Amazon Case Study: How to Hold Online Marketplaces Accountable for Counterfeits
First published in Managing Intellectual Property
In December 2021, a notable infringement case against Amazon ended. While the case settled before trial, plaintiff Maglula (represented by Finnegan) won a major legal victory by denying Amazon’s motion for summary judgment. This decision offers valuable lessons on proving patent infringement using representative products as well as the liability of online marketplaces like Amazon for trademark infringement and infringement for products offered on its “third-party” marketplaces.
Maglula, the maker of the popular Uplula Universal Pistol Magazine Magazine, has filed combination against Amazon in 2019, accusing it of patent infringement, trademark infringement, trademark infringement and copyright infringement based on Amazon’s offers to sell and sell counterfeit and counterfeit magazine chargers .
Amazon mounted a vigorous defense, which began with its unsuccessful motions to dismiss the case, to transfer the case from the Eastern District of Virginia (the so-called ‘rocket case’) to the Western District of Washington, and to compel arbitration. Maglula prevailed on all three motions and the case proceeded in the Eastern District of Virginia.
Following the discovery during the pandemic, which included a first-of-its-kind order allowing Maglula to inspect Amazon facilities for infringements, Amazon sought summary judgment on several patent and trademark claims.
But the court denied Amazon’s claim and explained that it was a “simple infringement case” and “simply not a case where Amazon can deflect liability.” The court made it clear that Amazon’s chances of winning at trial were slim when it said that “even the most compelling presentation of Amazon’s evidence would not make an iota of difference to a jury” and ruled. again stated that “this is simply not a case where Amazon can avoid liability.
The court ordered the parties to mediate, and they eventually reached a settlement. The court order on Amazon’s summary judgment motion was a key legal victory for Maglula and is instructive for others affected by counterfeit e-commerce sales.
Patents and Representative Pproducts
One of the most contentious issues in this case was Maglula’s use of representative products to prove infringement. The precedent of the United States Court of Appeals for the Federal Circuit allows patentees to prove infringement through representative products. In TiVo vs. EchoStar (2008), the court stated, “There is nothing improper in an expert testifying in detail about a particular device and then stating that the same analysis applies to other allegedly infringing devices that operate similarly, without discussing each type of device in detail.
Nevertheless, Amazon insisted throughout the litigation that Maglula could not rely on representative products and instead had to prove the infringement of each accused product separately. This position was particularly glaring when the products in question were counterfeits and counterfeits (copies) of the genuine Uplula charger and therefore identical to each other.
Early in discovery, Amazon decided to require Maglula to provide an infringement claim table for each accused product. Maglula objected and explained why representative mapping was consistently allowed and appropriate in this case. Following a hearing on the contravention motion, the court agreed with Maglula and did not require Maglula to provide a table of offenses for each product charged.
Meanwhile, Maglula and his expert have inspected thousands ofs accused products, including products Maglula may have obtained from Amazon customers and products Maglula was permitted to inspect at Amazon’s fulfillment centers in the United States. Maglula’s expert grouped the products into nine classes of incriminated products according to certain criteria. Four of the classes were counterfeit products bearing the name “Uplula” and five were counterfeit products bearing names such as “Magload”, “UpLood”, “QBLoader”, and “Castellan”, or had no name at all. Maglula’s expert provided a claim-by-claim and limitation-by-limitation patent infringement analysis of one product in each class and further found that, with the exception of the “Castellan” products, all of the incriminated products in the eight other classes were structurally and functionally identical, within and between classes, and violated in the same manner as the representative products inspected.
Amazon, for its part, was unable to identify any material differences between products inspected by Maglula and products not inspected. During fact-finding, Maglula served an interrogation seeking Amazon’s non-infringement claims and moved twice to compel a full response. Maglula’s second motion to compel sought Amazon’s full factual basis for its assertion that the accused products were not structurally and operationally the same for the purposes of infringement. But, other than a minor difference with the “Castellan” product, Amazon and its expert never identified any structural or operational differences between the accused products that mattered for the purposes of patent infringement.
Despite all the evidence that the offending products were the same for the purposes of the infringement, Amazon sought summary judgment of non-infringement of the goods that Maglula could not inspect. Maglula objected and explained that she correctly relied on representative products and proved the violation of those that were not inspected through representativeness. In its opposition, Maglula also relied on information that appeared on Amazon’s website to show that products with the same Amazon standard ID number are the same. Finally, Maglula noted that she did not have the opportunity to inspect some of the offending products because Amazon destroyed them.
Ultimately, the court denied Amazon’s motion for summary judgment and ruled that Maglula was not required to show, product by product, that each product had been infringed and could instead “show only a representative sample had been violated”. ”
With this battle over, the issue of representativeness offers valuable lessons for patent holders facing counterfeiting in e-commerce. To reduce their liability by hiding the true extent of infringement, online marketplaces may argue that each individual product must be inspected and requires separate proof of infringement. This argument may have superficial appeal if there are different “types” of counterfeits or knockoffs with different brands from different manufacturers. It will almost always be impossible for patent holders to inspect every product, especially those that have already been sold. But if, as here, the accused products are structurally and operationally the same for the purposes of patent infringement, patentees should be reassured that the court has validated the use of representative products to prove infringement.
Historically, Amazon and other online marketplaces have argued (mostly successfully) that they should not be directly or indirectly liable for sales of counterfeit or infringing products by third parties on their platforms. Much of the case law in this area considers antiquated trading venues like flea markets and in-person auctions – not the sophisticated machinery and virtually endless resources behind the online marketplace and back-end operations. from Amazon. It was long overdue for the law to catch up, and Maglula presented him with a compelling opportunity to do so.
In its motion for summary judgment, Amazon argued that it could not be secondary liable for infringement or trademark infringement for sales by “third-party” sellers through its Fulfillment by Amazon or Merchant Fulfilled programs. Network. In opposition, Maglula presented ample evidence that Amazon is not an uninvolved middleman simply providing a platform for third-party sellers, but rather “controls all aspects of the advertising and selling process” with its partners in sale. For example:
- Amazon determines in its sole discretion the content, appearance, design, functionality, labeling and all other aspects of its offerings.
- Amazon may redesign, modify, delete or restrict access to any Listing.
- Amazon controls the fulfillment and distribution process, for example, by determining which selling partners appear on Amazon’s website (and therefore which selling partner receives payment for an order) at any given time.
- Amazon controls communications between its business partners and customers.
- Amazon collects fees from its selling partners and may also, at any time, in its sole discretion and without notice, suspend, prohibit or remove product listings associated with Amazon and its selling partners.
- Amazon also controls certain aspects of payment processing, order cancellations, returns, and refunds for products sold on Amazon.com.
For these reasons, and others, Maglula argued that there were genuine disputes over material facts about whether Amazon was secondarily liable for infringement and trademark infringement.
The court found that Maglula raised genuine questions of fact about whether Amazon and its “third party” sellers have a relationship that allows Amazon to be secondary liable for their sales of counterfeit or infringing products, meaning that Maglula could proceed to test on this theory.
Intellectual property law is not the only area where courts may consider holding online marketplaces liable for the sales of “third party” sellers. In cases of product liability (for example, Bolger vs. Amazon2020, and State Farm Fire & Casualty vs. Amazon, 2019), courts have begun to hold online marketplaces liable for such behavior. Intellectual property owners should take note of these developments in other areas of law, as courts may find the principles underlying such product liability cases persuasive in intellectual property cases.
This case marks a significant step forward in holding online marketplaces like Amazon accountable for counterfeit and infringing products offered and sold through their channels. The underlying facts of each case are key, but as Maglula demonstrated in this case, online markets are vulnerable. At the same time, legislation and consumer education are key to protecting brand owners like Maglula and consumers from marketplaces that don’t do enough to rid their channels of counterfeit products and those known to sell them.
Originally printed in Intellectual Property Management on February 11, 2022. This article is for informational purposes, is not intended to constitute legal advice, and may be considered publicity under applicable state laws. This article is the opinion of the authors only and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP or the firm’s clients.