Amazon’s “Utility Patent Neutral Evaluation” program aims to stop fraudulent IP claims

As reported by Forbes, in an attempt to discourage bogus patent infringement claims against vendors and improve dispute resolution, Amazon has developed a new program which refers such claims to a neutral third-party evaluator.

Amazon’s current system requires an affected seller to remove any product subject to a patent infringement claim from the Amazon marketplace and work directly with the alleged patent holder to come to a solution. Under this system, a dispute can only be resolved effectively if the seller comes to an agreement with the claimant, or the seller applies to a court for a declaration that the product does not infringe the asserted patent. Accordingly, users of the Amazon marketplace have found that the system encourages “bad faith” claims, as an unscrupulous patent holder can effectively prevent a competitor from doing business in that product while the matter is settled.

However, under Amazon’s Utility Patent Neutral Evaluation Program (the “program”), such claims would be adjudicated by a neutral evaluator selected by Amazon. Amazon developed the program with small- and medium-sized businesses in mind, as those businesses are greatly affected by patent lawsuits, which can take significant time and cost to resolve. The program involves the following:

• Each party must pay the evaluator a deposit of $4,000, which discourages vexatious claims;
• The process takes place in line with a briefing schedule set by the evaluator;
• If the evaluator finds in favour of the patent owner, the infringing product will be taken down. If the evaluator finds in favour of the seller its product will remain listed on Amazon;
• The prevailing party gets their $4,000 deposit refunded, while the losing party’s deposit is paid to the evaluator; and
• The parties remain at liberty to commence a court action for patent infringement at a later time.

Some who have used the program to resolve disputes have found the experience satisfying, as it deters false complaints and moves quickly. However, the program applies only to utility patents (i.e., patents which protect the functional aspects of an invention) and not design patents, which may be subject to more bad faith claims since such patents are comparatively cheap and easy to obtain. With that in mind, Amazon’s new program represents a step forward, but may not solve all of the problems faced by vendors on its marketplace.

Authors: Jaclyn Tilak and Duncan Lurie