Personal Jurisdiction via Amazon in Patent Infringement Cases
The United States District Court for the District of Massachusetts recently held in Petedge v Fortress Secure Solutions, purchasing a product accused of patent infringement through Amazon is sufficient to establish personal jurisdiction.[1] In this case, Fortress Secure Solutions manufactured a ramp enabling pets to climb into a bed.[2] Two Petedge employees then bought said ramps on Amazon and had them shipped to Massachusetts.[3] Petedge then brought suit against Fortress in D. Mass. alleging Fortress’ ramp infringed one of their patents.[4] Fortress then filed a 12(b)(2) motion, arguing that as they had no office, paid no tax, and had not registered to do business in Massachusetts, the court could not establish personal jurisdiction over them.[5] Fortress further alleged they did not “’specifically design or target any of [their] products for sale in Massachusetts,’ and [do] not ‘market [their] products to Massachusetts customers.’”[6] However, Fortress does market and sell their products through online retailers, including Amazon, to customers countrywide.[7]
Alleged out-of-state patent infringement presents a curious case in civil procedure. Instead of following the jurisdictional law of the circuit in which the district court sits, the court must apply the law of the Federal Circuit.[8] This law requires that (1) that forum state’s long-arm statute applies and (2) “the requirements of due process are satisfied.”[9] In this case, it was clear that both the Massachusetts’ long-arm statute applied and that the court, clearly lacking general jurisdiction over Fortress, would have to look to specific jurisdiction.[10] The Federal Circuit has developed a three-part test for specific jurisdiction: “(1) whether the defendant purposefully directed activities at residents of the forum; (2) whether the claim arises out of or relates to those activities; and (3) whether assertion of personal jurisdiction is reasonable and fair.”[11] The court had little trouble satisfying these three elements. The first yielded the most analysis but was not difficult to fulfill as the “Federal Circuit has consistently held that a patent infringer is subject to personal jurisdiction where it sells the allegedly infringing product.”[12]
It’s important to note that the court states that the record does not indicate whether Fortress sold the allegedly infringing products to Amazon who then sold and shipped them to Massachusetts or whether Fortress directly sold and shipped the products to customers in Massachusetts with Amazon merely serving as an intermediary, introducing the customers to Fortress.[13] As the court left this apparent ambiguity unresolved, it appears we must assume the holding would apply under either situation.
The interesting question to address though is does it make sense to expose a merchant who places their products on Amazon to the personal jurisdiction of any state in which their products are ultimately sold in? Considering the present ubiquity of internet commerce, this may well be the only sensible result, at least from a policy perspective. Clearly, commerce has changed immensely since the days of Pennoyer[14] and Hess[15]. Furthermore, placing a product in the “stream of commerce” has long been a viable theory under which personal jurisdiction may be established.[16] In this case, it certainly would have been foreseeable that placing your product for sale on Amazon may result in it being sold in a state in which you otherwise have no contacts with. However, it is often easy to sell products on websites like Amazon and this may attract small or highly specialized businesses that otherwise would have a very local presence. Is it fair to hold such business subject to jurisdiction in potentially any state across the country? The burden of defending such cases so far from home may be quite onerous for these businesses and the alterative of potential de facto preclusion from the online marketplace would very likely not be socially desirous. At least for now, the solution appears to exist in the third prong of the Federal Circuit’s test. In exercising jurisdiction, the court must not offend “traditional notions of ‘fair play and substantial justice.’”[17] The Supreme Court has articulated five factors in making this determination and among them is a consideration of the defendant’s burden of appearing.[18] Hardly a “bright-line rule”, this likely fact intensive inquiry appears to be the best defense to jurisdiction small businesses have when selling their products on Amazon. With this due process safeguard in place, allowing plaintiffs to establish personal jurisdiction via Amazon, as in Petedge, is at least defensible and when considering the policy interests plaintiffs have, quite possibly the most sensible outcome.
Footnotes
