Addressing the issue of personal jurisdiction in the context of a declaratory judgment case involving a program for resolving patent infringement claims, the US Court of Appeals for the Federal Circuit concluded that a patent owner has personal jurisdiction in the forum of an alleged infringer when it files a program claim against the alleged infringer. SnapRays, dba SnapPower v. Lighting Defense Group, Case No. 23-1184 (Fed. Cir. May 2, 2024) (Moore, CJ. Lourie, Dyk, JJ.)
The Amazon Patent Evaluation Express (APEX) program helps resolve patent infringement claims against sellers on Amazon. Under APEX, a patent owner submits an APEX Agreement to Amazon that identifies the allegedly infringed patent claim and the Amazon listings with the alleged infringing products. Amazon then sends this APEX Agreement to the seller, who can do one of the following to avoid removal of their accused listings:
- Opt into APEX and let a third party determine whether their product likely infringes
- Resolve the claim directly with the patent owner
- File a lawsuit for declaratory judgment of noninfringement. If the seller does nothing, its listings are automatically removed from Amazon within three weeks of receipt of the APEX Agreement.
Lighting Defense Group (LDG), a Delaware company whose principal place of business is in Arizona, submitted an APEX Agreement alleging that SnapPower’s Amazon products (electrical outlet covers with integrated technology) infringed one of its patents. SnapPower, a Utah company whose principal place of business is in Utah, then filed a declaratory judgment action against LDG in Utah. LDG then filed a motion to dismiss for lack of personal jurisdiction. The district court granted the motion, finding that SnapPower did not demonstrate that LDG purposefully directed activities at SnapPower in Utah and that there was no evidence that LDG reached out to Utah other than through responses to SnapPower’s communications. SnapPower appealed.
The Federal Circuit reversed, finding that LDG was subject to personal jurisdiction under the Court’s three-prong test because (1) LDG purposefully directed its activities at SnapPower in Utah, (2) LDG’s submission of the APEX Agreement was directed to SnapPower in Utah and aimed to affect activities in Utah and (3) it would not be unreasonable to find personal jurisdiction over LDG in Utah.
In assessing the first prong, the Federal Circuit found that LDG knew, via APEX’s terms, that Amazon would notify SnapPower of the APEX Agreement and that the options available to SnapPower included a claim for declaratory judgment. Further, the Court found that the APEX Agreement had more power than cease and desist letters because of the automatic removal of the listings after three weeks, which would affect sales and activities in Utah.
In assessing the second prong, the Federal Circuit found that personal jurisdiction comported with due process because LDG’s actions aimed to affect marketing, sales and other activities in Utah and because the suit arose out of LDG’s activities in the forum.
In assessing the final prong, the Federal Circuit rejected LDG’s argument that allowing personal jurisdiction would “open the floodgates” and “allow lawsuits against any APEX participant anywhere in the country.” The Court was not persuaded that its holding would “open the floodgates,” as parties who participate in APEX will only be subject to personal jurisdiction if they have targeted listings that, if removed, would affect the marketing, sales or other activities in that state. Additionally, the Court found that LDG’s actions were greater than a mere cease and desist letter due to the automatic removal, making it fair to subject LDG to personal jurisdiction in Utah.
Practice Note: Patent owners who use APEX should be aware that, under this ruling, the act of filing an APEX Agreement will subject a patent owner to personal jurisdiction in the state of the alleged infringer in the event the alleged infringer seeks a declaratory judgment suit.
