U.S. District Judge William Sessions on Tuesday sent Sorrell’s case against MPHJ Technologies back to Vermont’s state court system.
“We’re so happy,” Sorrell said Thursday. “This is a very significant decision because our lawsuit was the first of its kind filed by any attorney general in the country.”
MPHJ remains confident, however. A statement from the company said it believes it will prevail on First Amendment grounds.
MPHJ is a “patent assertion entity,” another named used to describe companies that claim patents on any number of mundane processes, such as emailing scanned documents.
The companies, some of which operate through a nest of shell companies, demand “licensing fees” from businesses and nonprofits, threatening to sue if the money is not remitted. It’s typically cheaper for a business to pay a bogus patent claim rather than fight it in court.
Vermont lawmakers passed a unique law in 2013, specifically targeting bad-faith assertions of patent infringement.
But the case Sorrell brought against MPHJ was filed a few months before the new law was signed. It hinges on “traditional” consumer protection laws, a version of which exist in almost every state, Sorrell said. It was the first time a state used consumer protection laws to go after patent trolls.
MPHJ said because patent law is a federal matter, the case should be heard in federal court. To allow it to be tried at the state level risks the uniformity of federal patent law, they claimed, and could impair any patent-holder’s right to send letters to parties suspected of violating those rights.
“This is a gross mischaracterization of the State’s requested relief,” Sessions wrote in his decision.
Vermont did not challenge the validity of MPHJ’s patents, but claimed the company violated the state’s unfair and deceptive practices act by sending out infringement letters en masse.
Sorrell said one of the roughly 75 Vermont businesses that received letters from MPHJ did not even own a scanner — yet MPHJ demanded a licensing fee for use of the company’s scanning technology.
“This is what we contend was a shotgun approach, or just sending them out willy-nilly,” Sorrell said.
Walter Judge is a lawyer with the Vermont firm Downs Rachlin Martin PLLC, which helped bring the MPHJ letters to Sorrell’s attention.
“This ruling could be cited by other courts in the country for the proposition that a state can pursue state-based (non-federal) claims, in state court, against a patent-holder for conduct unrelated to whether the patent is valid or is infringed,” Judge said.
Sorrell said he’s spoken with attorneys general in other states that also are engaged in legal wrangling with MPHJ.
