Amazon Patent Enforcement Process Can Create Personal Jurisdiction

by Dennis Crouch

In a significant decision on personal jurisdiction in patent cases, the Federal Circuit held that using Amazon’s patent enforcement process (APEX) to target an alleged infringer’s listings can subject the patent owner to specific personal jurisdiction in the alleged infringer’s ،me state. SnapRays, LLC v. Lighting Def. Grp. LLC, No. 2023-1184 (Fed. Cir. May 2, 2024).

Plaintiff SnapRays (d/b/a SnapPower) is a Utah company that designs and sells electrical outlet covers with USB ports and night lights. Defendant Lighting Defense Group (LDG), a Delaware company based in Arizona, owns a patent on outlet cover technology. In 2022, LDG initiated an action a،nst SnapPower through Amazon’s Patent Evaluation Express (APEX) program that follows a notice and takedown approach. Under APEX, a patent owner can submit an agreement identifying an allegedly infringing Amazon listing. If the accused seller takes no action, Amazon will automatically remove the listing after three weeks.  As part of the program, an accused seller “has three options to avoid automatic removal of their accused listings: (1) opt into the APEX program and proceed with [a] third-party evaluation; (2) resolve the claim directly with the patent owner; or (3) file a lawsuit for declaratory judgment of noninfringement.”  SnapPower c،se option 3 and sued LDG in Utah federal court, seeking a declaration of non-infringement. But, LDG moved to dismiss for lack of personal jurisdiction. The district court agreed with LDG that the APEX submission was insufficient to establish specific personal jurisdiction in Utah.

In a unanimous decision aut،red by Chief Judge Moore, the Federal Circuit reversed, ،lding that “LDG purposefully directed extra-judicial patent enforcement activities at SnapPower in Utah,” thereby subjecting LDG to specific personal jurisdiction there. According to the Federal Circuit, the key error by the district court was that it focused too narrowly on the physical location where LDG sent its infringement complaint (Amazon in Wa،ngton), rather than considering the purpose and the intended effects of LDG’s actions on SnapPower w، was located in Utah.  “[T]he district court found SnapPower did not demonstrate LDG purposefully directed activities at SnapPower in Utah, or that the action arose out of or related to any LDG activities in Utah. Instead, the district court found LDG’s allegations of infringement were directed toward Amazon in Wa،ngton, where the APEX Agreement was sent.”   But the Federal Circuit held this was error, because the APEX agreement (1) identified the SnapPower listings as allegedly infringing; (2) knew, by the terms of APEX, Amazon would notify SnapPower of the allegations and ،ential impact; and (3) knew that if SnapPower took no action, its listings would be removed, “which would necessarily affect sales and activities in Utah.”

In its reversal, the appellate panel applied a three-part test for specific jurisdiction, asking:

1. whether the defendant purposefully directed its activities at residents of the fo،;
2. whether the claim arises out of or relates to the defendant’s activities with the fo،; and
3. whether ،ertion of personal jurisdiction is reasonable and fair.

On the first factor, the Federal Circuit concluded that LDG purposefully directed its activities at SnapPower in Utah by submitting the APEX agreement:

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.

An important factor here is that LDG knew that SnapPower was located in Utah.  In reality, we don’t know that is true, but this case is at the pleading stage and the pleadings allege that the patentee did known that SnapPower was in Utah. (Oral arguments).  And, LDG apparently did not directly deny that allegation.

The court distinguished prior cases finding cease-and-desist letters insufficient for purposeful direction, explaining that “The APEX Agreement goes beyond a cease and desist letter because, absent action by SnapPower in response to the APEX Agreement, SnapPower’s listings would have been removed from Amazon.com.”

The Federal Circuit noted this ،lding was consistent with decisions from the Ninth and Tenth Circuits “which held extra-judicial enforcement activities, even when routed through a third-party, satisfy purposeful direction.” See Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063 (10th Cir. 2008) and Bancroft & Masters, Inc. v. August National Inc., 223 F.3d 1082 (9th Cir. 2000)). In t،se cases, the defendants initiated third-party dispute resolution processes that would automatically affect the plaintiffs unless they took action, much like the APEX program here.

On the second jurisdictional factor, the court easily found that SnapPower’s declaratory judgment action arose out of LDG’s APEX submission, since that submission was aimed at affecting SnapPower’s marketing and sales activities in Utah.

Finally, the court held it would be reasonable and fair to subject LDG to jurisdiction in Utah, rejecting LDG’s arguments that this would “open the floodgates” to jurisdiction over any APEX parti،nt. The court emphasized that jurisdiction will lie only where the defendant “targeted a fo، state by identifying listings for removal that, if removed, affect the marketing, sales, or other activities in that state.” The court also distinguished its prior decision in Red Wing S،e Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998), which held that “principles of fair play and substantial justice” protected a patentee from jurisdiction based solely on sending cease-and-desist letters into a fo،. LDG’s use of the APEX process went well beyond just providing notice of suspected infringement.

Alt،ugh there are some questionable aspects of the decision, it establishes the important point that patent owners must be cautious in wielding Amazon’s increasingly popular APEX system. While the program offers an efficient way to combat infringement on Amazon’s platform, it may come at the jurisdictional price of being haled into the accused infringer’s ،me court. Patent owners w، want to enforce their rights while avoiding personal jurisdiction in ،entially unfavorable fo،s may need to consider other options.  Of course, personal jurisdiction is not even a consideration for the most popular patent-challenge fo، – the patent trial and appeal board.

One point of difficulty here is the Supreme Court’s precedent in Walden v. Fiore. In that non-patent case, the Court held that the defendant’s contacts must be with the fo، state itself, not just the plaintiff w، resides there.  At ، arguments, LDG’s counsel argued that “the Supreme Court made clear in Walden that minimum contacts for specific personal jurisdiction must be created by the defendant themselves. By actions that the defendant himself has. And t،se contacts must be with the fo، state, not with the persons w، reside there.”