Should eCommerce Websites be worried about getting sued for listing infringing products?

Recently, Hailo Technologies LLC – after three continuous attempts at suing the manufacturer of Anker Roav SmartCharge Car Kit – sued Best Buy, Target, and Walmart for infringement through the sale of Anker’s devices. While this clearly looks like a move made after extreme frustration, things might not go well for these online retailers.

For all those who have been tracking such cases, this move by Hailo isn’t surprising either.  Easy targets, as some might call them, retailers are becoming the new favorites in litigations especially among NPEs and it’s definitely something to worry about.

Should you be concerned? If you are an eCommerce seller or retailer, you probably should be.

Allow me to explain.

Can eCommerce websites/retailers be considered for infringement of a patent?

This question is pretty tricky to answer and it is difficult to give a definite yes/no answer without understanding the intricacies which would vary for different cases.  

To better answer this, let us have a look at similar lawsuits in the past and learn through their rulings to understand whether or not you as an eCommerce website and/or retailer really are at the risk of being accused of infringement.

Milo & Gabby LLC Vs. Amazon

In 2017,  Milo & Gabby LLC accused Amazon of design patent infringement, copyright infringement, and trademark infringement. They also held Amazon responsible for false designation of origin but the court’s judgment turned out to be in the favor of Amazon. 

You might ask why?

Perhaps, it was because of their approach and the arguments they placed forward.

Turns out, it was the claims. 

The Federal court noticed that all the claims regarding patent, copyright, joint or induced infringement were not placed before them. Phrases such as “other transfer of ownership” were not given a proper meaning by Milo & Gabby. Not only this, Milo & Gabby also failed to argue on its “offer to sell” theory where they mentioned that Amazon was a direct ‘seller’ of their products. But, they didn’t mention anything about the seller theory and ultimately lost this argument. 

Well, as they say, choose your lawyer and doctor very carefully, but to understand this better, let’s have a look at another case with a much clear outcome.

eBay vs Blaze

In this case, Robert Blazer (who has a patent on ‘Carpenter Bee Traps’) found that some products on eBay were infringing his patent.   

However, eBay was saved from all the damages on the basis of these three factors:

  • Whether the host is not the seller or that the listing is not an “offer to sell”,
  • Whether the payment is made directly to the seller or to the host, 
  • Whether there is an option to buy the item directly from the host.

Before you start dissecting these three points, let me help you summarize them in short:

eBay, unlike Alibaba and Amazon, doesn’t have any option to take the payment from the buyer directly. All the payments reach the seller directly which also means that it is, by no chance, making an “offer to sell”. Also, eBay has no knowledge of patent law, litigations, or other infringement details so there was not even a slight chance of willful infringement. 

eBay passed all these factors and thus was declared to be a not infringing on the Blaze patent.

Now that we had a look where the retailer was clear of any infringement, let us have a look at another example where the retailers were sued and accused of infringement, all involving one plaintiff.

Seoul Semiconductor vs LED Lighting retailers

Seoul Semiconductor in the past few months successfully sued multiple retailers for infringement. Here are few such instances: 

  • On March 2nd, 2019, Seoul Semiconductor filed a litigation case involving 10 LED patents against Service Lighting Electrical Supplies. The latter runs the largest online retail channel for LED bulbs called 1000bulbs.com
  • Sometime later, it targeted Bed Bath & Beyond Inc. The suit involved 8 LED patents.
  • In August, the series continued with the next target being Fry’s Electronics. The suit involved 15 LED patents. 

“In its complaint, Seoul asserts that certain LED TV products in Fry’s stores infringe 15 of Seoul’s LED patents that relate to manufacturing processes for LED backlight units. Seoul’s patented technologies cover LED TV backlight unit structures, LED backlight lenses for providing uniform illumination of LED lights, UCD technology for high color gamut displays, LED packaging, LED chip fabrication, and LED epitaxy. These are significant technologies to improve the color, brightness, and duration time of all LCD light sources such as smartphones, laptops, tablet PCs and monitors as well as TVs.”

Business Wire

Seoul won all these cases and was able to secure injunctions too. Previously, Seoul had successfully litigated some of these LED patents against retailers including the likes of Philcor. Seoul is also known to have sent notices to multiple entities warning them to stop selling the products infringing their patents (looks like Seoul’s on a ride!).

All that being said, based on these cases, two broad conclusions can be made:

  1. If a retailer/e-commerce website directly sells the products instead of a third party seller selling it, then the retailer/e-commerce website is liable for patent infringement. 
  2. If a third party is selling the products on an e-commerce website (which is the case with Amazon and eBay), then the e-commerce website might or might not be liable for the patent infringement. Few law firms, however, claim that the e-commerce website is still liable for induced infringement. Better to consult a lawyer in this scenario!

This should answer the question of the risks you run for being considered for infringement. However, there are quite some loopholes that can be explored, and it thus recommended to seek legal advice from an attorney before taking any action.

Authored by: Anoop Singh Chauhan, Infringement Team and Kanika Sharma, Research Team.

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