Receiving a Cease & Desist letter – Part 1: Where to start

I rarely see clients go into a defensive panic mode more quickly than when they receive a cease & desist letter. The calls I get range from the outraged to the panicked this-is-the-end-of-my-business-as-I-know-it response. A cease & desist situation can be tricky because it involves many factors, provides several options, and relies on good negotiations for a positive outcome.

Looking at some data on patent litigation suits may help us evaluate how we might proceed if you were to receive a patent cease & desist letter. Statistically, only about 5% of patent lawsuits actually reach trial. Slightly more (6%-9%) of the cases complete discovery and are adjudicated on pretrial motion for summary judgment. The rest (around 85-90%) are settled – usually with a licensing agreement – within 15 months of the suit being commenced.

Given this information, how would you proceed? I recommend that the first step should be to get a patent infringement opinion to determine if there is truly an infringement situation at hand. Very often, there is no meritorious issue. The plaintiff may simply be on a fishing expedition to learn more about you and if they have any potential claim to pursue. Some patent holders sent out lots of letters in the hopes that you will be scared of the potential patent litigation costs and simply settle the issue with an agreed-upon (though perhaps unwarranted) monetary payment. An infringement opinion will also identify potential defenses available and will help guide settlement negotiations in the light of the relative strengths and weaknesses of the parties.

If the infringement opinion is unfavorable, it is time to start negotiating with the other party to find a resolution. Giving up your rights entirely (basically abandoning your business) is the last thing you would  want to do, so your goal in this situation is to see to what the other party is willing to concede. Your patent attorney will play a crucial role in helping you get the most you can so that you still retain certain rights to continue your business in an economically advantageous path.