Patent 'Troll' MPHJ Takes Aim at Vermont in Fed. Circ. Appeal

Patent 'Troll' MPHJ Takes Aim at Vermont in Fed. Circ. Appeal Photo: Diego M. Radzinschi Vermont Attorney General William Sorrell

The patent-holding company MPHJ Technology Investments LLC has been on the defensive since last year, accused by state and federal officials of running an illegal intellectual property shakedown. Now the much-maligned company is looking for a break from an appeals court in Washington, D.C., arguing that its rights—not to mention the U.S. patent system—are under assault by Vermont’s attorney general and a federal judge in Burlington.

In a 50-page brief filed last week at the U.S. Court of Appeals for the Federal Circuit, MPHJ argued that Vermont should be barred from pursuing a state law consumer protection lawsuit against the company that it says is clearly preempted by federal patent law. MPHJ’s lawyers blasted U.S. District Judge William Sessions for ruling that Vermont’s case can proceed in state rather than federal court, and they urged the Federal Circuit to revive their bid for sanctions against the Vermont AG for bringing the case in the first place.

“There is nothing that can politely be said of [Sessions' ruling] except that it was transparent and wrong,” wrote MPHJ counsel W. Bryan Farney of Farney Daniels. (The Federal Circuit brief, which was submitted on July 15 but not yet publicly docketed, is available here.)

Vermont Attorney General Bill Sorrell sued MPHJ in May 2013, claiming that the company violated state consumer protection law by sending a series of cease-and-desist letters to Vermont businesses and nonprofit organizations in a scheme to collect money. MPHJ sent letters falsely asserting the recipients were infringing its patents and threatened legal action if they didn’t pay a licensing fee, Sorrell alleged.

MPHJ quickly removed the case from state court to federal district court in Burlington, asserting that Sorrell was attempting to skirt automatic federal jurisdiction for patent-related claims. Sessions rejected MPHJ’s argument in April, however, ruling that the AG’s case wouldn’t require a determination of the validity of MPHJ’s patents.

In last week’s brief, MPHJ couched the ruling as an affront to Congress and a threat to the federal judiciary’s turf. “This case is highly unusual and for the first time brings before this court an attempt by a state, and its attorney general, to create its own patent law and to disrupt the national uniformity of the U.S. patent system,” Farney wrote. “It could not be more clear that Congress would intend this case to be heard by this court.”

MPHJ also claims that the district court abused its discretion in denying MPHJ’s motion for sanctions against Vermont’s AG for pursuing what it characterized as “a self-evidently frivolous case.” According to MPHJ, Sessions rejected the sanctions bid because he “did not believe in Rule 11 sanctions, and had not granted such a motion in 18 years,” and because Rule 11 motions “were simply ‘not the Vermont way.’”

The state of Vermont has moved to dismiss MPHJ’s appeal. “It’s our position that the court does not have jurisdiction over this kind of remand,” Vermont assistant attorney general Bridget Asay told The Litigation Daily.

Attorneys for MPHJ did not respond to a request for comment.

In suing MPHJ, Vermont became the first state to use consumer protection laws to take action against a so-called patent troll. Vermont was also the first state to enact legislation that specifically forbids bad-faith threats or infringement lawsuits against state business. Dozens of other states have since passed similar antitroll legislation or are considering such bills.

MPHJ has been the subject of numerous investigations across the country, including one by the U.S. Federal Trade Commission. MPHJ sued the FTC in January, arguing that the agency’s investigation interferes with its right to assert patents. New York Attorney General Eric Schneiderman also investigated MPHJ, and in January announced that his office had extracted a settlement from the company.

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