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Federal Circuit Opinion Does Little to Resolve Questions Regarding Online Retailers’ Liability for “Offers to Sell”

May 24, 2017
Post by Nicholas J. Krob

Under 35 U.S. Code § 271(a), anyone who, without authorization, “offers to sell” a patented invention in the United States infringes said patent.  This basis for liability is distinct from liability for theactual sale of a product and does not require acceptance of the offer—raising interesting questions for online retailers like Amazon.  Notably, when an individual improperly posts another’s patented product for sale on Amazon, can Amazon be liable for patent infringement for “offering to sell” the patented product?  As it currently stands, the answer appears to be no.

While many plaintiffs have sued Amazon in the past alleging patent infringement on the basis of Amazon offering infringing products for sale, most cases have been settled or stayed prior to adjudication on the merits.  However, a recent case in Washington addressed this issue directly.

In Milo & Gabby, LLC v. Amazon.com, plaintiffs Milo & Gabby, LLC and Karen Keller brought suit in U.S. District Court against Amazon, alleging, among other things, that Amazon was liable for patent infringement under section 271(a) based on the fact that it offered products sold by third-party sellers on its website that allegedly infringed the plaintiffs’ design patents.

Following an advisory jury trial held to determine the underlying factual issues, the court concluded that Amazon did not offer to sell the alleged infringing products and was therefore not liable for patent infringement.  The court based this ruling on traditional contractual analysis, which requires “manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it” to constitute an offer.  As the court found this was not present here, it ruled that Amazon did not offer to sell the infringing products.

To a certain extent, this is a perplexing outcome.  How can one of the world’s largest retailers not be deemed to offer products for sale to consumers?  Even the court noted it “is troubled by its conclusion” and acknowledged “Amazon enables and fosters a market place reaching millions of customers, where anyone can sell anything, while at the same time taking little responsibility for ‘offering to sell’ . . . the products.”  While the court noted that this case illustrates that “we now live in a time where the law lags behind technology,” it stressed that this problem “is a subject which must be addressed to Congress and not the courts.”

While there was hope that the United States Court of Appeals for the Federal Circuit would provide some clarity and further insight on this issue on appeal, the court stated in anon-precedential opinion on Tuesday that the appellants, Milo & Gabby and Keller, failed to argue that Amazon is liable for patent infringement based on the “offer to sell” theory and thus failed to preserve the argument for the court’s consideration.  Accordingly, the court affirmed the district court’s judgment regarding patent infringement.

In light of these two rulings, it appears online retailers like Amazon will remain able to escape patent infringement liability for the products sold by third-party sellers on their websites.  Whether this will change in the future remains to be seen.

Nicholas Krob is an Intellectual Property Attorney in the Litigation Practice Group at McKee, Voorhees & Sease, PLC. For additional information please visit www.ipmvs.com or contact Nick directly via email at nicholas.krob@ipmvs.com.



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