In May 2024, the Court of Appeals for the Federal Circuit held in SnapRays v. Lighting Defense Group, that a patent owner's use of Amazon's APEX program against an accused infringer gave rise to personal jurisdiction over the patent owner in the district where the accused infringer resided. This case is a reminder to patent owners and accused infringers alike to be strategic in all forms of patent enforcement and defense in the U.S., and to keep in mind not only the advantages but also potential disadvantages of utilizing third-party non-judicial enforcement programs.
Amazon has a cost-effective patent enforcement program called the Amazon Patent Evaluation Express (APEX) (formerly called the Utility Patent Neutral Evaluation (UPNE) program) through which patent owners can enforce certain types of utility patents against sellers who sell infringing products on Amazon's online marketplace. Through this program a third-party neutral evaluator determines whether an accused product likely infringes one claim of a patent and, if so, then Amazon removes the listing from Amazon.com.
Patent owners can initiate APEX proceedings by submitting an APEX Agreement to Amazon, identifying one claim of one utility patent at a time and up to 20 allegedly infringing product listings. Upon receipt of an executed agreement, Amazon notifies accused sellers, and sellers have the option of (1) opting into an APEX neutral evaluation process, (2) resolving the claim directly with the patent owner; or (3) filing a lawsuit in a federal district court to seek declaratory judgment of noninfringement. If a seller takes no action whatsoever, Amazon removes the accused listings from Amazon.com after approximately three weeks.
Recently, in SnapRays d/b/a SnapPower v. Lighting Defense Group,1 the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit” or “CAFC”) addressed the question of whether a patent owner's use of Amazon's APEX program against an accused seller could give rise to personal jurisdiction over the patent owner in the judicial district where the seller resides. According to the CAFC, the answer to this question is unquestionably yes.
In SnapRays, patent owner LDG submitted an APEX Agreement alleging that certain SnapRays d/b/a SnapPower (“SnapPower”) products sold on Amazon.com infringed one of LDG's patents. After receiving Amazon's notification, SnapPower exchanged emails with LDG in an attempt to resolve the dispute directly, but was unable to reach resolution. Thereafter, SnapPower filed an action for declaratory judgment of noninfringement in its home state of Utah, a state where LDG was not located and had no business presence. Initially, LDG successfully had the case dismissed due to the district court's lack of personal jurisdiction over LDG. According to the district court, SnapPower had not shown that LDG purposefully directed activities at SnapPower in Utah or that the action arose out of or related to any LDG activities in Utah. Rather, the court found that if anything, LDG directed its activities toward Amazon in the State of Washington, because that is where LDG sent its APEX Agreement – to Amazon. The district court therefore concluded that LDG lacked sufficient contacts with Utah for the court to exercise specific personal jurisdiction over LDG. SnapPower appealed.
On appeal, the Federal Circuit reversed the district court's decision, finding that all factors were satisfied in the three-factor test for whether specific personal jurisdiction comports with the U.S. constitutional requirement for due process, namely “1) whether the defendant ‘purposefully directed' its activities at residents of the forum; (2) whether the claim ‘arises out of or relates to' the defendant's activities with the forum; and (3) whether assertion of personal jurisdiction is ‘reasonable and fair.'”2
The Federal Circuit found the first factor satisfied based on its findings that LDG purposefully directed its activities at SnapPower in Utah and intended effects that would be felt in Utah. Specifically, the court focused on the fact that LDG “intentionally submitted the APEX Agreement to Amazon,” identifying SnapPower products as accused of infringing LDG's patent, and LDG knew that Amazon would notify SnapPower in Utah of the APEX Agreement and inform SnapPower – in Utah -- of its available options. The Federal Circuit noted that if SnapPower failed to act, Amazon would remove its listings, “which would necessarily affect sales and activities in Utah.” Therefore, the Federal Circuit concluded that SnapPower had sufficiently alleged that LDG “undertook intentional actions that were expressly aimed at th[e] forum state,” and “foresaw (or knew) the effects of its action would be felt in” Utah.
The CAFC differentiated between cases involving the mere act of sending of cease-and-desist letters, which does not by itself give rise to specific personal jurisdiction, and this case. Specifically, the court focused on the fact that unlike cease and desist letters, which can be ignored without automatic consequences to an accused infringer's business activities, here, if SnapPower would have ignored Amazon's APEX Agreement notification, Amazon would have automatically removed SnapPower's listings from Amazon.com. This difference was important to the Federal Circuit's finding that LDG's actions were purposefully directed at residents of Utah, including SnapPower.
The Federal Circuit also found in SnapPower's favor on the second factor (i.e., whether the claim arises out of or relates to the defendant's activities with the forum) for the same reasons it found the first factor satisfied. The Federal Circuit next found in SnapPower's favor on the third factor (i.e., whether specific jurisdiction over LDG was “presumptively reasonable”). LDG's argument against reasonableness mainly hinged on the notion that allowing specific jurisdiction in this case would “open[] the floodgates of personal jurisdiction and allow lawsuits against any APEX participant anywhere in the country.” The CAFC was unpersuaded and explained that even if LDG was correct, that such a result would not be “inherently unreasonable.” The Court noted that parties who participate in APEX “will only be subject to specific personal jurisdiction in districts where they have targeted a forum state by identifying listings for removal that, if removed, affect the marketing sales, or other activities in that state.” The CAFC concluded that LDG had not presented any compelling argument for why such a result would be unreasonable.
The Federal Circuit also addressed concerns that its holding in this case would be at odds with the policy of Red Wing Shoe,3 an earlier Federal Circuit case that held principles of fair play and substantial justice protected a patentee from being subject to specific personal jurisdiction in a forum where the only contact with the forum was sending a cease-and-desist letter. Again, the court emphasized as an important difference the fact that LDG initiated a process that would automatically result in SnapPower's listings being removed from Amazon.com if SnapPower were to do nothing, which the CAFC viewed as being different from merely sending a cease and desist letter.
The important lesson of the SnapPower case, is that a patent owner's voluntary participation in the Amazon APEX program will subject that patent owner to specific personal jurisdiction in states in the U.S. where the accused sellers reside. Thus, if a seller wants to file a suit for declaratory judgment of noninfringement, invalidity, or unenforceability in their own home forum state, the patent owner who invoked Amazon's APEX program in the first place will not be able to dismiss the suit on the basis of lack of personal jurisdiction. Patent litigators and advisors must consider this consequence of using Amazon's APEX program. That being said, SnapPower does not affect any other ways to quickly dispose of such a lawsuit, nor does it mean that it will become more common for sellers to file declaratory judgment actions. This case is a good reminder to patent owners to be strategic about enforcement activities involving third-party non-judicial enforcement programs, and to be mindful of where they are exposed to specific personal jurisdiction, so that well-informed business decisions can be made. It is also a good reminder to sellers on Amazon that there are plenty of options available when it comes to APEX proceedings—which option is the best under the circumstances will always depend, of course, on the specific facts of a particular case.
Footnotes
1. ___ F. 4th ___, 2024 WL 1916631 (Fed. Cir. 2024).
2. Xilinx, Inc. v. Papst Licensing GmbH & Co. KG, 848 F.3d 1346, 1353 (Fed. Cir. 2017).
3. Red Wing Shoe v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360–61 (Fed. Cir. 1998).
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