Patent Trolls Target Local Business

By Monica Buchanan
|  Friday, May 17, 2013  |  Updated 12:47 AM EDT
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A business in Old Lyme couldn't believe it when someone threatened to sue them for using their own copy machine.  The Troubleshooters found this is a common practice called patent trolling, and it's hurting small businesses in Connecticut and across the country.

A business in Old Lyme couldn't believe it when someone threatened to sue them for using their own copy machine. The Troubleshooters found this is a common practice called patent trolling, and it's hurting small businesses in Connecticut and across the country.

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Imagine being sued for just scanning a piece of paper and emailing it to yourself or someone else.  Believe it or not, that's exactly what is happening businesses across the country, including one here in Connecticut.

"The letters are very threatening.  If you don't know what's happening, they're pretty scary," said Roberta Hurley.

Hurley owns a small business in Old Lyme called Southeastern Employment Services.  The company finds jobs for people with disabilities.  You can imagine her shock when she got a letter threatening to sue her and the businesses unless she paid a licensing fee for every employee who used the scan-to-email function on the business copier.

"We use that feature all the time," Hurley said.

The letter claimed Hurley was infringing on a set of patents that cover that process.  The company that sent the letter, FolNer LLC, says it owns those patents. But complying with the demand would have cost Hurley more than $75,000.

"It's basically people just buying patents and sending letters to small businesses and trying to get money out of them and they're not going to get it out of me," she said.

Hurley hired a patent attorney and what he found was a practice that's becoming more and more common.  Michael Blake also says it's threatening small businesses across the country.  It's known in the patent world as patent trolling.

"This organization has bought a patent solely to enforce it and try to get a royalty payment from people who may be infringing the patent," Blake said.

So-called patent trolls typically don't invent anything or sell anything.  They simply buy patents and make their money by threatening lawsuits.

"What they are probably hoping is to get a quick offer of a settlement to make this whole thing go away," Blake said.

He points out it's a lot more lucrative than you may think.  That's because FolNer LLC isn't the only company sending out letters, like the one Hurley got in the mail.

"There's a bunch of them that own the same patent supposedly and they're changing names and the business entity name and all we can find out after a quick look is just a P.O. Box in Delaware," Blake pointed out.

The Troubleshooters dug a little deeper.  Turns out, there are more than a dozen shell companies, all 6 lettered LLCs like FolNer, sending out the letters and claiming to own the same 4 patents.  According to the US Patent Office website, those patents all belong to a company called MPHJ Technologies.  These patents are registered as covering the scan to email process.

The shell companies and MPHJ Technologies are all registered in Delaware though.  It's a state that doesn't disclose officers or owners, making it near impossible to find who's behind the letters.

"They're hiding so people can't find out who they really are and then sue the actual principals who are involved or expose them to the media," said Blake.

The paper trail shows the patents were recently transferred to MPHJ from another limited liability company called Project Paperless.  Before that, they were owned by a company called Renaissance Group.  Documents show all three of these companies have ties to the Atlanta, Georgia law firm of Hill, Kertscher and Wharton.  Our calls to their law firm were not returned.

"It's unconscionable what they are doing to the end users," said Robert Goldberg, an attorney for the Business Technology Association, or BTA.  The BTA is an international non-profit organization that refers to businesses like Hurley's as "end users."  Goldberg says patent trolls are hurting American's economy and need to be stopped.

"You use the word patent trolls and a lot of people do. What I call them is terrorists.  I believe that these companies put terror into the end user who is just doing what they do normally.  They are using equipment as it is sold to them for a very common practice," he said

One big difference between the current network of LLCs looking to enforce the MPHJ patents and Project Paperless is the MPHJ entities haven't filed any lawsuits so far.  Project Paperless did file at least 2 lawsuits, but when the companies fought back, Project Paperless dropped the suits and transferred ownership of the patents to MPHJ.

Goldberg says it appears MPHJ is relying on intimidating letters and emails to get businesses to pay up.

"If in fact they bring litigation as they've threatened numerous end users, then through the discovery process we'll find out and expose who these people are," said Goldberg.

Here's his advice to business owners targeted by a patent troll.

"They can write back and say please identify the equipment you believe is part of the process that's infringing. You can deny infringement.  You can deny the validity of the patents.  You can write back and say you're going to vigorously oppose any litigation that's brought to enforce these patents and you can hire your own local counsel," Goldberg said.

For now, Hurley and her attorney have asked FolNer LLC to explain its accusations and are waiting for a response.  Hurley, though, isn't holding her breath.

"I just find it very slimy and backhanded that people would do this," she said.
 

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