Cease and desist letters are sent by companies asserting their trademarks, patents, or other intellectual properties. Receiving such a notice can be a nerve-wracking experience. Choosing the right response to such a letter can be crucial for a small business that needs to limit its legal bills and liabilities.
A cease and desist letter details the rights claimed by the sender, as well as the actions taken by the recipient that are allegedly infringing these rights. Normally, cease and desist letters are drafted by attorneys, and demand for certain actions to be taken. For instance, such a letter may claim that the recipient’s products infringe a trademark or patent, and demand that sales of these allegedly infringing products stop. Cease and desist letters usually threaten a lawsuit if these demanded actions are not promptly taken.
Upon receiving such a letter, a business can basically do three things:
Take the actions demanded by the sender to avoid a lawsuit.
Challenge the rights claimed by the sender.
Request that the supplier of allegedly-infringing products guarantee that they do not infringe the rights claimed in the cease and desist letter.
Complying with the cease and desist letter may be the least costly alternative. If sales of the allegedly-infringing products are low, then dropping that product to avoid a lawsuit may make sense. However, the recipient that chooses to comply with the cease and desist letter must have the sender promise in writing not to sue. Otherwise, the sender may conceivably sue for past damages even if the complained-of actions cease.
Challenging the rights being asserted in the cease and desist letter is probably the most expensive approach. An experienced attorney’s analysis detailing deficiencies in the claimed rights may be sufficient to stop the sender. However, this can lead to a very expensive lawsuit. Furthermore, even if the claim to the intellectual property is weak or tangential, proving that in court will be very expensive and time-consuming. It might be a Pyrrhic victory. As that legal aphorism goes, winning a lawsuit is the worst way to go bankrupt.
Lastly, a business may receive a cease and desist letter regarding products bought from a supplier. In such a case, the recipient should forward the letter to the supplier, who may insist that the sender’s assertions are frivolous. In that case, the recipient should ask the supplier to warranty that its products are not infringing, and to indemnify and defend the recipient against any action brought by the sender. Without these protections from the supplier, the recipient of a cease and desist letter should not take the supplier’s reassurances to heart.
Companies are becoming aware of the need to protect their intellectual properties. Cease and desist letters are the first step in asserting these rights, and they should not be ignored or taken lightly. A business has a few options in responding to the letters, but whatever choices are made has to be put down in writing to head off costly litigation.