On the short list of companies that have changed the way we live, at least in my lifetime, is Amazon. I am sitting down to draft this just minutes after getting a notification on my phone from my Ring (Amazon-owned) app that someone was at my door. And when I got to my door, there were three Amazon deliveries neatly stacked for me to take into the house. Package 1 held a replacement book for my son to return to his school library in exchange for the copy he lost. Package 2 held 12 D batteries for my other son’s hockey ball feeder, so that he could continue his shooting practices/wall scuffing in our basement. Package 3 had a new batch of instant cold brew coffee to help me power my way through long work days in my home office. All ordered in seconds, delivered in less than two days, and saving me at least an hour over getting the same products from a retail store. It is a marvel of simplicity, even as a complex mix of human and technological elements interact in order to make it all work. (I know everyone knows how Amazon works, but I think it is OK, on occasion, to remind ourselves how awesome a business can be when it improves our lives.)
At the same time, the challenge of policing IP infringement on Amazon is perhaps as daunting today as it was when I discussed it on these pages in 2017. In that column, I recognized that “Amazon is an outsized player in the modern world of commerce” which had “an opportunity to develop a leading IP dispute resolution mechanism befitting its position.” To that end, Amazon has set up a robust framework for dealing with IP disputes on its platform, which seems to be at least doing a good job of frustrating both IP owners and accused infringers in equal measure. While a lot of IP enforcement activity has occurred on the Amazon ecosystem, I have yet to see much spillover from Amazon-based enforcement efforts into IP disputes that have ended up in federal court — except for tortious interference or unfair competition type claims raised by alleged infringers in court pleadings addressing what they consider to have been vexatious prosecution of IP claims on Amazon.
I was pleased, therefore, to see one of the linchpins of patent enforcement on Amazon addressed in a recent precedential federal circuit opinion, in a case involving advanced electrical outlet covers. The patent owner, LDG, had invoked Amazon’s procedure for raising utility patent infringement complaints against third-party Amazon sellers with respect to a company called SnapPower. As described by the federal circuit, “Amazon offers a low-cost procedure called the Amazon Patent Evaluation Express (APEX) “[t]o efficiently resolve claims that third-party product listings infringe utility patents,” and LDG had tried to resolve its dispute with SnapPower based on discussions the parties had after Amazon notified SnapPower of LDG’s APEX effort. But those discussions failed, leading to a declaratory judgment complaint filed in Utah by SnapPower, which LDG moved to dismiss for lack of personal jurisdiction. That motion was granted, as “the district court found SnapPower did not demonstrate LDG purposefully directed activities at SnapPower in Utah, or that the action arose out of or related to any LDG activities in Utah. Instead, the district court found LDG’s allegations of infringement were directed toward Amazon in Washington, where the APEX Agreement was sent.” That reasoning, however, was rejected by the federal circuit panel.
Instead of finding that LDG’s infringement allegations were aimed at Amazon in Washington, the federal circuit found that “LDG purposefully directed its activities at SnapPower in Utah, intending effects which would be felt in Utah.” Importantly, LDG knew “by the terms of APEX, Amazon would notify SnapPower of the APEX Agreement and inform SnapPower of the options available to it under APEX,” satisfying the first factor of the personal jurisdiction test. In support, the panel cited cases in both the 9th and 10th circuits where submissions to a third-party administrator asking for legal action was a basis for personal jurisdiction, since those actions both targeted the entity and would cause effects in the entity’s forum state.
In response, LDG tried to analogize use of APEX to sending a cease and desist letter, which had previously been found not to “constitute purposefully directed activities because “a patent owner may, without more, send cease and desist letters to a suspected infringer, or its customers, without being subjected to personal jurisdiction in the suspected infringer’s home state” in a prior federal circuit case. Here again, the federal circuit panel disagreed, finding that the “APEX Agreement goes beyond a cease and desist letter because, absent action by SnapPower in response to the APEX Agreement, SnapPower’s listings would have been removed from Amazon.com.” LDG’s other attempts to sway the panel were unavailing, with the panel further finding that “LDG’s action of submitting the APEX Agreement was directed towards SnapPower in Utah and aimed to affect marketing, sales, and other activities in Utah,” such that the declaratory judgment lawsuit arose out of LDG’s activities in Utah.
Next, the panel addressed LDG’s argument — agreed to by the district court — that finding jurisdiction against LDG would open “the floodgates of personal jurisdiction and allow lawsuits against any APEX participant anywhere in the country.” That argument was rejected, since only APEX submissions which have “targeted a forum state by identifying listings for removal that, if removed, affect the marketing, sales, or other activities in that state,” would be the only ones where the patent owner would be subject to specific personal jurisdiction. And because an APEX agreement was different in kind from sending a mere cease and desist letter, LDG failed to articulate “a compelling argument why it would be unfair or unreasonable for it to be subject to specific personal jurisdiction in Utah under these circumstances.“
Ultimately, what was the key factor here for the panel and for courts to address going forward? A close look at the consequences of the communication between the IP owner and the putative infringer is the apparent answer. Is it a cease and desist letter that could be ignored with no action taken against the alleged infringer absent further efforts by the IP owner? Or is it something different? Here, if SnapPower had not responded to the APEX notification, it would have resulted in its “listings being removed from Amazon.com, necessarily affecting sales activities in Utah.” That prospective consequence seems to have carried the day on the jurisdiction question in favor of the infringer. As a result of this decision, potential declaratory judgment jurisdiction in the age of Amazon enforcement has become one more risk for patent owners traversing the patent jungle.
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.
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