Amazon patent enforcement system is "useful for simple matters"

Secret

With Amazon launching a pilot patent evaluation programme to streamline take-down actions, companies say the system looks useful but that it should only be used for matters that do not require discovery or the possibility for appeal

With Amazon launching a pilot patent enforcement system earlier this year, in-house counsel say the e-commerce giant’s efforts are commendable but that they would be cautious to use the new system until they had seen how it would work in practice.

The Utility Patent Neutral Evaluation (UPNE) programme, which was launched in February 2019, was developed by Amazon to offer patent owners a faster and cheaper means of getting patent-infringing products taken down from its platform.

The programme, which has so far only been tested by a few patent lawyers and cannot be used by most Amazon platform users, matches those sellers claiming infringement and the relevant accused merchants with a third-party lawyer. Each party is required to pay a $4,000 deposit, which is subsequently returned to the winner of the dispute.

The IP vice president at a global electronics company in the US says that the programme is both interesting and innovative, but adds that certain factors, such as the fact that the programme does not have discovery requirements, its decision cannot be appealed, and that it does not apply to items sold by Amazon itself, would make him approach its use with caution.

“The main advantage would be that the resolution can be had within a few months of the dispute at a fraction of the costs,” he says. “But while the lack of discovery will make the process move fast and cheaply, it will not afford the patent owner any meaningful opportunity to discover the evidence of infringement.”

“And if the neutral third party finds against you, you have no way of appealing that decision before Amazon kicks you out of the marketplace. Since many sellers would also presumably sell on other platforms such as eBay and Craig's List, that result might not be the end of the world.”

He adds that if a patent owner loses the arbitration, it can always go to the courts to enforce its rights there, which means the lack of appeal may not be a huge issue. However, the fact that the programme only applies to goods sold by third-party vendors may ultimately limit its usefulness to patent owners.

An Amazon spokesperson tells Patent Strategy: "Amazon respects the intellectual property rights of others and requires that third-party sellers do the same when listing items for sale on Amazon. While more than 99% of page views by our customers landed on pages without a notice of potential infringement, we continue to experiment and develop tools that will help us better protect rights owners and our customers, including this process for utility patent owners.

"The Amazon Utility Patent Neutral Evaluation process allows utility patent owners to more efficiently and effectively address suspected infringers, gives sellers a forum to contest accusations, and significantly reduces the time and cost burden on both parties."

The spokesperson declined to comment on when, or if, the company might develop the UPNE programme and make it available to all its users.  

The good

The head of IP portfolio management at an electronics company says her firm is already using the Amazon system for trademark and design activities with great success and is pleased to see that the programme has been extended to patents with this pilot.

But she agrees with the IP vice president that the system has inherent limitations in its current form, and adds that she would need to take time to work out how to use the system. She says that because the programme does not consider patent validity or have discovery or appeals provisions set up, it is likely not the appropriate forum for complex matters, which should be referred to a judge. 

Its speed and low cost, however, make the UPNE ideal for relatively straightforward matters.

“You need to take a good look at all aspects of the case, such as the costs and what you expect the outcome to be and what your desired business goal is to allow you to make the appropriate decision.

“Cost is not our main consideration but it is a very important factor when considering how to deal with counterfeit products,” she says.

She says there is also the consideration that patent infringement proceedings are usually more complex than those related to trademarks or designs. As such, while the Amazon trademark evaluation system works well for her company, she says she would have to see how the system works for patents in practice before the company could decide how it might use it.

“Patents will be more complex because trademark and design counterfeits are usually easy to spot and conclude a proceeding on,” she says. “Inventions, on the other hand, require study before you can conclude infringement and we would need to see how we might use the UPNE system in practice.”

The chief IP counsel of a global supplies company says agrees that the system might be useful for simple products; and especially consumer products where there are many small infringers and the business is more interested in shutting down proliferation of online selling rather than obtaining damages or getting an injunction.

"The system could work as part of a good deterrent approach as well when you cannot figure out who the manufacturer is or cannot pursue the manufacturer for some reason," she says.

"I would probably send a cease and desist letter first, but if that did not work, or if I could not contact the infringer for some reason,  it would be nice to go to this approach for the right type of case. Although at $4,000 per matter, this will get expensive for a widely infringed product. 

"AWS should offer a volume discount for repeated enforcement of the same patent. Do they rotate in a new attorney for each infringement so the neutral decision maker does not get repeat business for the same patent?

Those that have had a chance to test the system, however, are very pleased with it. William McKenna, partner at Woodard, Emhardt, Henry, Reeves & Wagner in the US, says the programme works exceptionally well to provide a swift and efficient tool for patent holders to combat the overwhelming majority of the infringing knock-off products being offered for sale on Amazon. Most of these products, he adds, are sold by small and/or overseas sellers, which are often difficult if not impossible to reach, as they either provide false contact information or simply do not respond to e-mail, letters or the like.

"I applaud Amazon for its creativity in establishing a solution to the growing problem of patent infringement within the growing online marketplace," he says. "Patent infringement actions in the US court system take place in an evolved process which can take years to complete. 

"The Amazon programme is not intended to rival the thoroughness of that process, but that is the tradeoff that they knew they had to make to achieve the speed and efficiency required."

The bad

Anna-Lisa Gallo, associate general counsel at water technology company Lixil in New York, says her company could not see the benefit of Amazon’s trademark enforcement system and suggests that that might also be the case for its UPNE system.

“Amazon has come in and said they're going to be the new legal system for patents. They tried to convince us previously to register our trademarks with them and that was something where you could see the benefit for them but not us.

“We’re now following what’s going to happen with their patent evaluation system,” she says.

While most in-house sources reacted to the pilot patent evaluation programme with cautious optimism or at least mild indifference, some were completely disparaging of its usefulness in a patent enforcement strategy. 

The chief IP counsel at a chemicals company in the US says that while he applauds Amazon’s attempts to create a better patent-related takedown process than what they currently have, there are some considerable flaws with this new system and that it is a “pretty horrible programme, from what he has seen”.

The first problem, he says, is that while a company could take a matter to the courts if it did not get the answer from the UPNE process that it wanted, a bad decision made in arbitration could be used by the other side in a courtroom to cast doubt on the case.

“The result is not an official judgment so you cannot appeal it. And even though it is not an official judicial proceeding, if you want to go to court later, you may have to do so with the decision of a group of arbitrators against you,” he says.

He adds that there are also better alternative dispute resolution programmes that Amazon might have chosen to use for its patent evaluation system rather than the one it has established.

“There are a lot of options for alternative dispute resolution and you do not need to invent a new one,” he says.

"The system is a variation on known alternative dispute resolution techniques that Amazon can use to off-load responsibility, send to a third party and move on to their business without thinking of sellers or customers."

Responding to this comment, an Amazon spokesperson tells Patent Strategy: "If anything, we’ve built a program that takes on more responsibility, not less, by bringing in capabilities and expertise to make a sound determination that Amazon often cannot otherwise make, and does so in a fraction of the time and cost of a court proceeding."

The Amazon platform is an integral part of many businesses’ selling strategies, and most would agree that having a quick and easy way to get patent infringing products taken down is a good thing.

However, patent holders should do a little exploring to find out how to best use the system, should it ever get past the pilot development stage, and perhaps leave more complex matters to the courts.