Intellectual Property

Policing Amazon?

Here's an idea: Amazon should develop its own arbitration system to resolve IP disputes.

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For anyone looking to sell their wares, the importance of Amazon can’t be overstated. Just look at the statistics in this recent Wall Street Journal piece — e.g., that Amazon captures 40 percent of all consumer spend online. Clients of our firm, operating in industries as diverse as cosmetics, pet goods, and apparel, are increasingly letting us know how critical their sales on Amazon are to their bottom line. Conversely, stopping infringers on Amazon has also taken on an outsized importance — especially since it is so easy for an infringer to set up a storefront and target the same audience for whatever goods a client is hawking. Because what is important to our clients is what is important for our firm, we have found ourselves dealing with Amazon-related issues for clients with greater frequency.

In some ways, the importance of Amazon in IP disputes is the type of issue that can sneak up on an IP lawyer who has not dealt with it before. I was a bit fortunate myself, since the first time an Amazon-specific issue arose in one of my cases was actually at a mediation. Having the client there in person to explain why the disputed Amazon listing would be a key component of any settlement was a huge help, especially since outside counsel on both sides had never discussed the issue in previous settlement talks. Nor was the mediator familiar with the value of Amazon listings to sellers, which made it difficult for him to value the demands and counters on both sides. Part of me suspects that more than a few IP lawyers can benefit from learning more about the value of Amazon listings to their clients. I know that it has become a necessary part of my conversations with certain clients.

At the same time as understanding how Amazon works becomes increasingly important for IP lawyers, it is also clear that both brand owners and the IP lawyers who work for them face challenges when trying to police infringement on the platform. As the WSJ piece notes, certain luxury brands have simply decided that Amazon is a virtual mall they are happy to stay out of. For many other brand owners, however, foregoing Amazon sales is a luxury they can’t afford. IP lawyers whose clients are trying to police Amazon can often find themselves feeling like a frontier-town sheriff’s posse looking to corral marauding bandits. Part of the reason for that is structural, and inherent to how Amazon requires IP owners (and for that matter accused infringers) to exercise lots of self-help when it comes to policing infringement.

An example. Let’s assume you have a client who is selling a patented product, under a trademarked brand name. Infringers start popping up on Amazon. As things currently stand, Amazon will not help much, if at all, with your patent claims through their platform. You need to run to court for that, and good luck getting the preliminary injunction you need at a reasonable price or within a reasonable time. You might fare a little better with Amazon if the infringers are dumb enough to use your trademarks in their listing. It may take a few emails, but Amazon will usually shut down infringing listings in a relatively short amount of time when there is evidence of trademark infringement. Is the process smooth? No. Will accused infringers argue that their due process was violated when a listing was taken down based on an ex parte submission? Maybe. But Amazon is a private forum, and clearly has made some decisions about how they will handle IP disputes raised by IP owners.

Maybe Amazon doesn’t care if sellers are happy with the current system, because those same sellers have no real alternative to Amazon. It seems to me, however, that Amazon has a real opportunity to set up a robust form of IP arbitration to handle IP disputes arising from activity on its platform. If successful, maybe more luxury brands will want to sell on Amazon. Perhaps more smaller sellers will be encouraged to set up storefronts if they feel comfortable that Amazon has a workable IP policy that gives them a fighting chance to stop infringement, and doesn’t blindside them if they are ever accused of infringement themselves. We know arbitration works, and I think it could work on Amazon for IP disputes, especially if it is modeled on something like UDRP proceedings — which have themselves proved effective for domain name disputes.

Some features of an Amazon IP arbitration system that I think could work would involve the participants in the system agreeing to waive damages if they are successful. IP owners would be encouraged to raise their claims through the system, and accused infringers will have incentive to either stop infringing behavior or try and succeed on the merits. The litigants could underwrite the costs of administering the system based on a flat-fee model, or based on a graduated scale tied to their Amazon sales volume. There are a lot of ways such an arbitration system could work, and I am sure Amazon’s own legal team has considered incorporating some of those approaches. At bottom, Amazon is an outsized player in the modern world of commerce. It has an opportunity to develop a leading IP dispute resolution mechanism befitting its position. We have clients interested in seeing whether Amazon’s approach to policing will change over time. So we will be watching Amazon intently, and not just for our holiday shopping needs.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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