QUESTION

What do we do when we receive a cease and desist letter accusing us of patent infringement?

Don’t panic. Although the words “patent infringement” often raise the specter of costly lawsuits and huge legal liability, that is often not the case. Sometimes, patent owners are simply looking for a one-time licensing fee. Other times, the recipient of a “cease and desist” letter is facing significant exposure. Evaluating the situation before spending too much time, money or emotional energy is important.

The first step is to try to find out what the patent owner wants. Have your law firm call the owner’s lawyer and ask if they have a demand or a proposal. To those familiar with commercial litigation, such an inquiry may appear to be a sign of weakness. But in the patent world, it is not uncommon. As already mentioned, the patent owner may ask for a one-time payment that is far less than the cost of a court fight.

If the claim cannot be resolved quickly and cheaply, then the recipient will need to evaluate its exposure. Such an evaluation starts with an infringement analysis, by comparing the accused product with the patent.

Even if such an analysis shows potential infringement, it may still be possible to challenge the validity of the patent (despite the fact that the patent has been granted by the PTO).

Another step is to evaluate potential damages. Damages for a claim brought by a patent owner that is not using the invention (e.g., a non-practicing entity) will be limited to reasonable royalties. For a patent owner that is actively selling its invention, lost profits pose a much greater risk.

Beyond the infringement claim itself, the recipient of an infringement claim needs to evaluate if and how it should change its current design to avoid further liability. Design around strategies can help in this regard.