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Joe Mullin - Jan 14, 2014 7:27 pm UTC

MPHJ Technology, the "patent troll" organization run by Texas lawyer Mac Rust, has cut a deal with the New York attorney general.

The deal, announced the day after Rust filed an audacious lawsuit against the Federal Trade Commission, will require Rust to limit the language he uses in his letters. The letters explain his position that any modern networked office that can scan documents to e-mail owes him $1,000 or more per employee.

The NY AG, Eric Schneiderman, has denounced MPHJ's tactics as "abusive," and the new settlement requires paybacks to any New York business who paid for a license. It will also, notably, allow MPHJ to continue sending licensing letters to New York businesses.

“So-called ‘patent trolls’ exploit loopholes in the patent system and have become a scourge on the business community,” said Schneiderman. "They drain critical resources from small and medium-sized businesses that would otherwise be available for reinvestment and job creation, which are sorely needed across New York... the guidelines established in today’s settlement will put an end to some of the most abusive tactics by placing the industry on notice that these deceptive practices will not be tolerated in New York.”

Attached as exhibits to the settlement deal are models of the kinds of new letters that Rust will be allowed to send out. The new letters are signed by MPHJ Technology and Mac Rust, not a gibberish six-letter acronym as before. They don't include any cash demand or drafted complaints like earlier letters sent out. And a new letter doesn't boast about a "positive response" received from other businesses, since almost none have purchased licenses to Rust's portfolio.

"If you do conclude that you have a system that infringes, we are prepared to offer a license," says the new light-touch "First Letter." "You may contact us in that instance to discuss that possibility."

The word "lawsuit" is nowhere to be found in the new letters.

"We would appreciate the courtesy of a response to that first letter," states the follow-up letter. "If we do not hear from you in a reasonable period of time from the date of this letter, we will assume that you do not intend to respond. Please note that in that event, the company reserves its rights under the US patent laws."

In a statement provided to Ars, an MPHJ spokesperson said the company can live with the New York rules.

"While MPHJ believes its attempts to enforce its patents have conformed with applicable law and believes it is better to have patent enforcement subject to the jurisdiction of the federal courts rather than individual states, it considers the guidelines proposed by the NY AG to be reasonable and believes this agreement is an acceptable resolution of the issue," stated MPHJ.

The settlement shows that Mac Rust bought the patents from another patent assertion company for one dollar in 2012. It isn't clear why the earlier owner, an operation called Project Paperless that centered on a Georgia law firm, was so eager to sell. The FTC complaint shows that one of the lawyers, Steven Hill, has continued to be involved in the licensing since the $1 sale.

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