Earlier this year, I wrote about efforts to reform the patent system to curtail abuses by “patent trolls.”  Patent trolls do not manufacture anything.  Rather, they often buy up patents and then bring lawsuits against businesses seeking to extract licensing fees.  Last week, the Federal Trade Commission (FTC) reported on its blog that it had settled a complaint against a patent asserion entity (a.k.a. patent troll) that the FTC claimed had falsely threatened patent suits against small businesses or made “unfounded claims that other companies have paid for patent licenses.”

Specifically, the FTC’s blog reported:

[T]he respondents sent out a series of letters to thousands of small businesses. The first letter – sent to more than 16,000 businesses on the letterhead of one of MPHJ’s dozens of six-letter subsidiaries – told the recipient they “likely have an infringing system” and directed them to contact the sender within two weeks “so that we may agree with you upon an appropriate license arrangement if one is needed.” The letter offered to settle without court action if the business agreed to a license of $1,200 per employee. (Other versions said $1,000.)

The FTC alleged that the patent troll made a series of misrepresentations, including that lawsuits would be filed even though the FTC reported that the patent troll did not file a single lawsuit.

WHAT IS THE KEY TAKE AWAY FOR MANUFACTURERS?

The rash of patent troll lawsuits against manufacturers has been on the rise.  Typically, these lawsuits are preceded by a letter seeking a fee in exchange for a license.  Even though a lawsuit may never be filed, it is important under most circumstances to advise legal counsel immediately because when a company is notified can be important to the litigation.  Additionally, if you see lawsuits being filed by others in your industry, track those developments closely because plaintiff’s lawyers often find an industry and move from one company to the next.  The good news, however, is that the FTC is taking notice, which hopefully will help stem the tide.