You receive a cease and desist letter. What should you do? There are a couple of options:
Responding to the Letter
You can either reject their demands and forcefully counter their claims, or you can try reaching a settlement. Ignoring the letter is not advisable as it could lead to a lawsuit. Replying to the letter allows you to buy yourself some time and assess your next steps. It also gives you an opportunity to make necessary adjustments to your business if needed.
It’s important to base your decisions on the merits of their allegations, rather than your personal feelings. Conduct a thorough patent study to understand the validity of their claims. If their infringement claims hold no merit, you can assertively respond. However, if their claims are valid, seeking a settlement may be necessary. Additionally, consider making business adjustments to prevent future liabilities.
Understanding Cease and Desist Letters
A cease and desist letter serves as a warning or notification from a patent or trademark owner regarding potential violations of their intellectual property rights. Typically, the letter includes:
- Contact information of the patent or trademark owner or their attorney.
- Details about granted patents and/or registered trademarks.
- Identification of the products they believe infringe on their patents or trademarks.
- Demands or steps they want you to take to resolve the situation.
Consequences of Ignoring a Cease and Desist Letter
Ignoring a cease and desist letter can lead to a lawsuit, although it is not guaranteed. Consider the letter as a way to resolve the issue outside of litigation. By acknowledging the letter, you avoid forcing a lawsuit. The best approach depends on careful consideration and due diligence.
Assessing the Merits of Allegations
For patent matters, the cease and desist letter will contain one or more patent numbers and identify the specific products that allegedly infringe on their patents. To assess the situation properly, it is recommended to seek guidance from a patent attorney, as even minor details can significantly impact the validity of infringement claims.
Trademark matters are comparatively simpler, but it is still advisable to consult a trademark attorney. Comparing the similarity of marks and assessing the similarity of goods and services are essential steps in evaluating infringement allegations.
Making Business Adjustments to Avoid Liability
If the patent or trademark owner’s infringement claims are valid, it is crucial to take immediate action to minimize future liabilities. For patents, it may be possible to design products that do not infringe on their patents, reducing the risk of future infringement. Selling products in different countries can also help, as U.S. patents have territorial limitations.
Unfortunately, adjusting trademarks can be more challenging. Permanently labeled products may require a recall, and ceasing the use of the trademark might be necessary. Conduct thorough due diligence on trademarks to prevent future issues.
Exploring Settlement Options
The cease and desist letter will indicate whether the patent or trademark owner is open to a settlement. If a settlement is in your best interest and they are receptive to it, consider exploring this option. However, be aware that settlements may introduce additional contractual obligations beyond avoiding infringement, which should be carefully evaluated.
If a settlement is reached, it may be beneficial to negotiate depleting your inventory to reduce losses.
Assessing the Likelihood of a Lawsuit
To gauge the possibility of litigation, consult an attorney who can conduct a litigation search and business search. Understanding the patent or trademark owner’s history and financial capabilities can provide insight. Assessing the merits of the infringement claims and considering nonmonetary reasons for litigation are also essential in estimating the likelihood of a lawsuit.
Keep in mind that these factors are not absolute indicators, as some companies may have alternative litigation histories or financial backing.
Enforceability of Cease and Desist Letters
It’s important to note that a cease and desist letter itself is not enforceable. It serves as a notification from the patent or trademark owner. For them to enforce their rights, they must serve you with a formal complaint and win a lawsuit.
To learn more about patent pending rights, you can refer to the following articles:
- Patent pending: What the inventor and competition need to know about each other
- Patent pending: Everything you wanted to know
Remember, when dealing with a cease and desist letter, it’s crucial to approach the situation with care and seek professional guidance when necessary.