Imagine this, a phone call or email comes into your office from an end user that is being advised they are violating numerous patents by scanning a document, sending it over a network, and emailing to another. This is an operation my assistant and I perform numerous times everyday. The letter is from Project Paperless, HeaPle, LLC or any of a number of alphabet entities claiming rights under what are commonly known as the Laurence Klein patents. Upon receiving a copy of the first letter, I obtained copies of the patents in question and reviewed them. Each runs over seventy-five pages and they made absolutely no sense to me. I contacted an engineer and asked him to read them and help me understand the patents. He was unable to do so as well. Ditto for a Patent Attorney friend sought out for assistance.
Challenging a patent in Federal Court is a time consuming and expensive endeavor. Even actions taken in the Patent Office to challenge these patents is extremely technical and expensive. I have been quoted from five hundred thousand to a million dollars. For small businesses, the alternative of paying one thousand dollars per employee that scans over a network and emails is far more attractive than expensive litigation.
By seeking license fees from small businesses, the trolls are shaking down entities that do not understand the patents, do not have the time or ability to decipher the patents, and cannot afford a lawsuit to challenge the claim. It is noteworthy that claims are not being sent to the manufacturers of the equipment or the entities selling them. As one moves up the supply chain, the financial pockets grow bigger and the likelihood of a challenge increases. But send out thousands of demand letters, and, even if only a small percentage pays off, it becomes a good business.
Certain members of Congress have looked into these practices and have introduced legislation that will require a party bringing an unsuccessful suit for a patent violation to pay the other party’s attorney fees and costs. Unfortunately the business equipment and systems industry cannot wait for Congress in light of its inability to accomplish much other than political bickering. Although lawsuits are seldom filed, in one case one was and the result is enlightening.
The suit was brought by Project Paperless LLC against BlueWave Computing. BlueWave fought back and countersued. Project Paperless dismissed their claim, with prejudice, and walked away. This led to the end of demands from Project Paperless and the rise of numerous other entities asserting claims under the Klein patents. As of the date of writing this column I have yet to learn of a lawsuit against an end user in our industry. If you do become aware of one, please notify the Business Technology Association or myself immediately. BTA convened an Industry Summit on March 14, 2013 and the major manufacturers and interested parties came together to discuss how best to address these problems. BTA has prepared a pamphlet on the subject to answer many of the questions raised. The pamphlet is available at BTA.ORG and you should consider sending it to each of your end users.
In the meantime, if your end user receives a demand letter, give these options to the end user:
l Ignore the initial letter from the licensing agent.
l Ignore the follow-up letter from the Texas Law Firm.
l Respond to the letter seeking specifics as to the equipment, software and applications in use that are believed to infringe.
l Respond to the letter denying that there is any infringement and requesting details as to the infringement.
l Respond that the patents appear to be invalid based upon prior art and prior patents by international companies.
Inquire if there are any judicial rulings upholding the patents. Engage legal counsel to review your situation and respond to the demands.
Or, pay the license fee.
