC was unwilling to accept that argument as a reasonable basis for not bringing suit.

MPHJ and its legal counsel strongly maintain that “their position that the enforcement letters that were sent were accurate, required by law, and protected by the First Amendment.” Three different federal courts have agreed with MPHJ on the First Amendment issue, including a recent final judgment in Nebraska in MPHJ’s favor. In that judgment, the Nebraska Attorney General was permanently enjoined from interfering with the patent-enforcement efforts of MPHJ and its law firms, and was ordered to pay all of MPHJ’s legal fees and costs.

“MPHJ is pleased that the FTC has agreed to end its investigation, and to enter into an agreement that does not impair MPHJ’s right to continue to send the correspondence required to enforce its patents against infringers,” said Jay Mac Rust, who manages MPHJ. “This resolution ensures that we can continue our efforts to protect our patent rights, and it avoids protracted administrative hearings and subsequent appeals.”

MPHJ says it owns a number of patents for certain networking system technologies, and says seeks to enforce those patents through licensing agreements and, when necessary, litigation. It notes that both Canon Inc. and Sharp Corporation have entered into licenses, and have reached agreements with MPHJ on behalf of their customers.

Our Take

It seems that this settlement with the FTC may not have much impact on MPHJ’s scan-patent enforcement activities, as it’s not clear whether the FTC’s directive that MPHJ not make “false representations” regarding its patent rights will actually mean anything, since MPHJ maintains that its statements have not been false. The fact that the FTC dismissed claims that MPHJ had never intended to bring lawsuits against companies – which may have undermined MPHJ’s argument that it was actually seeking to enforce its patents – also doesn’t bode well. On the other hand, while both Canon and Sharp have made deals with MPHJ, four companies – Xerox, Ricoh, Lexmark International, and Hewlett-Packard, are seeking to nullify MPHJ’s scan patents, based on the argument that they had already released products using the scanning technology in question before the MPHJ scan patents were approved by the U.S. Patent Office – thus “nullifying” the patents. The U.S. Patent Office is still deciding on the matter; its decision could have far-reaching consequences for MPHJ.

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