Minnesota targets East Coast 'patent troll'

Robert Ten Eyck said he thought the letter he received last December was a joke and ignored it.

"They had spelled my name wrong," Ten Eyck said.

Then another one came with the veiled threat of a lawsuit, accusing Ten Eyck's company of violating patents by scanning documents to e-mail addresses. Something called BriPol was pressing for money.

Sure that he had done nothing wrong, Ten Eyck, president of TEN-E Packaging Services Inc. in Newport, went to the state attorney general.

"It's difficult enough operating a small company without some sideshow that really has no legal basis for happening," Ten Eyck said in an interview.

On Tuesday, Attorney General Lori Swanson settled with MPHJ Technology Investments LLC, a Delaware company accused of trying to wring money out of hundreds of Minnesota businesses like Ten Eyck's on claims the firms were infringing on patent rights by using basic office equipment, namely office scanners.

Swanson's office said Minnesota is the first state in the country to settle with a patent troller.

MPHJ Technology and a host of affiliates including BriPol agreed to stop their campaign and to not restart without approval from Minnesota's attorney general.

If the state discovers that any Minnesota residents or companies actually paid MPHJ Technology money for either a license or an alleged infringement, MPHJ will have to pay a $50,000 civil penalty and refund all money. Swanson's office said it's not clear how many Minnesota companies were targeted but estimated it to be hundreds.

"Patent trolls shake down small businesses to pay 'license fees' they may not owe to avoid threats of costly litigation," Swanson said in a news release Tuesday.

The settlement was approved Tuesday by Ramsey County District Judge Lezlie Marek.

A lawyer for MPHJ called the agreement "pretty limited."

"The agreement does not allege any wrongdoing on the part of MPHJ," the company said in a statement issued through the lawyer. "It also does not restrict MPHJ's right to bring patent infringement suits against Minnesota companies."

Bryan Farney, a lawyer at Farney Daniels near Austin, Texas, said that MPHJ Technology is legitimately enforcing the patents covering a technology invented by an IT consultant in Virginia named Laurence Klein in the mid-1990s. Klein then moved to Israel, Farney said.

Farney said the company's position is that Klein came up with the first way to directly scan a document into software on a PC.

So-called patent assertion entities used to target mostly tech companies but have spread their activities to a range of businesses, and there is growing outrage over the practices as an abuse of the nation's patent system.

Copyright trolling has gained attention in the Twin Cities after Star Tribune articles about Minneapolis attorney Paul Hansmeier and his associates, who have filed hundreds of copyright cases against people who allegedly violate copyright laws by downloading pornography from the Internet.

In May, a federal judge in California ordered Hansmeier and his associates to pay $81,300 in defense costs and penalties, and also referred them to the Internal Revenue Service and the U.S. attorney in Los Angeles for possible criminal prosecution. An appeal is pending.

Since then additional sanctions have been filed in other courts, and a federal judge has reopened a handful of related cases in Minnesota to determine whether Hansmeier's associates defrauded the court. That issue is pending.

Federal Trade Commission Chairwoman Edith Ramirez recently recommended that the FTC launch an investigative study of the practices, but the commission hasn't yet voted to do so. There also are several bills addressing patent trolling pending before Congress.

Swanson said her office began investigating MPHJ Technology last spring after several small businesses in Minnesota complained about receiving a series of increasingly threatening letters. The letters said the companies were infringing on one of MPHJ's patents for using equipment to scan documents and convert the text to e-mail, and that the companies must pay a fee of $1,000 to $1,200 per employee for a license to avoid litigation.

The letters threatened litigation and some included a draft of a federal lawsuit.

Farney, the lawyer for MPHJ Technology, said: "While there may be some situations where there has been some abuse, I don't think this is."

He would not say how many businesses in Minnesota MPHJ Technology targeted.

MPHJ Technology has come under fire elsewhere. Vermont filed a consumer protection lawsuit against MPHJ Technology in federal court; that case is pending.

Farney said that MPHJ Technology is owned by J. Mac Rust, an attorney and businessman operating out of Waco, Texas. Rust referred calls to Farney.

Staff writer Dan Browning contributed to this report.

Jennifer Bjorhus • 612-673-4683