Amazon’s Patent Evaluation Express (APEX) Program Has Declaratory Judgment Action Risks for Patent Owners

Amazon’s Patent Evaluation Express (APEX) program provides an expedited and low-cost tool for patent owners to stop the sale of infringing products on Amazon’s platform. But low cost does not mean low risk. The U.S. Court of Appeals for the Federal Circuit’s recent decision in SnapPower v. Lighting Defense Group, 2023-1184 (Fed. Cir. May 2, 2024), confirms that one risk to a patent owner of availing itself of the APEX program is that it may expose the patent owner to declaratory judgment actions outside their home forum.

In SnapPower, a Delaware company initiated an APEX enforcement proceeding against a Utah-based seller of electrical receptacle covers. When a patent owner initiates an APEX proceeding against a seller on Amazon’s platform, Amazon sends the Agreement to all identified sellers with three options for the sellers: (1) opt into the third-party APEX proceeding; (2) resolve the claim directly with the patent owner; or (3) file a lawsuit for declaratory judgment of noninfringement. If a seller takes no action within three weeks, Amazon will remove the accused product listing from its platform. In the case of SnapPower, the accused infringer opted to file a declaratory judgment action in Utah. The patent owner moved to dismiss for lack of personal jurisdiction, and the U.S. District Court for the District of Utah granted LDG’s motion. The accused infringer then appealed. The Federal Circuit reversed and remanded the district court’s finding.

The Federal Circuit concluded that the patent owner, by initiating an APEX proceeding, necessarily affected “sales, marketing, and other activities” of the accused infringer. In particular, the court concluded that the patent owner had purposefully directed its enforcement activities at the accused infringer in Utah. The court explained that the patent owner knew that Amazon would notify the accused infringer and inform it of its options. The patent owner also knew that if the accused infringer took no action, its Amazon listings would be removed, which would necessarily impact its marketing, sales, and other activities within Utah. Ultimately, the patent owner’s intentional actions directed at Utah and the foreseeable impact on the accused infringer’s activities in Utah subjected the patent owner to declaratory judgement action in Utah.

The APEX program does offer some advantages for patent owners. For one, it’s an expedited process that is typically completed within a couple of months. The process is presided over by a neutral attorney who is experienced in U.S. patent disputes. There is no discovery and the dispute is resolved based on briefing submitted by the parties, which includes an opening brief by the patent owner, a rebuttal brief by the accused infringer, and a reply by the patentee. If the patentee prevails, Amazon immediately delists the accused products. The ability to stop infringing sales within a couple of months is a potent tool for a patentee, and something not available in district court unless a party is able to persuade a court to grant a temporary restraining order.

While speed is one important consideration, APEX proceedings are also substantially less expensive because there is no discovery available and the substantive legal work is limited to two briefs for the patentee, and one brief for the accused infringer. Moreover, the program limits the evaluation to a single patent claim.

Another advantage of the APEX program for patentees is that an accused infringer’s defenses are sharply curtailed. Invalidity or unenforceability are not available defenses unless there is a prior finding of invalidity from a U.S. district court, the Patent Trial and Appeal Board, or the International Trade Commission. The only other defense available to an accused infringer is if it can demonstrate that its products were actually on sale one year before the earliest effective filing date. This requires independently verifiable evidence, such as an earlier Amazon listing, and evaluators will not accept testimonial evidence.

There is also no procedure for reconsideration of an evaluator’s decision. If either the patentee or the accused infringer do not prevail in the APEX program, their only recourse is to go to U.S. district court. Once Amazon has delisted a product due to an APEX proceeding, it will only relist the product if there is a subsequent court decision that conflicts with the evaluator’s infringement finding.

Despite these advantages to a patent owner of using an APEX enforcement proceeding to stop infringing sales, patent owners should still consider the impact of the Federal Circuit decision in SnapPower. A patent owner will be opening itself up to the risk of having to defend a declaratory judgment suit in any jurisdiction where an accused infringer may reside. While not every seller on Amazon may have the means or incentives to bring a declaratory judgment suit, the SnapPower decision makes it easier by allowing the infringer to bring suit in its home forum.