Brett Trout
In 2022, Amazon formally launched its Amazon Patent Evaluation Express (APEX) program, billing it as an efficient way to resolve claims when a seller on Amazon is infringing your patent. Assuming you have signed up for the program and meet all of Amazon’s prerequisites, if you see someone on Amazon selling a product that infringes your patent you may fill out and submit an APEX Agreement to Amazon.
Upon receipt of an APEX Agreement from a patent holder Amazon sends the APEX Agreement to all accused infringers. The seller then has four options: 1) ignore the APEX Agreement; 2) opt into the APEX program and proceed with a third-party determining whether the product likely infringes the patent; 3) resolve the claim directly with the patent owner; or 4) file a lawsuit for declaratory judgment of noninfringement.
If a seller ignores the APEX Agreement, or opts for the third-party review which finds a likelihood of infringement, Amazon will remove the accused products from Amazon. If the parties settle the matter on their own, Amazon will take no further action. Finally, if the accused seller files a declaratory judgment of noninfringement, Amazon will abide by the court’s ruling.
The problem with the last option is that the accused infringer is unlikely to file the declaratory judgment of noninfringement in your home state. The accused infringer is much more likely to file the lawsuit in their own state or a state with courts more favorable to their position. This was the case in SnapRays, d/b/a SnapPower v. Lighting Defense Group. In SnapRays, LDG, a Delaware Limited Liability Company located in Arizona, owned U.S. Pat. No. 8,668,347 covering a cover for an electrical receptacle. Upon receipt of LDG’s APEX Agreement SnapRays, the accused infringer, filed a declaratory judgment of noninfringement in its home state of Utah. The United States District Court for the District of Utah dismissed the declaratory judgment action for lack of personal jurisdiction. The district court ruled in LDG’s favor, finding LDG lacked sufficient contacts with Utah to be subject to personal jurisdiction in an Utah court. The court ruled that submitting the APEX Agreement did not demonstrate LDG purposely directed activities at SnapRays in Utah. The district court’s ruling was based on similar cases and that is well-settled law that a patent owner sending a cease and desist letter to an accused infringer is not, without more, sufficient to justify subjecting that patent owner to personal jurisdiction in the accused infringer’s home state.
SnapRays appealed the district court’s ruling to The United States Court of Appeals for the Federal Circuit. As the issue related to personal jurisdiction in a patent infringement matter, the Federal Circuit applied “Federal Circuit Law” affording no deference to the lower court’s ruling. in determining whether or not LDG was subject to personal jurisdiction in Utah, the Federal Circuit examined three factors: (1) whether the defendant “purposefully directed” its activities at residents of the forum; (2) whether the claim “arises out of or relates to” the defendant’s activities with the forum; and (3) whether assertion of personal jurisdiction is “reasonable and fair.”
In finding that LDG submitting the APEX Agreement did indeed subject LDG to personal jurisdiction in Utah, the Federal Circuit held that extra-judicial enforcement activities, such as Amazon’s APEX program, satisfy the “purposefully directed” arm of the personal jurisdiction analysis. The Court held that the brunt of the harm caused by a defendant’s activities need not be suffered in the declaratory judgment state, as long as at least a “jurisdictionally sufficient amount of harm” is suffered in the state. The Federal Circuit likened the APEX Agreement to a copyright owner sending a notice of claimed infringement (NOCI) under eBay’s Verified Rights Owner (VeRO) program or someone sending a letter to Network Solutions, Inc. (NSI) challenging the registration of a particular domain name in a manner that automatically triggers NSI’s dispute resolution process.
The difference between these activities and a cease and desist letter, reasoned the Court, is that is that these activities all trigger an “automatic effect” in the accused infringers state if the accused infringer does not respond. Conversely, if an accused infringer ignores a cease and desist letter, no harm automatically occurs in the accused infringer’s state. In the SnapRays case, if SnapRays ignored the APEX Agreement, Amazon would automatically remove SnapRays’ products from Amazon. In overruling the lower court, the Federal Circuit ruled that this “automatic takedown process” was enough to tip the scales toward a finding of personal jurisdiction.
While the Federal Circuit did state “Parties who participate in APEX by submitting an Agreement will only be subject to specific personal jurisdiction where they have targeted a forum state by identifying listings for removal that, if re- moved, affect the marketing, sales, or other activities in that state.” it is hard to imagine an APEX Agreement that would not potentially affect the marketing, sales, or other activities in that state.
One of the main attractions of the APEX program is its low cost compared to a multi-million dollar patent infringement lawsuit. In light of this recent ruling, however, the APEX program may not only force a patent owner into a full-blown patent infringement trial before they are ready, but it may face them to litigate the matter in a hostile state. For this reason, if you are not willing, or financially able, to fight a patent infringement lawsuit in the home state of your accused infringer, you may wish to rethink filing an APEX Agreement in the first place.
Edit: SnapRays appealed the district court’s ruling
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