Patent Troll Shell Companies Shake Down Small Businesses For $1k Per Employee For Using Network Scanner

from the shakedown dept

Wed, Jan 2nd 2013 1:34pm — Mike Masnick

In the latest example of just how broken our patent system is, Joe Mullin has an excellent and detailed article unveiling one of the latest patent trolling scams: using some vague and highly questionable patents, combined with a series of shell companies, to send out tons of letters to small businesses, demanding approximately $1,000 per employee from any company that has a scanner connected to a network which has a "scan to email" function (as most new scanners do). The story is bizarre and complex, but that's part of the "game" that the trolls are playing to try to hide their trail.

Go read the long version, but the more compact version is that it appears that patent trolls are learning from some of the "innovations" of today's copyright trolling programs in which the focus is to broadly hit a ton of small possible "licensees" in the hopes that a reasonable percentage pays up. Traditionally, patent trolling mostly focused on larger companies with big bank accounts, thinking that most would rather just pay up than deal with the lawsuit. But this new generation is even more nefarious. The example in the article is a series of ridiculous patents originally granted to "Laurence Klein," which lawyers are now claiming cover using a scanner that's connected to the internet to email a scan. Here are the patents in question:

US Patent 6,185,590: Process and architecture for use on stand-alone machine and in distributed computer architecture for client server and/or intranet and/or internet operation environments
US Patent 6,771,381: Distributed computer architecture and process for virtual copying
US Patent 7,477,410: Distributed computer architecture and process for virtual copying
US Patent 7,986,426: Distributed computer architecture and process for document management

The article talks about how a company called Project Paperless LLC started sending around threat letters about those patents, telling companies that they had to pay $1,000 per employee if they had a scanner that was networked and had such a feature -- which scanners from HP, Brother, Xerox and Canon all do. But, rather than go after those companies, the patent troll in this case claims that any company using one of their scanners is liable and has to pay these outrageous sums. One of the companies who received the notice, BlueWave Computing, led by Steven Vicinanza, decided this was ridiculous and fought back, following the Drew Curtis / Fark "How to fight patent trolls" plan to a tee: he pointed out he didn't infringe, made it very, very clear he would fight this to the end and that he was going to make it as painful as possible for the troll. While Paperless Post sued BlueWave, it quickly backed down and dropped the lawsuit two weeks later, leading BlueWave to issue a press release (continuing with the Fark plan of publicizing the result).

While all this was happening, there was also an ongoing effort by some unnamed people to expose Project Paperless' effort and to show that the patents aren't valid.

Among the things they discovered was that it appeared that some of the partners in the law firm that "represented" Project Paperless, likely had an ownership interest in the patents. Hill, Kertscher, and Wharton, LLP is the firm, and research suggested that partners Steven Hill and Scott Wharton had holding companies, Bonita Sunrise and Wexford Holdings, that at least partially owned the patents. Given that exposure, plus the success of BlueWave in fighting loudly, what happened next was only too predictable: Project Paperless wrapped up its various lawsuits and... "sold" the patents to MPHJ Holdings, whose ownership is completely unclear. Soon after that, a whole series of companies popped up sending letters to companies demanding similar per-employee-payments for network-connected scanners. Among the companies Mullin uncovered doing this: AccNum, AllLed, AdzPro, CalNeb, ChaPac, FanPar, FasLan, FulNer, GosNel, and HunLos. Note a similarity in the style of all of those names?

Mullin includes a (redacted) threat letter from AllLed as an example. He also has the transcript of his phone call with the number listed on the letters (it's the same number on all the letters):

As for the phone number on the letters, 855-744-2360—I called it. The conversation was not enlightening.

"Thank you for calling the legal department," said a youngish-sounding man. "This is Kevin, how can I help you?"

I was calling about a letter I was holding from AllLed, I explained. Kevin asked for my letter's "file number," which was the one thing I couldn't give him—it would have revealed the source from whom I had received the letter. I told Kevin I was a writer who had been given the letter by someone else. All I wanted to do was contact AllLed, LLC directly—so how could I do that?

"We don't have any information on the entities that send the letter," he said. It was just an answering service. "We don't have their contact information."

"Well, who are you the 'legal department' for?" I asked.

"Hmmm," said Kevin. "Legal department."

"I don't get it—is 'Legal Department' a real company?" I persisted.

"Hmmm," said Kevin again. "We're just Legal Department."

"Well, you work for someone, right? What company do you work for?"

"This is Legal Department. That's all we can say."

As Mullin notes, this isn't a one-off case, either. There have been a growing number of similar attempts by patent trolls to go after large numbers of people or companies further down the supply chain, clearly following the traditional trolling strategy of just seeking lots of "settlements" from people who can't afford a lawsuit and don't understand the specifics.

No matter how you look at this, though, it's yet another example of how the patent system is completely broken. It hearkens back to the 19th century when scam artists roamed the countryside hitting up farmers for "licenses" for "patents" on common farm equipment. At that time, they were called patent sharks, and Congress actually changed the rules on what could be patented to fix the problem. Of course, today Congress isn't known for actually fixing problems.

117291579 Led Letter Final Redacted (PDF)117291579 Led Letter Final Redacted (Text)

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Filed Under: networked scanning, patents, scanners, shell companies
Companies: accnum, adzpro, allled, bluewave, bonita sunrise, calneb, chapac, fanpar, faslan, fulner, gosnel, hill kertscher wharton, hunlos, paperless post, wexford holdings

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Christopher Best (profile), 2 Jan 2013 @ 1:38pm

Two rows over from my desk is a network attached scanner that I rather regularly use to e-mail documents that I've signed and such. I actually want to turn the owner of said scanner in, in hopes the patent troll will attempt to sue them for $1k per employee.

Of course, the owner of said scanner is the Federal Government of the United States of America. I'd really be amused to see what happened when they tried to collect $1k per employee of the US Government.
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Anonymous Coward, 2 Jan 2013 @ 1:45pm

Re:
Maybe that's what happened with the whole debt crisis. The fiscal cliff is merely a coverup that someone high up was ignorant enough to pay them!
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That Anonymous Coward (profile), 2 Jan 2013 @ 1:57pm

What was the idea again...Oh yeah
The first thing we do is kill all the lawyers.
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Anonymous Coward, 2 Jan 2013 @ 2:02pm

The sheer, bald audacity is dazzling.
As Edward Albee wrote, you've got to have a swine to show you where the truffles are.
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That One Guy (profile), 2 Jan 2013 @ 2:21pm

Bring in the big guns?
Seems to me the most effective step to getting these trolls squashed, hard would be telling HP, Brother, Xerox and Canon that customers who have purchased their products are being threatened with lawsuits because of said products.

I'm fairly sure that's something all of them would be quite interested in stopping, as I can't think of a faster way to get people to use another company's products than threat of lawsuit for using theirs.
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Ehud Gavron (profile), 2 Jan 2013 @ 2:31pm

Why yes
I called and got Kevin.

He claimed to only be part of an answering service, and yet, when I gave him my company's name he "couldn't find it" meaning they have access to a list of everyone they mailed.

He said he did not represent the claimant... just an answering service. I let him know my company represents lots of customers in our region and want to speak with an attorney about it.

He took my name and number.

I look forward to speaking with someone who is an officer of the court.

E
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out_of_the_blue, 2 Jan 2013 @ 2:33pm

Corporatism running wild. But is Mike against corporations?
Well, he never says so. This is not the patent system as such: it's just typical dog-eat-dog "capitalism", otherwise known as legalized theft. The WHOLE system is broken because getting money is the sole measure in capitalism: it needs to be tempered with morality -- again, and the only effective way to do that is toss people into jail for these acts.

Remember Enron with its 2800 subsidiaries? Those were solely to hide its hiding in a tangled web. That's the major purpose of subsidiaries.

So, Mike: are you FOR jailing these thieves? Or going to stick to pattern and say they're shielded by legalities?

As you correctly note, politician aren't going to do anything about it, not until The People wise up and see that the actual enemy isn't hiding in caves far away, they're riding in limousines on Wall Street, hollowing out industry, wrecking the economy so can finish looting it.

... I don't hold out much hope of The People grasping that when Ivy League Mike won't admit it, and even hides it by omission.

Take a loopy tour of Techdirt.com! You always end up at same place!
http://techdirt.com/
Where if not whiney complaint or vulgar ad hom it's sheer assertion. No solutions.
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Anonymous Coward, 2 Jan 2013 @ 2:44pm

Re: Corporatism running wild. But is Mike against corporations?
Do you have syphilis?!

Shut up and go home you idiot. Word salad is the worst kind, and you seem to fancy yourself as some kind of chef.

What you're saying here bears no relation to the topic at hand, and your caustic attitude belies the fact that you have too little intelligence to even participate.

If you once made a cogent point maybe not everyone would be so disgusted at the sight of your username, but as it is you're simply a contemptible pussbag whose only point seems to be to malign the community.

You're worse than a troll, you're a sniveling shill with no value to anyone, and honestly, if you died in a gas station explosion we'd be happy to be rid of your inane babble.
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Anonymous Coward, 2 Jan 2013 @ 2:56pm

Re: Corporatism running wild. But is Mike against corporations?
Holy fuck.

Yes, you have some kind of perverted rage-on for Mike. We get that. All of us. I promise. You're ignorant, unintelligent, annoying, and unnecessarily aggressive. We get that, too. Whatever point you're trying to make, we got it. Please stop now. Please.

Please.
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Anonymous Coward, 2 Jan 2013 @ 2:56pm

Re:
Isn't the senate and house full of lawyers?
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Anonymous Coward, 2 Jan 2013 @ 2:57pm

Re:
NO! We do not need to kill all the lawyers. We need some people around for the manual labor and for testing the new death star on.
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Anonymous Coward, 2 Jan 2013 @ 3:04pm

Re: Corporatism running wild. But is Mike against corporations?
I think people should be fined or short jail time for these types of patent trolling. But your argument makes you look like an ass.
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Anonymous Coward, 2 Jan 2013 @ 3:07pm

OOTB seems unusually incurious, abnormally unintelligent, amazingly inarticulate, fantastically uncultured, extraordinarily uneducated, and apparently quite proud of all these things.
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MrWilson, 2 Jan 2013 @ 3:08pm

We need it to be clearly stated in law that users of products that may infringe on patents are automatically except from liability for patent violation. That would stop these kinds of trolls immediately.
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Anonymous Coward, 2 Jan 2013 @ 4:05pm

Is there anyway to convince people that "legal department" is in charge of the Occupy movement and send in the snipers ?
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IronM@sk, 2 Jan 2013 @ 4:33pm

Re: The sheer, bald audacity is dazzling.
Why does this audacity have no hair?

*bold
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Steevo (profile), 2 Jan 2013 @ 4:41pm

Countersue the scanner manufacturer.
I think this is a pretty easy matter to deal with.

I would write them a letter and CC the scanner vendor's legal department. I'd say "We bought that scanner from Hewlett Packard (just an example), and they provided the software that we use with it. If there is a licensing issue take it up with them. We are their licensee."

If they happened to sue me I'd counter sue Hewlett Packard and bring them in. After all, they put me up to it by selling me the machine and providing that software. If it has to be licensed, they ought to have done that.

It'd just not my problem past that.

Now, if Hewlett Packard was countersued on 300 of these lawsuits they would have to do something, wouldn't they? Or they would be out of business.
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Steevo (profile), 2 Jan 2013 @ 4:51pm

Even more fun!
Even more fun!

On second thought I would say "We may well have such scanner devices manufactured by Hewlett Packard, Brother, Xerox, Fujitsu, Canon and perhaps others. Each of them provided the equipment and licensed software to operate the equipment."

Then send out copies to each of those companies legal departments and their sales managers for this equipment.

See if the patent trolls have time to respond to discovery from 5 or 10 lawfirms. Fun!

This is what you call "finding your natural allies".

BTW, I actually do have all that scanner equipment. All different brands too. From Fortune 100 companies with legal departments and outside counsel on retainer. Great fun!
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Anonymous Coward, 2 Jan 2013 @ 5:56pm

I used to think that fraud and extortion was illegal.
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Anonymous Coward, 2 Jan 2013 @ 5:58pm

Re: Corporatism running wild. But is Mike against corporations?
Wow, you're an idiot. You think that anyone who criticises something else but doesn't call for someone else's head is secretly a supporter.

So, out_of_the_asscrack... no, wait a minute. We all already know you have a big hard-on for the RIAA so you don't bother with the facade of criticising them.
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Anonymous Coward, 2 Jan 2013 @ 7:02pm

Re: Countersue the scanner manufacturer.
That's just what BlueWave did according to the ArsTechnica article. The suit was dropped down a rabbit hole shortly after. You're right, they don't want those companies' attention nor legal artillery.
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That One Guy (profile), 2 Jan 2013 @ 7:26pm

Re:
They still are, but only if you don't have a law degree.

Get a law degree, and change the words you use('Person X committed fraud' becomes 'mistakes were made', while 'extortion' becomes 'settlement letter') though, and suddenly not only will the 'justice' system look the other way, it'll even help out.
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Anonymous Coward, 3 Jan 2013 @ 5:30am

Well I have to say all these patent trolls have really got the art of selling low to many people over selling high to a few down. Now if only the music industry would learn that....
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Anonymous Coward, 3 Jan 2013 @ 5:41am

I would be nice if our "justice system" worked for the betterment of society rather than the complete opposite.
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Dirkmaster (profile), 3 Jan 2013 @ 7:14am

Re: Re:
And for testing drugs, and cosmetics!

Why hurt perfectly innnocent animals when there are lawyers available?
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Anonymous Coward, 3 Jan 2013 @ 8:10am

Re: Re: The sheer, bald audacity is dazzling.
I said what I meant.
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Miff (profile), 4 Jan 2013 @ 6:05am

A little marketing can help this.
Xerox or HP or whoever makes these scanners can include in the device's license "this license includes the right to use all patented technology within the device" or similar. Then they can market their device as patent-protected, the legal theroy being that the company does have a patent license and if they say it's invalid they should take it up with the licenser, that is, Xerox or HP or whoever.

Then again this problem can also be solved if the statuatory limits for losing a patent lawsuit were raised.
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Anonymous Coward, 3 Mar 2013 @ 6:36pm

This is ridiculous. Just received notice from GosNel that I should settle with them for 1,200 per employee. The Feds and big companies need to get involved and shut these guys down for good. The best way to make that happen is to send out this same notice to every significant other of a congressman and congresswoman, fortune 500 executive, and the department heads of every federal agency. I guarantee this type of scam will be shut down once it starts impacting the right people, which is why they only pray on small business owners.
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Anonymous Coward, 3 Mar 2013 @ 6:38pm

Re:
Anonymous help us out please. This is the kind of corporate greed and social injustice that is killing this world.
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DC Lawyer, 11 Apr 2013 @ 6:37pm

Anonymous Coward, what are you going to do re. the demand? Presumably not pay it, but are you intending to respond?
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Sam Thompson, 12 Apr 2013 @ 9:58am

Got notice from BriPol, LLC
My notice is from "BrilPol, LLC" a company that JUST registered in Deleware using Cheap Legal Services to register their company 8 months ago.... HAHA. Can't even use a REAL attorney to register their corporation. Wonder how they will handle a REAL lawsuit when we file one against them?
The letter we received is not the exact same as the one posted in the subject above but even more simple checklist where someone is trying to extort moeny out of us for the "privilege of using a scanning service". Scary how people are trolling for money in today's broken patent system. I'm going to give mine to my attorney and let him fire away at them.
See if they want to fight. I got money to burn. Wonder if they do?
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Steevo (profile), 12 Apr 2013 @ 10:12am

Send a demand letter to your scanner vendor.
Sam,

You are using HP, Fujitsu, Kofax, some company like that's software, right?

Just send a demand letter to your scanner vendor, let them defend you. It's their fault, they wrote the allegedly infringing software. You didn't, they did.

They provided the software to you. Any infringing is their fault.
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Jual Fotocopy, 25 Apr 2013 @ 7:41am

Jual Fotocopy
Bro,,do you have info new promo at Xerox in asia?because i have supplier product copy,scan,etc in jakarta..thnks.
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Sheogorath (profile), 24 May 2013 @ 5:10am

I got a licence
I have a scanner in my home, so I contacted this company and entered into negotiations with them, only to have to pay the full $1000. So I sent them �664 in Scottish pound notes, each one carefully wiped on my dog's butt before the cash went into the envelope!
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Business Law, 6 Oct 2013 @ 9:36pm

It is disappointing that the patent system is so archaic that this type of deception can go on costing legitimate businesses time and money.
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