Patent Venue in the Age of Fulfilled by Amazon...
Gaston Kroub
The questions left standing by the Supreme Court's TC Heartland patent venue decision are slowly being answered by District Courts around the country. One question in particular poses an interesting challenge for litigants arguing for or against whether venue is proper: What role if any, do Amazon's Fulfillment Centers play with respect to establishing venue? In a recent decision out of the Southern District of California, Reflection LLC v. Spire Collective LLC, Judge Curiel provides some guidance on the issue, by granting a motion to dismiss for improper venue on the grounds that even where the defendant had goods stored in Amazon warehouses in a particular district, the plaintiff had "not demonstrated that Defendant has a “regular and established place of business” in this district” and thus, venue is not proper in this district." (Dkt. 11 at pg. 7, 1/5/18 Order, CASD Case No.: 17cv1603-GPC(BGS)).
What makes this situation interesting is that Fulfillment by Amazon is a popular option for professional sellers looking to outsource the warehousing and shipping of the products they sell on Amazon. While sellers sign up with Amazon to provide the service, it is Amazon itself that decides where the seller should ship the products for storage in one or more of Amazon's Fulfillment Centers (warehouses referred to as "AFCs"). Once stored at an AFC, Amazon can decide to redistribute stored products to other AFCs as needed. In the Reflection case, the defendant Spire was a Pennsylvania corporation, whose products "have been stored by Amazon in 23 states including California." (1/5/18 Order at pg. 2.) Since Spire was not a California corporation, the Court's analysis of venue centered on "whether Spire has “a regular and established place of business” in this district." (Id. at 3).
Despite Reflection's attempts to categorize Spire's relationship with Amazon as one that resulted in Spire having a "regular and established place of business" in California, it was ultimately unsuccessful in persuading the Court. Applying the In re Cray three-factor test for determining venue, the Court found that under the prevailing caselaw, Spire could not be considered as having a physical presence in California by virtue of its products residing in AFCs. (Id. at 5). As to the second Cray factor, the Court found that Spire's sales in California through Amazon were not equivalent to Spire itself selling in California, especially since Spire could not even control over how Amazon chooses to store and distribute its products across its AFC network. (Id. at 6). Finally, Reflection's arguments that Spire was effectively leasing space from Amazon failed, once again because it was Amazon which had full authority and control over Spire's products once they were sent to the AFCs selected by Amazon. Accordingly, because "Spire has no control over its products once they are sent to Amazon FCs, these storage centers cannot be said to be the “place of Defendant.”"(Id. at 7).
Motion to dismiss for improper venue granted, and a new precedent for other Amazon sellers using AFCs to wield in future venue disputes created.