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

January 31, 2023 / Washington Journal of Law, Technology & Arts / Leave a comment

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

January 30, 2023 / Washington Journal of Law, Technology & Arts / Leave a comment

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.

Universally Deceived: False Advertising in Movie Trailers

January 25, 2023 / Washington Journal of Law, Technology & Arts / Leave a comment

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.

Tough to Watch: Assumption of Risk in the NFL

January 20, 2023January 20, 2023 / Washington Journal of Law, Technology & Arts / Leave a comment

By: Kelton McLeod

On January 2^nd, 2023, during a primetime Monday Night Football matchup between the Buffalo Bills at the Cincinnati Bengals, Bills’ safety Damar Hamlin collapsed after being struck in the chest during a routine tackle. Bills’ medical staff rushed to the field, where assistant athletic director Denny Kellington performed CPR for nine minutes after it was discovered that Hamlin had no pulse. Kellington’s actions likely saved Hamlin’s life, as Hamlin had suffered from a severe cardiac arrest. National Football League (NFL) officials responded in the immediate aftermath of the episode by suspending play in the still ongoing football game (Hamlin’s collapse happened with less than six minutes left in the first quarter), before outright canceling the match on Thursday January 5^th. The reasons cited for not replaying the match at a later date were all related to a lack of a large impact on who would be playing in the upcoming NFL Playoffs and were unrelated to Hamlin’s current medical status.

In the days that have followed, Hamlin has continued to receive intensive treatment, but his recovery is looking more hopeful by the day. In fact, doctors report that after regaining consciousness one of Hamlin’s first questions was wondering who had won the much-hyped matchup. The NFL, and the larger professional sports world, have banded together around Hamlin, and it has been an incredibly touching display community in the face of potential tragedy. But the episode also draws attention to the larger issue of liability for injuries in professional sports.

While an on-the-job injury at a more “normal” job with a low risk of injury, and almost no risk of death, would likely lead to a suit seeking to recover damages for the injury and its consequences, Football remains different. The kind of injuries like the one Hamlin suffered remain an “inherent risk” to the sport, and players take on an assumption of that risk in choosing to play football. In Morgan v. Kent State Univ. (2016), the risks inherent in an activity are those that are “foreseeable, common, and customary” to an activity. Certain risks “are so inherent in some activities that they cannot be eliminated, and therefore a person participating in such activities tacitly consents to the risks involved.” It is foreseeable, common, and customary to be tackled or to tackle another in professional football, and as anyone who watched the replay might be able to see, the tackle is nothing out of the ordinary. Hamlin, therefore, would be hard-pressed to assign any potential injury liability to the NFL, the Bengals, the Bills, or Tee Higgins (the player who he was tackling), because Hamlin assumed the risk that he might be injured throughout the normal course of the game. This is further exemplified by Avila v. Citrus Community College Dist. (2006), where the court stated that “the football player who steps onto the gridiron consents to his opponents hard tackle.” Hamlin, by playing Football, consented to being hit in the chest during a tackle. While the result of said tackle was unlikely and harrowing to say the least, the risk of that outcome was assumed. Leagues like the NFL try to strike a balance between encouraging players to go out and give their all in any given match, and remain safe while doing so, and the balance always appears to be lopsided to giving it their all.

Hamlin’s injury occurred during a routine tackle; it was an example of the medical phenomenon commotio cordis, where blunt force trauma hitting the chest at just the wrong moment can cause an irregular and dangerous rhythm. This was an unlikely outcome to a standard play, but it was not an impossible outcome. Hamlin’s cardiac arrest is nowhere near the first injury that has grasped the attention of the public, and it is likely not going to be the last. The NFL itself has had a history with high profile catastrophic injuries, and deaths that have resulted in part due to trauma related to playing professional football. And these injuries extend far beyond Hamilin (or the high-profile concussion settlement of the 2010s). The National Center for Catastrophic Sports Injury Research keeps records of football fatalities and catastrophic injuries going back decades, related to professional and amateur football. Between 2016-2021, 140 catastrophic injuries to football players were reported across experience levels, while in 2021, 20 football related deaths were reported.

Players are aware of the potential risks of football, but that does not stop the Monday Night Football incident from being a wakeup call. Tennessee Titans linebacker Dylan Cole after the incident said that “[he] always said [he] signed on the dotted line, so [he] understands what [they]’re getting into” but that does not stop the hit from being “tough to watch” and a “reminder to the world of how precious life is and how absorbed we can get into things that really, truly don’t matter.”

While this incident ends in a fairytale fashion, with the world surrounding Hamlin in love and support, and Hamlin offering words of support to his fellow Bills players, there’s no guarantee that the next public injury ends the same way. And when it comes, because it will come, it is the player, and not the league, who remains on the hook for the injury.

Glorified Gambling: Moral and Legal Issues Within the Gacha Gaming Industry

December 7, 2022 / Washington Journal of Law, Technology & Arts / 2 Comments

By: Kiara Hildeman

What are gacha games?

Gacha games were first developed and received popularity in the early 2010s with the release of the first notable gacha game which shifted Japanese gaming culture forever. Gacha games are video games that revolve around a “gacha” (toy vending machine) mechanic. This mechanic functions through virtual in-game currency that is traded for a randomized item to be used in the video game. Items include anything from characters to weapons and each fall on a spectrum of rarity and utility. Therefore, players are known to “roll” for the rarest items multiple times during the window of availability.

In the United States, gacha games have been in the forefront of gaming in recent years with the release of hits like Genshin Impact. Games like these are free to download but include in-game purchases that often raise more revenue than would purchases for the game itself if it were sold for a one-time retail price. Popular games nowadays are sold for upwards of $60 and are anticipated to increase in price through the upcoming year. Since its release in September 2020, Genshin Impact has accumulated over 127 million downloads, and since then, the game has generated $3.7 billion in revenue.

How is gacha gaming harmful?

In-game currency is much like gambling chips as they are both purchased with real money. Also like gambling, gacha games are highly addictive. The chance-based mechanics of the games render them predatory and exploitative of their users. Addicts of gacha games are known to spend thousands of dollars on in-game currency, desperate for the best characters, gear, and skins. However, the difference between gacha games and gambling is that the prizes in gacha games have little real-world relevance. Gamblers and casinos have the opportunity to win a jackpot prize of real money for real purchases while gacha gamers are betting for virtual prizes that are later superseded by new items with each update to the game.

While gacha games are free to download, they are incredibly hard to succeed in if a player chooses to be “free-to-play”. Obviously, a free-to-play player will struggle when up against a “whale” who has invested a ton of money to possess the best items. The competitive atmosphere of these games influences their players to use their real money to acquire in-game items that will boost their stats. With new content being released on a weekly, monthly, or quarterly basis, a cycle is created wherein players must continue to gamble their money to maintain their status or ranking in the game.

What are the legal issues of gacha gaming?

Fundamentally, gacha games and gambling are almost identical. An alarming difference is that age restrictions for gacha games are lenient and hard to enforce. In casinos and with online gambling, the minimum age of eighteen is regularly enforced. Under Washington law, penalties for underage gambling include fines (up to $125), up to four hours of community service, court costs, and forfeiture of any winnings. Meanwhile, most gacha games have a minimum age of twelve. Genshin Impact is rated twelve and over and suggests having parental or guardian consent upon purchasing in-game currency. Still, there is no age verification process in the game, and there is no way to monitor whether a child has received parental consent. Compared to gambling, the innocent mask of a virtual game makes parents less likely to monitor the use of gacha games, increasing the likelihood that children are spending hours on these games unsupervised. There are sure to be ill effects with exposure to gambling at such a young age, including strained relationships, delinquency, and depression. If the gambling industry deems age restrictions necessary, then why should gacha games be open and accessible to teenagers and children?

A number of countries have enacted legislation that limits and restricts gacha gaming. In 2012, Japan’s Consumer Affairs Agency declared complete gacha to be a violation of the law. Complete gacha is a particular model of gacha wherein players are required to collect a series of items in order to claim a grand prize. Japan’s Consumer Affairs Agency felt that complete gacha was too similar to gambling, and the decision was a reaction to two cases where one middle schooler spent $5,000 in a month and another student spent $1,500 in three days on complete gacha rewards. China has also implemented restrictive gacha law that discloses the drop rate of items and loot boxes and a system of “pity” where a player is guaranteed an item after a certain number of purchases. The UK Gambling Commission has stated that video game loot boxes are a reason behind the rise in underage gambling and more children being classified as “problem gamblers”. Currently, only a handful of countries have active gacha regulations, and these games are fully banned in Belgium and the Netherlands.

In the United States, the circuit courts are split over whether gacha games constitute gambling. For one, judges cannot decide what the intrinsic value of virtual currency should be. Second, the nature of gacha games results in injuries that are often intangible and not addressable through the current court system and statutory framework. For example, if gacha games are not considered gambling, then plaintiffs cannot reasonably bring their claims under their state’s anti-gambling statutes. However, this has not stopped claims against these video games. In Taylor v. Apple, Inc., plaintiffs sought to hold Apple liable for having games on their app store with “features legally equivalent to slot machines.” A plaintiff’s minor son felt that he had been “induced” to make “in-game” purchases on loot boxes while playing Brawl Stars. The California federal district court dismissed the complaint and suggested seeking legislative remedies as loot boxes are not plainly prohibited by statute. In recent years, several states including Washington have introduced bills to regulate loot boxes in games (though all have failed). In 2019, the Protecting Children From Abusive Games Act was introduced in the Senate with intentions to regulate pay-to-win microtransactions and loot boxes in minor-oriented games. All these unanswered questions are understandable when it comes to the new realm of gacha gaming, but the United States will have to make a decision sooner or later as young and unsuspecting Americans continue to download these games and fall victim to their tactics.

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