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30 September 2015Patents

Federal Circuit sends MPHJ’s patent case to Vermont court

The US Court of Appeals for the Federal Circuit has ruled that a dispute concerning an allegation that licensing company MPHJ Technology Investments sent fraudulent letters asserting patent infringement should be heard at the Vermont Superior Court.

On Monday, September 28, the federal circuit ruled 3-0 that the dispute falls under Vermont’s consumer protection laws and that the superior court is the appropriate location for the case.

Bridget Asay, Vermont’s solicitor general, told WIPR that she is “pleased that the federal circuit has once again rejected MPHJ’s meritless attempts to remove this case to federal court”.

The case concerns letters sent by MPHJ to Vermont businesses in 2012. The letters informed businesses that they may be using patented technology without authorisation.

If a business did not respond, a second and third letter would be sent from law firm Farney Daniels stating that a lack of response was accepted as an admission of infringement.

At the centre of the dispute are MPHJ’s patents covering a system that connects computers to scanners and enables scanned documents to be sent as a PDF file to a user’s email address.

The state of Vermont filed a complaint in May 2013 at the Vermont court accusing MPHJ of violating the Vermont Consumer Protection Act (VCPA), threatening litigation that was unlikely to happen, and unfairly placing a burden on Vermont businesses to investigate the alleged infringement.

It sought two permanent injunctions, one prohibiting MPHJ “from engaging in any business activity in, into or from Vermont that violates Vermont law”, and another requiring MPHJ to stop “threatening” Vermont businesses with patent claims.

The state later dropped its request to stop MPHJ asserting its patents against Vermont businesses.

But in 2014, MPHJ requested to move the case to the US District Court for the District of Vermont and said that because the injunction request concerned the validity and enforcement of its patents it should be considered as federal law and not state law.

MPHJ added that the injunction was sought under Vermont’s anti-'patent troll' law the Bad Faith Assertions of Patent Infringement (BFAPIA), which took effect on July 1, 2013. Such an injunction, if enacted, would mean MPHJ had to comply with the BFAPIA.

In the filing, MPHJ added that both the VCPA and the BFAPIA should be declared invalid because they were pre-empted by federal law and that, as a result, the injunction request should be a matter for a federal court.

But the state rejected the claim and said that the injunction concerned the VCPA and not the BFAPIA and therefore fell under the jurisdiction of the Vermont court.

Judge Kathleen O’Malley, presiding over the case at the federal circuit, agreed.

She said: “The issue is, thus, whether the phrase ‘Vermont law’ encompasses not only the VCPA, but also the BFAPIA.

“We hold the state to its concession at oral argument; it has expressly disavowed any request to enjoin MPHJ’s conduct under the BFAPIA. We see no reason to disturb the district court’s finding that the state is not seeking an injunction that requires MPHJ’s compliance with the BFAPIA.”

O’Malley added that a finding by the Vermont court that the VCPA is valid “would affect the development of a uniform body of patent law, as such a decision would be binding in Vermont, but would not be in other states with similar laws or in federal courts”.

In a statement to WIPR, a spokesperson for MPHJ said the company acknowledged the significance of O’Malley’s statement.

Walter Judge, director at law firm Downs Rachlin Martin, said the decision by the federal circuit "represented a victory for the Vermont attorney general in its attempt to bring MPHJ to justice".

He added that MPHJ's behaviour of attempting to move the case to a district court will contribute to commentators' image of MPHJ as a "poster child" for the typical patent troll.

The case will now head back to the Vermont court.

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