Context: As matter of “fair play and substantial justice,” U.S. district courts do not have personal jurisdiction over patent holders whose activities with respect to the forum in question are negligible if an alleged infringer brings a declaratory judgment (DJ) action. For instance, sending a cease-and-desist letter to an alleged infringer or its resellers does not suffice to establish personal jurisdiction, as those letters might as well be ignored by their recipients. Otherwise alleged infringers would frequently bring DJ actions in their home states, and venue transfer motions would often fail as there likely will be some key witnesses in that area.
What’s new: Yesterday (May 2, 2024), the Federal Circuit once again clarified (PDF) that the jurisdictional hurdle in those types of situations is reasonably high, yet identified circumstances in which personal jurisdiction in the alleged infringer’s (and DJ plaintiff’s) home state is perfectly warranted: extra-judicial patent enforcement such as (in the case at hand) the Amazon Patent Evaluation Express (APEX). By distinguishing this case (SnapRays dba SnapPower v. Lighting Defense Group) from various others (about half of which involve other rights than patents), the opinion gives an idea of where mere infringement notices end and extra-judicial patent enforcement begins.
Direct impact: It remains to be seen whether the losing appellee will request a rehearing en banc or Supreme Court review. The Federal Circuit decision explains why drawing the line between infringement notices and extra-judicial patent enforcement does not open the floodgates to DJ actions in alleged infringers’ home states
Wider ramifications: Other suspected infringers can argue that takedown notices sent to some platform statistically have the same automatic takedown effect as Amazon’s extra-judicial patent enforcement proceedings. The Federal Circuit cites to a Tenth Circuit decision relating to eBay’s Verified Rights Owner (VeRO) program, under which auctions are automatically terminated if a notice of claimed infringement (NOCI) is submitted. Based on how Apple and Google describe their handling of infringement notices concernings apps distributed via their mobile app stores, takedown does not appear to be an automatic consequence of patent infringement notices to Apple and Google concerning third-party apps. As a matter of policy, Amazon-style pseudo-judicial patent enforcement is undesirable, and that may have been a major part of the reason for which the Federal Circuit decided to draw the line there.
This is how the Federal Circuit describes the APEX process (citations omitted):
“Amazon offers a low-cost procedure called the Amazon Patent Evaluation Express (APEX) “[t]o efficiently resolve claims that third-party product listings infringe utility patents.” Under APEX, a third-party determines whether a product sold on Amazon.com likely infringes a utility patent, and if so, Amazon removes the listing from Amazon.com. To initiate an evaluation under APEX, a patent owner submits an APEX Agreement to Amazon which identifies one claim of a patent and up to 20 allegedly infringing listings. Amazon then sends the APEX Agreement to all identified sellers. Each seller has three options to avoid automatic removal of their accused listings: (1) opt into the APEX program and proceed with the third-party evaluation; (2) resolve the claim directly with the patent owner; or (3) file a lawsuit for declaratory judgment of noninfringement. If the seller takes no action in response to the APEX Agreement, the accused listings are removed from Amazon.com after three weeks.”
What the decision focuses on is the fact that inaction is not an option for a seller who desires to continue to sell their products through Amazon: takedown is an automatic effect if the alleged infringer doesn’t reach an agreement with the patentee and elects neither to participate in Amazon’s pseudo-judicial process nor to bring a DJ action in district court. Options 2 (settlement) and 3 (DJ action) are obviously always available. Amazon also offers APEX, which means that Amazon will obtain an opinion from a third party as to whether the infringement claims have substance. And that is the option that the patentee and appellee in this case availed itself of.
All resellers and platform operators face patent infringement assertions against the products they (or their partners) distribute sooner or later. They put different processes in place in order to protect themselves.
If a patent holder sends an infringement notice (from a simple letter just stating an allegation all the way to a formal cease-and-desist order with an explicit threat of enforcement action) to a reseller or platform operator like Amazon, the Federal Circuit does not believe the alleged infringer’s home court would typically have personal jurisdiction over the patentee. In its 2008 decision in Avocent Huntsville Corp. v. Aten Intern. Co., Ltd., the Federal Circuit stated that “a patent owner may, without more, send cease and desist letters to a suspected infringer, or its customers, without being subjected to personal jurisdiction in the suspected infringer’s home state.”
The two words “without more” are now key. Why is APEX more? “[B]ecause, absent action by SnapPower in response to the APEX Agreement [that the patent holder in his case, LDG, had signed with Amazon], SnapPower’s listings would have been removed from Amazon.com. […] The automatic takedown process, which would affect sales and activities in the forum state, is the ‘more’ Avocent envisioned.”
There is no question that Amazon, through that APEX system, goes further than most other platform operators and resellers. For instance, Apple’s App Store Content Dispute webpage says:
“If you believe that an App or Search Ad available through the App Store violates your intellectual property rights, you can submit your claim here. […] [U]pon receiving your submission, we will contact the [third-party] provider of the disputed content regarding your claim and ask that they work with you directly to resolve the issue.”
If that is not just what they say, but also their practice, then takedown is indeed not automatic, and reaching out to Apple would not have an impact on personal jurisdiction in a DJ case.
The Intellectual Property webpage of Play Console Help (Google Play is the default and dominant Android app store) mentions patents among other types of intellectual property rights:
“We don’t allow apps or developer accounts that infringe on the intellectual property rights of others (including trademark, copyright, patent, trade secret, and other proprietary rights). We also don’t allow apps that encourage or induce infringement of intellectual property rights.” (emphasis added)
But it doesn’t go into detail on patents. Instead, the focus is on copyright and trademark issues. There is no APEX-like pseudo-judicial process there either, and no sign of takedowns being automatic.
The closest equivalents to APEX that the Federal Circuit decision discusses are eBay’s Verified Rights Owner program (mentioned further above) and an internet domain-related process by major registrar Network Solutions, Inc. (NSI): “[D]efendant’s letter automatically triggered NSI’s dispute resolution process, which would result in the plaintiff losing the domain name unless a declaratory judgment action was filed.”
For the Federal Circuit, according to this new SnapRays dba SnapPower v. Lighting Defense Group decision, an automatic takedown in the event of neither resolving the problem otherwise (settlement, DJ action) nor effectively succumbing to Amazon’s pseudo-jurisdiction makes all the difference in terms of causing sufficient harm in the alleged infringer’s home state to establish personal jurisdiction for DJ purposes. In that case, the sole remaining chance for a patentee to move the dispute out of that state is a motion to transfer venue.
The APEX Agreement between the patent holder and Amazon has that automatic consequence (if the alleged infringer doesn’t participate nor resolve the issue by some other means). Amazon promises to patent holders to remove products unless the alleged infringer responds (or finds a different solution):
“LDG purposefully directed its activities at SnapPower in Utah, intending effects which would be felt in Utah, and conclude this satisfies the first element of our test for specific personal jurisdiction. LDG intentionally submitted the APEX Agreement to Amazon. The APEX Agreement identified SnapPower listings as allegedly infringing. LDG knew, by the terms of APEX, Amazon would notify SnapPower of the APEX Agreement and inform SnapPower of the options available to it under APEX. […] If SnapPower took no action, its listings would be removed, which would necessarily affect sales and activities in Utah. SnapPower therefore sufficiently alleged LDG ‘undertook intentional actions that were expressly aimed at th[e] forum state,’ and ‘foresaw (or knew) the effects of its action would be felt in the forum state.’”
The distinction is subtle, but it can be made.