Vermont’s lawsuit against alleged patent troll can stay in Vermont state court.

A federal appeals court has just affirmed Vermont federal Judge Sessions’ second decision to “remand” the case against MPHJ – the alleged “patent troll” – back to Vermont state court.

Procedural History Of The Case

Vermont Attorney General William Sorrell originally filed this lawsuit against alleged “patent troll” MPHJ Technology Investments, LLC in Vermont state court claiming that MPHJ’s bad faith sending of numerous patent infringement letters to Vermont businesses and non-profit organizations violated Vermont consumer protection law. (The AG’s Complaint was not based on Vermont’s new Bad Faith Assertions of Patent Infringement Act (i.e., the “anti-patent troll” law), as that law had not yet been passed when the AG filed his Complaint). MPHJ “removed” the case to federal court arguing that the case was really about its federal patent rights and therefore belonged in the federal court system. The AG moved to “remand” the case back to state court and federal Judge Sessions did so, agreeing with the AG that the case was not fundamentally about MPHJ’s patent rights but rather about its behavior within Vermont. MPHJ appealed that remand decision, and lost. The federal appeals court agreed with the AG and with Judge Sessions that the case did not implicate patent law. Therefore, the case was back in state court as originally filed. The AG then amended its Complaint against MPHJ. Thereupon MPHJ again removed the case to federal court. MPHJ argued that the AG’s amendment invoked the new anti-troll law (even though the amended Complaint made no mention of the law), and that that law is unconstitutional, and therefore provided a basis for removing the case to federal court. The AG responded by again moving to remand the case, stating emphatically that the amended Complaint did not implicate the anti-troll law and that the AG was not suing MPHJ under that law, but only under pre-existing Vermont consumer protection law. Again Judge Sessions remanded, agreeing with the AG that the amended Complaint did not invoke the anti-troll law. Again MPHJ appealed that remand order. And, again, the same federal appeals court has now shot down MPHJ’s (second) appeal – agreeing with the AG and with Judge Sessions that the AG’s case against MPHJ is not based on the anti-troll law and has nothing to do with federal patent rights.

But What About Vermont’s Anti-Troll Law?

What is interesting about this decision – and about this entire case – is that it is about the legality or illegality of a patent-holders alleged trolling activities, but it is NOT about Vermont’s new anti-troll law. MPHJ’s second attempted “removal” of this case to federal court was an attempt to make this case about the constitutionality of the anti-troll law. But that attempt did not work. This decision does not decide whether Vt.’s anti-troll law is or is not constitutional, nor whether it does or does not interfere with a party’s patent rights. The whole point of this jurisdictional decision is that that issue was not before the court, because, in turn, the AG is not suing under that law. Thus, this particular case will not involve, and will not test, Vermont’s first-in-the-nation state anti-troll statute.

So one might well ask: why is Vermont’s Attorney General so determined not to use the anti-troll law against an alleged patent troll? Wouldn’t a state attorney general want to use his latest and greatest weapon to go after an alleged patent troll, and rise up, so to speak, against a challenge to the constitutionality of that law? I assume the answer is, essentially, because the conduct by MPHJ that the AG is suing over in this case took place before the anti-troll law went into effect, and the lawsuit was filed before the law went into effect. Trying to apply that law retroactively against MPHJ might be problematic. If MPHJ were to be found liable under the new anti-troll law, it could argue on appeal that that law shouldn’t have been applied to them in the first place because it wasn’t in effect at the time of their activities.

So What Now?

So what now? After two years of procedural and jurisdictional battles that had nothing to do with the merits of the consumer protection case (at least in the view of the AG and the federal courts), will the case now proceed in state court to litigation on the merits?