Understanding Patent Cease and Desist Letters

Understanding Patent Cease and Desist Letters

Patents apply to actual inventions and prevent others from manufacturing, selling, or using a product or process. These protections are granted by the government in exchange for public disclosure of the invention, which can leave creators open to instances of patent infringement.

When this occurs, an inventor’s first line of defense is the patent cease and desist letter. This formal demand is sent directly to an alleged infringer and can later be used during litigation to show misconduct was knowing and willful.

If you have received a cease-and-desist letter based upon patent infringement, please contact us at Verna Law, P.C. at 914-908-6757 or send an e-mail to anthony@vernalaw.com

 

What is a Patent Cease and Desist Letter?

Once a patent application has been granted, the owner of the patent has exclusive rights over the invention. When these rights are violated, a patent cease and desist letter can be sent to an alleged infringer of these rights. This is typically the first step in defending a patent, and in most cases, it’s also the last necessary step. Cease and desist notices are partially credited with keeping over 97 percent of legal disputes from ever entering the system.

Although patent owners are granted certain protections by the U.S. Government, the onus of policing violations still falls upon the patent owner. Any enforcement activities must begin with the IP owner, and in many cases, this can lead directly to litigation. The driving focus behind patent cease and desist letters is to avoid further legal issues, but without professional assistance, these notices may simply be ignored.

Every cease and desist letter explains the misconduct that’s occurring and demands that it be ended. By sending one, patent owners create an evidentiary trail that can later be used in court.

If you receive a patent cease and desist letter, you have a specified time period to respond. If infringement is obviously taking place, it’s important to cease those actions immediately. Of course, not every claim of patent infringement is cut and dry, so if there’s any confusion as to whether infringement is occurring, it’s important to consult with a patent law firm to understand the patent owner’s demands and the patent owner’s patent claims.

What Constitutes Patent Infringement?

Patent infringement occurs when someone other than the intellectual property owner sells, offers to sell, uses, or manufactures a patented item or process. This must occur during the duration of protection – typically 20 years – and meet all elements of at least one claim within the patent.

Some typical defenses to a patent infringement claim include:

• Prior Art: Alleged infringers may claim that a patent is invalid due to the existence of prior art.
• Non-Infringement: If the device at issue does not utilize all elements of a claim, infringement has not taken place.
• Inequitable Conduct: A patent can be invalidated if the owner acted in bad faith during prosecution.
• Doctrine of Laches: If a patent owner procrastinates in defending its rights, they could lose the ability to do so.
• Estoppel: Individuals are prevented from making assertions contrary to prior claims, actions, or established facts.

Writing a Patent Cease and Desist Letter

Considering the increasing number of design and utility patents granted by the USPTO, there’s little doubt that the frequency of patent cease and desist letters is increasing.

It’s important to include pertinent patent law when sending a cease and desist letter. This lets the recipient know that you’re doing more than just “fishing” for potential infringing behavior. In addition to including specific instances where your patent was infringed, you need to explain how the recipient’s behavior constitutes infringement. This is done through a patent’s claims.

Whenever you file a patent application, you’re required to list several claims that describe the invention. These explain the scope of your patent and thus dictate the protection provided by the U.S. Patent and Trademark Office. If alleged violations don’t meet the criteria of at least one of the claims, then infringement has not occurred.

Parts of a Patent Cease and Desist Letter

A well-crafted patent cease and desist letter sent by a patent litigation attorney can bring a quick resolution to a matter. Failing to include appropriate information, though, could result in the notice carrying no legal weight. This is why it’s important to consult with a lawyer. The following are all integral parts of a patent cease and desist letter:

1. Contact information for yourself and the infringer.
2. Demand that all infringing activities end.
3. Demand that infringing activities not be resumed.
4. Patent registration number.
5. Dates and examples of the infringing activities.
6. Additional legal actions that may be taken.
7. Deadline for response (often 10 days).

Each of these aspects of a cease and desist letter is geared toward removing all doubt that infringing activities are accidental. At this point, infringers typically acquiesce and end their activities – especially if their misconduct was knowing and willful. Those who engaged in accidental violations usually abide by the requests in these notices as well.

 

Responding to Patent Cease and Desist Letters

If you’ve received a patent cease and desist letter claiming infringement, it’s important to thoroughly review the information provided. Keep in mind that this document is not legally binding. Patent trolls send out bad faith cease and desist letters frequently. In doing so, they hope to either stifle competition or extort money from individuals engaged in legitimate conduct. You’re not obligated to respond, but failing to do so could lead to litigation, so clearly, every cease and desist letter should be responded to in writing.

If your behavior doesn’t constitute infringement, a patent cease and desist response letter is your opportunity to showcase that fact. In doing so, you may eliminate any further harassment from the alleged patent owner. You’ll also start establishing your own evidentiary trail. This can become useful later if you end up in court.

Always keep in mind that cease and desist letters and their responses are simply meant to enforce the law. If you’re engaged in patent infringement, a cease and desist notice should be viewed as an opportunity to end a conflict before further legal action is taken.

 

When Cease and Desist Letters Don’t Work

Cease and desist letters are among the most effective tools in the intellectual property world, but there will always be instances when an infringer refuses to cease an infringement. This is why around 4,000 patent infringement cases have been filed yearly in federal courts over the last few years. Unfortunately, this may be your only recourse if a cease and desist letter isn’t effective.

If another party is wrongfully claiming that they’re not infringing upon your patent, you’ll have the option to file a complaint to initiate patent litigation in court and have the infringer served. They’ll have time to respond, but if they fail to do so, you may be awarded a default judgment that includes an injunction and monetary compensation. Judgment amounts in patent cases have been trending upwards over the last two decades.

One of the most overlooked issues regarding patent cease and desist letters is the possibility of declaratory judgments. The infringer could seek a judgment of non-infringement in a more favorable court the moment they feel litigation is imminent. This could put you on the defensive side, so at times, you may want to consider filing a lawsuit prior to sending a cease and desist letter. The lawsuit can always be dropped later if an acceptable conclusion is reached.

A cease-and-desist (C&D) letter typically demands that the recipient stop (cease) doing something now and avoid (desist from) doing it in the future, or risk being sued. The steps you take after receiving a C&D letter can critically impact how the potential dispute affects your business (as discussed in our related IP Update regarding trademark and brand protection).

In patent disputes, C&D letters are frequently used to advise the recipient that they are infringing the patent rights of the patent holder and demanding the recipient to stop. Sometimes the patent holder may offer the recipient a license to the patent at issue. A C&D letter may fall across a spectrum of threatening to friendly, depending on the sender, the recipient, and the nature of the allegations/accusations.

 

Steps to Take if You Receive a Patent Cease and Desist Letter

If you receive correspondence that you believe is a C&D letter, consider these five steps:

1. Consult an Intellectual Property Lawyer:If you receive a C&D letter for patent infringement, you should consult with an Intellectual Property (IP) lawyer with expertise in patent infringement litigation. Intellectual property law is a highly specialized practice area. It is important to obtain counsel who is familiar with patent litigation to put yourself in the best position moving forward.

   Patent infringement allegations are often rooted in complex and highly technical facts and can take time to properly investigate. Consulting with an experienced IP lawyer quickly after receiving a C&D letter makes for the best use of the time leading to the sender’s proposed deadline and will set you up to properly consider the allegations, gain an understanding of your risk level, and evaluate the next steps.

2. Make Note of the Deadline:A C&D letter will typically include a deadline for you to respond and confirm your compliance with the demands. A deadline may have been chosen randomly or may be intentional and especially important where there is a risk of fast-approaching harm or legal deadlines by which the sender needs to commence litigation.

   Even if you do not intend to comply with the demand, there is value in responding by the identified deadline to try to resolve or reduce the conflict, or to demonstrate to a future judge or arbitrator that you did not simply ignore the request.

   If the deadline is too quick for you to respond meaningfully, you can consider sending a short-term response that you will need additional time to investigate the allegations and/or seek legal advice.

3. Consider the Merits:Just because someone sent you a C&D letter, it does not mean they have a (strong) claim against you. When evaluating the merits of a C&D letter, consider the sender and the nature of the complaint. Questions to ask yourself include:

   • Does the sender appear to have the rights it is asserting?
   • Does it seem like your actions infringe on the sender’s rights?
   • How important are your allegedly infringing activities with respect to your business interests?
   • What is the bigger picture? Is there a relationship between you and the sender that you wish to preserve? Are there other aspects to the dispute between you and the sender beyond the patent infringement allegations, such as employment considerations or allegations of breach of confidence?
   • Considering the merits at the outset will give you a better understanding of the possible risks you are facing. Experienced patent litigation counsel can assist you in evaluating your position, including the questions above.
   • See, below, a discussion on the possibility of filing a Declaratory Judgment lawsuit.

    

4. Evaluate Your Options and Respond:How you respond to the C&D letter will depend on various factors, including the nature and strength of the allegations and the possible commercial interests at stake. Among other options, you may choose to comply with the demands, deny any wrongdoing through a responding letter, or explore the possibility of mutually agreeable patent licensing terms.

   All correspondence with the sender should be made on a ‘without prejudice’ basis to prevent any such correspondence from being used as evidence by the sender in future court proceedings.

   You should also be careful not to make any public statements or comments to any third parties about the dispute without first discussing it with an IP lawyer.

5. Gather and Preserve Your Records:Even if you receive a C&D letter that does not expressly threaten litigation, a lawsuit is a possible outcome. For this reason, as soon as you receive a C&D letter, you should put a “litigation hold” in effect, where you preserve all records that may be relevant to a lawsuit later. This will help you avoid any allegations that you intentionally deleted or destroyed records that you would have been required to provide to the other side during the litigation.

   What you preserve depends on the nature of the allegations, and you should seek legal advice to ensure that you safeguard the proper records.

 

Another Consideration: Declaratory Judgment Jurisdiction: A Look at the Totality of the Circumstances

​Recipients of a cease-and-desist letter may consider filing a Declaratory Judgment lawsuit against the IP owner who sent the letter, asking the court for a declaratory judgment stating that the recipient is not infringing the patent (and asking for attorney’s fees as damages).  Declaratory judgment actions different because they permit a party to seek a court judgment that defines the parties’ rights before an injury occurs. A declaratory judgment differs from other judgments because it does not provide for any enforcement or order a party to take any action or pay damages. Essentially, it states the court’s authoritative opinion regarding the exact nature of the legal matter and whether the parties would be entitled to relief without actually requiring the parties to do anything. For example, a declaratory judgment action could be brought to determine party rights and obligations under a contract or to establish the validity of a patent.

Under Article III of the U.S. Constitution, a federal court may only issue a declaratory judgment when there is an actual controversy. Without an actual controversy, the federal courts do not have jurisdiction to hear the case. For an actual controversy to be found, the plaintiff cannot be merely seeking advice from the court, but instead must show that the controversy between parties is substantial, immediate, and real and that the parties have adverse legal interests.

In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Supreme Court evaluated Declaratory Judgment (“DJ”) jurisdiction under a totality-of-the-circumstances test, where there must be “a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant relief.” Looking to the totality of the circumstances, courts analyze the contents of a cease-and-desist letter as a key factor—but often not the only factor—in assessing DJ jurisdiction. Other factors include the relationship of the parties, litigation history of the patent owner, actions of the parties, and more, as discussed below in the context of the MedImmune test.

Creating a “Substantial Controversy” through Cease-and-Desist Letters

The “substantial controversy” requirement allows potential infringers to challenge infringement claims and patent validity without “betting the farm” by requiring potential infringers to make (or continue to make) a potentially infringing product. But when do a patentee’s actions create a substantial controversy? In SanDisk v. STMicroelectronics, for example, the U.S. Court of Appeals for the Federal Circuit’s analysis searched for an act by the patent owner indicating it would enforce its rights. The court found that the patent owner provided a clear intent to enforce its rights by, among other things, providing detailed infringement charts explaining how the accused infringer violated its patents. But patentees rarely provide such clear accusations when they want to avoid DJ jurisdiction, and the court refused to define the boundaries in this case.

The court extended its analysis in decisions following SanDisk. The Federal Circuit has consistently stated that “a communication from a patent owner to another party, merely identifying its patent and the other party’s product line” is not enough for a definite and concrete dispute. Still, simply avoiding specific threatening phrases, such as “you are infringing my patent,” generally does not inoculate a patent owner’s letter from creating DJ jurisdiction. Instead, the language of the letter usually must connect the patents with an accused product, and the language or circumstances surrounding the letter must suggest that the patent owner will assert its patent rights. While a strongly worded letter may be sufficient alone to trigger DJ jurisdiction, many letters use less threatening language. In those instances, courts do not stop their analysis at the words of the letters. All communications become relevant, with courts considering informal conversations, the history of the parties (e.g., whether they have a litigious history), later discussions between the parties about the contents of the letters, and more. Courts analyze these facts collectively to determine whether a patent owner signaled an intent to assert its rights, creating a definite and concrete dispute.

As an example where the court found no DJ jurisdiction, in Element Six v. Novatek the patent owner worded its letter as an information gathering tool. It requested information on the accused infringer’s products so that it could determine potential liability. The court did not consider this to be a demand or accusation. Instead, the court viewed it as an attempt to gather information to determine the rights of the patent owner. Further, the patentee did not provide additional information on its patents or a potential infringement analysis until the accused infringer requested the information. The court did not find this later-arising information to contribute to DJ jurisdiction because the accused infringer asked for it as opposed to the patent owner using it to threaten filing suit. The court focused on the information in the original letter and determined that a request for information was not a definite enough threat to enforce the patent owner’s rights and did not create a substantial controversy.

“Sufficient Immediacy and Reality” in the wake of Cease-and-Desist Letters

Some view the “sufficient immediacy and reality” requirement to be more straightforward than the “substantial controversy” requirement. In general, if a recipient allows time to pass between receiving a cease-and-desist letter and filing a DJ action, the delay will undermine the immediacy and reality of the dispute. Patent owners seeking to avoid DJ jurisdiction can further bolster this argument by showing that the accused infringer has not taken any corrective action in response to the letter or other communications.

But even with the passage of time, courts might still find sufficient immediacy and reality if the patent owner has taken other actions in the interim. For example, a potential infringer might believe they are a target of the patent owner if the patent owner has sued others in the same market after sending similar cease-and-desist letters. The potential infringer may believe that the patent owner simply has not gotten around to suing it, creating an immediacy and reality to support DJ jurisdiction.

An accused infringer can also retain the immediacy and reality of a controversy if it temporarily takes corrective action to avoid the accused conduct but is still prepared and wanting to revert to its original accused conduct. This is true even if the alleged infringement had abated for many years. In Myriad, for example, the patent owner sent a letter demanding that the accused infringer refrain from performing its patented tests. The accused infringer refrained from performing the tests for 10 years but then filed a DJ action. The court found sufficient immediacy and reality based in part on the fact that the parties’ legal positions had not changed during the abatement. The patent owner had continued asserting its patent rights by demanding that accused infringers run their tests through the patent owner, suing those who violated these terms. The accused infringer in this case succumbed to these threats and did not provide accused services to his patients. The court also noted that the accused infringer wanted to provide and was ready to provide the patented tests. The court even compared this with the fact that it affirmed the dismissal of claims by other accused infringers who stated they may want to provide the tests. Because these facts did not change over the 10 years between the letter and the DJ action, the immediacy and reality of the suit did not dissipate.

It is important to remember that this is not a rigid, formulaic analysis. Courts have said that attorneys cannot simply prevent DJ jurisdiction by avoiding “magic words” such as “litigation” or “infringement.” Instead, courts evaluate the totality of the circumstances and determine whether the accused infringer is reasonably concerned about being sued to the point of satisfying these two requirements. This dynamic prevents the courts from clearly defining a universal set of language that would always avoid DJ jurisdiction in a cease-and-desist letter, further complicating the balancing act that patent owners must perform when sending letters to create notice for damages or knowledge for indirect infringement.

The Interplay Between DJ Jurisdiction and Notice for Damages

To recover damages for patent infringement, a patent owner must provide actual or constructive notice to the accused infringer. A cease-and-desist letter may provide actual notice, but to do so it must “assure that the recipient knew of the adverse patent during the period in which liability accrues.” The courts focus on the acts by the patent owner to put the accused infringer on notice, not any independent knowledge the accused infringer may have separately developed regarding the patent.

To provide this notice, the Federal Circuit has stated that “the actual notice requirement of § 287(a) is satisfied when the recipient is informed of the identity of the patent and the activity that is believed to be an infringement, accompanied by a proposal to abate the infringement, whether by license or otherwise.”

At first glance, this appears to create a binary choice either to avoid DJ jurisdiction and fail to create notice for damages, or to create both DJ jurisdiction and notice. But courts insist the rules are not coextensive. For example, the Federal Circuit noted the distinct requirements and purposes of these doctrines in SRI International v. Advanced Technology Laboratories:

The criteria for actual notice under § 287(a) are not coextensive with the criteria for filing a declaratory judgment action. These statutory purposes are distinct, serve different policies, and are governed by different laws. The requirement of actual notice under § 287(a) is designed to assure that the recipient knew of the adverse patent under the period in which liability accrues, when constructive notice by marking is absent. Actual notice may be achieved without creating a case of actual controversy.

Despite this recognition, courts generally analyze challenges to DJ jurisdiction and notice for damages at different stages of the litigation, preventing them from providing a direct comparison. Still, analyzing the rules for notice can be instructive.

Identifying the asserted patent is fairly straightforward. While rare cases have not required a patent owner to identify the patent number, it is generally not advisable. Courts allow more flexibility in identifying an accused product, however. Patent owners can generally identify a line of products and often are not required to identify a particular product by its model number. This allows patent owners to be less specific in their letters, which could undermine DJ jurisdiction in some instances. In PCT International v. Holland Electronics, the patent owner identified an entire family of products as potentially infringing its patents. The accused infringer insisted that the patent owner needed to identify specific model numbers the patent owner thought were infringing,

 

If you have received a cease-and-desist letter based upon patent infringement, please contact us at Verna Law, P.C. at 914-908-6757 or send an e-mail to anthony@vernalaw.com

 

Conclusion

Patent cease and desist letters are powerful tools in protecting intellectual property rights. Whether you are sending or receiving one, understanding the process and taking the correct steps is crucial. By consulting with an experienced IP lawyer, accurately assessing the merits of the situation, and carefully crafting or responding to these letters, you can significantly impact the outcome of any potential disputes.

 

If you have received a cease-and-desist letter based upon patent infringement, please contact us at Verna Law, P.C. at 914-908-6757 or send an e-mail to anthony@vernalaw.com