What to Consider Before Sending Patent Letters

A company has discovered a potential infringer of one of its patents. In most cases, the first instinct may be to send a cease-and-desist letter informing the potential infringer of the patent rights and its potential infringement. However, while patents can be a highly valuable property right, one must take care not to inadvertently walk the company into unwanted litigation or expose the company to patent misuse or unfair competition counterclaims.

Since the Supreme Courts 2007 MedImmune Inc. v. Genentech Inc. decision, cease-and-desist letters can expose a patent owner to immediate litigation in an inconvenient forum. Thus, it is important that a company does its homework" before contacting the accused infringer. Thoroughly understanding patent rights and evaluating the strategic position of the infringer at the outset can save a company a great deal of money and grief in the long run.

Homework on Infringement Claims

Before sending a cease-and-desist letter, a patent owner must have at least a good faith basis on which to assert that the accused is infringing one or more patent claims. In other words, the company needs to perform an investigation so it can reasonably believe the item does actually infringe one of the patent claims. No one can be 100-percent sure of infringement, as some of the evidence needed to prove infringement may be in the possession of the infringer. In addition, the meaning of the patent claims is ultimately a matter for a court to decide. But sending a letter without doing an investigation (and having evidence of that research) may expose a company to a host of potential claims, including unfair competition, antitrust liability (and potential triple damages), patent misuse, liability for the accused party's attorney fees and sanctions under 11 of the Federal Rules of Civil Procedure. A letter that is partially true, but overreaches in its accusations may also be found to constitute bad faith. At a minimum, the company may end up spending time and money litigating such statements, resulting in costs that could have been avoided by careful drafting.

A company may want to consider the strength of its patent before sending the letter. Has the patent been tested in litigation before? Perhaps new information has come to light in the time since the patent was issued, such as prior art (previously publicized relevant data such as articles, patents or sales) that was not before the patent examiner and of which the company was not previously aware. This new information may bear on the validity of the patent. If such prior art has come to light, a company should assume that it will be found by a litigation opponent. In such a case, consider submitting the patent to a reexamination at the U.S. Patent and Trademark Office (USPTO) to reaffirm the patent's validity prior to attempting to enforce the patent.

The company should also consider its goal in sending the cease-and-desist letter. Does it want the infringer to stop infringing, or is it looking to license the patent? The goal may depend on the infringer.

Homework on the Potential Infringer

As a company would before filing a lawsuit, it should gather as much information on the infringer as it reasonably can before sending a cease-and-desist letter. First, the basics: how big is the infringer? Is it a deep-pocketed company with the resources to take any litigation to completion if it so chooses, or is it relatively small? Does it have a litigious history? Is the potentially infringing item a cornerstone of the infringers business, or is it relatively small in comparison to its overall business? 

This information is useful in several ways. It can help a company understand the likelihood of litigation and what sort of exposure to legal fees it might have should litigation ensue. Relatively speaking, patent infringement cases are expensive to litigate, a fact that will play a large role in both sides' decision making. If the potentially infringing item is particularly important to a company, large or small, and the suing company's goal is to get the opposition to stop infringing, it may find itself in a long, expensive legal fight. Likewise, the infringing company's litigation history can help the accuser understand whether the opposition was amenable to settlements in the past, as well as whether it has filed suit(s) for declaratory judgment after receiving a cease-and-desist letter.

The latter is an important piece of information. By filing a declaratory judgment action, the potential infringer takes some control by choosing the court where the case will take place and forcing the patent owner to make immediate expenditures in legal costs. Forum selection can work to a patent owner's benefit as well. While patent cases are governed by the same statutes and the precedents of the Federal Circuit, the proceedings can be significantly affected by local rules of the district court. Some courts put patent cases on a "fast track," which is often viewed as a strategic advantage to a patent owner if it has prepared their case thoroughly ahead of time. For these reasons a company might consider filing its infringement lawsuit when it sends its cease-and-desist letter, but not serving the suit on the defendant immediately. In most cases, this allows a company to essentially lock in" its venue, something that is particularly attractive if it is sending the letter to a company that has filed declaratory judgment actions in the past. However, be aware that even though the company hasn't served the complaint, the letter recipient might find out about the case, and the company should take into consideration what sort of effect that could have on the tenor of negotiations if its goal is a quick resolution to the issue.

By thinking expansively and thoroughly evaluating a patent infringement situation, a company can avoid many of the common pitfalls that arise in patent litigation and better maximize the value of its patent assets.

Rakesh Amin, a partner at Amin Talati, represents companies in the food, beverage, supplement, drug and cosmetic industries. Amin focuses on FDA, FTC, patents, trademarks, licensing, business contracts and litigation. Most lawyers at Amin Talati have science degrees ranging from chemistry, bio-medical engineering to pharmacy and legal degrees focused on intellectual property (IP) and regulatory compliance.