Everything's Bigger in Texas

It recently came to light that Texas-based MPHJ Technology Investments has sent an astounding 16,465 letters to small businesses, requesting that they pay a license fee of $1,000 per worker or face a patent infringement lawsuit. And we know this, in part, because MPHJ has now filed suit against the Federal Trade Commission.

The story begins with the thousands of letters MPHJ sent out regarding patents related to document-to-email scanning systems. MPHJ only targeted businesses with 20-100 employees, but even so, the campaign was hardly a success: Only 17 companies took licenses and paid up.

What MPHJ succeeded in doing was to anger Main Street and raise the ire of various government entities with its callous actions, which included targeting a nonprofit in Vermont that helps developmentally disabled adults, as well as an Alzheimer's patient in a nursing home in Nebraska. The attorneys general of New York and Vermont have taken legal action, and Sen. Claire McCaskill (D-MO) referred to the company as "bottom feeders" in a Senate hearing on patent demand letters.

The FTC had planned to sue MPHJ and its sole member, Texas attorney Jay Mac Rust, as well as Farney Daniels, the law firm MPHJ retained to help with its patent enforcement. The subject of the FTC lawsuit would have been related to deceptive trade practices. However, MPHJ filed its lawsuit as a preemptive strike, naming the four sitting FTC commissioners personally and alleging that the agency overstepped its authority.

Congress has a well-established history of taking on non-practicing entities that it considers to be "patent trolls," but the FTC does not. If it does sue MPHJ, it would be the first time the FTC ever took direct action against a non-practicing entity.

This could end up being one of the more important IP stories of 2014 - but even if it fizzles, at least it offers entertainment value the size of a Texas lawyer's belt buckle.