read about Amazon's new patent neutral evaluation procedure and how to use it to protect your business.

Amazon’s Patent Neutral Evaluation Procedure: What You Need to Know

In April 2019, Amazon unveiled its Patent Neutral Evaluation Procedure, designed to enlist private attorneys in resolving disputes through an arbitration procedure between utility patent owners and sellers on the Amazon Marketplace.

Given that the Amazon Marketplace is the largest online retailer in the United States, capturing nearly 68% of all online sales, it is no wonder that intellectual property holders, including patent owners, must exercise constant diligence in monitoring the site for counterfeit goods.

On the other hand, sellers of these products, many of whom rely on the platform for their sole livelihood, must also guard against potential claims of infringement or risk significant cuts to their income.

Amazon’s newest intellectual property tool gives these parties tools to resolve potential disputes by utilizing a private patent attorney as an arbitrator, which can lead to speedier resolutions of disputes, saving time and money for both parties.

Currently, the Patent Neutral Evaluation Procedure is in a test phase and is only open by invitation. Initial reports of the program, which was quietly rolled out in the fall of 2018, are positive, indicating that the rollout will likely expand in the coming year.

Regardless of whether you are an intellectual property holder or a seller on the Amazon Marketplace, here is what you should know about this new evaluation procedure.

Patent Neutral Evaluation Prerequisites and Initiation

In order to participate in the program, the intellectual property holder must hold a utility patent, which protects the functional aspects of an invention.

This utility patent is referred to as the “Asserted Patent,” and allegedly infringing products are referred to as the “Accused Products.” Although each evaluation procedure may target Accused Products sold by multiple sellers, it can only consider one Asserted Patent.

Currently, the evaluation procedure is only able to consider utility patents, not design patents, which protect ornamental or non-functional creations. Utility patents must have an active US registration in order to be eligible for participation. To learn more about the different types of patents, this blog post has a detailed overview.

The rights holder, known as the Owner, initiates the procedure by submitting an agreement to participate in the program.

When submitting the agreement, the Owner must include:

  • The Owner’s name and physical address, along with the contact name and email address for the individual responsible for communications
  • Names of any corporate parents, subsidiaries, or other related entities
  • The US utility patent number for the Asserted Patent the Owner wishes to have evaluated
  • The patent claim number, and
  • The Amazon Standard Identification Number (ASIN) of the Accused Product(s).

Once Amazon receives the information from the Owner, it will contact each account listing the Accused Products for sale. The owners of these accounts, known as Sellers, receive an identical agreement, which they must return within three weeks.

When returning the agreement, the Sellers must include:

  • Their name and physical address, along with an individual’s name and email address for communication
  • Names of any corporate parents, subsidiaries, or other related entities
  • The ASINs for any Accused Products for which the Seller agrees to participate in the evaluation procedure.

Once the Owner and Seller(s) submit their paperwork and the deposit, Amazon will select a qualified patent attorney, who acts as the evaluator for the process. Each side will wire $4,000 to the attorney, to be held in escrow during the pendency of the evaluation procedure. If multiple Sellers are participating in the procedure, the $4,000 will be split equally among them.

Sellers who do not return the form within three weeks, or who fail to pay the deposit, will have any Accused Products removed from their marketplace accounts, and the Owner’s deposit will be returned. If the Owner fails to pay the deposit, the Seller’s deposit will be returned, and no action will be taken against the Accused Products.

If the parties complete all portions of the evaluation, the “winning” party will receive their deposit back, and the “losing” party’s deposit will be paid to the attorney, as his or her fee. Amazon will not take any portion of this fee.

Patent Neutral Evaluation Procedures

The Patent Neutral Evaluation procedure lasts approximately four months and has strict deadlines. It is important for the parties to adhere to these deadlines; missing one could result in forfeiture of the case as well as the $4,000 deposit.

In general, the parties will provide written arguments, which the attorney evaluator will review. Unlike court trials, there is no discovery or oral arguments; this is the parties’ only opportunity to have arguments heard.

Although the parties may not speak independently to the evaluator, they may speak to one another regarding the possibility of amicably settling their differences. If an agreement is reached, the evaluator may keep up to $1,000 of the deposit from each party, to compensate him or her for work completed.

Timeline for Written Submissions

After all parties have agreed to participate in the evaluation procedure, they will submit written arguments. A typical schedule for these arguments may be divided as follows:

  • Owner: 21 days to submit initial arguments
  • Seller: 14 days to respond
  • Owner: Seven days to reply

Written submissions will have page limitations and formatting requirements to which the parties must adhere. While they may submit photographs or charts as evidence to support their claims, neither party may submit physical evidence; the attorney evaluator may only consider electronic submissions.

The Owner’s Arguments

The Owner’s goal is to convince the attorney evaluator that the Accused Product likely infringements upon the Asserted Patent. This can be done by explaining what the patent protects – what is listed in the patent claims – and demonstrating that the Accused Products have each of these elements present.

Typically, the Owner will present the patent grant, along with photographs and illustrations of both the patented item and the Accused Item. When building their cases, Owners will often purchase the Accused Products through the Amazon Marketplace in order to more conclusively demonstrate their infringement claims.

Owners should consider building their case from the moment they discover the infringing action to prepare the best arguments and evidence possible.

The Seller’s Defense

In formulating a defense, the Seller may only raise three claims.

First, the Seller can argue non-infringement based on utility patent claim limitations. A patent owner can only assert ownership over the portions of an invention covered in the patent grant. To make this argument, the Seller needs to analyze the Asserted Patent’s claims and demonstrate that one or more claimed elements are not present in the Accused Products.

Second, Sellers can present evidence that a court, the US Patent Office, or the International Trade Commission (ITC) has determined that the patent is invalid or unenforceable. The attorney in Amazon’s Patent Neutral Evaluation program is unable to make this decision.

Third, Sellers can present evidence that the Accused Product, or products that are physically identical to the Accused Product, was on sale for at least one year before the Asserted Patent’s effective filing date. This can be done by providing the date of first sale on the Amazon Marketplace or through archival websites such as the Wayback Machine. The attorney evaluator is unable to consider affidavits or declarations in their role.

The Evaluator’s Decision and Conclusion of Proceedings

When reviewing submissions, the evaluator will make a determination as to whether the Accused Product likely infringes on the Asserted Patent. This decision will be rendered within 14 days of receipt of all written submissions. Unlike in court, there is no requirement that the Owner prove its case by a preponderance of the evidence. Instead, the evaluator is able to weigh all evidence and issue one of two rulings, as he or she sees fit.

First, the evaluator may decide that the Accused Product likely infringes the Asserted Patent.

Second, the evaluator may decide that the Asserted Patent does not cover the Accused Product. This could be for one of three reasons:

  • The Accused Product does not infringe on the Asserted Patent because each of the patent claims are not present in the Asserted Product.
  • A court, the US Patent Office, or the ITC have issued a finding or ruling that the patent is invalid or unenforceable.
  • The Accused Products were on sale more than one year before the earliest effective filing date of the Asserted Patent.

If the evaluator finds that the Accused Products likely infringed on the Asserted Patent, Amazon will remove these items from the Marketplace within 10 business days of receiving the decision. If there is no finding of likely infringement, Amazon will take no further action.

After the evaluator reaches a decision, he or she will return the deposit to the victorious party, retaining the $4,000 from the other side as compensation for his or her time.

Patent Neutral Evaluation does not foreclose either party from gaining further or different relief. Although Amazon does not provide an internal opportunity for appeal for the evaluator’s decision, it will honor subsequent federal court decisions and formal arbitral awards regarding patent infringement.

For example, if the evaluator determines that the Accused Product likely does not infringe the Accused Patent, but a court later determines it does, the Owner can present this order to Amazon, which will then remove the Accused Product.

However, the parties should be cautious to reveal information about the internal evaluation procedures. The initial agreement contains confidentiality language, and prevents the parties from seeking discovery relating to the evaluation in later court cases.

Benefits of Participation

One of the major benefits of participating in this program is that it is a relatively streamlined process. Although it can take a number of months from start to conclusion, this timeline is significantly shorter than a federal intellectual property court case, which could take more than a year to conclude. This process is also significantly cheaper than patent litigation, which can easily become unaffordable for small business owners.

Importantly, this process gives both Owners and Sellers a chance to argue their cases in front of a neutral party. By working with an experienced patent attorney, the parties can be assured that their positions will be dealt with in a thoughtful manner by someone who understands the issues. Patent infringement issues, due to their scientific and technical nature, have the potential to become complicated quickly. As a result, it is important to work with someone qualified to take them on.

This is particularly beneficial to innocent sellers, who may unfairly be the targets of their competitors. Under previous policies, seller accounts may be closed during investigations, which could severely impact their livelihoods. Owners may dislike having Accused Products on sale during the procedure, but the relatively quick timeline has the potential to offer speedier relief than a preliminary injunction would.

Owners who file a claim through the Patent Neutral Evaluation program may also get lucky: Sellers who know that they are distributing counterfeit goods may decide not to participate, which would trigger automatic removal of these products from the Marketplace.

Although the process does not allow as much nuance into the infringement analysis as formal litigation does, the parties do not waive any rights to pursue their claims in court, with the US Patent Office, or before the ITC. As a result, the dispute has the potential to be considered both within the Patent Neutral Evaluation program and before a more formal tribunal relatively simultaneously.

Other Amazon Intellectual Property Protections

The Patent Neutral Evaluation program is one of several protections Amazon has put into place to balance the rights of intellectual property holders against those of Marketplace sellers. Amazon has already instituted programs designed to protect other forms of intellectual property.

One example is its Brand Registry Program, which provides tools that allow trademark owners to more effectively control product listings and search for potential infringers. This program is open to trademark owners who have registered their marks. Amazon also has tools allowing copyright, trademark, and patent owners to report infringement, in order to combat counterfeiters.

As more and more people turn to e-commerce sites like the Amazon Marketplace, programs such as the new Patent Neutral Evaluation procedures will be increasingly important to resolving intellectual property disputes in e-commerce.

If you need to speak with an attorney about options for intellectual property rights protection on e-commerce platforms, click here to email us, or call 855-473-8474.

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