Friday, July 24, 2015

Direct Infringement - "Sold" or "Offered to Sell"


In an interesting decision from the Western District of Washington last week, Judge Ricardo S. Martinez granted an order denying Amazon's Motion for Summary Judgement that it did not directly infringe Milo & Gabby's animal-shaped pillow case design patents in Milo & Gabby, LLC et al v., Inc., No. C13-1932RSM (W.D. Wash. 2014). The Court agreed with Plaintiff Milo & Gabby that questions of fact preclude summary judgment as to whether Amazon "offered to sell" allegedly infringing merchandise actually sold by third-party vendors, but listed on the website. 

Milo & Gabby are a Washington State LLC that designs and sells animal-shaped pillow cases inspired by the pets and children of founders Karen Keller and her husband. They own the rights to several design patents to the ornamental designs of pillow cases, including the D520,798; D521,299; D521,792; D523,677 (pictured above); and D551,889 patents at issue in this case. Upon learning that alleged knock-off copies of Milo & Gabby products were being sold on through third-party merchants, Milo & Gabby sued Amazon for, among other things, direct infringement of Milo & Gabby's design patents.

However, the parties do not dispute that the alleged infringing products are actually sold by third-party merchants, not Amazon.  Amazon enables third-party merchants to list products on the website. The third-party seller is solely responsible for sending Amazon content for a product sought to be sold, such as an image of the product, a description of the product, and a price. The third-party seller specifically represents and warrants that it has the right to grant Amazon a license to use all content and other materials provided. Third-party sellers may ship their products directly to customers or have their orders fulfilled by Amazon (i.e., FBA service). Sellers who use the FBA service retain legal title to the product, while Amazon provides storage and shipping.

Amazon argued that there is no evidence that the patented products were sold or offered for sale by Amazon within the meaning of 35 U.S.C. §271(a). Rejecting Amazon's contention, the Court referred to "the norms of traditional contractual analysis" in defining an "offer to sell." Analogizing to the Federal Circuit Court of Appeal's decision in 3D Systems, Inc. v. Aarotech Laboratories, 160 F.3d 1373 (Fed. Cir 1998), the Court reasoned that displaying an item on the website and permitting purchase of the item through the same website, could be regarded as an offer for sale. Indeed, the website provides pricing information, permits quantity selection, and provides a means for effecting a purchase. For at least these reasons, the Court concluded that summary judgment was inappropriate. In arriving at this conclusion, the Court did not explicitly distinguish between products shipped by the seller and products shipped by Amazon's FBA service.

So remains the issue of Amazon's liability for allegedly infringing products that may be purchased through the website. This case could indicate a shift towards opening the legal floodgates of liability for online merchants whom permit the purchase of third-party knock-off products. While making claims of direct infringement easier to formulate, this case also raises questions regarding policing policies and actions that could be taken to avoid infringement. As always, we will keep you apprised of any developments as they occur.

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