Abstract
A Washington court recently held that Amazon was not liable for patent infringement when other companies sold infringing goods on Amazon's website because it found that Amazon itself did not offer to sell infringing goods or engage in any other infringing acts.
Patent infringement can occur by making, using, importing, offering
to sell, or selling a patented product. If the infringing act is
offering to sell an infringing product, it is imperative to
identify who made the offer in order to properly assign liability.
In the e-commerce marketplace, this can be complicated.
Recently, in Milo & Gabby v.
Amazon.com,1 the U.S. District Court for the
Western District of Washington found that Amazon did not
"offer to sell" goods that third-party retailers offered
to sell or sold onAmazon.com. However, the court stated that it was
"troubled" by its own decision and its potential
implications on patent infringement law in an era of ecommerce.
Background
Milo & Gabby, LLC (Milo & Gabby) sued Amazon.com
(Amazon) for design patent infringement, accusing Amazon of
infringing its protected animal-shaped pillows. Milo & Gabby is
a small, family-owned business that has design patent protection
for its line of children's products, which are combinations of
stuffed animals and pillows. The case began when a foreign
manufacturer made copies of the pillows and created sale listings
on the Milo & Gabby, LLC (Milo & Gabby) sued Amazon.com
(Amazon) for design patent infringement, accusing Amazon of
infringing its protected animal-shaped pillows. Milo & Gabby is
a small, family-owned business that has design patent protection
for its line of children's products, which are combinations of
stuffed animals and pillows. The case began when a foreign
manufacturer made copies of the pillows and created sale listings
on the Amazon.com platform.
Amazon allows third party sellers to list, sell, and distribute
products to Amazon customers. The sellers create their own listings
and set the product price. Amazon gives the sellers the option to
ship their products to customers directly or to use the
"Fulfillment by Amazon" (FBA) service. If the seller
elects FBA, Amazon handles storage, shipping, and returns of the
product.
The counterfeit goods were almost indistinguishable from the Milo
& Gabby pillows, and the product listings on Amazon's
website even used Milo & Gabby's original product images.
Some sellers of the counterfeit products chose the FBA program and
elected for Amazon to store and ship the goods itself. When Milo
& Gabby became aware of the listings and informed Amazon,
Amazon investigated the accusations and removed the products from
its online store.
Milo & Gabby sued Amazon for offering to sell the allegedly
infringing products on Milo & Gabby, LLC (Milo & Gabby)
sued Amazon.com (Amazon) for design patent infringement, accusing
Amazon of infringing its protected animal-shaped pillows. Milo
& Gabby is a small, family-owned business that has design
patent protection for its line of children's products, which
are combinations of stuffed animals and pillows. The case began
when a foreign manufacturer made copies of the pillows and created
sale listings on the Amazon.com platform.
The Milo & Gabby Decision
Selling and offering to sell infringing products are distinct
acts of patent infringement. Offering to sell an infringing product
is an infringing act even if the offer is never accepted or the
product is never sold. Whether there has been an offer to sell is a
question that courts decide, but is based largely on factual
questions that the jury decides.
After a three day trial, the jury determined that Amazon did not
communicate or set the price, description, or quantity of the goods
and did not otherwise indicate that it was willing to enter a
bargain to sell the goods. Accordingly, the jury determined that
Milo & Gabby had not proven that it was more likely than not
that Amazon had offered to sell the infringing products.
Considering the jury's findings, the court held that Amazon had
not offered to sell the allegedly infringing products. The court
expressed "difficulty" in reaching this decision and
admitted that it was "troubled by its conclusion and the
impact it may have." Specifically, the court was troubled that
under current law, Amazon could allow sellers to list and sell
almost anything on its platform and still avoid responsibility for
offering to sell potentially infringing products. The court
observed that this is an example where "the law lags behind
technology" and suggested that Congress, rather than the
courts, should address the issue.
Strategy and Conclusion
The Washington court concluded in this instance that Amazon was
not liable for patent infringement when other companies sold
infringing goods on Amazon's website. While this conclusion
provides some guidance to online retailers, the court's
discomfort in reaching the conclusion creates uncertainty in
whether it or other courts would reach the same conclusion in
related cases, particularly if the facts are different or if a jury
reaches a different conclusion based on the facts before them as to
the involvement of the online retailer in the offer or the sale of
infringing products. The broader effect of the decision is also
uncertain in light of an appeal of the decision to the Federal
Circuit, possible legislative action that may result from the
court's suggestion that Congress address the issue due to the
court's perception that the law is lagging behind the current
technology in the marketplace, and possible public reaction to the
court's decision and the effect of that reaction on Congress
and the courts.
Footnotes
1 The Milo & Gabby decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/wawd-2-13-cv-01932-152.pdf.
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