Navigating Amazon’s Neutral Patent Evaluation in Real Life: Part I

You come up with a brilliant idea for an invention, pour your heart and soul into reducing it to practice and spend a great deal of time and money to get a patent. You receive the patent registration certificate, frame it and hang it on your wall. You think, “This is great! I’ve got a patent and now no one can copy my invention!” You form a company and start selling your new product online. A few months later, you log on to your Amazon.com account and see that some seller in some far away country is offering your exact product on amazon.com. Now what?

This is the all too familiar story clients often face, and the exact situation one of my clients—we’ll call him Bill—brought to me a few months ago. Luckily, Amazon provides weapons for patent owners like Bill to deploy in order to combat patent infringement on Amazon. Amazon’s latest tool offered to its authorized sellers is called the “Neutral Patent Evaluation Process.” In part one of this series of articles, I will outline the preliminary steps I took to initiate Amazon’s “Neutral Patent Evaluation Process.”

Background

Bill discovered certain sellers on Amazon were selling and offering for sale infringing products in early October 2019. He wanted the accused products removed from Amazon before Black Friday, the kickoff to the holiday shopping season. After I conducted an infringement analysis and determined that the products listed on Amazon were in fact infringing, Bill and I devised a two-prong plan of attack. First, we decided I would send cease and desist letters to all the infringing sellers. We decided that if a seller responded to the cease and desist letter with a desire to amicably resolve the infringement issue, I would send an agreement in which the seller would agree to remove the infringing products from Amazon by a certain date. However, if the seller chose not to comply, we decided we would move to prong two—the “Neutral Patent Evaluation Process” offered by Amazon.

The Process

The Neutral Patent Evaluation Process is a relatively new program launched by Amazon in 2019. It is limited to utility patents, is confidential, voluntary and comparatively low-cost (compared to federal patent litigation or the process to stop the importation of infringing products at the border). The Neutral Patent Evaluation Process is limited to one claim from one unexpired U.S. patent and follows this basic structure:

1. The patent owner requests to participate in Amazon’s Neutral Patent Evaluation Process.
2. The patent owner also submits a statement identifying the accused infringing products by their Amazon Standard Identification Number (or ASIN) and explains how the products infringe the patent. The number of products a patent owner may accuse is limited to 50 products.
3. Upon receipt of the patent owner’s request and the list of accused products, Amazon sends a neutral patent evaluation agreement to the patent owner and the infringing seller(s). Both must complete and execute this agreement in its entirety. The infringing seller has a three-week period of time to consider the agreement and to notify Amazon whether it agrees to participate in the Neutral Patent Evaluation Process. If the seller agrees to the evaluation, its listings remain active until the conclusion of the neutral evaluation. If, however, the seller does not comply with the agreement, or if the seller does not agree to participate in the evaluation process, the listings for the seller’s accused products are removed from Amazon’s marketplace.
4. If both parties agree to participate in the neutral evaluation, Amazon selects a neutral third-party patent lawyer and requires each party to pay the evaluator a $4,000 deposit.
5. After both parties pay the deposit the evaluator, the evaluator establishes a schedule for the submission of written arguments by both parties. Generally, the patent owner has 21 days to submit its initial arguments, the seller has 14 days to respond, and the patent owner has 7 days to optionally reply. No modifications to the schedule are permitted. The evaluator must announce his or her decision within 14 days of the patent owner’s reply deadline. The evaluator determines that the patent owner is or is not likely to prove that the accused product infringes the asserted claim. The evaluator only provides an explanation for the decision if he or she decides in favor of the seller. Some reasons the evaluator may cite for deciding in favor of the seller include: (1) the accused product does not infringe (i.e., it does not include all elements of the asserted claim); (2) a court has found the patent invalid or unenforceable; or (3) the accused products (or physically identical products) were on sale more than one year before the earliest effective filing date of the patent.
6. If the evaluator determines that the accused product infringes the patent, Amazon will take down the listings for the accused products.
7. If the evaluator’s conclusion is in favor of the seller, the accused products will remain listed on Amazon.
8. The prevailing party in the Patent Neutral Evaluation Process is refunded the $4,000 deposit. The $4,000 deposit from the losing party is retained by the evaluator. If there are multiple sellers who paid the $4,000 deposit but did not prevail, a total of $4,000 is retained by the evaluator. The remaining amount in excess of the $4,000 deposit is donated to an Amazon Smile charity of the patent owner’s choice. Amazon does not retain any portion of the deposit.
9. The losing party may not file an appeal or request reconsideration. However, the patent owner may commence a federal court action for patent infringement or the seller may file a federal declaratory judgment action as to infringement or validity of the patent.

So Far So Good—Steps 1 Through 3

On October 30, 2019, Bill and I sent a letter to the “Amazon.com Legal Department” asking Amazon to initiate and allow Bill to participate in the Neutral Patent Evaluation Process. In the letter, we identified Bill’s patent, listed the accused products by their ASIN numbers and described how the seller’s products were infringing claim one of Bill’s patent. We additionally included the complete patent infringement analysis, which consisted of drawings from the patent and photographs of the infringing products. Finally, we described how Bill has already sustained significant damages from the sale of the infringing products on Amazon and argued that he would continue to be harmed if Amazon did not take down the listings for the accused products.

The very next day, Amazon sent the following correspondence to the infringing sellers requesting that they each contact Bill directly to resolve this matter:

After Amazon sent this correspondence to the infringing sellers, many of them contacted Bill and myself in an effort to reach a resolution. However, several sellers disagreed with my analysis and refused to take down their infringing products. (One in particular accused Bill of “bullying him” because he was the “little guy” in the industry. Yet, Bill, too, is a “little guy” and merely wished to protect and enforce his hard-earned patent rights.) Others completely ignored Amazon’s suggestion to contact us.

On November 19, 2019, we sent Amazon a follow-up letter to update them with a list of those sellers with whom we did not reach a resolution, those who disagreed with my patent infringement analysis and those who ignored us entirely. We explained to Amazon that we wanted to pursue the Neutral Patent Evaluation Process with the remaining sellers.

On December 4, 2019, Amazon sent the following notice to Bill inviting him to participate in the Neutral Patent Evaluation Process:

The evaluation agreement attached to Amazon’s email was sent not only to Bill but also to the infringing sellers. Amazon requested basic information from both parties including names, addresses, contact information, and the ASIN numbers of the accused products. Bill submitted his completed and executed evaluation agreement on December 12, 2019.

On December 17, 2019, Bill received the following correspondence from Amazon, which describes the next steps of the Neutral Patent Evaluation Process:

The evaluation agreement attached to Amazon’s email was sent not only to Bill but also to the infringing sellers. Amazon requested basic information from both parties including names, addresses, contact information, and the ASIN numbers of the accused products. Bill submitted his completed and executed evaluation agreement on December 12, 2019

From December 17, 2019 to the beginning of January 2020, Bill and Amazon continued to communicate with each other about the evaluation process. Then, on January 7, 2020, Amazon sent Bill an email informing him that “the sellers were notified and invited to participate [in the evaluation process] on 1/1/20” and that the sellers “have 21 days to [notify Amazon whether they agree to join in the evaluation].” Amazon closed by stating “[w]e will be back in touch with you following [the sellers’] response deadline of 1/22/2020 to let you know whether or not the case will proceed to the evaluation phase.”

Cliffhanger

Now, we wait to see which sellers, if any, wish to participate in the process. If a seller agrees to the evaluation, Amazon will select a neutral patent evaluator from a list of attorneys experienced in patent disputes. At that point, Bill and the sellers will each receive from Amazon instructions on how to wire the $4,000 deposit to the evaluator. If a seller does not participate in the neutral evaluation or does not comply with the evaluation agreement by January 22, 2020, Amazon intends to remove that seller’s listings of the accused products from the Amazon marketplace.

Thus far, having completed steps 1 through 3, Bill and I have been quite pleased with Amazon’s Neutral Patent Evaluation Process. Amazon has been very prompt and responsive in assisting us with this patent dispute. Bill and I look forward to working with Amazon and completing the next steps, if necessary. Stay tuned for an update in my next installation of this series to see how it all pans out (now available here).