Enforcing Patents The Amazon Way

By Tammy Dunn and Lisa Margonis

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For years, patent owners have struggled with what to do about infringers on Amazon and other online marketplaces.  The traditional answer has been to get an order from a court or other tribunal that has determined infringement and to present a copy of that order to the online marketplace.  For many, however, engaging in expensive protracted litigation in district court or in the International Trade Commission to get such an order may not be an option for a variety of reasons, including, most often, budget.

Amazon now has an answer – the Utility Patent Neutral Evaluation Program, referred to as the “UPNE” or as the “Patent Evaluation Program.”

Currently still in the pilot stage, Amazon’s Patent Evaluation Program is showing to be a useful tool to quickly and inexpensively enforce utility patents against third-party sellers of infringing products on Amazon’s marketplace.  District court litigation can take several years and cost millions of dollars, and litigation at the International Trade Commission, though much faster, can be just as costly.  For companies that sell consumer products largely sold on Amazon marketplace, Amazon’s Patent Evaluation Program may provide an inexpensive way to quickly clear the market of infringing competitors.

How it Works:

Because the program has not yet “officially” launched, initiating the process may be somewhat of a mystery to those looking to participate.  Although some information exists online generally describing the procedure, there are no portals or links through which patent owner or sellers can participate in the program yet.

Counsel with experience navigating into and through the Patent Evaluation Program will be particularly helpful for those interested in participating and/or those faced with a sudden need to participate.

The first step is to have the Amazon Neutral Patent Evaluation Team determine whether the patent is eligible for the program.  While many utility patents covering consumer goods should be eligible, patents that involve highly complex technology and/or source code analysis may not be suitable for the program.  Design patents and non-U.S. patents are not eligible.

Assuming the patent is deemed to be eligible, the next steps include actual entry into and participation in the neutral evaluation process.

It is important to note that the program is completely voluntary and the alleged infringer can choose whether or not to participate in an evaluation of its accused products.  Additionally, each party (Patent Owner and each Seller) must pay an equal fee to a Neutral Evaluator to participate in the Evaluation Program, which covers the cost of the evaluation (Amazon does not retain any portion of the fee).  An interesting aspect of the program, in addition to features discussed in more detail below, is that the winner of the evaluation gets its participation fee back.  This factor alone is something that may appeal to many patent owners and sellers alike.

The process generally consists of the following steps:

  1. The Patent Owner must first submit a Neutral Patent Evaluation Agreement, which includes the terms and conditions that govern the procedure. Among these terms are confidentiality provisions and restrictions against using the findings for any purpose outside of the Patent Evaluation Program.  In the Agreement, the Patent Owner also identifies the Accused Product(s) and the asserted claim (limited to one).
  2. Amazon then sends the Agreement to each Seller listing the Accused Product(s).

This is where some patent owners may see the most immediate relief—if a seller chooses not to participate in the program, the evaluation does not proceed, but the patent owner gets the benefit of having the accused infringer’s products removed from the marketplace almost immediately.

Similarly, this is where accused sellers could suffer the biggest impact on their online sales, if they are not properly advised at this stage.

Why might a seller choose not to participate?  It could simply be the cost.  The seller also has a very limited amount of time in which to choose to participate or not.

  1. Amazon then selects an independent Neutral Evaluator and instructs the Patent Owner and the Seller(s) to pay the required fee to the Neutral Evaluator. At this time, the current fee is $4,000 per party.  The Neutral Evaluator is not employed by or affiliated with Amazon.  Rather, evaluators are independent attorneys with relevant experience to determine questions of patent infringement.
  2. The Neutral Evaluator then contacts the Patent Owner and the Seller(s) to initiate the evaluation process. If, however, the alleged infringer chooses not to participate, then Amazon will remove the product from the marketplace.
  3. Assuming the accused infringer agrees to participate, the parties are then given the opportunity to submit briefs to the Neutral Evaluator. It is important to note that arguments based on invalidity or unenforceability, other than one supported by a finding by a court of competent jurisdiction, the U.S. Patent Office, or the U.S. International Trade Commission, are not accepted.  There is no discovery and no hearing.  The evaluator reviews the briefs and determines whether the Patent Owner is likely or unlikely to prove the Accused Product(s) infringes the asserted claim of the patent-at-issue.
  4. If the Neutral Evaluator makes a determination that the Patent Owner is likely to prove infringement, then Amazon removes the product from its marketplace. If the independent evaluator makes a determination that the Patent Owner is unlikely to prove infringement, Amazon allows the Seller(s) to continue selling the product on the marketplace.  The Neutral Evaluator retains the fees collected from the losing party to cover the costs of the evaluation and returns the fees paid by the winning party.

Overall, the process takes 3-4 months total, and costs a very small fraction of the cost of litigation.  While there is no process for appeal or reconsideration of the Neutral Evaluator’s decisions, a losing party can submit a subsequent judgment or order from litigation or arbitration with a contrary finding to remove the Accused Product from the marketplace or reinstate the Accused Product, as the case may be.

Although still in its infancy, the program has great promise as a cost-effective option for clients seeking to enforce their patents in the Amazon marketplace.

For more information on the Amazon UPNE program and Osha Liang’s Amazon UPNE Program services, please contact us at OLAmazonUPNE@oshaliang.com or the authors of this article, Tammy Dunn (dunn@oshaliang.com) and Lisa Margonis (margonis@oshaliang.com).