As mentioned in my previous post, one strategy in enforcing your patent is to send an entity that is potentially infringing your patent what is called a “Cease and Desist” letter. The letter has a few core purposes.
First, it provides “actual notice,” which is notifying the allegedly infringing party that you believe they are currently or are about to infringe on your patent. In patent law, if an entity is infringing your patent, in certain circumstances they may not be liable for the infringement before they are provided with actual notice. More specifically, if you are not properly marking your product with your patent number, actual notice is required. Therefore, two elements that should be included in your cease and desist letter are 1) the number of your patent and 2) identification of the products or processes you believe may be infringing.
Second, cease and desist letters often initiate licensing negotiations. Aside from or in addition to asking/demanding the allegedly infringing party cease their infringing activity, you may offer them a license to your patent, which would reduce the risk to them of the potential infringement liability.
Needless to say, when asking a party to stop their commercial activity and pay you money, the correct tone must be struck in order to create a favorable environment. However, the need for setting the proper tone goes beyond establishing a good relationship. A cease and desist letter may be construed by the receiving party as creating an “actual controversy.” An actual controversy is what is required by federal law before a law suit can be filed. In this circumstance, the suit that could be filed by the alleged infringing party is a Declaratory Judgment action (“DJ action”), which requires the court to determine whether the allegedly infringing party is actually infringing the asserted patent. As interpreted by the courts, cease and desist letters may create an actual controversy if it creates a reasonable belief of litigation based on “the totality of the circumstances,” as the Federal Circuit said in Hewlett-Packard Co. v. Acceleron LLC. If that sounds vague to you, rest assured, you are not alone. Patent attorneys nation wide struggle with what language to use in a letter to avoid giving rise to an actual controversy.
One might ask what is so bad about creating an actual controversy. There are two ways it is unfavorable, each presenting a disadvantage depending upon your own enforcement strategy. If you seek to avoid litigation, and the allegedly infringing party is not so adverse or actually is in favor of litigation, you have provided them with the means to initiate litigation against your own wishes. If you are willing to litigate, you have given them the ability to file suit in their chosen forum. Instead of filing in your home court, they may file in theirs, or in another district that they believe provides them with a strategic advantage. In either case, a cease and desist letter that creates an actual controversy wrests control of the process from your hands, which nobody likes.
The crucial task becomes walking the fine line between providing actual notice without creating an actual controversy. Courts have explicitly said that such a feat can be accomplished, but have provided little guidance on how to actually go about doing so. However, certain principles have been construed based upon cases determining whether certain letters provide actual notice and whether certain letters create an actual controversy.
As noted above, tone is key. If the tone of the letter conveys to the recipient that the patentee is willing to negotiate a license, that goes a long way in heading off a DJ action. Establishing the correct tone requires the use of many vagaries, such as their product “may infringe” as opposed to “infringes.” Additionally, the letter must not put the recipient’s back against a wall; they must be given time to investigate both the patent and their own product. Therefore, establishing an appropriate timeline to initiate licensing negotiations is beneficial. Providing a claim chart may further demonstrate the seriousness with which you believe they are infringing, as well as showing your commitment to addressing the perceived infringement.
While all of the above suggestions on drafting a cease and desist letter may facilitate avoiding creating an actual controversy, certain facts about the parties may make the task more difficult. More particularly, if the patentee’s sole source of revenue is the licensing of patents, and the allegedly infringing party is aware of this, then the belief of impending litigation may be more substantial and reasonable. Similarly, if a patentee has ongoing litigation with other parties related to the same patent, that too may create an actual controversy. The bottom line is that based on the absence of a bright-line rule from the courts, use your best judgment when considering you, the allegedly infringing party, and the tone created in your letter to avoid undesired outcomes while still moving forward with enforcing your patent.
Next week’s post will deal with a more aggressive tactic; filing suit.