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The Printing Industry and Patent Trolls – An Update on the CTP and HQPI Patent Infringement Litigation Cases and their Negative Impact on Industry’s Companies

At a time when the printing industry is searching for new growth and development opportunities, it now faces new obstacles: patent trolls, the epitome of greed, thoughtlessness, and unethical behavior impacting the survival, growth, and development of printing and related companies.

By Harvey R. Levenson, Ph.D.
Published: March 8, 2016

Author's note: This article was not sanctioned or funded by any university, private or public company. It is meant to educate and inform on a matter that is negatively impacting the growth, development, and survival of companies in the printing and related industries, Original Equipment Manufacturers (OEMs), and equipment distributors.

At a time when the printing industry is searching for new growth and development opportunities, it now faces new obstacles: patent trolls, the epitome of greed, thoughtlessness, and unethical behavior impacting the survival, growth, and development of printing and related companies. 

What is a Patent Troll?

A patent troll is a company or person that purchases a patent and then sues another company claiming that the use of one of its products infringes on the purchased patent.

Trolls attempt to enforce patent rights against alleged infringers far beyond the patent's actual value or contribution to the technology or the industry that the patent represents. Patent trolls typically do not manufacture products or provide services based upon the patents in question. They use patents as “legal weapons,” instead of actually creating any new products or coming up with new ideas to improve business, commerce, or society. Trolls are in the business of threatening and creating litigation.

Further, trolls often buy-up patents cheaply from companies that are looking to monetize patents that have little or no value, or should have not been granted to begin with, because of Prior Art demonstrating that what the patents teach was obvious prior to the time of application for the patent. These patents are subject to an invalidity contention and termination by the United States Patent & Trademark Office (USPTO) when alleged infringers contest the trolls. They are typically very broad, covering generic or well-known types of applications that should never have been patented to begin with.

In possession of these broad and vague patents, the troll then sends out intimidating letters to those they argue infringe on their patents. It is a scare tactic that preys on innocent companies that are merely providing a service needed by society. These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars. Many who receive infringement letters will choose to pay the licensing-fee out of fear, and because patent litigation is extremely expensive and can involve lengthy and time-consuming court deliberations. 

So what is the troll issue in the printing industry in the United States?

Printing Industries of America has been attempting to bring the patent troll issue to the forefront so the printing industry understands what it is facing today and will likely face on an increasing basis in the future unless Congress does something to change the situation.

On its website, Printing Industries of America has established a Patent Listserv for printers seeking advice. In an article entitled, “Patents Infringements Actions in the Printing Industry,” Printing Industries of America wrote, “Printing Industries of America will provide industry firms, especially our members, with current information on infringement accusations. If you have been similarly accused, or know of other actions not listed here, please alert Jim Workman at jworkman@printing.org. You can also participate in our Patent Listserv and seek advice and share information with other printers that have been targeted by trolls.” 

In a December 15, 2015 article, Adam Dewitz at WhatTheyThink.com wrote

“A company called High Quality Printing Inventions, LLC, is using a patent initially granted to Moore (now R.R. Donnelley) to file patent infringement lawsuits in the U.S. District Courts in a litigation campaign against several printing companies using common web-to-print functionality.”

I recently contacted several present defendants and those who were already sued and opted to settle out of fear and intimidation to find out the tactics being used in the litigation campaign in the current batch of patent trolling cases. I focused on two highly visible collections of cases involving patents purchased by two shell companies: CTP Innovations (CTP) and High Quality Printing Innovations (HQPI). A shell company is a business entity having no employees or contact information, only a referral to an attorney, but owned by an unnamed parent company.

Due to the sensitive nature of the information requested, and agreements that have been reached in some cases, anonymity was promised. Some companies declined to participate out of fear of reprisal unless anonymity was assured. Others were fearful of providing specific responses to some of the questions due to confidentiality promises made when “deals” were given by the trolls.

How the CTP and HQPI Patent Trolls Have Impacted Specific Companies in the Printing Industry—What Impacted Companies Have To Say

Here are some examples of the havoc that these patent trolls have caused in the printing industry. Such disruption is not only to printing companies of all sizes, but to Original Equipment Manufacturers (OEMs) and equipment distributors as well.

One company officer said that when informing the OEM about being sued, he was told that the patents in question:

“…could not stand since it’s targeting [a] very broad application of what software and web technologies can do for [the] print and publication field.” He said, “…because they now have to defend themselves, they are dedicating resources that are better served for day-to-day operations and for the advancement of the business. As such, this is a waste of resources compromising the ongoing success of the company…We are halting all investments that we believe may be included in future litigation until we come up with a plan to protect our interest or are satisfied with [the] resolution of this case and its future impact.”

He went onto say, “Unfortunately, patents are being misused and the task of correcting the system that enabled the deterioration of innovation and consumer choices is not an easy one but we must start somewhere.”

“We believe this patent lawsuit to be frivolous, and the abuse of our legal system by patent trolls hurts consumers. This along with other frivolous suits stifle competition, hurt consumers, and bully innovative companies.”

When asked if he had any idea who was behind the shell company and benefiting financially, he identified RR Donnelley as the “affiliate.” However, RR Donnelley claims that the patents in question were previously sold, and the company has no ownership interest in the patents and receives no licensing payments. RR Donnelley’s more detailed response follows.

The officer of another company wrote that the alleged patent infringement lawsuit served on them said that they are in violation of numerous patents, and it went on to name them one by one. The company principal went on to say, “Essentially, we were being sued for a practice most every printer in the industry utilizes.”

His company was asked to pay a license fee in excess of a six-figure amount.

In response to a question on the impact on the company, the company principal noted,

“First, it’s been financially draining and secondly a distraction to running a business on a daily basis. It has affected the morale of the company in an adverse way… Patent trolls are greed mongers who use the tactics of fear and ambiguity of certain patents to intimidate small companies to settle upfront and [the trolls] use these proceeds to continue that pattern of behavior.” 

Yet, a letter from another company noted, “If you are a printer then you are highly likely to be sued for $100k to $300k soon,” referring specifically to RR Donnelley as the accuser working through a patent troll, CTP Innovations. The letter continued, “They are suing the printers first… RR Donnelley is now going after the printers’ vendors... I have never felt such injustice in my life in going through the process that RR Donnelley has put me through.”  Again, the perception was that RR Donnelley, as the previous owner of the patents, is responsible for the infringement lawsuits being imposed on printing companies. As will be noted later, RR Donnelley explains this misperception.

I received a phone call from a young lady running a small design studio with her husband. She was nearly in tears with fright after receiving an intimidating letter threating a lawsuit if a licensing fee for a small piece of equipment and its application, commonly used by graphic artists, is not paid.

The scenario of patent troll intimidation is being repeated across the industry. When exploring attorney assistance in these matters, the companies threatened or sued are learning that attorney fees, often starting at approximately $250,000, can be even greater than the license fees being requested. Hence, they are “between a rock and a hard place” and some have paid the trolls out of intimidation and fear.

In exploring whom these troll “shell” companies are, most of the accused allegedly infringing companies did not know because there are no individuals named or contact information given such as street addresses, phone numbers, etc., only contact information for the attorneys representing the trolls. However, the officers of two of the companies sued suspected that they were set-up by the RR Donnelley Company, as a means for collecting license fees from printers, equipment manufacturers and distributors, and from related companies.

My impression was that RR Donnelley had sold these patents, certainly a right that they had, and had relinquished any financial interests in them. However, in digging deeper into Corporate Disclosure Statements as part of public documents filed with various United States District Courts, the RR Donnelley name did appear as a company “…having financial interests in the outcome of [these cases.]”

The following is one example (Click image for larger version).

 
   

 

This was a surprising finding, considering that RR Donnelley, as one of the largest commercial printing companies in the world, was perceived by the companies being threatened or sued to be operating as a troll and exploiting resources from companies within its own industry through fear and intimidation tactics.

Recognizing that RR Donnelley is a long-standing highly respected company within the printing industry, and as an advocate for the industry, I contacted the company for an explanation. This provided RR Donnelley the opportunity to explain any misunderstandings, if there were any, regarding the company’s ownership of the patents and financial interests in them.

RR Donnelley’s Response

In a response to a letter requesting clarification of the patents sold to CTV and HQPI, RR Donnelley provided the following authorized statement.

“RR Donnelley would like to provide feedback…to clarify some apparent misunderstandings regarding the three HQPI and CTP patents that you reference in your letter (the ‘Patents’).”

1.  RR Donnelley ("RRD") no longer has any ownership interest in the Patents.

2.  RRD has no ownership interest in the plaintiffs that are asserting the Patents.

3.  As RRD no longer owns the Patents, and has no ownership interest in the plaintiffs, RRD has no ability to control the assertion of the Patents.

4.  RRD has no financial interest in the HQPI patent. We are owed compensation from the purchaser of the CTP patents. We believe this is why RRD has been identified in certain pleadings as having a financial interest. 

5.  RRD retained a license to use all of these Patents. All work that RRD performs for its customers is licensed under these Patents. Similarly, any work that a vendor performs for RRD is likewise licensed under these Patents. 

The companies impacted by the lawsuits imposed by the patent trolls alleging infringement feel torment, fear, and intimidation. Many have never been faced with lawsuits and are inexperienced in knowing how to deal with the matter. Most cannot afford to hire legal counsel and some are small companies attempting to provide a reasonable living for their employees. The sense of many defendants is that if there is valid infringement, it is the original equipment manufacturers (OEMs) that should be held liable, not those to whom the equipment was sold. At best, the three patents are marginal because Prior Art likely exists that was not presented to the US Patent & Trademark Office (USPTO) examiners at the time of patent application.

With regard to the RR Donnelley allegations, RR Donnelley’s response explains a lot, and particularly why the RR Donnelley name is included under “financial interests” in the Court certificates. It is because the purchasers of the patents still owe RR Donnelley money for the purchases, not for any license fee received. I was always under the impression that RR Donnelley sold all of the patents outright. This confirms my impression. I was assured that RR Donnelley is receiving no money from license fees.

Recommendation

Printing and related companies sued by patent trolls should not settle by paying the fees requested and should not enter into a single-company litigation that can cost even more than a settlement. Giving in to patent troll license fees or other demands will exacerbate the problem and encourage additional intimidating and threatening lawsuits in an attempt to extort funds from companies doing honest and legal business, and working hard to survive and grow, and provide employment opportunities for skilled staff members.

I am proposing that a solution is bringing together all of the companies for which a lawsuit has been filed by patent trolls, and to work as a unit in bringing the matter of alleged patent infringements before the US Patent & Trademark Office (USPTO). It is likely, for example, that the patents in question referenced in this article can be invalidated via Prior Art.

Dr. Harvey R. Levenson is Professor Emeritus and former Department Head of Graphic Communication at Cal Poly State University in San Luis Obispo, California. He is a frequent Expert Witness specializing in communication, intellectual property, media, printing, and technology

 

Discussion

By Gordon Pritchard on Mar 08, 2016

So,mspecifically wgat should an individual printshop owner do today if they receive a patent violation claim for compensation?

 

By Joe Polanco on Mar 08, 2016

Harvey,

Excellent article in summarizing a complex, challenging, and to many, a very frustrating topic. With our industry being a large and fragmented one, we have a target-rich environment for these firms.

As you have stated in numerous instances, a joint effort may be the best approach, but it's also not as simple and/or inexpensive as some might desire.

Regardless, you have raised the issue, and more importantly clarified the RRD questions which had many in the industry concerned.

As to the question posted by Gordan -- if one finds themselves in the targeting sights of a "Troll," contact an attorney who is KNOWLEDGEABLE regarding intellectual property. Each case is different and requires an attorney to assist. Harvey is a great resource, but no offense to him, an attorney is the place to start.

Joe Polanco

 

By HARVEY LEVENSON on Mar 09, 2016

I’ve received a number of requests asking whom to go to if a company is sued or threatened by a patent troll.

One law firm that has taken a leadership position in assisting the printing industry with such matters is Jackson Walker in Dallas, Texas. I recommend contacting Nate St. Clair, a Partner. Nate can be reached at nstclair@jw.com or (214) 953-5948.

 

By HARVEY LEVENSON on Mar 12, 2016

I received the following letter from a one of the companies sued in either the CTP or HQPI series of cases. I am posting it on behalf of the sender who asked to be anonymous out of fear of retribution.

------------------------------------------

Harvey,

I just finished reading your article on the patent troll issue. It is very well written and comprehensive.

RRD’s explanation does not quite wash. HQPI disclosed in filings that both their hired law firm and RRD retain a financial interest in the litigation. In the case of the law firm, that certainly means a contingency fee. I believe it means the same for RRD, which is why they had to be listed as retaining a financial interest in the litigation. If they were merely owed a fixed amount for licensing the patents, they would not have a financial interest in the litigation, because they would be owed that amount regardless of outcomes.

We were approached by a troll a few years ago about one of our patents, which broadly covers e-commerce sales of commercial printing. We got it for defensive purposes, and would never assert it against a fellow printer. Nonetheless, we asked them to provide their draft agreement. Under the agreement, we would have assigned ownership to them, retained a license to use ourselves, and it gave them the right to assert the patents. They would have paid us nothing up front, but we would have received a cut of any settlements they extracted or were awarded at trial. It is likely this is exactly what RRD signed, which is why they retain a financial interest that had to be disclosed in court filings. And really, do you think RRD would assign a patent to a brand new shell company without receiving a cash payment, if the sale price were fixed? Patents are like domain names, the money goes into escrow, the transfer occurs, and then the funds are released from escrow to the seller. Once the USPTO has recorded a new owner of a patent, ownership can only be transferred by the listed owner.

RRD’s careful wording, “We are owed compensation from the purchaser of the CTP patents,” leaves wiggle room. Try asking them what is the amount of compensation owed, is it fixed, and why would they transfer a valuable IP asset to a brand new shell company with no credit history, and not get cash payment up front?

I think they are being deceitful. Ask them to prove that they have no financial interest by showing you the contract between them and the troll.

Thanks you for your work exposing this issue.

 

By Gordon Pritchard on Mar 12, 2016

@ Joe Polanco - you say to contact a lawyer, but the article says that fees often start at $250K which is beyond the range many printshops can afford.

Below, as an example, is a redacted and edited for brevity troll extortion letter. Note the vagueness ("likely" "reason to believe"etc). - IMHO there's a lot of fishing going on that uses intimidating words to get the info they don't actually have.They're getting you to self incriminate by providing them the information they don't have. In fact, the way it's worded seems to allow you to ignore the letter if you don't think you're infringing! (You have to answer yes to ALL the questions in any one of the 4 choices presented - if you can't answer YES to ALL the questions in any one of the choices then you can probably safely ignore the letter.

"April 19, 2013 FOR IMMEDIATE ATTENTION

Re: Notice of Likely Infringement of U.S. Patent Nos. 6,611,349 and 6,738,155 Our Reference No: xxxxxxxxx-xxxxxx

To Whom It May Concern:

Our firm represents CTP Innovations LLC ("CTP"). You are receiving this letter because CTP has reason to believe that you are using its patented technology without a license to do so. The purpose of this letter is open a conversation with you regarding your obtaining a license and avoiding the necessity of CTP's filing a lawsuit in federal court for patent infringement against XXXXXXXXX"
This letter describes (1) the subject matter of the two patents-at-issue; (2) how you likely have an infringing system; (3) why you need a license; and (4) the terms of a proposed license to resolve this matter in a non-adversarial manner as soon as possible. Please note that this is not an advertisement or other material that should be discarded. We ask that you read this letter in its entirety.

We have directed this letter to you specifically because publicly available information suggests that you are the correct person at your company with whom to open the conversation. If this is incorrect, we would greatly appreciate your directing this letter to the appropriate person within your organization and/or providing that person's name and contact information to us.

The two relevant patents are as follows, and you can review these patents at www.google.com/patents by entering the numbers: (a) U.S. Patent No. 6,611,349 ("System and Method of Generating a Printing Plate File in Real Time Using a Communication Network") and (b) U.S. Patent No. 6,738,155 ("System and Method of Providing Publishing and Printing Services Via a Communications Network").

One aspect that these patents relate to is networked computer-to-plate ("CTP") workflow technology. Our initial investigation indicates that your company generates and uses CTP files in a networked environment. To help you confirm that you come within the scope of the aforementioned patents, below are a brief set of fact checklists. If you answer "YES" to all of the boxes in anyone of Choice A through D, it is highly likely that you infringe one or both of the patents and you should promptly contact us.

CHOICE A
- Have you stored via a network high resolution documents or files?
- Have you generated lower resolution files corresponding to the high resolution files?
- Have you provided the lower resolution files over a network for designing a page
layout?
- Have you generated a plate-ready file from the page layout?
- Have you provided the plate-ready file to a networked printer?

CHOICE B
- Have you provided access (e.g., send or make available over a network) to images over a network and those images are used to design a page layout?
- Have you linked the images in creating a thin Postscript file from the page layout?
- Have you replaced the low resolution images with high resolution images in the Postscript file?
- Have you created a PDP file from the Postscript file?
- Have you converted the PDP file to a plate-ready format?

CHOICE C
- Have you stored high resolution files on a computer server?
- Have you generated low resolution files that correspond to the high resolution files?
- Have you provided (e.g., send or make available via access over a network) the low resolution files for designing a page layout?
- Have you generated PDF files from the page layout?
- Have you provided (e.g., send or make available via access over a network) the PDF file?
- Have you provided a plate-ready file to a networked printer?

CHOICE D
- Have you stored files such as images, text, or data on a computer server?
- Have you provided (e.g., send or make available via access over a network) these files over a network for designing a page layout?
- Have you generated PDF files from the page layout?
- Have you generated a plate-ready file from the PDF file?
- Have you provided the plate-ready file to a networked printer?

Please note that Choices A through D above do not comprise an exhaustive list of infringing workflows, and it may be determined that you nevertheless require a license even if your workflow does not exactly fit within Choices A through D.

Most businesses, upon learning that they are infringing another's patent rights, desire to operate lawfully and enter into a license promptly. We anticipate that you will respond likewise. As such, we are willing to offer a fully paid-up, one-time license for a cost of a total of $75,000 for both patents if we are able to reach an agreement in the next two weeks and a license of $95,000 if we are able to reach an agreement in the next three weeks. This license would include past, present, and future uses of the technology.

Recipients of a letter of this nature commonly ask why we are not contacting the manufacturers involved in the CTP process. The answer is that CTP Innovations' patent rights most directly address a printer's workflows. In this particular context, we expect if you review your agreements with a manufacturer, you will find that the manufacturer does not owe you any indemnification duty. Even if it does exist, the indemnification obligation does not shift any case against you; instead, it creates a separate matter between you and the manufacturer to resolve. It will not stay any legal action against you.

We invite you to consult with a patent attorney regarding this matter. There can be serious consequences for patent infringement. Infringers who continue to infringe despite having an objectively high risk of infringement of a valid patent can be liable for triple the actual damages and the patent owner's litigation costs, including all attorney fees and expenses.

Please contact us within two weeks of this letter's date, so we can agree upon a license, if one is necessary. Please feel free to contact by email at xxxxxxxxxx or by telephone at to discuss further.

We look forward to resolving this matter promptly with you.

Sincerely,
xxxxxxxx"

 

By Gordon Pritchard on Mar 12, 2016

Following up on the extortion letter I posted. The letter refers to two patents:

US patent 6611349 B1 Filing date 30 Jul 1999 published 26 Aug 2003
System and method of generating a printing plate file in real time using a communication network

US patent 6738155 B1 Filing date 30 Jul 1999 published 18 May 2004
System and method of providing publishing and printing services via a communications network

Note the filing dates. IMHO CtP/workflow vendors were doing the things covered by those patents years before those patents were filed let alone published. I doubt those patents have any validity - but I'm not a patent lawyer.

I think an organization, like the PIA, could afford to hire the lawyers needed to invalidate those two patents.

 

By HARVEY LEVENSON on Mar 12, 2016

I recommend that anyone being impacted by this matter contact Jackson Walker in Dallas, Texas and specifically attorney Nate St. Clair, a Partner. Nate can be reached at nstclair@jw.com or (214) 953-5948. I am not suggesting entering into a single party litigation. This would be quite expensive. Mr. St. Clair is working to mobilize a large number of impacted companies to pursue the matter as a team, thereby greatly reducing the cost for any one company. Mr. St. Clair is highly knowledgeable about the matter and the patents in question. As noted in my article, the ideal situation would be pursuing invalidation of the patents via existing Prior Art.

 

By Gordon Pritchard on Mar 12, 2016

One last thing...the extortion letter offers good advice for avoiding patent trolls and litigation. They write:

"Recipients of a letter of this nature commonly ask why we are not contacting the manufacturers involved in the CTP process. The answer is that CTP Innovations' patent rights most directly address a printer's workflows. In this particular context, we expect if you review your agreements with a manufacturer, you will find that the manufacturer does not owe you any indemnification duty. Even if it does exist, the indemnification obligation does not shift any case against you; instead, it creates a separate matter between you and the manufacturer to resolve. It will not stay any legal action against you."

I suggest that you speak with a lawyer and have them write up a contract that you and your vendor signs that covers that issue, Basically, that if there are any patent issues/claims related to the purchase or use of their software, hardware, services, etc. that the vendor, not you, will be responsible for any claims or legal actions against you. You may be able to do so retroactively on purchases already made.

Again I am not a lawyer. Just P'd Off.

 

By William Ray on Mar 14, 2016

All,

There is plenty of prior art to quell this problem. Years ago I wrote a series of articles for High Volume Printing -- a very public domain publication at the time -- that describe a workflow that we were enveloping for a customer. Directly going to plate via a network from a data store was clearly defined in that article series. Indeed, imposing a form on the fly with metadata from a data store via network was clearly defined.

I have copies of the articles somewhere and would be glad to supply then if anyone needs them.

 

By William Ray on Mar 14, 2016

BTW, these articles are prior art.

 

By HARVEY LEVENSON on Mar 14, 2016

Hello Bill,

I would most appreciate receiving the Prior Art items that you referred to. Please send to my e-mail address: hrlevenson@thegrid.net

I hope that all is well with you.

Harvey

 

By William Ray on Mar 15, 2016

Will do. I need to find them so it will be tomorrow sometime.

Things here in printed electronics land are going well.

Best.

 

By Kevin Keane on Mar 15, 2016

Hello

Patent law is not for the weak of heart. It's technical as all get out, and is a massively effective sleeping aid. PrintCo folks should not go it alone here, I hire patent firms for my clients patent needs, it's simply not my bailiwick. Having said that, I have told Dr Levenson privately that I am aware of a patent filed in 1997 that certainly constitutes prior art. I will reach out to Harvey and Nate St. Clair with the particulars.

 

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