Patent troll that wants $1,000 per worker gets sued by Vermont A-G

Late last year, a vigorous and secretive patent troll began sending out thousands of letters to small businesses all around the country, insisting that they owed between $900 and $1,200 per worker just for using scanners. The brazen patent-trolling scheme, carried out by a company called MPHJ technologies and dozens of shell companies with six-letter names, has caught the attention of politicians.

MPHJ and its principals may have gone too far. They’re now the subject of a government lawsuit targeting patent trolling—the first ever such case. Vermont Attorney General William Sorrell has filed suit in his home state, saying that MPHJ is violating Vermont consumer-protection laws.

Going after small businesses has raised the ire of many. In Vermont, the lawyers behind MPHJ may have seriously over-shot: they went after two small nonprofits who are named in the Vermont complaint—Lincoln Street, a Springfield nonprofit that gives home care to developmentally disabled Vermonters, and ARIS Solutions, a non-profit that helps the disabled and their caregivers with various fiscal and payroll services.

“All of a sudden, these nonprofits were getting threats,” said Sorrell in an interview with Ars. “This caused consternation on behalf of a number of Vermont companies and caused them to incur expenses when they hired private legal counsel. We’re hopeful that other states will take action to protect their businesses and organizations. They’ve sent threatening letters all over the country.”

The Vermont complaint complaint (PDF) includes redacted copies of demand letters, identical in their wording to the letter first published by Ars Technica in January.

More details revealed about a still-murky operation

By January, lawyers who spoke to Ars knew of more than 10 six-letter entities shooting out threat letters, with names like GosNel, AdzPro, and AllLed. But Vermont investigators were able to get additional information not available to defense lawyers (or journalists). For instance, they discovered that there were forty different shell companies sending out the letters, all under the control of MPHJ.

The Vermont complaint also confirms that Jay Mac Rust, a Texas attorney, has a central role in the scheme. In April, Ars published parts of a recorded conversation between Rust and a letter-holder. In those conversations, Rust described himself as the lawyer who gets sent to deal with “irate” letter recipients.

Rust is manager of MPHJ and is the signatory on every patent’s “Exclusive License Agreement” between MPHJ and the shell companies, according to the Vermont complaint.

The size and scope of the MPHJ letter campaign still isn’t clear. The Vermont suit says that similar letters have been sent to “numerous” Vermont businesses as well as “hundreds or thousands of businesses outside Vermont.”

It also isn’t clear who is ultimately getting the money from these settlements. In an interview with Ars, Brian Farney, one of the lawyers in charge of the scheme, wouldn’t reveal the name of the owner of MPHJ, who he referred to simply as “the client.”

The complaint also notes that MPHJ “targeted small businesses in commercial fields unrelated to patent law” and took payouts that were less than the $900 minimum its letters stated. MPHJ “performed little, if any, due diligence to confirm that the targeted businesses were actually infringing its patents prior to sending these letters.”