Patent troll to sue the federal government - This will be fun!

01/14/2014 - 00:00

MPHJ Technology Investments quickly became one of the best-known "patent trolls" of all time by sending out thousands of letters to small businesses—16,465 of them, we now know—saying that if the business did not pay a licensing fee of $1,000 or more per worker, it would be sued for patent infringement. MPHJ claimed to have patents that cover any networked "scan-to-email" function.

As the debate over so-called "patent trolls" has flared up in Congress, MPHJ became the go-to example for politicians and attorneys general trying to show that patent abuse has spun out of control. "We're talking about bottom feeders," said Sen. Claire McCaskill (D-MO) in one Senate hearing focused on patent demand letters.

We now know that MPHJ has also become the first patent troll targeted by the Federal Trade Commission. The FTC's interest in MPHJ was revealed in an audacious "preemptive strike" lawsuit that MPHJ actually filed against the FTC on Monday. The suit, which names the four sitting FTC commissioners personally, says that the agency has overstepped its bounds and trampled on MPHJ's constitutional rights.

The new lawsuit (PDF) also reveals how MPHJ organized its 101 subsidiary LLCs, which all have bizarre six-letter names like GosNel and IntPar. It discloses how many targets MPHJ found and how they were chosen. And the final exhibit—the FTC's draft complaint, which was on the verge of being filed—reveals the mystery of who actually owns MPHJ.

The company's sole member is Jay Mac Rust, a Texas lawyer with a trail of troubled cases, including one where he was accused of running a "Ponzi scheme." Last year, Ars was provided with a recording of one of Rust's enforcement calls. "99 percent of people are using it," said Rust about the MPHJ patents at that time. "You know it and I know it."