Knock it off!

Responding to a cease and desist demand

  1. A brief introduction to Intellectual Property

Nearly everyone likes owning property. When you own property, you have something which can often be sold, rented, or used for personal or financial gain. Property can take take many forms but is generally broken into two categories: real property and personal property. Real property generally refers to physical land and physical improvements to land (such as buildings). Personal property generally refers to portable physical items such as paintings, cars, or clothes. Intellectual property is a type of personal property.

While not a perfect analogy, there are many helpful and informative similarities between intellectual property and other personal property (such as a car). To acquire personal property, a person generally 1) identifies the property they want, 2) negotiates with the current owner to agree on a purchase price, 3) completes the agreed upon transfer, and 4) registers the transaction / ownership with the appropriate governmental entity. To acquire intellectual property, a person generally 1) comes up with something novel, 2) files an application with the appropriate governmental entity (accompanied by necessary fees), and 3) negotiate / argue with the entity until (if at all) they acknowledge and register your right to you.

A property owner, in most cases, has the right to exclude others from using their property without permission. If you own a car and someone starts using that car without your permission, you can generally work with law enforcement (e.g. the sheriff’s office) to make them stop treating your car as though it was theirs. Similarly, the owner of intellectual property generally has the right to exclude others from infringing on their property. If you have a patent on a particular device and someone else starts making a device which which infringes, you have the right to make them stop using your intellectual property as if it was theirs.

  1. Your Intellectual Property

If you’ve been planning for the long-term, you have likely been expanding your intellectual property (IP) portfolio through creation or acquisition of patents, trademarks, copyrights, trades secrets, or otherwise. You have likely been obtaining protection for your internally developed IP assets, researched your products and processes to minimize the risk of infringing on the IP assets of others, and researched IP risks related to products and processes you buy. You also likely follow the market closely to make sure people aren’t infringing on your IP assets. Just as you seek to protect and enforce your IP assets, so do your competitors and other market players. In spite of your best efforts, if you’re making, using, or selling innovative goods, there’s a reasonable possibility you will, sooner or later, receive a cease and desist demand.

  1. Cease and Desist Demands

A cease and desist demand is likely not the best way to start a conversation, isn’t how I would generally advise a client to begin their conversations, and may not be how you choose to start a conversation with someone you think is infringing on your IP assets, but it is a very common first step. The demand will most likely be a written letter, be delivered by traceable means, identify the basis for their asserted intellectual property right (patent, trademark, or otherwise), identify the true party in interest (who owns or has a right to assert the intellectual property right), and identify the goods and/or services they allege to are infringing. The demand will likely be sent by an attorney and assert that, if you continue to engage in the complained of behavior, you may face increasing consequences and provide a timeline / deadline by which they would like a response.

  1. Relax

If you receive a cease and desist demand, your first thing you should do, in the words of The Hitchhiker’s Guide to the Galaxy, “DON’T PANIC.” You have a variety of options and discussing those options is the objective of this article. While you don’t have to do anything, totally ignoring a cease and desist demand is something I would recommend in only very rare circumstances. In many circumstances, a person is more likely to have the dispute elevated (such as to an infringement suit in federal court) by ignoring a cease and desist demand. Somewhere between panicking and doing nothing you’ll find the best course of action.

  1. Talk with your Attorney

It may sound self-serving when an attorney tells someone to talk with an attorney, but it really should be one of the first calls you make. You are likely working with a deadline (since the cease and desist demand letter likely set a deadline). The sooner you bring your attorney into the loop, the more time you give your attorney to help you. Your attorney should be one who has expertise in intellectual property and preferably the specific type of intellectual property at the heart of the dispute. If the attorney with whom you usually work does not have the specialized expertise to help with the you with the matter, he or she can likely refer you to a specialist well suited to help you and with whom they and they can work. One big advantage of patent and trademark law is you are often not constrained by state boundaries. With most legal matters, your attorney needs to be a member of the respective state’s bar. With many patent and trademark matters, since they are federal, any attorney in the country who is registered to practice before the U.S. Patent and Trademark Office (USPTO) can assist you so there is a deep bench of talent available to you.

  1. Are you are likely infringing?

Just because someone says you are infringing on their intellectual property doesn’t mean they are right. Work with your attorney to carefully analyze the scope of the asserted intellectual property (e.g. the patent claims). Particularly when it looks like a close call, your attorney is likely to be able to help a great deal as you try to understand the highly specialized and technical language of a patent claim or likelihood of confusion in a trademark dispute.

    1. Likely not infringing

If you are likely not infringing, congratulations. You aren’t done, but your road ahead is definitely the easier road. You will likely want to work with your attorney to communicate back to the party who send the cease and desist demand.

      1. A general demur

If you and your attorney conclude you are likely not infringing, you may wish to inform the person who send the cease and demand that you believe you are not infringing on their asserted intellectual property. This may take the form of a fairly general statement that you believe your goods or services do not infringe the asserted intellectual property. With more complicated products where features are not necessarily readily apparent (e.g. a microprocessor) a general demur may be more effective since it may be more difficult to determine whether a product is truly infringing. A general demur is comparatively quick and inexpensive to prepare but is less likely than other options to finally resolve the issue as it’s similar to two children on the playground saying “yes you did” and “no I didn’t.” If your goal is a quick final resolution, this is likely not be the option for you.

      1. A specific demur

Instead of a general assertion that you are not infringing their intellectual property, you may choose to provide a detailed analysis of why you believe you are not infringing the asserted intellectual property. This is a great opportunity to build your reputation as a reasonable person who respects the intellectual property of others and expects others to respect yours intellectual property. This communication back will likely take the form of a letter your attorney writes to the attorney through whom the cease and desist demand was sent.

Particularly in well-connected industries and with small businesses, owner-to-owner communication may be appropriate as well. This may bring the issue to quicker final resolution, but is accompanied by some risks. You will likely be laying out a significant amount of your trial strategy if the dispute winds up in court. If you’re right, you may end the matter. However, if it doesn’t resolve the matter, you have lost the element of surprise.

    1. Is the intellectual property likely valid and enforceable?

Analyzing whether the asserted intellectual property is valid generally takes significantly longer (and is therefore more expensive) than determining whether a particular product likely infringes on a particular patent (though it may vary by specific situation). Intellectual property may be unenforceable for a variety of reasons. By many metrics, current patent quality is fairly low. Using the most recent data available from the USPTO (through Fiscal Year 2015), the last three quarters of 2015 all had a lower Quality Composite Score than any other quarters since 2012. Quarter four of 2015 specifically had a quality composite score more than 44% lower than quarter one of 2015. Your attorney is likely to research art which existed before the patent was applied for, review the file wrapper of the application from which the patent issued, and otherwise gather the information necessary to generate an opinion on whether the intellectual property is valid and enforceable. If the intellectual property is invalid or unenforceable, you’re now in likely your second best scenario. It likely cost you a little more to get here, but you likely don’t need to discontinue any of your activities

      1. Unenforceable intellectual property

If the intellectual property asserted by the other party in the cease and desist demand is invalid or unenforceable, you should work with your attorney to evaluate the relative merits of your available responses. Your response options include the following

        1. A general demur

If you and your attorney conclude their intellectual property is likely not enforceable (e.g. because the utility patent is expired, the patent should not have issued due to prior art which should have caused the application to be rejected, or there is not a reasonable likelihood of confusion between your trademark and theirs), you may wish to deny the validity of their asserted intellectual property. This may take the form of a fairly general statement that the asserted intellectual property is invalid or enforceable. A general demur can relatively quick and inexpensive to prepare but is less likely than other options to finally resolve the issue as it’s not dissimilar from two children on the playground saying “yes you did” and “no I didn’t.” If your goal is a quick final resolution, this may not be the option for you.

        1. A specific demur

Instead of a general assertion that the intellectual property is invalid or unenforceable, you may choose to provide a detailed explanation of why you believe their intellectual property is invalid or unenforceable. Explaining why you believe the intellectual property can help resolve the matter more quickly if you are correct. If you are incorrect, it may embolden the other party to push harder because you have shown some of your cards.

        1. Citation of Prior Art

A citation to prior art allows anyone to submit information relevant to an enforceable patent to the USPTO. 35 USC § 301, 37 C.F.R. 1.501, MPEP 2202. The prior art is limited to patents or printed publications and the relevance of the prior art to at least one claim needs to be explained. There is no fee payable to the USPTO to file a citation of prior art. The prior art is placed in the patent’s file but the art is not substantively reviewed by the USPTO unless and until the application is otherwise re-opened. However, the art is available to anyone who examines the patent file. Writing the statement explaining the relevance of the prior art need not be a lengthy and expensive process. Therefore, a citation of prior art should be strongly considered when you and your attorney believe there is prior art which would render a patent invalid or enforceable. Generally, a citation of prior art would be used in conjunction with another option.

        1. Ex parte re-examination

If you and your attorney believe the patent is invalid and choose to have it invalidated within the USPTO, ex parte reexamination is an attractive option The fee due the USPTO for an ex parte reexamination request is currently $12,000 though small and micro entity discounts are available. The request has many more formal requirements than the statement explaining relevance required with a citation of prior art. The request is essentially an office action, written by the requestor, rejecting one or more patent claims. Due to the formal requirements and detail which must be included in the request, preparing a request for ex parte reexamination can be expensive and time consuming (take multiple weeks). However, since the requestor is not actively involved in the process, it is unlikely there will be significant additional fees prior to a determination upon the reexamination request. Because ex parte reexamination does not allow active participation by the requestor, there is little to no risk an error will have disastrous consequences since there is no estoppel in later proceedings (you won’t loose the opportunity to raise arguments later if you don’t raise them now).

A request for ex part reexamination can serve multiple purposes. Because it must be served on the other party before it is filed with the USPTO, it can be part of your response to the party who sent the cease and desist demand. Even if you don’t choose to pay the filing fee to initiate reexamination proceedings, the detailed analysis required in a request for ex part reexamination should be more than adequate to meet the requirements of the statement explaining the relevance in a citation of prior art submission. Therefore, if the request for ex parte reexamination relies on prior art not considered when the application was examined, the request may be filed as a citation to prior art saving you the filing fee and placing the public on notice that the patent may have significant patentability issues. When used appropriately, this is one of the strongest options if you believe the patent is invalid or unenforceable.

        1. Inter partes reexamination

If you and your attorney believe the patent is invalid and choose to pursue having it invalidated within the USPTO, inter partes reexamination can also be an attractive, albeit expensive, option. The fee due the USPTO for an inter partes reexamination request depends on the subject matter and number of claims but it starts $9,000 for the request plus an additional $14,000 post-initiation fee (which is refundable if the USPTO does not grant the request). Unlike ex parte reexamination, inter partes reexamination fees are not eligible for small and micro entity discounts. It may be difficult to muster $23,000 to file the request, but inter partes reexamination allows you to actively participate in the process. One initiating inter partes reexamination should very carefully review all their arguments as they will likely later be barred from raising arguments in USPTO or court proceedings which could have been raised in inter partes review.

        1. Suit in Federal Court

Likely the most “hard ball” option is to file a suit in Federal Court seeking declaratory judgment. In a declaratory judgment action, a party seeks a binding determination from the court that it has not infringed particular rights of another. In order for the court to be able to hear the case, the court must have jurisdiction. An action which creates a “reasonable apprehension of suit,” such as the cease and desist demand you received, will generally meet the requirements. “Respondents claim a right to royalties … . Petitioner asserts that no royalties are owing … .” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 125-126 (2007). There must be “some affirmative act” by the accuser that creates a substantial controversy SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007). A declaratory judgment action is neither quick nor inexpensive. However, it may provide some tactical advantages, particularly if you believe the other side is likely to sue you for infringement. One of the greatest advantages is choosing where the suit will be heard. Although forum selection in intellectual property disputes is less liberal than it used to be, choosing the forum may reduce your costs, increase the other party’s cost, and influence the other party’s interest in continuing their action.

      1. Infringing enforceable intellectual property

Hey, it happens. In spite of your best efforts, your goods or services may infringe on someone else’s intellectual property. Maybe the patent issued recently. Maybe they were issued a trademark only recently. It matters how you arrived here, but it matters less than what you decide to do now.

        1. Discontinue the offending product or activity

One obvious option to a cease and desist demand is to discontinue the complained of activity. If the product or service which are alleged to be infringing is a small or minimally profitable portion of your activities, you best option may be to exit that line of business. You obviously entered the line of business for a reason, but the cost and difficulty of remaining in it may be greater than now makes sense.

        1. Work around the intellectual property

In the case of a patent, you may be able to change the appearance (in the case of a design patent) or process, machine, manufacture, or composition of matter (in the case of a utility patent) such that you are no longer infringing. If their patent requires a square widget, you may be able to redesign your product to use a round widget. While it may be disruptive, a cease and desist demand may be a useful impetus to encourage you to innovate. If you can innovate around their intellectual property, you may be able to create a better product which is a springboard for your next generation of products or services.

        1. License the intellectual property

Intellectual property rights share many attributes with other property right. Just as a merchant may be willing to sell some goods and unwilling to sell others, some intellectual property is available to use for a price and other is not. Some parties send a cease and desist demand in order to force someone out of a market. However, much more frequently, the party desires to be paid for use of their intellectual property. The agreement to pay for use of the intellectual property of another generally takes the form of a license or assignment. A license may take many forms, but it generally it includes a term (e.g. the enforceable term of a patent), a price (e.g. flat rate or per-piece), a geographic region (e.g. a state, region, nation, or globally), and exclusivity (i.e. a statement of whether the same intellectual property may also be licensed to others). Negotiating the terms of a license should be done with the assistance of good business and intellectual property attorneys. For a price, you may be able to continue your operations largely unencumbered.

          1. Cross licensing

Instead of paying money for the right to use someone else’s intellectual property, if you have an appropriate intellectual property portfolio, you may give the other party the right to practice some of your intellectual property in exchange for permission from them for you to practice some of theirs. This may limit your need to directly fund a competitor and conserve cash. Your business and intellectual property attorneys will be great assets in negotiating an agreement if you pursue this option.

        1. Continue your activities

Asserting an intellectual property right can be expensive with the cost exceeding $100,000 fairly quickly and not infrequently exceeding $1 million for a suit in federal, there is a real possibility the other party is bluffing and will not see the matter through. If you believe the other party lacks the resources or interest in pursuing a matter to the end, you may choose to continue your activities in spite of infringing. This is likely to have very low cost in the short term. However, if you get wrong and the other party does pursue the matter, you risk running up a large bill which you will owe them if they eventually prevail.

  1. Other Options

Interest based dispute resolution is not just a buzz term in Appropriate (or Alternative) Dispute Resolution. You may be able to exchange something you value little but the other party values highly for something you value highly and the other party values little in a way which minimizes cost and maximizes value for both parties. A Cease and Desist letter is generally dry, to the point of being terse, and does not explain why the party is sending the demand. Talk with your attorney first, but part of your response strategy may well include picking up the phone, calling the real party in interest (the owner of the intellectual property), expressing that you value intellectual property (yours and theirs), expressing a desire to bring the matter to a timely resolution, and a willingness to have an open dialogue as you work through the issue. This may allow you to find out what the other party truly wants. They may want respect (an acknowledgment of them and their IP), money (some sort of licensing agreement), or to put you out of business. Their ability to get what they want will depend on their strength of their IP, but knowing what they want can help you make a more effective game plan.

  1. Communication and Ethics

The rules governing communication ethics vary by jurisdiction.

The American Bar Association (ABA) model rule


In representing a client, a lawyer shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is authorized to do so by law or a court order.

Comment 4

This Rule does not prohibit communication with a represented person, or an employee or agent of such a person, concerning matters outside the representation. For example, the existence of a controversy between a government agency and a private party, or between two organizations, does not prohibit a lawyer for either from communicating with nonlawyer representatives of the other regarding a separate matter. Nor does this Rule preclude communication with a represented person who is seeking advice from a lawyer who is not otherwise representing a client in the matter. A lawyer may not make a communication prohibited by this Rule through the acts of another. See Rule 8.4(a). Parties to a matter may communicate directly with each other, and a lawyer is not prohibited from advising a client concerning a communication that the client is legally entitled to make. Also, a lawyer having independent justification or legal authorization for communicating with a represented person is permitted to do so.

A simple differences of opinion and claim interpretation has the potential to lead to lengthy and expensive series of exchanges between attorneys. While your attorney generally cannot contact the real party in interest if they are represented, you, as the client, generally may. If your attorney doesn’t bring up the possibility, feel free to suggest the option so you can discuss the advantages and risks. Comment 4 to specifically provides “Parties to a matter may communicate directly with each other.” A good discussion with your attorney about the risks and benefits of talking directly with the other party is highly advisable and will go a long way in helping you avoid some potentially costly mistakes. In spite of the risks, you and your attorney are well served by considering all communication options, including those which may bring the dispute to an end substantially sooner.

  1. Closing

There’s little doubt responding to cease and desist demand wasn’t on your to-wish list of things to do when you came to work this morning, but you have options and it doesn’t have to be the end of the world. Whatever you do, “DON’T PANIC.”

If you would like to visit further about cease and desists, or any other intellectual property matters, I’d be happy to visit with you.