The Neutral Patent Evaluation

By Mary Bonzagni

Business owners often ask themselves, ‘why embark on a path of securing a U.S. patent when enforcing your patent rights in court will inevitably be a very costly and time-consuming endeavor?’ Amazon may have helped to remove the presumption embedded in that question by offering an attractive alternative to the costly and time-consuming litigation route.

As we all know, Amazon dominates the e-commerce marketplace worldwide. For many consumers (like me), Amazon has become the first and primary source for virtually anything we may need (or want). Dominance, however, has come with a price. Mounting pressure from intellectual-property owners for Amazon to take responsibility for conduct in its marketplace has apparently pushed Amazon into choosing to relinquish its former ‘hands-off’ approach to infringement concerns.

Neutral Patent Evaluation

For U.S. utility patent owners (not U.S. design or foreign patent owners) who have identified infringing products on the Amazon retail or Marketplace platform, Amazon now offers its neutral-patent-evaluation procedure.

The benefits of this procedure include its low cost ($4,000) relative to litigation and its streamlined approach to resolving patent disputes (two weeks to four months). Plus, the parties do not waive any rights to pursue their respective claims in court.

By way of this procedure, a patent owner files a request for an evaluation of their infringement allegation against an Amazon retailer. The Amazon retailer is given the option of either responding to the allegation or removing the accused product listing. If the Amazon retailer choses to respond, then Amazon assigns a neutral evaluator who is a qualified patent attorney, and each party then pays a deposit in the amount of $4,000 to the evaluator. The deposits are held in escrow during the evaluation procedure. The prevailing party will have its deposit reimbursed, while the non-prevailing party will forfeit its deposit, with the forfeited deposit paying the fees/costs of the evaluator.

“While the benefits of this process are apparent, there are limitations.”

While it is not same-day Shipping, this procedure takes only a few weeks (if the Amazon retailer does not participate in the procedure) or up to a maximum of four months (if the Amazon retailer does participate in the procedure). To assure that this procedure concludes within this relatively short term, Amazon limits the evaluation procedure to one patent claim, does not allow any challenges to the validity of the asserted claim, allows only written arguments of a specified length (no discovery or oral arguments), and imposes strict response deadlines.

If the evaluator decides the accused product is covered by the asserted patent claim, then Amazon will remove the listing of the product from its online marketplace. Irrespective of the evaluator’s finding, however, should either party obtain a judgment or order from a court of competent jurisdiction that the accused product does or does not infringe the asserted patent claim, or that the asserted patent claim is invalid, then that party may submit the judgment or order to Amazon, which will honor it by either removing or relisting the product.

During the neutral patent evaluation, the parties may not talk directly to the evaluator but may talk to each other regarding the possibility of reaching an amicable resolution to the dispute. If this happens, then the evaluator may keep a portion of the deposits received from each party as compensation for work completed.

While the benefits of this process are apparent, there are limitations. For example, the outcome of this process determines only whether a product may continue to be sold on Amazon; it does not limit other avenues of commerce for allegedly infringing products. Plus, the procedure only applies to third-party merchants. In other words, products sold by Amazon itself, cannot be challenged using Amazon’s neutral-patent-evaluation procedure. It is also problematic that Amazon does not inform the parties how neutral evaluators are selected. Nonetheless, in my opinion, this procedure is attractive for what it does offer.

Amazon’s Other Programs

Amazon has other programs as well that are designed to protect IP rights. Amazon’s brand-registry program provides owners of registered trademarks with tools for searching and identifying potential infringers of their registered trademarks on the Amazon platform. Amazon also allows IP owners to report patent, trademark, and/or copyright infringement directly to Amazon by way of its report-infringement form. If Amazon accepts the infringement claim, then it will remove the reported content and will take appropriate (but unfortunately confidential) action against the retailer. If Amazon rejects the infringement claim, then they will not take any further action. Amazon will, however, provide the claimant with the reason for its rejection of the claim.

Conclusion

As more and more consumers flock to e-commerce sites, the hope is that Amazon’s neutral-patent-evaluation initiative will be picked up and further developed by other online marketplaces, or perhaps developed into an all-inclusive system that serves to address not only patent, but also trademark and copyright, infringement in a way that all online marketplaces can collaborate on.

Mary Bonzagni is a partner at the law firm of Bulkley Richardson, where she focuses on intellectual-property matters; (413) 781-2820.