January 14, 2014 / 3:00 AM / 5 years ago

New York bears down on patent trolls, settles with Delaware firm

NEW YORK (Reuters) - New York’s attorney general has reached a civil settlement that bars a Delaware firm from using what he called “deceptive” means to get businesses to pay money for patent licenses.

New York Attorney General Eric Schneiderman speaks to reporters during the New Eastcoast Arms Collectors Associates Arms Fair at the Saratoga Springs City Center in Saratoga Springs, New York October 13, 2013. REUTERS/Hans Pennink

The settlement with MPHJ Technology Investments LLC heralds what the attorney general, Eric Schneiderman, called new guidelines to assure that so-called “patent trolls” do not use improper tactics.

Also known as “patent assertion entities,” patent trolls try to extract licensing fees or file infringement lawsuits that some critics view as frivolous.

Last month, the U.S. House of Representatives passed a bill to require companies filing infringement lawsuits to disclose more, and encourage judges to require losing plaintiffs to pay defendants’ legal fees.

That bill later moved to the Senate. Other state attorneys general are also investigating patent trolls, and the Federal Trade Commission is studying the impact of abusive patent litigation on competition.

“So-called ‘patent trolls’ exploit loopholes in the patent system and have become a scourge on the business community,” Schneiderman said in a statement on the MPHJ settlement.

“The guidelines established in today’s settlement will put an end to some of the most abusive tactics by placing the industry on notice that these deceptive practices will not be tolerated in New York,” Schneiderman added.

Schneiderman’s settlement with MPHJ was reported earlier by The Wall Street Journal. MPHJ could not immediately be reached for comment. Its lawyer did not immediately respond to requests for comment.

According to settlement papers, MPHJ in 2012 acquired five patents related to computer architecture for $1.

It then created 100 subsidiaries with “cryptic” names such as “AbsMea,” “FolNer” and “GosNel,” which sent more than 1,000 letters to New York businesses accused of “likely” patent infringement, the papers show.

Targets had to sign non-disclosure agreements before receiving basic information about the patents, and MPHJ sent more than 300 letters threatening lawsuits unless recipients negotiated for licenses on “reasonable terms,” the papers show.

MPHJ has “to this day” filed no patent infringement lawsuits against New York businesses, the papers show.

The settlement requires MPHJ to reveal its true identity to targets, describe with “reasonable specificity” its claims, and have a good faith basis for claiming infringements.

In a statement, MPHJ told the Journal it considered its patent enforcement efforts lawful, but called the guidelines “reasonable” and the settlement an “acceptable resolution.”

Additional reporting by Karen Freifeld; Editing by Christopher Cushing

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