Patent (Enforcement) Pending

What shop is still open and stocks everything you could possibly need? Amazon, of course!

The online retail giant has seen a huge surge in sales during the worldwide coronavirus pandemic, with transactions reaching $11,000 a second in April. The total number of products available for sale on Amazon and their third-party sellers platform Amazon Marketplace is almost half a billion. What does Amazon patent enforcement look like and is this providing help or hindrance to well established patent systems?

Amazon has made news headlines in recent years when their patent applications have published showing they are researching the delivery of products by drones. What a whacky idea you might think, until interactions with your post man or woman make you wonder if there is a safer way to receive parcels. Amazon has continuously been ahead of the curve and anyone in the tech world will tell you they are at the cutting edge of e-commerce. In 2019, Amazon filed more patent applications in the United States than tech giants Google and Facebook, almost matching the 2,490 filed by Apple.

As discussed in the previous article in this series, Amazon patent enforcement is taking place and the online retail giant has taken steps to begin policing trade mark infringement. However, there is still much work to be done if it is to be said that they are taking an active role in enforcing patent rights. Often, we find client’s never have to enforce their patent rights; the mere possession of such rights being enough for competitors to respect them in fear of lengthy and costly litigation and/or a finding of infringement.

Patent litigation is particularly expensive in the United States, but the cost depends greatly on the complexity of the technology, legal issues pertinent to the case and the number of patents involved. The cost of a large patent suit can easily run to 5 million dollars. While countries around the world have been developing systems to properly regulate this extremely complex area of law for decades, Amazon is attempting to strip patent infringement analysis right down to a single, non-appealable decision from a Patent Attorney, selected by them.

Alexa, find me a Patent Attorney, and ask them what they think…

Last year, Amazon began testing a system it calls the Utility Patent Neutral Evaluation Procedure (UPNEP). The idea is as follows:

• the proprietor of a US patent can file a request with Amazon for fast evaluation of potential patent infringement in a product listed on Amazon;
• Amazon contacts the accused infringer, who must pay a $4,000 deposit if they want to keep their listing and have it evaluated;
• the patent proprietor must also pay a $4,000 deposit to allow the evaluation to proceed
• Amazon appoints a “neutral” third party Patent Attorney to determine if the product is likely to be found to infringe the patent in question;
• if a finding of infringement is determined to be likely, Amazon will delist the product and keep the deposit paid by the accused infringer; refunding the patent proprietor’s deposit;
• otherwise, the listing stays, the accused infringer gets his deposit refunded, and the patent proprietor loses his deposit

The evaluation is made based on a very limited amount of written information and arguments from both sides have to be presented very quickly. This is in stark contrast to the protracted and very expensive pre-trial discovery common to US litigation. You get what you pay for though, right? If you want a proper and in-depth analysis, this can’t be done for $4,000 and considering only a few written statements from either side.

We are not completely opposed to the efforts made by the Amazon patent enforcement system; it would be effective at taking down products which are definite infringers, particularly when the seller knows so and wouldn’t want to lose $4,000 while getting the listing removed. It would also be useful in fast moving markets, where lengthy litigation has its drawbacks.

Alexa, say my competitors are infringing my patents…

The biggest concern we have is abuse of the system. Hundreds of thousands of companies on Amazon Marketplace have only a few products and it would be very easy to eliminate small competitors by filing completely unfounded claims in the hope that the competitor might not be able to spare the $4,000 required every time they are to have their listing analysed, and thus the listing is eliminated without any wrongdoing on the part of the seller.

We also wonder how the “neutral” third party will be selected, and how impartiality will be ensured. It is not as simple as just selected a random Patent Attorney who is not acting as representative for either of the parties. The European Patent Convention tried to address this point through spelling out who should be excluded from examination and appeal proceedings. However, case law still develops in this area and it is far from settled as to who has an interest in each individual case. European law has addressed issues such as how long it takes after working for a company for your interest in that company to diminish. Amazon has not published any details of how Patent Attorneys would be ensured to be impartial, leading us to think they probably aren’t going to take measures to safeguard against bias.

Finally, the entire process offers no opportunity at all for the seller to dispute the validity of the patent, unless the US Patent and Trademark Office has already ruled that it is invalid. This is a key and overruling defence if there is contention as to whether the product infringes the patent or not.

Overall, we are concerned that if Amazon deems testing of UPNEP to be successful, it would be providing this as a free service. The entire fee paid by the losing party goes to the Patent Attorney, so it is unlikely Amazon will spend significant time or money implementing the necessary legal framework to make this the prime option for enforcing patent rights.

Of course, Amazon is like any other shop or e-commerce platform, and so third-party vendors and Amazon can still be attacked through the more thorough and traditional legal channels if either are offering for sale an infringing product. Please get in touch with our e-commerce expert John if you would like more information on Amazon patent enforcement.

In the first article in this series, Trade Mark Associate Andrew Couttie discusses trade mark rights in e-commerce.

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