How to respond to a cease and desist letter?

You can respond to a cease and desist letter by:

1. Rejecting their demands and forcefully rebutting their claims; or
2. Reaching out to seek a settlement.

But, you shouldn’t ignore the letter since you may be forced into a lawsuit.  Otherwise, they might sue you to get your answer. By replying to the letter, you can delay the lawsuit to buy yourself more time to decide your next steps and make business adjustments if needed.

Your decisions need to be based on the merits of their allegations, and not on how you feel about the situation. Do a patent study to understand the merits of their allegations. Thereafter, you can send a forceful response if their infringement claims have no merit. However, if their claims are valid, you may need to reach out for a settlement. At the same time, you can make business adjustments to avoid future liability.

What is a cease and desist letter?

A cease and desist letter is a warning or notification from a patent or trademark owner that you are violating their intellectual property rights. The letter will include four things:

1. The contact information of the patent and trademark owner or their attorney;
2. One or more granted patents and/or registered trademarks;
3. One or more of your products they allege infringes on their patent(s) or trademark(s); and
4. Their demands or what they want you to do to resolve the situation.

What happens if you ignore the cease and desist letter?

You could find yourself in a lawsuit if you ignore the cease and desist letter.  Although in many instances, it won’t lead to one.

Consider the letter as a precursor to a lawsuit. The patent or trademark owner wants to resolve the situation without litigation. By not acknowledging the letter, you are forcing a lawsuit so that they can get an answer from you.  As such, at a minimum, you want to recognize the letter.

Whether you take an amiable or belligerent approach will be based on your due diligence. Otherwise, you won’t know which approach to take.

How to assess the merits of the allegations in the cease and desist letter?

For patent matters, the cease and desist letter will include one or more patent numbers. It will also identify your product(s) that they allege infringes their patent(s). You need to determine the scope of patent protection for each patent and determine if your product(s) infringes their patent(s).

I’ve written several articles to help guide you in the right direction. However, the bottom line is that you need to hire a patent attorney. Assessing patent infringement is an involved process.  Typically, even what you might consider minutia could significantly impact the merits of their infringement claims.

Here are a few articles that you can read to familiarize yourself with assessing the merits of the claims in the cease and desist letter.

1. Purpose of patent study after receipt of cease and desist letter
2. How to avoid patent infringement?
3. Avoiding patent infringement

For trademark matters, the cease and desist letter will include their trademark registration number(s). Plus, it will identify your product(s) they believe infringes on their trademark.

In trademarks, you need to compare the similarity of the marks and the similarity of the goods and services. Other factors called the DuPont factors are also analyzed for assessing infringement.

Although assessing the merits of the trademark infringement allegations is simpler than a patent matter, you should still hire a trademark attorney to confirm your assessment due to the complexities of the law and the impact on your business if you make a wrong decision.

What types of business adjustments should you make to avoid liability?

If they have valid infringement claims, you need to take action now to mitigate future liability.

For patents, you can design around their patent.  If your product(s) infringes their patent now, you can’t eliminate your liability for your past sales.  But, by designing around their patent(s), you can avoid liability for future sales.  You may be able to make simple changes to your product to avoid infringement of their patent.

Also, for products in stock, you may be able to sell them in a different country. U.S. patents only cover activities in the United States and not outside foreign countries (i.e., the territoriality of patents)

For trademarks, it’s often harder to make adjustments. First, your products may be permanently labeled with your mark. You can’t relabel the products. You may have to recall all of your products to avoid liability. Unfortunately, you may have to stop using your mark.  To prevent this in the future, you need to do your due diligence on your trademarks before you start.

What types of settlements are possible?

The letter will inform you whether the patent and trademark owner is open to a settlement.  If it’s in your best interest to take one and if they are open to one, then you should explore the settlement.

Be aware that sometimes, settlements are not beneficial.  For example, you add contractual obligations in addition to your duty to avoid patent and trademark infringement when you enter into a settlement agreement. In these agreements, they tend to give patent and trademark owners more protection than what they have under their existing intellectual property rights.

If you do settle the case, you should ask them to deplete your inventory so that you don’t take a large loss on your current stock.

How do I gauge the probability of a lawsuit?

You can gauge the probability of litigation by having an attorney:

1. Do a litigation search;
2. Do a business search;
3. Assess the merits of the infringement claims; and
4. Understand the nonmonetary reasons for litigation.

The litigation search will let you know if the patent and trademark owner has been involved in litigation and the results of that litigation. If they have a long litigation history, then you know they’re not hesitant to start a lawsuit. However, it’s harder to tell if they’re willing to get into a lawsuit with you if they have no history.

The business search will let you know if they have the financial means to go through litigation. If they are a larger company, then they have the means to sue you. However, if they are a start-up, they may be more hesitant to go through litigation.

An attorney should also assess the merits of the infringement claims, as discussed above in greater detail.  This is an important factor in determining the likelihood of a lawsuit.

Also, you need to understand that there are nonmonetary reasons for litigation. The damages resulting from your infringement may be low compared to the cost of litigation. However, the primary reason may be the reputational harm caused by your infringement. In this case, the lawsuit is not about making the person whole in a financial sense. They want to protect their reputation.

These are just factors and not absolute. Many times you might see a company with no litigation history, but that’s because they sue infringers under a different name. Or, a small company might have the financial means because they’re a subsidiary of a much larger company.

Is a cease and desist letter enforceable?

A cease and desist letter is not enforceable. It is merely a notification from a patent and trademark owner.  To enforce their rights, they need to serve you with the complaint and win a lawsuit.

You can read more about what rights patent pending gives to inventors.

1. Patent pending: What the inventor and competition need to know about each other
2. Patent pending: Everything you wanted to know