A closer look at Attorney General Sean Reyes’ campaign donors

A closer look at Attorney General Sean Reyes’ campaign donors

Disclaimer: The views expressed in this post do not necessarily reflect the opinions of FortyFive Politics, its contributors, or anyone else associated with fortyfivepolitics.com.

I like Sean Reyes, I’ve voted for him twice. I hope nothing I write here is seen as an attack on Sean or an implication of corruption or pay-to-play.

Transparency for public officials is a good thing. Every elected official has conflicts of interest. As voters, it’s important that we understand these conflicts and keep a close eye on any actions related to them.

Sean Reyes took over as Utah Attorney General in December 2013, vowing to “restore integrity” to the office that had been rocked by scandal. Reyes has been praised for his efforts to clean up the office and get it back to a place where Utahns can have confidence in their attorney general again.

Part of the pay-to-play allegations against Reyes’ predecessors Mark Shurtleff and John Swallow were the hundreds of thousands of campaign donations from payday lending companies to each of their campaigns. While attorney general, Mark Shurtleff used his position to influence payday lending policy and protect the industry from government reform.

John Swallow’s heavy ties to payday lenders included working as a lobbyist and in-house council for payday lender Check City before joining the Attorney General’s office.

Given our past, Utahns would be wise to keep a close eye on anyone who fills the position of Utah Attorney General. A closer look at some of Sean Reyes’ campaign donations raises some questions.

Patent trolling

“A patent troll uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. Instead, trolls are in the business of litigation (or even just threatening litigation). Unfortunately, the Patent Office has a habit of issuing patents for ideas that are neither new nor revolutionary, and these patents can be very broad, covering everyday or commonsense types of computing – things that should never have been patented in the first place. Armed with these overbroad and vague patents, the troll will then send out threatening letters to those they argue infringe their patent(s).  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.” (Electronic Frontier Foundation)

For a more entertaining take on the problems of patent trolls, watch this clip from Last Week Tonight with John Oliver.

Patent trolling is not the same as legitimately protecting your intellectual property. If a company invents a technology and is granted a patent and they choose to go after another company that uses their technology without authorization, that is an entirely different thing. That is not what we’re talking about when we say patent trolling.

Etagz & Sean Reyes

etagz-patent

image from a patent owned by Etagz

Some have raised the question of whether or not Utah company Etagz is a an example of patent trolling as defined above. Etagz owns patents related to the attachment of digital media to products that are sold at the retail level. According to Etagz, this “can include a CD, DVD, CD-ROM, memory card, USB flash drive or other digital communication device attached to a product or other merchandise.” That means if you attach an instructional DVD to one of your retail products, then Etagz claims you are infringing on their patents and need to pay a licensing fee.

The patents are pretty broad in that they claim to cover any kind of “digital communication device” and there’s no specific way the media has to be attached to the product.

Attaching CD-ROMs to textbooks existed before Etagz filed their first patent in 1999. There were also companies that attached toys to video cassettes prior to 1999. And a multimedia manufacturer provided options for attaching CDs to packaging as early as 1998. So there is some question on whether Etagz were the first to come up or use the idea of attaching a “digital communication device” to a product.

“In 1999 Etagz had applied for patents, which today might not seem earth shattering, but at the time in 1999 they were pretty innovative and somewhat revolutionary,” said Reyes of the Etagz patents.

“People loved [the technology] so much…larger companies started to say…we want to still continue to do this, but we just don’t want to pay you anymore.”

“Leading up to me coming over, the company was really suffering.”

In 2011, in an effort to strengthen their ability to litigate these supposed patent infringements, Etagz hired 39-year-old Sean Reyes. In the press release announcing the hire, Etagz touted Reyes as a “oft-rumored and likely candidate for Utah Attorney General in 2012.” Etagz CEO Isaac Jacobson, a major Reyes campaign donor, said in the press release, “We are in the midst of a very aggressive campaign to enforce our patent rights against a legion of infringers. Sean is the perfect person to lead our crucial litigation efforts.”

Also from the press release: “Joe Pia [another Reyes campaign donor], of the law firm Pia, Anderson, Dorius, Reynard & Moss, which has filed dozens of patent infringement cases on behalf of eTAGZ, states: ‘There is not a more highly regarded attorney than Sean that I know.’”

Reyes’ job was to litigate infringers who refused to pay the licensing fee.

“We never considered ourselves to be patent trolls,” said Reyes. “And 99% of the community that we dealt with thought we were the..they called us the Robin Hoods, the anti patent trolls.”

"We never considered ourselves to be patent trolls and 99% of the community that we dealt with thought we were the..they called us the Robin Hoods, the anti patent trolls."

Sean Reyes

One of the companies Etagz went after was Tom Teasers Custom Calls, a small business that produces hand-made turkey calls. Tom Walton, the owner of Tom Teasers said, “We promote turkey calls, and when we come out with a DVD that actually shows how to use the product, it is beneficial to someone who is new to turkey calls. It’s a bonus package for our customers.”

Attaching that instructional DVD to his product is the reason Etagz went after Tom’s company, claiming they had violated Etagz’ patents. Without the resources to fight a lawsuit, Tom and his business were forced to reach a settlement with Etagz in 2012.

“We tried to avoid litigation by being reasonable and saying, you know, you guys are already ambassadors of our technology, you’re using it,” Reyes said of the way Etagz operated their business. “Let us educate you on how much more money this could make. What if we expanded your use and we showed you other partnerships or other ways to use it. So this is what we’ve done for 12 years.”

In June 2012, as another example, TV Guide and Etagz reached a settlement after some litigation. In the press release announcing the settlement, Reyes is quoted saying, “While TV Guide has made a wise choice to settle, we will continue to litigate against Flambeau, Inc., (makers of toys such as the Duncan Yo-Yo), which is another defendant in this case.”

Flambeau, Inc. continued to fight the patent infringement lawsuit, and, shortly after Sean Reyes left Etagz when he was appointed to be Utah’s Attorney General, Flambeau was able to defeat Etagz in court when a judge ruled that Flambeau did not infringe on Etagz’ patents.

“We would rather go the distance in litigation then pay undeserved windfall to such parties. In short, we are unwilling to reward the extortionist demands of patent trolls.” said Flambeau President Jason Sauey in response to the ruling.

"In short, we are unwilling to reward the extortionist demands of patent trolls."

Jason Sauey, President at Flambeau, Inc.

Flambeau’s attorney Josephine Benkers said of the case, “We believed that the patents at issue did not embody anything that had not been done before and, therefore, that Flambeau was not liable for patent infringement. The Court agreed and invalidated the asserted claims.”

“When you’re in that space all it takes is one person who’s upset with you and they just start throwing out, ‘Patent troll! Patent troll! You guys are patent trolls.’ No. That’s just like saying every lawyer who deals with torts..[is] an ambulance chaser,” said Reyes when speaking about Etagz sometimes being called a patent troll.

Etagz appeal to a higher court was also denied and now Etagz appears to be on the decline. The company’s domain name, etagz.com, was allowed to expire and there hasn’t been any news related to the company since its appeal on the Flambeau lawsuit was denied in March of this year.

When asked if Etagz is still in business, Reyes said, “Yeah, I don’t know. As soon as the Governor put me in, I had strict sort of walls. I’ve spoken probably to my old partners maybe once or twice to see them at a, you know, mutual social event. I haven’t discussed their cases, their issues…I only read that Etagz got into some licensing agreement with Premier Pet.”

(The licensing agreement with Premier Pet came after Etagz filed a patent infringement lawsuit against Premier Pet Products in late 2012.)

Etagz and closely related companies have donated over $165,000 to the Sean Reyes campaign

Sean Reyes’ campaign for attorney general of Utah has received more than $150,000 from people and companies that profit from the kind of patent litigation we’re talking about. Receiving campaign donations is not necessarily a bad thing, but when an attorney general receives such a large amount of money from a single special interest, then it’s important to be aware of this potential conflict of interest and keep a close eye on the actions of the attorney general.

A big chunk of the campaign contributions for Reyes’ 2012 run for attorney general came from his boss at Etagz, Isaac Jacobson. Jacobson wrote checks to the Reyes campaign from himself and also through some of his businesses. $16,120 came from Jacobson himself. $20,000 came from Jacobson’s Accelerate Media LLC, $62,500 came from Etagz, $25,000 came from another Jacobson company, Infringer Task Force, $5,000 came from Jacobson’s SAGE, LLC, and an additional $7,000 from Jacobson company Secure American Gold Exchange, LLC. All in all, $135,620 came from Jacobson and his various businesses.

The Reyes campaign also received $32,300 from the law firm Pia, Anderson, Dorius, Raynard, & Moss (both directly from the firm and through the firm’s partners), which helped litigate some of the Etagz patent infringement lawsuits.

“I received campaign donations in 2012 from the guys that knew me best and trusted me the most when I was trying to run against millions of dollars that was coming in through super pacs many of which was unreported,” said Reyes of the donations. “I’m not at all ashamed of anything we did in terms of running and trying to enlist people. When you’re running…you usually don’t get tons of donations from people across the board, it’s friends and family that support you.”

Donor Description Amount
Etagz NPE that aggressively enforced their digital hang tag patents and employed Sean Reyes prior to his being appointed Attorney General $62,500
Isaac Jacobson CEO of Etagz $16,120
Accelerate Media, LLC Isaac Jacobson company. Sean Reyes was partner/general counsel. $20,000
Infringer Task Force, LP Isaac Jacobson company. $25,000
SAGE, LLC Isaac Jacobson company. $5,000
Secure American Gold Exchange, LLC Isaac Jacobson company. $7,000
Pia, Anderson, Dorius, Raynard, Moss Outside counsel for Etagz. $32,300
 Total $167,920

Patent troll legislation in Utah

Why does it matter that Utah’s attorney general has deep connections to a patent litigator like Etagz? Because this is an issue that directly relates to the attorney general’s office.

During the 2014 Utah legislative session, Representative Mike Mckell introduced a bill to help rein in patent trolls in the state. During the committee hearing, Rep. Mckell said he had consulted with the attorney general’s office and made some changes to the bill based on their recommendations.

The bill authorizes the attorney general’s office, in addition to the party who received the demand letter, to go after patent trolls that send unspecific demand letters.

“We were supportive of Mike’s bill.” Reyes said. “I was helping him negotiate with those who were in opposition of the bill…I think we got an even stronger bill than what he first proposed.”

Also interesting to note, Reyes donor Joe Pia of Pia, Anderson, Dorius, Raynard, & Moss spoke against the bill in committee.

Reyes also told me he is supportive of Senator Mike Lee’s efforts to pass federal patent trolling legislation that would address the most egregious cases of patent trolling.

Reyes also noted his work with Attorney General Bill Sorrell of Vermont in helping to “put in place probably the most stringent anti-patent trolling legislation in the U.S.” Vermont’s legislation was similar to the bill passed in Utah last year.

Reducing conflicts of interest

When asked if he had any ownership in Etagz or Accelerate Ventures Reyes said, “I don’t think I had any shares in Etagz. I think I had some options in Accelerate Ventures, but I had to give those all up when I was appointed…I divested pretty much everything that I had to take on..the governor was so, and justifiably so, concerned about any, not just actual conflicts but perceptions of conflicts that he said you’re just gonna have to divest everything.”

Reyes says he has a division director who handles any patent troll cases that come in under the new powers given in Mckell’s 2014 bill. Reyes called him a “filter” and he provides an annual report on the patent trolling cases they’ve handled.

Reyes said his office has not received any patent troll complaints yet, but invites the public to report any abuse they encounter to his office and they will investigate it.

About author

Michael Jolley
Michael Jolley 29 posts

Michael has been active in Utah politics since 2009 and admits he still has a lot to learn. He lives in Provo with his wife Jessica and their two small children. Follow Michael on Twitter: @UTJolley

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