Weekly IP Takeaways

Prepared by Cislo & Thomas LLP Attorney Mark D. Nielsen, Ph.D.

1. In a recent warning letter to a medicinal cannabis and cannabidiol (CBD) company, the FDA expressed concern that CBD was allegedly being marketed or misbranded as drugs in that the company was making claims regarding intended uses of CBD. The FDA also expressed concern that the company was allegedly labeling and/or marketing its products as dietary supplements even though they do not appear to qualify as such under applicable law. The FDA even warned the company about marketing products as having intended uses for pets. All this to say, while the 2018 Farm Bill may have removed CBD from the list of Schedule 1 drugs, the FDA is still being very restrictive about how it is marketed and labeled. Sellers of CBD-containing products should be exceedingly careful in their advertising and marketing so as not to make drug claims (e.g., references to intended uses), not to refer to CBD as a dietary supplement, and even to be careful regarding describing use of CBD for pets in marketing materials.

2. In an effort to exert more control over his extremely busy patent litigation docket, Chief Judge Rodney Gilstrap of the Eastern District of Texas has introduced Section 101 subject matter eligibility contentions as a separate step in patent cases in which a Section 101 subject matter eligibility challenge may be brought. The Standing Order is here. Many courts in the country have some form of local patent rules that require disclosures of infringement and then invalidity contentions. Judge Gilstrap is now requiring defendants that wish to challenge the subject matter eligibility of a patent to submit specific Section 101 eligibility contentions 45 days after receiving the plaintiff’s infringement contentions. The contentions require an identification of claims challenged, the factual and legal basis for the challenge, a statement of whether the challenged claims are representative of other challenged claims, as well as support for any assertion that, as applicable, particular elements of claims were well understood, routine, or conventional, and more. This is a strong message from Judge Gilstrap that early Section 101 motions to dismiss are not an option in his court any longer. It is also a useful tool to manage the plethora of Section 101 challenges asserted in patent litigation these days. One would expect to see other judges adopt this approach if it proves useful and successful for Judge Gilstrap.

3. In what may prove to be a very important case if it stands, or if it is reviewed by the Supreme Court, the Third Circuit Court of Appeals, applying Pennsylvania law, held that Amazon can be treated as a “seller” of a product sold in the Amazon Marketplace by a third party, at least in the product liability context. The opinion in Oberdorf v. Amazon is here. Basically, a third party vendor of dog collars offered a collar product through Amazon Marketplace. Oberdorf bought the collar, the vendor shipped it directly to the buyer, and unfortunately, a the collar broke while the buyer was walking her dog (and the dog was pulling, as they do!), and the leash snapped back, hit the buyer on her face and glasses, and resulted in her being permanently blind in her left eye. The district court held that Amazon could not be held liable under strict liability principles as a “seller” of the product. The Third Circuit reversed, assessed Amazon’s potential identity as a “seller” under a four-factor test, and also indicated that the fact that Amazon did not take title to the product was not dispositive. The test, pursuant to case law from the Pennsylvania Supreme Court, looks at: (1) Whether the actor is the only member of the marketing chain available to the injured plaintiff for redress; (2) Whether imposition of strict liability upon the [actor] serves as an incentive to safety; (3) Whether the actor is in a better position than the consumer to prevent the circulation of effective products; and (4) Whether the [actor] can distribute the cost of compensating for injuries resulting from defects by charging for it in his business, i.e., by adjustment of the rental terms. Under this test, the Third Circuit relied on a number of facts in determining that Amazon is, in fact, a “seller.” The facts include: (1) Amazon generally conceals the identity of sellers on its platform; (2) Amazon, through its vendor agreements, exerts a lot of control over third party sellers; (3) a relationship exists between Amazon and third party sellers on its platform; and, (4) Amazon has some ability to spread costs should it be subject to liability as a seller for product defects. This ruling is very significant, and in contrast to cases such as Milo & Gabby LLC v. Amazon.com, Inc. in which the Federal Circuit held that Amazon Marketplace was not a seller. The case is significant because if expanded geographically into other jurisdictions, or into other areas of law such as intellectual property, it could create significant challenges for Amazon, and likely higher costs for sellers on Amazon. In addition, given the apparent tension between the Third Circuit’s Oberdorf opinion and the Federal Circuit’s Milo & Gabby opinion, there is a developing circuit split, which aside from the general importance of this issue, may support the Supreme Court granting certiorari to resolve the question of whether Amazon is a “seller” in the context of third party sales of products in its platform(s).