Archives for September 2013

Patent Troll “Light” in Minnesota?

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Patent trolls may not feel so welcome after the MN AG’s actions.

MPHJ (patent troll of Vermont fame) and the Attorney General of Minnesota (AG) have settled a disagreement about MPHJ’s activities in Minnesota.  The Assurance of Discontinuance, which can be found here, includes some interesting provisions, and while some commentators have noted that this capitulation may signify the end of MPHJ’s activities in Minnesota, the agreement does present some interesting questions.

For example, would the agreement actually be enforceable if MPHJ sent a demand letter without getting the AG’s prior approval?  Constitutionally, MPHJ has the right to send demand letters so long as the letters are not objectively baseless.  The agreement may fall under the covenant-not-to-sue rubric, but covenants not to sue are only enforceable “if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.”  Newton v. Rumery, 480 US 386, 392 (1987).  While this agreement may serve MPHJ and the citizens of Minnesota, it does not serve the overall interests of the patent system, which is the existence of valid and enforceable patents (and the challenge and invalidation of improvidently granted ones).

There are several questions surrounding the AG’s approval of future MPHJ demand letters:

  1. What process is the AG going to use to vet the demand letters?

Is the AG going to conduct invalidity and unenforceability analysis (won’t it have to in order to determine whether the letters are objectively baseless)?  Will MPHJ be required to provide a claim construction so that the AG can evaluate the claims or will the AG do it themselves?  Is the AG going to reach out to potential infringers and request information regarding potential liability?  If a request for information is made, is that information kept confidential?  Does the potential infringer have a right to refuse to provide information?

  1. Will that process be open for public inspection?

If a letter is vetted by the AG, what information about that vetting will be available to members of the public so that people can understand what amount of diligence has gone into reviewing the demand letters? What information collected by the AG will be available?  If a claim construction is completed, will it be available for public inspection?

  1. Along the same vein, what impact will the AG’s stamp of approval have on subsequent recipients of MPHJ’s demand letters?

If approved, has the state of MN just said: “Yes, we think MPHJ has a legitimate claim”?  Would a business, who has received an AG approved letter, think that they have basis to challenge the validity of the demand?  What if the AG is wrong and the patent was actually unenforceable and therefore the sending of the demand letter was objectively baseless?

Other interesting questions include:

Does the scope of the letter include businesses outside of MN?  MPHJ appears to have agreed not to send a letter to anyone having an address in MN, but it is not clear that this would exclude a company having its headquarters in MN and a business in Wisconsin.  Should all business set up a corporation in MN for receipt of service of process to be under the protection of this agreement?  Could this be a national agreement that could completely doom MPHJ?

Which patents does this agreement apply to?  It appears to apply to any and all patents owned or acquired by MPHJ and its affiliates.  Why would MPHJ acquire any additional patents with this agreement in place?

Lastly, MPHJ attested that it has not received any money from anyone it sent a letter to and if this representation turns out to be false it has to pay $50K.  Given scope of MPHJ’s activities and its many, many subsidiaries, it will be very interesting to see whether any MN residents come forward.

MPHJ’s Motion to Dismiss for Lack of Personal Jurisdiction

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MPHJ filed a motion to dismiss yesterday (filing is below).  Nothing surprising here – MPHJ asks the court to review issues of personal jurisdiction first before ruling on remand issue then claims that no personal jurisdiction exists under general or specific jurisdictional principles.

A few interesting aspects after my quick read of the paper:

  1. MPHJ attempts to minimize its contacts within the state, claiming that the state’s basis is THREE letters sent to entities in Vermont.
  2. MPHJ focuses almost exclusively on Federal Circuit precedent which isn’t controlling on this issue and suggests that Second Circuit law is in lock-step with the Federal Circuit’s opinions.

In regards to the letters, if true, MPHJ can win on this argument.  However, my understanding is that MPHJ (or its subsidiaries) has sent hundreds of letters and has made phone contact with individuals in VT.  In fact, it would seem odd for the state of VT to take such a strong position against MPHJ if it was a mere three letters that were sent to businesses in the state.  Thus, I would imagine that the state will be able to show that MPHJ has made a substantial number of contacts within VT.

As to the specific jurisdiction caselaw, I’m not sure this is as clear as MPHJ makes it out to be. One of the cases cited by MPHJ in support of their position is Fiedler v. First City Nat. Bank of Houston, 807 F. 2d 315 (2nd Cir. 1986) where the court did not find personal jurisdiction over defendants due to minimal contacts within the state of NY.  Interestingly, the court looked at other cases Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 308 N.Y.S.2d 337, 256 N.E.2d 506 (1970) (jurisdiction proper over a California resident who participated in a New York art auction via a telephone link with an agent of the auctioneer who then relayed defendant’s bids) and CT Chemical (USA), Inc. v. Horizons International, Inc., 106 F.R.D. 518 (S.D.N.Y.1985) (defendant established a telephonic course of dealing with the plaintiff-seller and travelled to New York to have lunch with the seller in order to discuss and negotiate the contract) where the court did find PJ.  The Court cited with approval the reasoning of Judge Sweet who stated with regards to these cases “the defendants had established a pattern of commercial dealings with each plaintiff centered in New York and used the telephonic link to this state as a means of projecting themselves into local commerce.”  Depending on what evidence the state can produce, it may be able to show that MPHJ was projecting itself into local commerce and thus satisfy personal jurisdiction in the 2nd circuit.

Other interesting aspects of note – MPHJ has yet to answer the complaint and MPHJ responded to the State’s Motion for Remand today (more on that later).

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MPHJ’s Assurance of Discontinuance

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