How to Respond to a Patent Cease and Desist Letter. Episode 105

Receiving a Cease and Desist Letter

In the last episode, I talked about how to write a cease and desist letter—specifically, when you have a patent and want to stop someone else from selling your patented invention. In this episode, I’m going over the opposite situation—when you receive a letter telling you to cease and desist from selling a certain product because it allegedly infringes someone else’s patent.

Initial Caution and Disclaimer

Let’s go through what steps you should take. First, as I mentioned in the last episode, cease and desist letters can vary widely. Maybe they give you a patent number; maybe they’re more vague. So, what I say in this episode might not fully apply to your situation. Also—and this is a big disclaimer—if you receive a cease and desist letter, do NOT try to handle it yourself.

This podcast is often about self-help, especially with filing patent applications, and while I always recommend hiring an attorney, I understand that inventors often go the DIY route. But when it comes to litigation—do NOT attempt to do this yourself. As I state in every episode, this is not legal advice for your particular situation but just general information. That’s especially true for litigation.

So, let’s talk about how a hypothetical person—not you—might respond to a cease and desist letter, and the steps they should take.

Reviewing the Patent

You receive a cease and desist letter—hopefully, it includes a patent number. Maybe the patent itself is attached. Get a copy of the patent and look at the claims. I’ve discussed claims in many podcast episodes. You’ll want to look at the claims and compare them to your product.

You really only need to focus on the independent claims, and there likely won’t be more than three. Go word-by-word through those claims and see if your product includes everything listed. If it does, then you’re infringing. If it doesn’t, then you’re probably not infringing. But it can be difficult to determine because it depends on how the words are defined.

I covered this in the episode on claim construction. Also, make sure the patent is a U.S. patent. If they send you a Japanese patent and claim you’re infringing, you’re only infringing if you’re selling in Japan. If they don’t have a U.S. patent, you’re free to sell in the United States.

The letter might claim that your entire product line infringes. You’ll need to analyze each product individually.

Assessing Royalty Demands and Damages

Some cease and desist letters don’t get into details, but others do. They might demand a specific royalty rate or claim you owe $1,000,000 in damages.

Once you’ve analyzed your product line to assess whether you’re infringing, you’ll need to calculate whether it’s worth paying a royalty, fighting back, or responding with a letter explaining why you’re not infringing.

Also, check whether the other party marked their product with the patent number. If they didn’t, you might only be responsible for damages after receiving the letter. If they did mark their product, you could be liable for past damages dating back to when they started marking.

When to Ignore a Letter

As I mentioned in the last episode, if you receive a letter from an individual (not an attorney), sometimes it may be best to ignore it. Maybe the person has a weak patent that could be invalidated. Or maybe they’re misrepresenting what their patent actually covers. Some people go on “fishing expeditions,” sending out hundreds of letters, hoping one or two people will pay just to avoid the hassle.

Determining Next Steps

Let’s say you’ve analyzed the situation—your product line, their patent, whether you’re infringing, how much you’ve made, and how much they might be entitled to. Maybe it’s a gray area. What do you do next?

One option is to redesign your product so it doesn’t fall within the scope of their patent. That might be expensive, and you could still be liable for past damages, but not for future ones. If you take this route, make sure they don’t have any pending patent applications that might cover your redesigned product—otherwise, they might come after you again when those patents issue.

Negotiating a Royalty

You might want to negotiate the royalty. For example, you could respond that you believe the requested 10% royalty is unreasonable but that you’re open to a 5% royalty.

Indemnification from Third Parties

Another consideration is whether you’re indemnified by another party. For instance, maybe there’s a patent on a type of gear, and you hired a manufacturer to build your product. You didn’t specify what kind of gear to use, but they used a patented one.

Check your contract. If it contains an indemnification clause, the manufacturer may be responsible for reimbursing you in a patent dispute—even if you lose.

Summary of Defensive Strategies

These are some common defensive strategies:

• Ignoring the letter (in limited cases)

• Designing around the patent

• Offering to license at a lower rate

• Checking for indemnification by another party

Offensive Strategies

Now let’s look at offensive strategies.

One is filing a declaratory judgment of non-infringement. If someone has threatened you with a lawsuit, you can file first in your local court asking for a ruling that your product does not infringe their patent.

Another is conducting a prior art search. Just because someone received a patent doesn’t mean they should have. Maybe the examiner missed something. Search for publications or products that came before their filing date to see if their patent is invalid for lack of novelty or obviousness.

Even if the examiner found a reference and still issued the patent, they may not have fully understood the prior art’s relevance. So, you can write back and say:

“Even though you received a patent and our product arguably falls within your claims, if you sue us, we will request that the judge invalidate your patent. If that happens, you lose—and you won’t be able to enforce your patent against anyone else.”

You might offer not to file a lawsuit for invalidity if they agree not to sue you. Whether you challenge the patent at the USPTO or in district court is a strategic decision to be made with your attorney.

Countersuits

Another option is to review your own patent portfolio. Maybe they are infringing one of your patents. You can respond by saying that if they proceed with legal action, you’ll sue them for infringement.

False Accusations

If they are knowingly or recklessly making false accusations of patent infringement, that can be actionable too.

Final Thoughts

So, those are the basics of how to respond to a patent cease and desist letter. Don’t handle it alone. But if you receive one and are working with an attorney, at least now you know the basics and some of the options available.

I’m Adam Diament, and until next time, keep on inventing.