Navigating Amazon: “On-Demand” Worker and World of Ultra Fast Delivery

amazon on demand workerOn March 22, 2017, Amazon unveiled its Prime Now” one-hour delivery service in Milwaukee, Wisconsin which brought the total number of cities where the service is available to over thirty. The Prime Now service provides the speed and convenience that many online consumers now expect. In meeting the growing consumer demand for speed and convenience, Amazon has adopted the “on-demand” workforce model similar to the one used by Uber Technologies and Lyft. The on-demand workforce concept is still somewhat in its infancy and is certainly not without its faults. It is (and will continue to be) the focus of increased regulatory scrutiny and a platform for potential suits from workers who may feel they are being exploited.

Labor Laws and the “On Demand Worker”

Amazon originally relied on third-party companies to handle its ultra-fast delivery service but began hiring “on-demand” drivers directly through its Amazon Flex program in September of 2016. There are a number of potential advantages of the “on-demand” workforce. For example, it helps the company reduce labor costs by classifying the drivers as independent contractors thereby providing flexible work arrangements and allowing the company to reduce its employment costs through opting out of local minimum wage and overtime laws. Using an on-demand workforce also allows the company to adjust the size of its workforce based on demand. However, the model also carries many risks. Namely, the risk of lawsuits from workers who claim worker’s compensation, unemployment benefits or other employee benefits. The relationship could also be subject to scrutiny by the Internal Revenue Service or state taxing authorities. These are risks that retailers will need to carefully analyze and consider before implementing the on-demand workforce concept.

The Drones Are Coming

One possible solution to the workforce issues that has garnered mass media attention is Amazon’s stated goal of using drones to deliver its products and packages in a half hour or less. The timetable for drone implementation has not been set but the use of drones purport to solve many of the labor law issues that continue to challenge the “on-demand” workforce model. However, the use of drones does require the review and analysis of myriad legal and regulatory issues. The legal issues requiring consideration include compliance with any applicable Federal Aviation Administration regulations which have gone into effect regarding drones. Some of these regulations appear to limit some of the potential to scale the use of drones. Retailers utilizing drones will also need to consider the labyrinth of local and state law and regulations that may be adopted.

As a leader in the world of hyper fast delivery, Amazon has already tested its competitors’ ability to adapt and so far Amazon has outperformed its competition in this space. The world of traditional brick and mortar will need to keep pace by more efficiently managing their retail operations and discovering innovative ways to deliver their products to assure customer satisfaction. To accomplish this, there are many leasing, distribution and economic factors which need to be properly considered and documented,

©2017 von Briesen & Roper, s.c.

Amazon to Control Delivery by Drone?

People are talking about and news organizations are covering Amazon’s announced plans to deliver goods by drone in the not-too-distant future.  However, fewer are talking about or covering Amazon’s effort to be the only company that can autonomously deliver goods by drone.  On March 25, 2014, Amazon filed a United States patent application directed to aspects of a drone delivery system.  Pursuant to current patent law, the application was published on October 1, 2015, roughly 18 months after the application was filed.  While the application is still pending and not yet an issued patent, it provides an interesting look at the scope of protection Amazon is seeking for its drone delivery system.

Under current proposed FAA regulations, drones cannot be flown outside of the line of sight of the operator.  A much greater range will be needed for an effective drone delivery network.  Amazon is proposing to send its drones as far as 15 miles from a regional fulfillment center.  The drones would take off vertically from a warehouse floor, fly at low altitude over a suburban landscape and then descend into the backyards of their destination points.  There they would lay the package on the lawn before lifting off to return to the warehouse for another run.  The success of such a system will depend upon receiving FAA approval.  FAA approval of such a system is likely to be contingent upon demonstrating that the system can be operated without causing a hazard.  In other words, the drones will need to be equipped  with “sense and avoid” technology that prevents them from crashing into things.

Amazon’s pending patent application, Pub. No. US 2015/0277440 A1, contains claims that are broadly directed to a propeller driven automated mobile vehicle having a laser based rangefinder configured to determine a distance to an object, to a distance determining system for an automated mobile vehicle having a distance determining element positioned to emit a laser signal that reflects off a reflective exterior surface of a motor, and to an automated mobile vehicle having a plurality of motors where the alignment axis of at least two of the motors are not parallel and each motor has a distance determining element.  These claims have not yet been examined by the Patent Office.  Upon examination, the scope of the claims will likely have to be narrowed to distinguish them from prior art.  However, it seems clear that Amazon is interested in pursuing broad protection for “drones” having a distance determining element, which is likely to be a necessary component of any “sense and avoid” technology.  Thus, the potential exists that Amazon will obtain patent protection broadly covering drone delivery systems.

The way the Amazon patent application is written, it seeks to avoid the need for human involvement to ensure that vehicles do not collide with other drones, manned aircraft, or other objects or structures on the ground.  It also discusses a system for automatically sensing and avoiding objects.  Thus, the “automated mobile vehicles” of the application and recited in the claims appear to be directed to autonomous drones.  However, at this stage it is not yet clear whether the claims in any patent that issues will be limited to autonomous drones, but might also cover remotely-piloted drones.  It remains to be seen whether the examination process will push Amazon into limiting the claims to autonomous operation.

The Amazon patent application also discusses the distance determining elements being used to detect the presence of objects and to then cause the automated mobile vehicle to alter its path to avoid the object.  Thus, the distance determining elements seem to be used not only for unloading positioning, but also for sense and avoid in flight.  While in a remotely piloted context, a sense and avoid system may not need to actually determine distances to other objects.  The remote pilot could rely on visual displays of the surrounding environment of the drone to avoid collisions.  However, in an autonomous operation, it is difficult to envision any sense and avoid system that would not need to know at least the distance from the drone to surrounding objects to function.  Amazon appears to be using this need to know such distances in the autonomous context to preempt the field.  In other words, a patent covering any autonomous drone that determines distance to surrounding objects might preclude any other drones from being able to have a functioning sense and avoid capability.

The broadest claims in the Amazon patent application just recite a “distance determining element.”  In a narrower claim, the application specifies “the distance determining element is at least one of an ultrasonic ranging module, a laser rangefinder, a radar distance measurement module, stadiametric based rangefinder, a parallax based rangefinder, a coincidence based rangefinder, a Lidar based rangefinder, Sonar based rangefinder, or a time-of-flight based rangefinder.”  Thus, at this stage, Amazon is trying to cover all of the named techniques, any combination of those techniques, as well as anything else that could broadly be considered a distance determining element.

As noted, the Amazon patent application is still just pending and has yet to be examined.  Amazon may have other patent applications pending that have not yet been published, and therefore are not yet open to review by the public.  FAA regulations are also still developing.  Thus, much remains to be determined even as it relates to Amazon itself.  Other entities may also be working on drone delivery systems and/or have pending patent applications that have not yet been published.  Domino’s Pizza is said to have tested delivering pizzas by drone.  Skype’s co-founders have set up Starship Technologies to develop a ground-based drone that would be able to deliver groceries to customer’s homes.  It will be very interesting to see how the intellectual property protection for drone delivery systems plays out.

©2015 All Rights Reserved. Lewis Roca Rothgerber LLP

Amazon Wins Ruling on Results for Searches on Brands It Doesn’t Sell

On October 21, 2015, the Ninth Circuit ruled that online retailer Amazon does not violate the Lanham Act when, in response to a search for a brand it doesn’t sell, it returns a results page that fails to disclose that fact and simply offers competing products sold under different brands. The decision in MultiTime Machine, Inc. v. Amazon.com, Inc. weakens the “initial interest confusion” doctrine in the Ninth Circuit and will likely be perceived as a significant victory for online retailers.

Plaintiff MultiTime Machine (MTM) sells an expensive military-style watch known as the “MTM Special Ops,” but doesn’t sell it through Amazon. When an Amazon customer types “mtm special ops” into the Amazon search box, the result is a list of other brands of military-style watches that Amazon sells. Meanwhile, “MTM Special Ops” remains visible within the search box and also in smaller type at the top of the page. Nothing on the page indicates that Amazon does not sell MTM products. MTM sued Amazon for trademark infringement, claiming that Amazon’s use of its trademark in this way created a likelihood of confusion.

The district court dismissed the case on summary judgment. MTM appealed. In a 2-1 decision issued July 6, 2015, the Ninth Circuit remanded the case, holding that there were issues of fact as to consumer confusion that precluded summary judgment. MTM then petitioned for a rehearing en banc.

On Wednesday, while that petition was pending, the same panel reversed itself and held in a 2-1 decision that “no rational trier of fact could find that a reasonably prudent consumer accustomed to shopping online would likely be confused by the Amazon search results.” Summary judgment in favor of Amazon was affirmed.

Judge Silverman (the dissenter in the July opinion, now writing for the majority) wrote that Amazon is doing no more that “responding to a customer’s inquiry about a brand it does not carry by … stating clearly (and showing pictures of) what brands it does carry.” In the majority’s view, this is “not unlike when someone walks into a diner, asks for a Coke, and is told ‘No Coke, Pepsi’.”

The Court held that the Ninth Circuit’s traditional eight-factor Sleekcraft test for assessing likelihood of confusion is not appropriate for this case. Sleekcraft is designed for cases analyzing similarity of the marks of competing brands. Here, said the Court, there is no issue as to the other marks involved; the only issue is Amazon’s use of MTM’s mark in displaying search results. In cases involving trademarks in the Internet search context, the more appropriate test is “(1) Who is the relevant reasonable consumer; and (2) What would he reasonably believe based on what he saw on the screen?”

Adopting the standard set forth in Toyota Motor Sales, U.S.A. Inc. v. Tabari, 610 F.3d 1171 (9th Cir. 2010), the Court held that the relevant consumer here is a “reasonably prudent consumer shopping online … Unreasonable, imprudent and inexperienced web-shoppers are not relevant.” The Court also noted that the watches at issue are relatively expensive and that consumers are therefore likely to be even more vigilant than usual.

As for what is seen on the screen, the Court focused on the “clear labeling” of all of the competing products returned in the search. MTM argued that “initial interest confusion” might occur because the phrase “mtm special ops” appears three times at the top of the search results page. It also argued that Amazon should change its results page to explain to consumers that it does not offer MTM watches. The Court brushed off both contentions. “The search results page makes clear to anyone who can read English that Amazon carries only the brands that are clearly and explicitly listed on the web page.”

As a result, in the Court’s view, no jury trial is necessary because there are no material issues of disputed fact. The contents of the web page showing “clear labeling,” and the expensive price of the watches, is undisputed. The Court needs no more to conclude that “no reasonably prudent consumer accustomed to shopping online” could be deceived, even initially.

Judge Bea, who had written the majority opinion in the July decision, wrote a sharp dissent. In his view, a jury is entitled to decide whether shoppers would believe that there is a relationship between MTM and the products listed in the Amazon search results. MTM had argued that this could arise from a belief that MTM had acquired those brands, or because they are other brands from the same parent company (much as Honda and Acura automobiles come from the same company). Determining whether or not MTM is correct, said Judge Bea, is a question for a jury, not appellate judges. This is especially true in a case involving brands whose relationships to each other may not be so obvious to consumers – unlike the relationship between Coke and Pepsi.

Judge Bea claims that, by “usurping the jury function,” the majority effectively overrules the “initial interest confusion” basis for infringement. In his view, the question of whether the defendant’s labeling is clear enough to prevent customers from initially believing that the products are connected with those of plaintiff is a fact-intensive inquiry, and prior Ninth Circuit cases have not applied the doctrine as a matter of law, as the Court does here.

Apart from the technical legal issues, the two opinions reflect differing views of how the public interacts with online commerce. The majority appears to believe that online buying is now so common that consumers are conditioned to understand that entering a trademark as a search term will not necessarily return results pointing only to that brand. Its apparent desire to create a bright-line rule on “clear labeling” may make it easier for e-retailers to move to dismiss, without a trial, infringement claims from brand owners concerned about use of their marks to search for competing products. The dissent is more skeptical about consumer sophistication; its approach would create a greater burden on online retailers to defend against infringement claims.

It is unclear whether the majority intends its holding to be applied only in cases where, as here, the goods are relatively expensive and the brands are not well known. Given this uncertainty, the fact that it was a split decision, the prior petition for rehearing en banc, and the participation by multiple amici curiae, it is possible that there will be an en banc rehearing in this case. If the decision stands, however, it may diminish the doctrine of “initial interest confusion” in the Ninth Circuit and allow a freer hand to online retailers in using trademarks to generate searches for broad classes of competitive products.

© 2015 Foley & Lardner LLP

Amazon Settlement with NLRB a Reminder for Employers — “Confidential” Wage Policies Violate the NLRA

Barnes Thornburg

Last week in a settlement with the NLRB, online retailer Amazon agreed to allow its largely non-union workforce to discuss pay and working conditions with each other without fear of discipline. The settlement, as reported by Bloomberg News which obtained a copy, required Amazon to rescind certain work rules that prohibited workers from sharing information with one another, although Amazon did not admit any violation of the NLRA.

Amazon’s work rule was considered too broad by the NLRB because it prohibited discussion of wages and working conditions, considered quintessential “protected concerted activity” under the NLRA. In Amazon’s case, the NLRB got involved when an employee was disciplined after voicing concerns about security in the employee parking lot. The employee apparently filed a charge with the NLRB protesting his discipline and this led the NLRB to examine not only the circumstances of the employee’s discipline, but to scrutinize Amazon’s policies as well.

This settlement serves as a reminder to all employers, both union and non-union, that policies which prohibit discussion of terms and conditions of employment are on their face unlawful under the NLRA.  It is tempting for employers to require that wages or other benefits be kept “confidential” for a variety of reasons, but enforcing such policies is an easy way to draw unwanted attention from the NLRB, especially given the Board’s current focus on protected concerted activity.

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