Amazon recently implemented a streamlined process for patent holders to assert claims of infringement against sellers of products on the Amazon marketplace. The process, which Amazon is calling the Utility Patent Neutral Evaluation Procedure (UPNEP), allows for patent holders to request a neutral evaluator to determine whether a single claim of a granted utility patent is infringed by up to 50 separate products.
The timelines are tight, the stakes are high, and the process is over in a relatively short period of time. With no current option for appeal or review, it is important for those that rely on Amazon for their profits to take these UPNEP reviews seriously. Below, we discuss the process, the pitfalls and how the system can be potentially gamed, and how to navigate this new process as Amazon more fully rolls it out into production.
The patent holder initiates the process by submitting a simple complaint to Amazon, which largely identifies who the patent holder is, the patent and single claim to be reviewed, and the identification of products to be evaluated. One submitted, the sellers are contacted and given three weeks to decide whether they wish to participate in the dispute. The seller confirms its desire to participate by completing a similarly simple agreement that identifies the seller and the products the seller wishes to have reviewed. Any identified seller that does not participate in the process will have their listing removed from Amazon.
Once the seller(s) and the patent holder have submitted the necessary paperwork, Amazon identifies a neutral patent attorney to act as an arbiter for the evaluation. Each side must then submit $4,000 to the identified patent attorney, to be held in escrow until the resolution of the matter. Where there are multiple sellers, the sellers split the $4,000 payment equally. If the seller(s) fail to submit payment, their listings will be removed. If the patent owner fails to submit the payment, any deposits paid by the seller(s) will be returned, and the listings will remain.
After the agreements and the escrow is handled, the Patent Neutral Evaluation Procedure begins, and with it, some very tight deadlines. Unlike traditional litigation, where discovery, motion practice, settlement conferences and other matters can require years to complete, the UPNEP process takes less than four months. While the shortened timeline is great for patent owners, it does create some issues, as there are no provisions for extensions, and the response and reply deadlines are tight.
The deadlines for the UPNEP are:
- The patent owner has 21 days from the commencement of the UPNEP to submit its initial brief;
- The seller(s) then have 14 days to respond to the initial brief; and
- The patent owner then has 7 days to file a reply to the response.
The filings are similar to standard motion for summary judgment practice, with the first filing being from the patent owner attempting to show how the accused product(s) infringe the single identified claim, through use of images, claim charts, and written arguments.
The seller(s) then get the right to respond to the patent owner’s initial filing. The three arguments seller(s) are allowed to make are: i) non-infringement of the claim of the patent; ii) invalidity of the patent based on prior ruling of the United States Patent and Trademark Office (USPTO), International Trade Commission (ITC), or a federal court of the United States; and iii) invalidity of the patent based on products being sold more than one year before the earliest priority date of the patent (i.e., the “on-sale bar”).
Finally, the patent owner can reply to the response of the seller(s), in order to counter any information submitted by the seller(s). The reply is optional, but is generally advisable, and failure to file a reply will not trigger an automatic victory to the seller(s).
There are page limits for each of the above filings, making it important to focus on the best arguments and evidence available. This also helps both sides, as it keeps the review laser focused, and not bogged down in tons of information collected in discovery, as would be the case in standard patent litigation practices.
After all the filings are completed, the neutral patent evaluator will return a decision within fourteen days. The evaluator will determine whether the product(s) of the seller(s) “likely infringe” the claim of the patent at issue. If the evaluator determines that the product(s) do likely infringe the patent, then the listings are removed and the patent owner is refunded her $4,000. If the evaluator determines that the product(s) are not likely to infringe the claim, then the seller(s) get their $4,000 back and the listings are unaffected.
Before the conclusion of the evaluation, the parties may independently settle with one another. If the patent owner and the seller(s) come to an agreement, then the evaluator keeps $1,000 from each of the parties (total $2,000), and the balance is returned to the parties.
Pros for Patent Owners
Ultimately, for valid patent owners that have their patents being infringed upon on Amazon, the Utility Patent Neutral Evaluation Procedure is a real boon. It provides quick and easy resolution to infringement matters, and can be done across numerous sellers in a single filing. If the patent owner were to do this through federal courts or other legal avenues, an action would need to be filed against each seller individually, and would take potentially years to complete. The time and cost savings here are immense.
Another advantage of the Utility Patent Neutral Evaluation Procedure is that, given these are administrative filings with Amazon, the location of the sellers is irrelevant. This means that troublesome jurisdictional issues, especially with regards to foreign sellers, are also not an issue that can complicate the proceedings.
With that said, there are strategies to be considered by patent owners with respect to how to file. For instance, given that sellers can effectively pool their resources, allowing up to 50 sellers to assemble their finances to hire top patent counsel to submit a response on their behalf, it is important to consider the strength and weaknesses of any UPNEP before filing. In some instances, filing individual complaints against sellers may be advantageous, in order to see which sellers are willing to pony up the $4,000 to fight a UPNEP proceeding by themselves – especially considering that the patent owner can have one initial brief prepared and file that brief individually against each separate seller that does continue to fight.
Conversely, where the case for infringement is strong, then assembling as many sellers into one big group can save the patent owner significantly on both expense and time, knocking out whole groups of competitors at one time. For many patent owners, this could be an extremely enticing option, as bringing that many small sellers into
Further, where settlement is the desire, such as attempting to obtain a license from one or more sellers, patent owners may leverage the UPNEP process to force quick action on settlement negotiations, with the risk of the seller’s products being delisted from Amazon as a consequence of not taking prompt action on acquiring a license from the patent owner. This may also play into the decision as to whether to bring the UPNEP against one or a group of sellers, as it may be easier to negotiate with one seller, as opposed to a group of sellers.
Potential for Abuse
Of course, the Utility Patent Neutral Evaluation Procedure comes with the potential for abuse as well. Patent owners, even those with weak or otherwise questionable patents, may file actions against sellers, with the idea that at least some will not have the wherewithal to put up the $4,000 payment for the action, or be able to pay for counsel to prepare a response to submissions by the patent holder. Amazon is filled with small mom and pop sellers that would be unable to proceed and would have to accept licensing terms from the patent owner or have their product delisted.
Further, given the limited ways in which a seller can defend against the claims of the patent owner, which consist of a smaller subset of the entire list of arguments defendants in federal court actions can use, patent holders with otherwise invalid patents may wield them as a sword in these UPNEP proceedings without fear of invalidation. In fact, many non-practicing entities may look to capitalize on forcing settlement/licensing agreements with sellers, since there is no risk of invalidation through the UPNEP proceeding.
Finally, given the quick and tight deadlines, sellers may be under the gun to try to get representation and follow through with the filings in order to protect their listings. For those sellers not currently engaged with counsel, it could take precious time away from their ability to prepare an adequate defense to a patent owner’s claim. Where in federal courts or before the USPTO, a defendant can request extensions when counsel needs time to review a matter in full, that does not appear to be an option with Amazon’s UPNEP.
With all of the above said, however, nothing prevents sellers or patent owners from taking the matter to a federal court, ITC or the USPTO, if they do not get their way via Amazon’s UPNEP.
All-in-all, Amazon’s UPNEP is just one more way in which Amazon is getting serious about infringement on its platform. The UPNEP offers a very viable and cost-effective platform for both patent owners and sellers to adjudicate their rights quickly and relatively easily.
No matter whether you are a patent owner or an Amazon seller, it is important to consider retaining counsel for these disputes. Given the limited amount of back-and-forth, the short timelines, and the significance of what is on the line, ensuring that your submissions are as legally sound as possible is a must.
If you are a patent owner looking to file UPNEP complaints, speak first with a qualified patent attorney, preferably one with experience dealing with Amazon and sellers on Amazon. If you are a seller that has received a UPNEP action against one or more of your listings, the same goes – quickly obtain patent counsel to provide a substantive defense, as the dates will pass quickly, and the more time counsel has, the better job they can do to protect your rights.