Last year we discussed the implications of the Supreme Court’s choice not to review the Federal Circuit’s SnapRays decision for patent owners that rely on the Amazon Patent Evaluation Express (“APEX”) program. A recent case out of the Northern District of California illustrates the limits of the SnapRays decision.

As we highlighted, the APEX program offers a streamlined (and less expensive) way for utility patent owners to remove infringing product listings on Amazon.com. Using the program, however, opens the door for the accused seller to file a declaratory judgment action in district court. Which district court a seller can file in was typically limited to the patent owner’s home forum. The SnapRays decision, however, added the seller’s home forum as a potential location where sellers can seek a declaratory judgment of noninfringement. But what if the seller’s home forum is outside of the United States?

In Guangzhou Shanshui Tongxun Shebei Youxian Gongsi, et al. v. Phone Lasso, LLC, the allegedly infringing sellers are companies based in China, and the patent owner is a company based in North Carolina. After the patent owner initiated an APEX request targeting the sellers’ listings, the sellers filed a declaratory judgment action in the Northern District of California. The patent owner then filed a motion to dismiss for, among other things, lack of personal jurisdiction – the Court granted the motion despite the sellers’ argument that SnapRays precedent supports a finding of personal jurisdiction in California.

The sellers relied on specific jurisdiction only and argued that “Phone Lasso’s conduct in filing an APEX complaint was directed at California [because] the APEX proceeding risked disruption of the foreign Plaintiffs’ sales through Amazon to customers located in California.” The Phone Lasso Court explained that “SnapPower is distinguishable from this case because there the plaintiff (SnapPower), which was the target of an out-of-state patent holder’s APEX complaint, was a Utah company with its principal place of business in Utah…[b]y contrast, the Plaintiffs in this case are companies based in Mainland China and Hong Kong, not the forum state of California.”

Further, the Phone Lasso Court clarified that, to establish specific jurisdiction, “[t]he Supreme Court has made clear that the relationship between the defendant and the forum state must arise out of contacts that the ‘defendant himself’ created…[h]ere, by contrast, Phone Lasso’s initiation of the APEX proceeding would not ‘necessarily affect’ activities within California in the same manner because Plaintiffs are not based here.” Phone Lasso presented unrebutted evidence in support of its motion that it did not have any ties to California.  While concluding that it lacks personal jurisdiction over the patent owner, the Phone Lasso Court granted alternative relief for the patent owner’s motion and transferred the case to the Eastern District of North Carolina.  

The Proskauer Intellectual Property Team is continuing to monitor the evolving guidance on personal jurisdiction and venue. While the Phone Lasso case illustrates some potential limitations of the Federal Circuit’s SnapRays decision, we recommend that patent owners’ pre-submission investigation include the seller’s location and consideration of the potential for a declaratory judgment action in a less favorable jurisdiction before initiating a takedown using the APEX program.