First-ever enforcement of the AG-request Patent Troll Prevention Act
OLYMPIA — Attorney General Bob Ferguson filed a lawsuit against Landmark Technology A for its predatory “patent troll” practices that harm small businesses. Landmark unlawfully sent threatening letters in bad faith to over a thousand small businesses nationwide. In the letters, it demanded $65,000 in patent licensing fees. When five Washington small businesses refused to pay, Landmark sued them. The businesses settled to avoid the expense of a lawsuit.
Ferguson’s lawsuit, filed in King County Superior Court, asserts the company violated the Patent Troll Protection Act, which prohibits bad faith assertions of patent infringement. Ferguson requested this legislation in 2015, sponsored by Sen. David Frockt, D-Seattle, and Rep. Laurie Jinkins, D-Tacoma, to crack down on “patent trolls” who harass and threaten small businesses with patent infringement claims.
This lawsuit is the first enforcement of this law. The Attorney General’s Office Patent Troll Working Group learned about this scheme from one of the targeted businesses.
Landmark does not make products. Its entire business model consists of demanding licensing fees from other companies. From January 2019 to July 2020, Landmark sent identical form demand letters to 1,176 small businesses nationwide, claiming the business infringed on Landmark’s alleged patent rights. In those letters, Landmark threatened to sue if the business did not pay $65,000 to license the patent.
In the letters, Landmark claims it has rights to a vaguely worded patent related to loan processing and credit reporting. In 2014, the United States Patent and Trademark Office deemed this patent likely to be declared invalid. Nonetheless, the company broadly and aggressively misuses the patent claims, targeting virtually any small business with a website, seemingly at random. Landmark claims that common, near-ubiquitous business webpages infringe on its patent rights — such as small business home pages, customer login pages, new customer registration and product-ordering pages.
In short, Landmark misuses a legally questionable patent, falsely claims it has patent rights on web features that virtually every business uses, and uses those claims to demand tens of thousands of dollars from small businesses.
Landmark targets all types of small businesses. Landmark’s small business targets typically cannot afford in-house attorneys or law firms on retainer. In just one month, Landmark sent demand letters to businesses in the following industries: apparel, appliances, automotive supplies, building supplies, candy, consumer electronics, department stores, event ticketing, fabrics, florists, food service, furniture, grocery, hardware, health & beauty, kitchen products, manufactured housing, mattresses, paper, pet products, petroleum, printers, sales & marketing, seeds, shoes and more.
Landmark sued multiple companies that refused to pay — including five Washington companies. Its infringement claims are highly unlikely to hold up in court, and Landmark could not succeed against all 1,176 businesses it targeted. Landmark frequently targets smaller businesses that cannot afford lengthy patent litigation. Four Washington companies sued by Landmark settled for $15,000 to $20,000 each to avoid hefty legal costs from litigation:
- A bottle maker in Seattle
- An electrical supplies company in Spokane
- A bakery in Seattle
- A bookseller in Seattle
Ferguson’s lawsuit asks the court to require Landmark to pay restitution on any costs the companies incurred from Landmark’s lawsuits and demand letters. Some Washington companies may have paid the $65,000 fee as demanded in Landmark’s letters. During the course of the lawsuit, the Attorney General’s Office will learn exactly how much the target companies paid.
“Landmark extorts small businesses, demanding payment for webpages that are essential for running a business,” Ferguson said. “It backs them into a corner — pay up now, or get buried in legal fees. I’m putting patent trolls on notice: Bully businesses with unreasonable patent assertions, and you’ll see us in court.”
Landmark’s demand letters
Landmark claims it has rights to a patent issued in 2006 for, as its demand letters put it, an “automated multimedia data processing network for processing business and financial transactions between entities from remote sites.” This patent, known as the ‘508 patent, expires in 2023.
The ‘508 patent relates specifically to online loan processing and credit reporting technologies, but Landmark’s letters demand license fees for ubiquitous business webpages, from customer logins to home pages. Landmark usually targets customer login pages, but has also demanded license fees for webpages containing privacy practices, shopping carts, products for sale and company home pages. This means any business with a web presence is a potential target for Landmark.
Landmark’s demand letters do not contain any factual allegations against specific company webpages. Rather, Landmark sends form letters, containing identical infringement allegations, to each company. Only the name of the target company and the URL of the allegedly infringing webpage changes from letter to letter.
The ‘508 patent itself is vaguely worded. In 2014, in a lawsuit contesting the ‘508 patent, the federal Patent and Trademark Office found that the primary claim of the patent “does not recite a technological feature that is novel and unobvious over the prior art, and is therefore not a technological invention.” However, that case settled out of court before the patent could be invalidated.
Even though the patent is not likely to survive under further legal scrutiny, Landmark has continued to assert the patent at a shocking rate, issuing an average of 24 demand letters per week — knowing that individual businesses lack the resources to combat its demands in court, and are likely to instead choose to pay the fee or settle.
Landmark Technology A’s business model is similar to an earlier, now-defunct company called Landmark Technology. Landmark Technology also sent demand letters and sued companies related to the ‘508 patent and other related patents. The new Landmark Technology A started in early 2019.
Landmark is a “patent-assertion entity” — a company that enforces patent rights against other businesses, rather than producing a product itself. Abusive patent assertion entities — also known as “patent trolls” — target smaller companies that cannot afford long-drawn-out litigation, and demand payment of licensing fees.
Patent trolls typically assert patents after the target companies have independently invented or begun using a technology allegedly covered by a patent. They frequently only do so after the technology has already become ubiquitous in the industry.
Although patent trolls rarely succeed on patent infringement claims in court, the vast majority of disputes end in settlements because patent litigation is costly and disruptive for small businesses. Patent trolls often offer to settle for amounts well below litigation costs to make settlement an obvious business decision for the companies. Economic studies have found that patent trolls are a burden on productive companies and stifle innovation, costing their targets billions of dollars a year.
The Patent Troll Prevention Act was enacted to stop predatory patent troll activity. Ferguson’s lawsuit asserts that Landmark’s predatory assertions of patent infringement violate both the Patent Troll Prevention Act and the Washington State Consumer Protection Act.
Ferguson’s lawsuit asks the court to legally bar Landmark from enforcing the ‘508 patent in bad faith, sending demand letters or filing patent infringement lawsuits. It also asks the court to require Landmark to pay civil penalties, attorney’s costs & fees and restitution to businesses. This restitution would include all the money it made from its unlawful scheme and all expenses the businesses incurred as a result of Landmark’s unlawful acts.
Assistant Attorney General Seann Colgan is leading the case for the Attorney General’s Office.
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.
Brionna Aho, Communications Director, (360) 753-2727, Brionna.email@example.com
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