Yes, we’re a tease. The Bureau Director and Commissioners do not have cameos in next month’s final installment of the Hobbit (and no, this is not strategically placed native advertising #notanad). The Commission has taken a starring role in battling trolls of a much more human sort.
The agency last week announced a settlement with several “patent assertion entities” (which some lovingly call trolls), including a Texas-based law firm. The particular patent at issue here is related to network computer scanning technology and the trolls sent letters to thousands of small businesses asserting that they “likely” were using infringing technology and offering to negotiate an appropriate license if needed. Now some have suggested that asserting a likely patent violation with little or no evidence in support of the assertion itself violates Section 5 (much as it might violate Rule 11 if done in court.) However, the FTC chose not to go down that path. (Although an earlier settlement with the NY AG’s office included a provision addressing this issue.) Instead the agency focused on two other statements in the letters.
The initial letter, which kindly offered to negotiate a license (for up to $1,200/employee) helpfully noted that “many companies have responded [positively].” According to the FTC, however, “many” was actually zero as no one had responded positively to the offer at the time the first 7,300 letters were sent. Small businesses who didn’t immediately embrace the licensing offer received subsequent letters which asked less nicely. These included a letter from a law firm that attached a draft complaint which they said their client would be “forced to file” if a positive response was not forthcoming within two weeks. According to the FTC, more than 4,800 small businesses received such a letter and no lawsuit was filed against any of the recipients who failed to respond. Therefore, according to the FTC, this statement also violated Section 5.
Assuming you’ve checked in the mirror and aren’t developing troll-like characteristics, should you care about any of this? Perhaps. Outside of the “patent assertion” arena, how many companies have sent “cease and desist” letters concerning a rival’s allegedly false or misleading advertising? While counsel no doubt often cautions not to make idle threats of litigation, surely some of these letters threaten litigation if a favorable response is not received. How strong [and idle] must that threat be before a Section 5 line is crossed? In this case the letter stated that the client would “be forced” to file. Is that the same as saying that they “will file?” The proposed consent order also makes it unlawful to falsely state that a lawsuit will be filed “imminently” or within a “specified period of time.” Even if a client does intend to file a lawsuit they might not want to threaten to file it within “30 days” unless they are actually prepared to do so within that time frame.
Of course, all of this may have been exacerbated by the fact that the threat was made not just once, or dozens or even hundreds of times but rather thousands of times without ever being carried out. Perhaps like the little boy of Mother Goose fame, you can cry wolf once or twice without any real consequence. Even so, the next time that draft cease and desist letter crosses your desk you might want to give it a closer look and consider the story of the troll and the five FTC Commissioners gruff.