Is Amazon’s APEX the Top Option for Patent Rights?

By: Nicholas Lipperd

Are more avenues to resolve patent disputes a good thing? Patent litigation is a process that can easily cost millions of dollars and which lasts years; it is not exactly an option available to every patent holder. Even with the availability of arbitration, options to protect patents remain limited. Amazon has determined that a private patent evaluation program is a good thing, at least for its Amazon Marketplace. After beta-testing for three years under the name “Utility Patent Neutral Evaluation (UPNE),” Amazon formally implemented its Amazon Patent Evaluation Express (“APEX”) system in 2022, which allows sellers to flag possibly infringing products for Amazon to analyze without the use of the judicial patent system. This system advertises cheap, fast, and fair outcomes to sellers on Amazon Marketplace asserting their utility patent rights, yet has drawn criticism for disproportionately one-sided outcomes leading to its use as a retaliatory tool. Does the fact that this cheap, quick process reduces barriers to litigation offset these shortcomings? Should Amazon make changes to its process to achieve more balanced results?

A case brought in Federal Court for patent infringement takes two to four years to adjudicate, not including an additional year if an appeal is sought. Intrinsically tied to this lengthy timeline is the hefty price tag. Though the median cost for patent infringement cases with $1 million-$10 million at risk fell 250% from 2015 -2019, a full patent trial will still average $1.5 million. How does a patent holder without such resources assert the patent’s rights? Arbitration or mediation are cheaper options, at $50,000 on average, but often requires the other side to agree to participate. When the patent owner wants the patent rights asserted within Amazon Marketplace, though, the owner generally has a cheaper and faster option.

Amazon’s APEX program allows patent holders to have their patents examined by a neutral third-party patent examiner, rather than the United States Patent and Trademark Office (“USPTO”). APEX begins with the patent holder submitting a complaint through Amazon’s Brand Registry, providing the Amazon Standard Identification Numbers (ASINs) of the allegedly infringing sellers and upon which claim in which patent the holder believes the ASINs infringe. For each alleged infringer, Amazon sends a notice and allows up to three weeks for a response. Should Amazon receive no response, such products will be automatically delisted, similar to a default judgment. Upon receipt of the response, an evaluator independent of Amazon and each party is assigned to the issue, and each side is required to pay a $4000 fee, refundable to the winner. The patent holder gets three weeks to submit arguments. The sellers then have two weeks to respond, with the patent holder given one week to submit an optional reply. The evaluator then decides within two weeks, making only the determination if the sellers’ products likely infringe on the patent holder’s claim. It is noteworthy that the APEX evaluator does not make any determination on the validity of the claims in the patent at issue. If the evaluator decides in favor of the seller, the product stays on the platform; if not, the products are removed. There is no appeal process from the evaluator’s decision. The entire process takes fewer than three months, and at a price tag of $4000 per party, creates a fiscal barrier of a fraction of the cost of formal patent litigation.

This process is not, though, without its drawbacks. The patent holder wins a disproportionate amount in APEX proceedings, creating incentives to initiate the process without valid claims. Because the evaluator does not look at the validity of the asserted patent, the accused sellers can do nothing but play defense. In legal terms, they are without the affirmative defense of invalidity. They can’t win, they can only hope to survive. Further, the evaluation is not subject to formal rules like the Federal Rules of Civil Procedure or the Federal Rules of Evidence. The evaluators are hired for their expertise in the patent field, not for their investigative skills in the information provided. With no process of verification from Amazon, patent holders are submitting fraudulent information to obtain favorable judgments. With loose evidentiary rules, a low fiscal barrier, and no chance for the patent to be ruled invalid, the incentives all line up for patent holders to abuse this process, especially considering there is no chance for appeal. Should a competitor be cutting significantly into profits, $4000 is a very low risk for a possibly high reward of ejecting your competition from the market. Tortious interference claims stemming from the APEX process are already coming to light. 

Perhaps the most well-known legal spat involving Amazon’s patent evaluation process is the case of Tineco Intelligence Tech. Co. v. Bissell Inc. (W.D. Wash, 2022). Bissell is a US company that sells vacuums, and Tineco is a Chinese company that does the same. When Bissell initiated a UPNE proceeding, Tineco ignored it, leading to the automatic removal of its products. Tineco moved for a ruling in district court that Bissell’s patent claims were invalid and that their products did not infringe. Luckily, perhaps in part because of the sheer volume of business both entities do, Amazon deviated from its set UPNE/APEX process and reinstated Tineco’s listings before the District Court case finished, though U.S. International Trade Commission (“ITC”) proceedings continued. This case and Amazon’s deviation are seen by some as the exception to the rule. Many entities are still using APEX as a hammer to bludgeon competition into settlements and licensing agreements, despite the tortious interference claims that sometimes follow.

Amazon’s APEX has the potential to be the first of many commercial patent dispute programs due to its budget-friendly, expedited decisions. Yet before it can be considered a system after which other businesses should model their systems, it must rebalance and overcome the issues outlined above. Although a large burden is placed on “neutral evaluators” hired by Amazon, these evaluators currently do not review the patent at issue for invalidity. To establish a more balanced approach and to disincentivize misuse of APEX by predatory sellers, invalidity must be considered. Even if such consideration drives up the required fee slightly, the trade-off would be worthwhile to promote fairness in the process. Amazon has three years of beta-testing under its belt with this system and thus has the data available to see where fraud and misuse are most prevalent. A thorough review of this data should lead to the tightening of its evidentiary standards throughout the process. Despite the name inviting such a pun, APEX must not be allowed to thrive as a predatory tool.

While barriers to justice should not be so high that patent holders may not assert their rights, the process should not be so favorable and easy that it inadvertently incentivizes abuse of the process. Through small tweaks, APEX can continue to serve patent holders’ rights without demanding the time and money that large-scale patent litigation requires.

Virtual Experiences in the Art World: Potential for Copyright Issues

By: Lauren Liu

Since the COVID pandemic hit, the world has been facing continuous health and economic issues. The art world, in particular, has been facing hardships that require art institutions to adjust their mode of operations. Since the year 2020, the world’s effort to contain the spread of COVID forced art galleries and museums around the world to close their doors and look for new forms of operation and exhibition. Such adaptations include increasing online marketing platforms, organizing virtual panels, and even creating online art exhibitions. In particular, these virtual exhibitions use high-resolution images of artworks, and provide them with contextual introductions of the artists’ background and inspiration. Some galleries include artworks that are available for sale, and thus further providing financial benefits for the galleries and their artists. The most fascinating part of these virtual platforms is the galleries’ implementation of virtual reality and augmented reality tools to produce virtual tours and remote immersive experiences. In other words, they are virtual exhibitions that mimic the audience’s experience when they are physically in an art gallery.

Virtual reality, also known as augmented reality (AR), usually displays an original or scanned work of art in a digital setting, thus creating a “total immersion” experience for the audience. As amazing and creative as it is for the audience, legal issues can arise for the gallery. For example, AR can invite “guerilla hacking” of a virtual exhibit. Hackers can copy and post unsanctioned works on the digital digital platform, and thus infringe upon the copyright of the original artists and take away the gallery’s potential revenue. Furthermore, the gallery also faces potential lawsuits from their artists alleging that the unauthorized use of their works was approved by the gallery.

As museums and galleries started implementing these virtual methods, they also had to start considering potential copyright issues. When museums use virtual reality or displaying art works online, they must keep in mind the intellectual property rights in the images and the text. Furthermore, they need to consider the rights of the artist, especially for a primary-market sale offer. For most artists, museums generally can clear the rights to use high-resolution images through the artist or her licensing agency. As for the photographer, if he or she is not employed by the artist or the museum, the museum should consider obtaining a broad license or require the photographer to execute a work-made-for-hire agreement with the customary in-the-alternative assignment language. Museums should also obtain the necessary rights from the author of the essays featured in the viewing room.

Museums and galleries may have available to them, the Fair Use defense against copyright infringement claims. For example, for secondary-market sales, such as resales of artworks, museums and galleries may not have a relationship with the artist or the artist’s estate. In such a case, the Fair Use Doctrine may allow the use of small, low-resolution images. The Copyright Act of 1976 provides that “the fair use of a copyrighted work is not an infringement of copyright.” To determine whether an allegedly infringing use is “fair use,” courts need to consider four factors: (1) the purpose and character of the use, including whether such use is of a commercial or for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Whether or not the doctrine allows the display of large-scale, high resolution images without permission is less clear. There is also no specific definition of large versus small scale, and high versus low resolution. Courts usually analyze each situation according to a totality of circumstances.

Lastly, galleries should be aware of whether or not the displayed artwork incorporates third-party content. If so, the owner of that content can potentially have a claim against the display. Possible solutions to mitigate this risk include obtaining an opinion from attorneys regarding potential Fair Use defense, working with the artist in advance of an exhibition to reach an agreement about the use,  and potentially having liability or omissions insurance in place. 

The online presence of museums and art galleries has grown due to COVID. Even now, after all venues have nearly reopened to the public, many virtual options still remain available. Although there are many uncertainties in potential copyright cases, museums and galleries that are using or considering virtual arts should conduct more thorough legal research, seek legal advice from counsel, and implement prevention mechanisms to mitigate risks.

Administrative Agencies & Their Role in Technological Regulation

By: Chi Kim

On January 7, 2023, Kevin McCarthy became Speaker of the House after his colleagues from the House of Representatives held fifteen separate voting sessions. The House demonstrated an equally impressive and depressing feat given the inability of our current elected officials to achieve results for even seemingly mundane decisions. While many liberal observers may have rejoiced at the chaos, the fifteen votes is emblematic of an overall trend of inefficiency within the legislative branch and political processes, especially when tackling more fluid concepts and problems within the technology sector. Creating regulations requires large amounts of information, lobbying, and time to convince policymakers with inflexible positions and procedures around fluid and emerging technologies of the merits of the proposed regulations. In addition to the typical policy lag, the timeline for proposed technological regulations are further exacerbated by the following intrinsic and extrinsic factors. 

Intrinsically, Congress is not equipped to handle technological regulation by design. Although our most recent Congress is younger than its predecessor by one year, this small change alone is a historical anomaly. The 118th Congress is the third oldest since 1789 and generally has been climbing since the early 1980s.The average ages in the Senate and House are 63.9 and 57.5, respectively. While this could be the result of modern medical advancements, the increasing age of our elected officials bodes negatively for the hope that our policymakers will understand the technology that they are regulating. Remember, for instance, the famous Facebook hearings? Even the generally unpopular Mark Zuckerberg looked relatable when forced into the position of explaining a new technology to an older person. Beyond the general lack of subject matter expertise, congressional officials cannot invest the requisite time to learn about these issues while also tackling persistent issues within voting rights legislation, labor and supply chain constraints from international pressures, and a looming recession creeping closer layoff by layoff. 

Extrinsically, big tech still has a massive voice within our congressional chambers. During the 2020 election cycle fifteen major tech companies, including Amazon, Facebook, Google, Microsoft, Oracle, and others, spent $96.3 million to influence forthcoming bills like the National Defense Authorization Act, Fairness for High Skilled Immigrants Act, and the CHIPS for America Act. While Congress receives input from stakeholders, there is often a cost to frame their political positions. 

Despite our political gridlock, the American government is not completely unarmed against big tech. In political law, hydraulics is the concept that political energy is never destroyed but rather manifests into new forms, finding new gaps and openings within the regulatory or political landscape, much like water does on earth. In the context of the technological landscape, the responsibility of passing regulations has flowed to administrative bodies. The Federal Trade Commission (FTC), for example, influences technology policy in a number of different ways. The FTC recently filed a lawsuit against data broker Kochava Inc. for selling geolocation data from millions of mobile devices. If the FTC is successful, such a ruling would likely affect the overall data broker industry. Notably, the FTC leadership impacts the policy direction advanced by the agency. For FTC Commissioner, President Biden appointed Alvaro Bedoya, who previously served as the founding director of the Center on Privacy and Technology at Georgetown Law Center where he worked at the intersection of privacy and civil rights. Additionally, as of the writing of this article, the FTC is accepting public comments for a proposed rule to ban non-compete clauses. This rule is intended to increase worker earnings and create more competition among big tech. While administrative agencies do have their own procedural “policy lags,” the FTC can still actively tackle issues while receiving input from internal and external industry experts without being directly tainted by lobbying efforts. 

Law and technology are often portrayed as incompatible ideas — rising technology  meeting archaic regulations. However, policymakers need to realize that law and technology are not so different — both policymaking and technology development require troubleshooting and reiterations over time. However, unlike the software engineers in the companies that they regulate, policymakers do not have endless opportunities to sandbox their regulations before fully staking their political careers and capital. The responsibility of making such regulations has often flowed to administrative agencies that can take measured steps on the daunting task of regulating big tech companies. However, Congress should build on administrative agency efforts by passing bills based on the failures or successes of the agency actions. Doing so could result in more relevant and long-lasting technology regulations. 

Cannabis Patents in Federal Courts

By: Yixin Bao

Introduction

Technology impacts almost every industry, and the cannabis industry is no exception. There are multitudes of cannabis patents granted by the United States Patent and Trademark Office (“USPTO”) each year, including the technology to process and cultivate cannabis plants, and the medical uses of cannabis in the treatment of diseases. As states continue to legalize cannabis, the dispute about whether a federal court should apply the illegality doctrine to cannabis-related patents would become more prevalent in the future.

Background

Traditionally, USPTO does not prohibit the filing of patents related to cannabis. In fact, the number of cannabis-related patent filings continues to increase in recent years. The explanation for this increase seems to be related to the more advanced technologies resulting in the rising medical and recreational use of cannabis and a trend favoring the legalization of cannabis on a state-by-state level.  21 states have acted to legalize recreational marijuana, and even more states have legalized the medical use of marijuana. Nevertheless, in most circumstances, at the federal level, marijuana and marijuana-related products are still considered illegal. Because the legalization of cannabis and marijuana is a relatively recent occurrence, unsurprisingly there has been limited cannabis patent litigation in legal history. 

With the expectation of increased patent litigation over cannabis patents, the question then becomes whether the illegality doctrine should apply to cannabis patents in a federal court, where marijuana and cannabis are schedule 1 controlled substances under the Controlled Substances Act in the eyes of the federal judiciary. The idea of the illegality doctrine comes from Everet v. Williams, also known as “the Highwayman’s case,” a 1725 case in an English court. The court refused to uphold a lawsuit regarding the enforceability of contracts, which was to share the spoils of the armed robber. “No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.” Lord Mansfield spoke so. The illegality doctrine is based on the belief that a person shouldn’t be able to benefit from his or her wrongdoing. 

Discussion

This question of whether the illegality doctrine should apply to cannabis patents in a federal court has already been raised more often in the legal profession. For example, according to several Goodwin Procter LLP attorneys, including Rob Cerwinski, Brett Schuman, Daniel Mello, and Nikhil Sethi, the uptick in cannabis-related patenting activities in recent years might lead to a potential cannabis patent “war.” These attorneys argue that a federal court should not apply the doctrine because these patents are not the fruit of a crime. There is a big difference between the private agreement between the two criminals in the Highwayman’s case and the patent owners’ rights granted by the USPTO. For example, many cannabis patent holders are pharmaceutical companies and research institutions, instead of criminals. Even the U.S. government holds a cannabis patent. The U.S. Department of Health and Human Services has a patent on certain parts of the marijuana, the non-psychoactive cannabinoids, for their potential use to protect the brain from damage by certain diseases. These holders’ businesses are legal, where the illegality doctrine should not be applied. 

A second reason that the illegality doctrine should not be applied is that patent rights themselves do not violate federal drug laws. Patent rights are the rights to exclude others from making or using the invention, which is again, different from the rights to grant owners to make or sell the invention. 

Last but not least, if a federal court decides to apply the illegality doctrine to the cannabis patents, it will be in direct conflict with an agency that serves as the national patent office and trademark registration authority for the United States, USPTO. 

Future

While marijuana stays illegal under federal law, a large majority of the public seems to favor federal legalization of recreational and medical marijuana according to a CBC News poll published in 2022. As the technologies grow, the public shows support, and states continue to legalize cannabis, this dispute about whether a federal court should apply the doctrine to these patents could become more prevalent.

Universally Deceived: False Advertising in Movie Trailers

By: Nicholas Neathamer

Have you ever been excited by a flashy movie trailer, only to be sorely disappointed when you get around to seeing the film itself? While it is certainly a common sentiment, most people would not think to litigate over the letdown. Yet in the ongoing case, Conor Woulfe et al v. Universal City Studios LLC et al, two disgruntled movie-watchers have sued Universal City Studios LLC for just such a disappointment, claiming that Universal deceived them with an early trailer for the movie Yesterday

The movie Yesterday, released in 2019, takes place in a world where everyone except the protagonist mysteriously loses all recollection of The Beatles, allowing the protagonist to pass off the band’s famous songs as his own creations. A trailer for the film featured said protagonist serenading popular actress Ana de Armas with the Beatles song “Something.” Allegedly, this brief sighting of de Armas in the trailer was enough to prompt Conor Woulfe and Peter Michael Rosza to watch Yesterday, and both men paid $3.99 on Amazon to stream it. However, to their immense disappointment, the scene with de Armas from the trailer was removed from the film’s final cut, and de Armas never makes an appearance otherwise. 

While someone’s favorite actress being cut from a film without warning sounds like a fairly trivial problem, the resulting lawsuit and its demands are nothing for Universal to laugh at. In January of 2022, Woulfe and Rosza sued Universal in the District Court for the Central District of California. The pair brought several claims that alleged the studio profited from the illegal misrepresentation of the movie, ultimately seeking $5 million for two yet-to-be-certified classes of spurned viewers of Yesterday. Woulfe and Rosza seek class certification for viewers who paid to see the film in California and Maryland. 

To combat these claims, Universal filed a special motion to strike this lawsuit under California’s Code of Civil Procedure § 425.16, the state’s anti-SLAPP statute. A SLAPP suit, or a strategic lawsuit against public participation, is generally a lawsuit without legal merit that is brought to dissuade critics from producing negative publicity. In response to such frivolous lawsuits that limit critics’ free speech, many states have enacted Anti-SLAPP statutes. California’s anti-SLAPP statute specifically provides defendants with a special motion to strike a claim that arises from an act in furtherance of free speech and in connection with a public issue, “unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” After the defendant shows that the suit arises from such an act, the burden falls on the plaintiff to show that the complaint is both legally sufficient and “supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.” Hilton v. Hallmark Cards. Universal also filed a motion to dismiss the suit for failure to state a claim, under Federal Rule of Civil Procedure 12(b)(6). 

In his ruling, Judge Stephen V. Wilson worked through a multi-step framework laid out by the Ninth Circuit to reach the conclusion that this lawsuit stemmed from Universal’s right to free speech, as Universal’s creations of Yesterday and its trailer both were exercises of free speech. He also ruled that Woulfe and Rosza’s claims were in connection with a public issue for several reasons, including the fact that the user reviews, ratings, and an interview regarding the lack of de Armas in the final cut demonstrated public interest in the dispute. Because the claims center around an act of free speech that is connected to a public issue, Wilson went on to analyze whether Woulfe and Rosza had established a likelihood of success on their claims. 

Ultimately, Judge Wilson was persuaded by the majority of Universal’s challenges to the movie viewers’ claims, including barring injunctive relief. However, Wilson did leave room for the suit to continue. Namely, he allowed the plaintiff’s claims of unfair competition, false advertising, and unjust enrichment to continue, and even left open the possibility of monetary damages, stating that “the Court cannot rule as a matter of law that [Woulfe and Rosza] received the full value of what they paid for…”. 

Both the unfair competition and false advertising claims take into account the “reasonable consumer standard,” in which a plaintiff must show that the defendant’s misrepresentation is likely to deceive an ordinary consumer acting reasonably under the circumstances. Using this standard, Wilson found that Woulfe and Rosza alleged facts that demonstrate the plausibility that ordinary consumers would be misled by the trailer. Additionally, California’s false advertising law only applies when a significant portion of reasonable consumers could be deceived by a trailer. On this point, he found it plausible that viewers of Yesterday would expect Ana de Armas to feature prominently in the movie, allowing the suit to survive the anti-SLAPP motion and a motion to dismiss.

Notably, Wilson also held that Universal had no defense in the First Amendment’s free speech protections because Woulfe and Rosza had sufficiently alleged that Yesterday’s trailer is false, commercial speech. Specifically, Wilson noted that the First Amendment provides no protection for false or misleading commercial speech. Wilson, applying factors from Bolger v. Youngs Drug Products Corp., found that Yesterday’s trailer constitutes commercial speech because it (1) is an advertisement for the movie, (2) refers to the specific product of the movie, and (3) Woulfe and Rosza have alleged sufficient facts to show that Universal had an adequate economic motivation so that the economic benefit was the studio’s primary purpose for the expression in the trailer. 

However, Judge Wilson’s ruling does not mean that any studio whose movie disappoints compared to its trailer is eligible to be sued. Despite many media sources’ bold headlines that movie studios can now be sued over their deceptive trailers, Wilson explicitly limited his holding to “representations as to whether an actress or scene is in the movie, and nothing else.” This statement wisely barred Wilson’s ruling from being used to support lawsuits when moviegoers’ subjective tastes are not met by films whose trailers enticed them. Furthermore, Woulfe and Rosza’s claims have yet to actually succeed–Wilson’s ruling only shows that their surviving claims are plausible and have at least a slim likelihood of success. While this holding certainly does not yet doom movie trailers to lose their artistic freedom of expression, movie studios may want to be a bit more careful about which actors they choose to feature in their trailers moving forward.