Patent Troll Saga in Vermont Continues
State of Vermont Suing Alleged Patent Troll for Violating Consumer Protection Law
Vermont was the first state in the country to sue an alleged “patent troll” for consumer protection violations.
Vermont’s case against MPHJ Technology Investments, LLC (MPHJ) is now over two years old and virtually nothing has been decided. No discovery has been done; no documents have been produced; and no depositions have been taken. But much time has been spent; much ink has been spilled; many, many briefs have been filed; and much money has been spent. In the two years, only a jurisdictional battle has been fought: whether the case involves MPHJ’s patent rights, and therefore is governed by federal law, and therefore belongs in federal court – as MPHJ contends. Or – as the Attorney General contends – whether it is merely about state law, i.e., whether MPHJ’s sending of patent infringement “cease and desist”-type letters to many Vermont companies, which letters the Vermont Attorney General contends contained false statements, violates Vermont consumer protection law, regardless of whether MPHJ’s patents are valid and enforceable, such that the case belongs in state court. This is stuff only a legal wonk could love.
While all this jurisdictional back-and-forth has played out over the last two years, involving two appeals to higher federal courts, MPHJ has recently “upped the ante,” so to speak, by filing a separate lawsuit against Attorney General Sorrell, claiming that Vermont’s efforts to stop or restrict MPHJ’s activities in Vermont infringe MPHJ’s federal civil rights.
Thus, there are now two legal cases involving the alleged "patent troll" MPHJ and the Vermont Attorney General pending in Vermont. In the second case, federal Judge William Sessions just issued an important decision.
But before turning to that decision, some background. In the original case, State of Vermont v. MPHJ, the Vermont Attorney General sued MPHJ in Vermont state court, claiming that MPHJ's activities in sending threatening "cease and desist"-type letters to Vermont companies violates Vermont's consumer protection law. As noted above, all of the activity in that case so far has involved whether the case belongs in state or federal court. MPHJ has twice tried to "remove" the case to federal court on the grounds that no matter how Attorney General Sorrell frames his Complaint, it is fundamentally about MPHJ’s federal patent rights. Federal Judge Sessions has twice ruled against MPHJ and "remanded" the case back to state court, finding that the case is not about the validity of MPHJ’s patents per se, but only about its allegedly fraudulent activity in sending threatening letters to Vermont companies, which is a matter of state consumer protection law, not patent law, and, hence, there is no federal jurisdiction. The first time Judge Sessions remanded the case, MPHJ appealed the remand order but it was affirmed by the federal appeals court, confirming that there was no issue of federal law and that the case belongs in state court where the Attorney General had filed it. In its second attempt at removal, MPHJ argued that an amendment to the Attorney General’s Complaint invoked Vermont’s brand new anti-troll act, 9 V.S.A. § 4195 (effective July 1, 2013), which gave MPHJ a new basis for seeking federal jurisdiction. The Attorney General responded that the Amended Complaint does not in fact invoke the anti-troll act and that the suit against MPHJ in no way relies on the anti-troll act but rather only upon pre-existing consumer protection law. Judge Sessions agreed with the Attorney General, again sending the case back to state court. MPHJ is now appealing that second remand order.
In the second case, MPHJ v. Sorrell, filed in federal court and also before Judge Sessions, MPHJ is the plaintiff. MPHJ alleges that the State of Vermont is violating MPHJ’s federal civil rights by interfering (supposedly) with MPHJ’s rights to enforce its patents by sending its "cease and desist" letters into Vermont. In the latest activity in that case, Judge Sessions has just thrown out most of the MPHJ’s Complaint. See Opinion and Order dated June 3, 2015. The only claim that Judge Sessions has allowed to proceed, for the time being at least, is MPHJ’s challenge to the constitutionality of the new anti-troll act. Although MPHJ is not currently being sued under that act, Judge Sessions found that MPHJ’s fear of future prosecution under that act is justified because MPHJ: a) says that it does plan to continue its practice of sending “cease and desist” letters to suspected Vermont infringers, and b) can reasonably fear that that activity will be prosecuted under the anti-troll act. Thus, MPHJ will be allowed to challenge the constitutionality of that act.
Thus, both of the Vermont lawsuits involving MPHJ and its alleged “patent trolling” activities will continue to grind away.
There will surely be more to come.
 Vermont’s first-in-the-nation state anti-troll act is known as the Bad Faith Assertions of Patent Infringement Act.