In May 2024, the Federal Circuit issued a decision concerning a patentee’s use of Amazon’s patent enforcement process, called APEX.
Briefly, Amazon has a low-cost procedure, the Amazon Patent Evaluation Express Procedure, or APEX, that is meant to resolve patent infringement issues for products sold on Amazon’s website. The process is meant to take only 7 weeks to get a final disposition, and costs $4000. There are several other private sales-channel enforcement processes that are becoming more popular, given the low cost and relative quickness of getting a resolution.
LDG, a Delaware LLC with headquarters in Arizona, is the owner of a patented electrical receptacle with additional functions. SnapPower, a Utah company designs, markets and sells electrical outlets as well, and uses Amazon.com as a sales channel.
In May 2022, LDG submitted an APEX challenge alleging SnapPower sold products on Amazon infringing one of LDG’s patents. Amazon notified SnapPower and both LDG and SnapPower exchanged emails and held a conference call but came to no agreements.
SnapPower subsequently filed an action for declaratory judgment of non-infringement in its home state of Utah. LDG asked to have this dismissed for lack of personal jurisdiction, which the district court granted. The court said LDG’s allegations were directed towards Amazon in Washington, where the APEX agreement was sent.
But the Federal Circuit reversed the district court’s decision on jurisdiction.
The court laid out a three-factor test for whether specific personal jurisdiction comports with due process:
1) whether the defendant purposefully directed its activities at residents in the forum,
2) whether the claim arises out of, or relates to, the defendants’ activities in the forum, and
3) whether assertion of personal jurisdiction is reasonable and fair.
The first two factors comprise the ‘minimum contacts’ portion of the jurisdictional framework. If those are satisfied, then specific jurisdiction is “presumptively reasonable”. The burden then shifts to the defendant to present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.
SnapPower argues that LDG purposefully directed enforcement activities at Utah when it initiated the APEX program. The court agrees that LDG did so, intending effects which would be felt in Utah, so the first element is satisfied.
LDG argues SnapPower’s action for declaratory judgment of non-infringement does not arise from, or relate to, any activity by LDG in Utah because the APEX agreement was sent to Washington, not Utah.
The court held however, that LDG’s actions in submitting the APEX agreement was directed towards SnapPower in Utah and aimed to affect marketing, sales, and other activities in Utah, SnapPower’s suit arises out of the defendants’ activities within the forum. The second element is now satisfied.
With the first two elements being satisfied, specific jurisdiction is presumed reasonable.
LDG, however, argues it is unfair and unreasonable. Ruling for SnapPower in this instance would open the floodgates of personal jurisdiction and allow suits against any APEX participant anywhere in the country. The district court agreed with LDG, noting that principles of fair play afford a patentee latitude of its patent rights without subjecting itself to jurisdiction in a foreign forum. The Federal Circuit, however, disagreed and ruled that LDG did not meet its burden to present a compelling case of other considerations that would render jurisdiction unreasonable. First, the Federal Circuit contested that the floodgates would be opened on personal jurisdiction, and second, disagreed that such a thing would be inherently unreasonable. The Federal Circuit said LDG initiated a process in APEX that, if SnapPower had taken no action, would have affected sales in Utah. LDG has not articulated a compelling argument for why it would be unfair or unreasonable for it to be subject to specific personal jurisdiction in Utah under these circumstances.