House Lawmakers Urge FTC to Crack Down on Patent Trolls

Vermont lawsuit seen as a model for potential enforcement action

Opening up a new front in the war on patent trolls, a group of lawmakers—led by Reps. Judy Chu (D-Calif.) and Blake Farenthold (R-Tex.)—urged the Federal Trade Commission to get into the fight. In a letter to FTC chairwoman Edith Ramirez, the 18 lawmakers urged the commission to use its authority to examine whether patent assertion entities are engaging in unfair and deceptive business practices. 

Although the FTC is no stranger to the activities of patent assertion entities (aka patent trolls), holding a workshop late last year, the focus was on the impact of PAEs on innovation and competition, rather than unfair or deceptive business practices that could potentially come under the FTC's statutory authority.

The lawmakers were inspired by a recent suit filed last month by the Vermont Attorney General William Sorrell against MPHJ Technology Investments for violating the state's consumer protection act.

Filed the same day the state of Vermont passed a bill creating a right to sue for bad faith assertion of patent infringement, the complaint keys in on a particular practice of patent trolls to send demand letters to small businesses and consumers that are likely to settle and pay up rather than spend millions to go to court and fight. Many, including President Obama, have called the practice nothing less than extortion.

Indeed, the Vermont complaint notes that MPHJ, which has more than 40 shell companies doing its bidding, "performed little, if any due diligence to confirm that the targeted businesses were actually infringing its patents prior to sending these letters."

MPHJ sent thousands of letters to businesses and non-profit organizations, demanding as much as $1,200 per employee for infringing on a patent for scanning documents into email. In the complaint, Vermont AG Sorrell noted MPHJ has yet to go to court.

"We can’t let patent trolls hide under the bridge any longer—we must expose them of their deceptive practices,” said Rep. Chu. “Patent trolls abuse the marketplace for financial gain and target end users who have every right to enjoy the products and services they purchased. The FTC has a role to play in ensuring every American consumer is protected from those who use wrongful business practices to make a quick buck.”

Going after patent trolls has become a higher priority in Congress, because the practice has been seen as a blight on the economy and jobs. To date, five patent reform bills have either been introduced or drafted.