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Judge ‘Troubled’ by Verdict Clearing Amazon

SEATTLE (CN) - A federal judge Tuesday expressed concern over the implications of a jury verdict in his court that found Amazon is not liable for third-party retailers' sale of counterfeit animal-shaped pillows.

Husband and wife Karen and Steve Keller run Milo & Gabby, which sells animal-shaped pillowcases that are a cross between stuffed animals and pillows for children.

The company sued Amazon in 2013 after finding knock-off versions of their products for sale from third parties. Shortly after receiving the lawsuit, Amazon removed the pillows, and continued to remove offending products when it was aware of them, according to court documents.

Throughout the action, Amazon denied that it "offered to sell" the infringing pillowcases.

The case was pared down, but U.S. District Ricardo Martinez in July declined to dismiss Milo & Gabby's claims that Amazon infringed on its patents.

Martinez found that because Amazon "offered to sell" the pillowcases and filled the orders, the patent infringement claim could proceed.

At the end of October, a jury ruled for Amazon. It answered "no" to eight questions about whether Amazon was liable for the third parties' sale of the infringing pillowcases.

Judge Martinez concluded that the jury's factual determinations were correct, but wrote that he is "troubled by its conclusion and the impact it may have on the many small retail sellers in circumstances similar to the plaintiffs."

In his Nov. 3 opinion, Martinez noted that the law is behind technology, and that there is no federal case that directly addresses who made the "offer to sell" the infringing products.

"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' or 'selling' the products," Martinez wrote. "Indeed, under the current case law, Amazon has been able to disavow itself from any responsibility for 'offering to sell' the products at all."

Milo & Gabby's website features a section on how to identify counterfeit pillowcases.

The company said it decided not to sell their products on Amazon, but in 2013 its founder Karen Keller found ads for her pillowcases on the website, featuring the Amazon logo.

Amazon says it has a strict anti-counterfeiting policy and that it can suspend or terminate a seller's privileges if it finds counterfeit goods.

In January 2014, Amazon told the Seattle Times that its third-party sellers brought in "tens of billions of dollars," without citing specific figures.

The Wall Street Journal reported that year on Amazon's practice of commingling items at its warehouses for faster shipping. Johnson & Johnson temporarily stopped selling many products to Amazon out of concerns that the company wasn't doing enough to prevent the sale of expired and damaged Johnson & Johnson products.

Many of the 10 counterfeiters cited in the Oct. 3 opinion are from China, which has a well-known history of counterfeiting U.S. goods.

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