Vermont sues patent troll over small business shakedowns

Well, this is good news. The state of Vermont has decided to join private companies like Twitter in taking the fight to patent trolls — shell companies that don’t do anything except use old patents to extort businesses into paying licenses for common technology.

In a complaint filed in Vermont’s Superior Court, the state accuses MPHJ Technology — which operates 40 shell companies through a UPS store in Delaware  — of violating consumer protection law by demanding small businesses buy a license or face a patent lawsuit.

“Hopefully would-be patent trolls will see this and realize that if you want to prey on Vermont businesses large and small they’re going to have a fight on their hands,” Attorney General, William Sorrell, said by phone on Wednesday.

The patents in question date from the year 2001 and involve technology for scanning documents and attaching them to an email. Despite being around for more than a decade, no one tried to enforce the patents until 2012 when an attorney from Texas — a notorious troll forum — named Jay Mac Rust began brandishing them.

The Vermont complaint explains that Mr. Rust and his friends have been sending letters to hundreds of businesses in Vermont, including non-profit groups that help the disabled, and telling them to pay $900-$1200 per employee or face a federal lawsuit.

Patent trials are one of the most expensive forms of litigation and are an ordeal for even big companies — let alone a small shop in the Green Mountains. Worse, the defendants are out of luck even if they win since the shells that sue them don’t have any assets.

According to Sorrell, “patent trolling is a national problem” and the trolls have been harassing Vermont’s tech sector, as well as small business and non-profits, for years.

Vermont’s lawsuit, which demands the troll pay $10,000 for each letter it sent out, is based on consumer protection laws that forbid deceitful communications. The state’s governor this week also signed a new anti-troll law that Sorrell describes as “another arrow in the quiver.”

The suit will almost surely raise constitutional issues concerning state power and patents but, for now, businesses will welcome a big new ally in the fight against patent trolls; others include Google(s goog) and patent scholars like Mark Lemley and Brian Love. It will be interesting to see if states with big tech centers, like California and Massachusetts, ask to intervene or file suits of their own. You can read the complaint yourself here:

Vermont v MPHJ Technologies Complaint

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