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

from the shakedown dept

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.

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