Stop in the Name of ' the IP Police?

Never a Cop When You Need One

When it comes to infringement of intellectual property, there are no “IP police” hiding in the obscure nooks and crannies of cyberspace to chase down those who misuse property online. Instead, the e-commerce firm itself often must become its own IP cop, when it discovers ' as it inevitably will in the online free-for-all ' that its marks, copyrighted content or knockoffs of its unique products appear on the Web site or in the e-catalog of a competitor. And while it's possible that civil authorities may act if the firm is lucky enough that its dollar losses from the crime (if there is one in the first place) are sufficiently large to interest a prosecutor, in most cases the firm's own attorney will be the only person who will tell the infringer to “Stop, in the name of the Copyright Act! Stop in the name of the Lanham Act! Before you break my client's bank account and steal my client's royalties.”

Fortunately, taking action once a firm finds someone infringing its rights can be quick and relatively inexpensive ' at least to start. In most cases, the first weapon of defense (or offense) will be the widely used cease and desist letter, because it generally does not cost much. That paper-wad-like shot across the bow (often mockingly referred to as a ding letter) will put the infringer on notice of a claim, demand that it immediately stop the offending use and, if possible, claim damages. More sophisticated letters warn of the many financial consequences of not stopping, such as having to pay legal fees, turn over a multiple of gross profits from sales of infringing goods, and pay damages, as well as the cost of changing the infringer's Web site to remove the infringement.

But being easy and relatively inexpensive are not the only reasons that cease and desist letters have become a routine part of e-commerce practice, as I mentioned in “IP Litigation: What Is It Good For?” in the September 2009 edition of e-Commerce Law & Strategy (www.ljnonline.com/issues/ljn_ecommerce/26_5/news/152683-1.html). Instead, infringement is simply everywhere online, for many reasons. (Several universities and public-interest groups have even created a clearinghouse to make information available on the “chilling effect” ' legal or not ' that such letters can have. See, www.chillingeffects.org.)

Ready, Aim '

Many online entrepreneurs, accustomed to working in a world in which “copy and paste” is a common tactic, may have less legal sophistication about copying content, leading to more possible infringement cases. In a world of tight margins and even tighter timetables in the race to get online before rivals, forsaking legal due diligence ' at the risk of unintentional infringement ' is often deemed a reasonable risk, especially compared with the potential reward of a timely and successful product launch. Even those who do realize that laws limit the ability to copy intellectual property can still easily become confused by the subtle doctrines dictating what may be used and what is prohibited, especially because intellectual property law rarely is black and white, but depends on the context of usage (see, “A Touch of Gray,” in the July 2009 edition of e-Commerce Law & Strategy; www.ljnonline.com/issues/ljn_ecommerce/ 26_3/news/152379-1.html). Combined with the ease of establishing an e-commerce Web site, it is surprising that cases of possible online infringement do not occur more often (or at least are not discovered more frequently).

Moreover, from the perspective of the infringed-content owner, many reasons exist to “send first, ask questions later.” The cost of a full lawsuit, and even of an investigation of potential infringement, can mount to many times the expense of sending what is essentially a form letter. If the alleged infringer is a startup firm, then it may not be able to afford a defense, and may simply change or discontinue the use because it is cheaper to change than to fight. One online seller and client, in an industry where copyright knockoffs made in Third World countries present a never-ending business and legal challenge, acknowledges that its cease and desist letters will rarely result in prosecution, or change the targets' behavior. Instead, his goal is to establish a reputation of contesting infringement so that, in his words, the copycats will “knock off someone else's products first.” And because sales techniques and marketing campaigns change quickly online, the infringer may also be willing to take down something that was intended to be used for only a relatively short time anyway.

In e-commerce, where IP may be a firm's most valuable asset, protecting the integrity of the brand, even against small infringements, may be the most important business strategy. Moreover, all the same concerns apply equally when the target of the letter is a former employee who has left to work for a competitor. A strong cease and desist letter sends a message not only to that employee, but also to all those left behind who may have thought about leaving, but do not have the stomach ' or wallet ' to pay the cost of the inevitable legal claims.

Fire?

Of course, there are reasons not to send such a letter. Foremost is the business and legal risk that the other side may actually have a better right to the content than you do, such as through prior use. Not only would you not stop the competitor, but you may have to stop your own use of the content ' as well as incur the legal fees to defend the counterclaim.

And there's the practical question: What are you likely to get as a result of the letter (other than more legal bills, if the other firm does not capitulate quickly)? While there is certainly value in stopping a competitor before it gets off the ground, even against an established firm it is generally difficult to prove damages. Discussion of a recovery also assumes that the infringer has assets that have value and can be seized ' which is merely an aspiration for many Web startups, the type of firm likely to commit an infringement. While you can, in theory, recover your legal fees in many types of IP litigation, it is not always easy; Lanham Act fee recovery (in trademark cases) applies only in “exceptional cases,” and only for the prevailing party. In copyright cases, a registration of the copyright in question must have been filed with the U.S. Copyright Office (www.copyright.gov) prior to the alleged infringement, even though the legal copyright interest itself exists from first publication. (Many firms do not register copyrights as a matter of course, whether because of the cost or administrative burden. As a practice tip, prior registration can provide significant procedural benefits should you have to resort to litigation to protect your rights in trademark and copyright matters.)

Another reason to stop and breathe before sending the cease and desist letter is that the Internet has made retaliation easy, albeit with the medium's own creative twist: The firm sending the original letter may lose more in the court of public opinion than it could ever hope to gain in a court of law (see, e.g., http://avvoblog.com/2009/03/19/rise-of-legal-blogs-presages-death-of-frivolous-lawsuits; www.ojr.org/ojr/law/1095284771.php; http://thresq.hollywoodreporter.com/2010/07/lucasfilm-ebay-ceaseanddesist.html?utm_source=twitterfeed&utm_medium=twitter; http://blog.ericgoldman.org/archives/2010/06/steps_you_can_t.htm; www.ontechnologylaw.com/2010/06/cease-and-desist-letters-four-ways-to-keep-your-client-and-yourself-from-looking-foolish; and www.thinkgeek.com/blog/2010/06/officially-our-bestever-cease.html).

From a more traditional perspective, the infringement litigation may force you to defend other legal claims, such as wage and hour claims from a former employee, that may never have been worth bringing other than as a way to deter the infringement claim. For all of these reasons, online the best defense is not always a good offense in a world that has changed dramatically from the 19th Century, when the German military philosopher and Prussian soldier Carl von Clausewitz first coined that advice for more traditional forms of war.

Other Issues

Ethics

From the technical perspective of legal ethics, an attorney is not supposed to send a letter threatening to take a formal litigation action, i.e., to file a lawsuit against another user of a client's property unless the client has confirmed that it will proceed with the threat. The client who admits that it is willing to spend only for the letter, to try to scare the infringer, cannot (in theory) ask counsel to threaten a lawsuit, though he or she can refer to “all actions permitted by law” or use similar generic language, but not the threat of a lawsuit itself.

Cost

As in everything else in today's economy and in legal practice, cost must be considered. Cease and desist actions that do not settle quickly can require intensive factual research and preparation: legal fees, even from junior associates, can quickly mount into the thousands or even tens of thousands of dollars. And costs are not measured in dollars alone. Because the arguments and defenses will be very fact specific, and require extensive input from the firm's management team, the client must budget for significant time of its executives to assist counsel to get the facts correct and, if necessary, appear in court, rather than on money-making activities. Clients have often complained to me that the most troubling aspect of litigation (after its cost, of course) is the distraction it causes from normal business operations. I recently spent an entire mid-summer weekend with a client's management team, each of whom had returned from seashore vacations and other more pleasurable ways of enjoying the season than doing intensive witness preparation with a trial lawyer, in order to convince the court to hear our injunction request on Monday morning. In that case, the client reached a favorable settlement when everyone was in front of the judge, but only after all of the expense and effort had been incurred during an intense week of preparation, and on terms that were essentially those that had been offered the week before, when the possibility of a harsh ruling from the court did not appear imminent. As the client told me afterward, none of us would ever get those days (or dollars) back again, literally or figuratively.

Two Other Points of View

Bruce Bellingham

To further consider the real-world concerns that arise when a business client assures me that it is prepared to “spend whatever it takes” to go to court to protect its rights, I asked two of my courtroom colleagues for the types of advice they give clients when they call to discuss cease and desist letters. Bruce Bellingham (www.lawsgr.com/attorneys/Bruce/Bellingham), a former law professor and seasoned litigator, emphasized that although such letters are relatively standard, they must be tailored to each situation (which, of course, has its own cost in fees). He says:

In the course of enforcing a restrictive covenant, such as an agreement not to compete, cease and desist letters can be directed to the breaching party and to third parties, such as the breaching party's current employer or business associate. The purpose of a demand letter to a breacher differs from one to a third party, and the tone and substance of the letter should reflect that.

He also took a philosophical perspective that cut to the reality of settlements ' and to why such letters are often inevitable, even though both sides know the likely result:

The breacher will already have a good understanding of the claim, but will usually have an overwhelming interest in continuing to breach. The breacher is often living on the proceeds of the unlawful activity, so compliance will usually require painful financial adjustments (such as spending some of the money you paid for his promise). The breacher will almost always regard the enforcement of a restrictive covenant as an “unconstitutional” infringement of “natural rights.” Nothing you can do in advance ' not even a separate payment for a promise not to compete ' will forestall that reaction.
I have seen a fairly young man stridently declare that he would continue to “support his family” by competing for his former clients' business, even though he sold his inherited, money-losing firm, consisting of nothing but good will, for over $600,000 cash.
Thus, breachers rarely desist because of anything you write. The real purpose of a demand letter is to send them running to counsel. If you are lucky, and if your claim is as good as you think, the breachers' lawyer may recognize the problem and privately counsel compliance or a compromise acceptable to you. Your real purposes are to frighten the breacher and enlist his or her lawyer as a kind of tacit ally on your behalf. A stern tone and threats are the order of the day.

In contrast, Bellingham views letters to third parties ' the new employer of a former employee bound by a restrictive covenant, or the seller of infringing goods ' as potentially more efficient and effective. He says:

Third party recipients of demand letters, on the other hand, rarely want any part of the breachers' fight. While there are exceptions ' like competitors who hire away your key employees expecting a fight ' third parties usually know nothing of the contractual right being breached. They are very likely to desist if you show them that: a) your demand is based on a genuine contract right; and b) they have even a remote possibility of being held liable for interference with your rights. In the case of employment non-competes, that can solve your problem. Accordingly, a more “polite” and essentially informative letter is indicated. You are, in fact, trying to help the third party avoid a potential liability.

Matthew Cohen

Speaking from a patent background, Matthew Cohen (www.lawsgr.com/attorneys/Matthew/Cohen) echoed Bellingham's advice on the importance of tailoring the letter to the situation, but emphasized the many potential pitfalls that can unintentionally result from ill-advised demands.

As sender, particularly in a patent context, think about the relationship of the parties, if there is one. Is this the first time, that is, have there been alleged infringements of other (rights)? Do the parties know each other in a business context? If there is previous bad blood between the parties, the letter can be more personal and perhaps more forceful.
Also, know the client. Is your client selling goods or services covered by the infringed (right)? If so, you may want to point out the products sold in the letter and (highlight) that those products are properly marked (with the rights information). However, if your client is a patent-holding company and the letter too generic, it may get very little attention, as the “dinged” party may believe that it is just one of many, many recipients.

Cohen warns, though, that the typical business response for an aggressive letter may wind up costing more in legal fees in the long run. Even worse, it may prejudice the litigation position if the recipient of the letter decides to sue first:

Do not write anything that may trigger a declaratory judgment action (that would try to invalidate the patent or other IP right, in whole or in part). Words like “infringement,” “lawsuit,” “injunction” and the like may trigger a declaratory judgment response. It is wiser to tell the receiving party that they “may” be selling or using a good or service that “may” be the same or similar to the claims in a certain patent, and that your client does not permit such use. Be forceful, yet without threatening litigation.
Also ' do your homework before sending the letter. Make sure there is a technical opinion regarding the alleged infringement relating directly to the patent and the alleged infringing article. If the response is a declaratory judgment action, you don't want to run afoul of Rule 11. Without a pre-filing technical evaluation from a qualified evaluator (i.e., an engineer, not a company president or counsel), sanctions are possible.
Last, don't be vague. Give the opposing party the patent numbers. Give them a clear description of the infringing articles. Let them know that you've done your homework and that you are serious.

Cohen offers similar advice to the recipient of such a letter, who should not ignore a demand letter, or dismiss it out-of-hand to see whether the sender is bluffing.

As receiver of a cease and desist letter, your approach is fairly simple. Proceed as if the sender intends to file suit to enforce its IP. Your first response should acknowledge the ding letter. Let the sender know that you take all claims of IP infringement seriously, and that you are investigating the claim. A simple acknowledgement should buy you some time to really investigate if there's a problem.
Then investigate the claim. (Emphasis added.)

But Cohen stresses that recipients of such letters cannot put their head in the sand, regardless of the cost in legal fees, or diversion from normal business operations. On the other hand, the threat of a lawsuit should not be treated as the end of the world, either. It may be just a savvy client enlisting his or her counsel in a business use of the legal system.

At no time should you just ignore the letter, nor do you treat it like the end of the world. Remember, people are always making accusations. Some have merit ' some don't. (Emphasis added.)

Maybe Wait a Minute

So in fact, unlike the stereotypical thief running down the street with a stolen loaf of bread, often the recipient of a cease and desist letter should not stop running, but instead should slow down to evaluate the circumstances. You may decide that abiding by the demands in the letter is the best choice, but you may also decide that you can respond more effectively to execute your own business strategy.

In one case I handled, our client received not only a trademark cease and desist letter, but also a complaint filed with the U.S. Patent and Trademark Office. In response, it did exactly what Cohen warned those who send such letters about ' it filed a declaratory judgment action claiming that its use of a product name did not infringe the complainant's registered mark, and, to boot, filed it in a remote area of Texas, where our client was based. Faced with having to hire local counsel in a “foreign” location, where our alleged infringing client was a major employer represented by the local district attorney, the mark owner quickly settled the case, on terms that allowed our client to continue use of its product name.

Ultimately, therefore, acting with all of the haste and urgency typically associated with cease and desist letters may be the most counterproductive step one can take, whether as sender or recipient of such a letter. The spectrum of reasons for sending such letters, and variations on whether they are truly threats, warrants deliberate consideration of each situation.

Perhaps the best advice to the “IP cop's” demand to stop using its property is that instead of stopping just because the demand was made, the recipient ' and sender as well, when it feels that a nastygram must immediately be sent to a competitor ' should take a minute to think about whether making that demand will help its cause or, with the ironic twist of fate created by the constant scrutiny and mockery of the always-vigilant Internet audience, just make the situation worse.

Cease and desist warnings are not unique to lawyers ' others just don't call them such an imposing name (or charge so much to do them).

Who doesn't remember the Supremes' immortal warning to a cheating lover: “Stop, in the name of love, before you break my heart”?

School children early learn to shout: “Stop in the name of the law” from chase scenes in old cartoons and movies.

Never a Cop When You Need One

When it comes to infringement of intellectual property, there are no “IP police” hiding in the obscure nooks and crannies of cyberspace to chase down those who misuse property online. Instead, the e-commerce firm itself often must become its own IP cop, when it discovers ' as it inevitably will in the online free-for-all ' that its marks, copyrighted content or knockoffs of its unique products appear on the Web site or in the e-catalog of a competitor. And while it's possible that civil authorities may act if the firm is lucky enough that its dollar losses from the crime (if there is one in the first place) are sufficiently large to interest a prosecutor, in most cases the firm's own attorney will be the only person who will tell the infringer to “Stop, in the name of the Copyright Act! Stop in the name of the Lanham Act! Before you break my client's bank account and steal my client's royalties.”

Fortunately, taking action once a firm finds someone infringing its rights can be quick and relatively inexpensive ' at least to start. In most cases, the first weapon of defense (or offense) will be the widely used cease and desist letter, because it generally does not cost much. That paper-wad-like shot across the bow (often mockingly referred to as a ding letter) will put the infringer on notice of a claim, demand that it immediately stop the offending use and, if possible, claim damages. More sophisticated letters warn of the many financial consequences of not stopping, such as having to pay legal fees, turn over a multiple of gross profits from sales of infringing goods, and pay damages, as well as the cost of changing the infringer's Web site to remove the infringement.

But being easy and relatively inexpensive are not the only reasons that cease and desist letters have become a routine part of e-commerce practice, as I mentioned in “IP Litigation: What Is It Good For?” in the September 2009 edition of e-Commerce Law & Strategy (www.ljnonline.com/issues/ljn_ecommerce/26_5/news/152683-1.html). Instead, infringement is simply everywhere online, for many reasons. (Several universities and public-interest groups have even created a clearinghouse to make information available on the “chilling effect” ' legal or not ' that such letters can have. See, www.chillingeffects.org.)

Ready, Aim '

Many online entrepreneurs, accustomed to working in a world in which “copy and paste” is a common tactic, may have less legal sophistication about copying content, leading to more possible infringement cases. In a world of tight margins and even tighter timetables in the race to get online before rivals, forsaking legal due diligence ' at the risk of unintentional infringement ' is often deemed a reasonable risk, especially compared with the potential reward of a timely and successful product launch. Even those who do realize that laws limit the ability to copy intellectual property can still easily become confused by the subtle doctrines dictating what may be used and what is prohibited, especially because intellectual property law rarely is black and white, but depends on the context of usage (see, “A Touch of Gray,” in the July 2009 edition of e-Commerce Law & Strategy; www.ljnonline.com/issues/ljn_ecommerce/ 26_3/news/152379-1.html). Combined with the ease of establishing an e-commerce Web site, it is surprising that cases of possible online infringement do not occur more often (or at least are not discovered more frequently).

Moreover, from the perspective of the infringed-content owner, many reasons exist to “send first, ask questions later.” The cost of a full lawsuit, and even of an investigation of potential infringement, can mount to many times the expense of sending what is essentially a form letter. If the alleged infringer is a startup firm, then it may not be able to afford a defense, and may simply change or discontinue the use because it is cheaper to change than to fight. One online seller and client, in an industry where copyright knockoffs made in Third World countries present a never-ending business and legal challenge, acknowledges that its cease and desist letters will rarely result in prosecution, or change the targets' behavior. Instead, his goal is to establish a reputation of contesting infringement so that, in his words, the copycats will “knock off someone else's products first.” And because sales techniques and marketing campaigns change quickly online, the infringer may also be willing to take down something that was intended to be used for only a relatively short time anyway.

In e-commerce, where IP may be a firm's most valuable asset, protecting the integrity of the brand, even against small infringements, may be the most important business strategy. Moreover, all the same concerns apply equally when the target of the letter is a former employee who has left to work for a competitor. A strong cease and desist letter sends a message not only to that employee, but also to all those left behind who may have thought about leaving, but do not have the stomach ' or wallet ' to pay the cost of the inevitable legal claims.

Fire?

Of course, there are reasons not to send such a letter. Foremost is the business and legal risk that the other side may actually have a better right to the content than you do, such as through prior use. Not only would you not stop the competitor, but you may have to stop your own use of the content ' as well as incur the legal fees to defend the counterclaim.

And there's the practical question: What are you likely to get as a result of the letter (other than more legal bills, if the other firm does not capitulate quickly)? While there is certainly value in stopping a competitor before it gets off the ground, even against an established firm it is generally difficult to prove damages. Discussion of a recovery also assumes that the infringer has assets that have value and can be seized ' which is merely an aspiration for many Web startups, the type of firm likely to commit an infringement. While you can, in theory, recover your legal fees in many types of IP litigation, it is not always easy; Lanham Act fee recovery (in trademark cases) applies only in “exceptional cases,” and only for the prevailing party. In copyright cases, a registration of the copyright in question must have been filed with the U.S. Copyright Office (www.copyright.gov) prior to the alleged infringement, even though the legal copyright interest itself exists from first publication. (Many firms do not register copyrights as a matter of course, whether because of the cost or administrative burden. As a practice tip, prior registration can provide significant procedural benefits should you have to resort to litigation to protect your rights in trademark and copyright matters.)

Another reason to stop and breathe before sending the cease and desist letter is that the Internet has made retaliation easy, albeit with the medium's own creative twist: The firm sending the original letter may lose more in the court of public opinion than it could ever hope to gain in a court of law (see, e.g., http://avvoblog.com/2009/03/19/rise-of-legal-blogs-presages-death-of-frivolous-lawsuits; www.ojr.org/ojr/law/1095284771.php; http://thresq.hollywoodreporter.com/2010/07/lucasfilm-ebay-ceaseanddesist.html?utm_source=twitterfeed&utm_medium=twitter; http://blog.ericgoldman.org/archives/2010/06/steps_you_can_t.htm; www.ontechnologylaw.com/2010/06/cease-and-desist-letters-four-ways-to-keep-your-client-and-yourself-from-looking-foolish; and www.thinkgeek.com/blog/2010/06/officially-our-bestever-cease.html).

From a more traditional perspective, the infringement litigation may force you to defend other legal claims, such as wage and hour claims from a former employee, that may never have been worth bringing other than as a way to deter the infringement claim. For all of these reasons, online the best defense is not always a good offense in a world that has changed dramatically from the 19th Century, when the German military philosopher and Prussian soldier Carl von Clausewitz first coined that advice for more traditional forms of war.

Other Issues

Ethics

From the technical perspective of legal ethics, an attorney is not supposed to send a letter threatening to take a formal litigation action, i.e., to file a lawsuit against another user of a client's property unless the client has confirmed that it will proceed with the threat. The client who admits that it is willing to spend only for the letter, to try to scare the infringer, cannot (in theory) ask counsel to threaten a lawsuit, though he or she can refer to “all actions permitted by law” or use similar generic language, but not the threat of a lawsuit itself.

Cost

As in everything else in today's economy and in legal practice, cost must be considered. Cease and desist actions that do not settle quickly can require intensive factual research and preparation: legal fees, even from junior associates, can quickly mount into the thousands or even tens of thousands of dollars. And costs are not measured in dollars alone. Because the arguments and defenses will be very fact specific, and require extensive input from the firm's management team, the client must budget for significant time of its executives to assist counsel to get the facts correct and, if necessary, appear in court, rather than on money-making activities. Clients have often complained to me that the most troubling aspect of litigation (after its cost, of course) is the distraction it causes from normal business operations. I recently spent an entire mid-summer weekend with a client's management team, each of whom had returned from seashore vacations and other more pleasurable ways of enjoying the season than doing intensive witness preparation with a trial lawyer, in order to convince the court to hear our injunction request on Monday morning. In that case, the client reached a favorable settlement when everyone was in front of the judge, but only after all of the expense and effort had been incurred during an intense week of preparation, and on terms that were essentially those that had been offered the week before, when the possibility of a harsh ruling from the court did not appear imminent. As the client told me afterward, none of us would ever get those days (or dollars) back again, literally or figuratively.

Two Other Points of View

Bruce Bellingham

To further consider the real-world concerns that arise when a business client assures me that it is prepared to “spend whatever it takes” to go to court to protect its rights, I asked two of my courtroom colleagues for the types of advice they give clients when they call to discuss cease and desist letters. Bruce Bellingham (www.lawsgr.com/attorneys/Bruce/Bellingham), a former law professor and seasoned litigator, emphasized that although such letters are relatively standard, they must be tailored to each situation (which, of course, has its own cost in fees). He says:

In the course of enforcing a restrictive covenant, such as an agreement not to compete, cease and desist letters can be directed to the breaching party and to third parties, such as the breaching party's current employer or business associate. The purpose of a demand letter to a breacher differs from one to a third party, and the tone and substance of the letter should reflect that.

He also took a philosophical perspective that cut to the reality of settlements ' and to why such letters are often inevitable, even though both sides know the likely result:

The breacher will already have a good understanding of the claim, but will usually have an overwhelming interest in continuing to breach. The breacher is often living on the proceeds of the unlawful activity, so compliance will usually require painful financial adjustments (such as spending some of the money you paid for his promise). The breacher will almost always regard the enforcement of a restrictive covenant as an “unconstitutional” infringement of “natural rights.” Nothing you can do in advance ' not even a separate payment for a promise not to compete ' will forestall that reaction.
I have seen a fairly young man stridently declare that he would continue to “support his family” by competing for his former clients' business, even though he sold his inherited, money-losing firm, consisting of nothing but good will, for over $600,000 cash.
Thus, breachers rarely desist because of anything you write. The real purpose of a demand letter is to send them running to counsel. If you are lucky, and if your claim is as good as you think, the breachers' lawyer may recognize the problem and privately counsel compliance or a compromise acceptable to you. Your real purposes are to frighten the breacher and enlist his or her lawyer as a kind of tacit ally on your behalf. A stern tone and threats are the order of the day.

In contrast, Bellingham views letters to third parties ' the new employer of a former employee bound by a restrictive covenant, or the seller of infringing goods ' as potentially more efficient and effective. He says:

Third party recipients of demand letters, on the other hand, rarely want any part of the breachers' fight. While there are exceptions ' like competitors who hire away your key employees expecting a fight ' third parties usually know nothing of the contractual right being breached. They are very likely to desist if you show them that: a) your demand is based on a genuine contract right; and b) they have even a remote possibility of being held liable for interference with your rights. In the case of employment non-competes, that can solve your problem. Accordingly, a more “polite” and essentially informative letter is indicated. You are, in fact, trying to help the third party avoid a potential liability.

Matthew Cohen

Speaking from a patent background, Matthew Cohen (www.lawsgr.com/attorneys/Matthew/Cohen) echoed Bellingham's advice on the importance of tailoring the letter to the situation, but emphasized the many potential pitfalls that can unintentionally result from ill-advised demands.

As sender, particularly in a patent context, think about the relationship of the parties, if there is one. Is this the first time, that is, have there been alleged infringements of other (rights)? Do the parties know each other in a business context? If there is previous bad blood between the parties, the letter can be more personal and perhaps more forceful.
Also, know the client. Is your client selling goods or services covered by the infringed (right)? If so, you may want to point out the products sold in the letter and (highlight) that those products are properly marked (with the rights information). However, if your client is a patent-holding company and the letter too generic, it may get very little attention, as the “dinged” party may believe that it is just one of many, many recipients.

Cohen warns, though, that the typical business response for an aggressive letter may wind up costing more in legal fees in the long run. Even worse, it may prejudice the litigation position if the recipient of the letter decides to sue first:

Do not write anything that may trigger a declaratory judgment action (that would try to invalidate the patent or other IP right, in whole or in part). Words like “infringement,” “lawsuit,” “injunction” and the like may trigger a declaratory judgment response. It is wiser to tell the receiving party that they “may” be selling or using a good or service that “may” be the same or similar to the claims in a certain patent, and that your client does not permit such use. Be forceful, yet without threatening litigation.
Also ' do your homework before sending the letter. Make sure there is a technical opinion regarding the alleged infringement relating directly to the patent and the alleged infringing article. If the response is a declaratory judgment action, you don't want to run afoul of Rule 11. Without a pre-filing technical evaluation from a qualified evaluator (i.e., an engineer, not a company president or counsel), sanctions are possible.
Last, don't be vague. Give the opposing party the patent numbers. Give them a clear description of the infringing articles. Let them know that you've done your homework and that you are serious.

Cohen offers similar advice to the recipient of such a letter, who should not ignore a demand letter, or dismiss it out-of-hand to see whether the sender is bluffing.

As receiver of a cease and desist letter, your approach is fairly simple. Proceed as if the sender intends to file suit to enforce its IP. Your first response should acknowledge the ding letter. Let the sender know that you take all claims of IP infringement seriously, and that you are investigating the claim. A simple acknowledgement should buy you some time to really investigate if there's a problem.
Then investigate the claim. (Emphasis added.)

But Cohen stresses that recipients of such letters cannot put their head in the sand, regardless of the cost in legal fees, or diversion from normal business operations. On the other hand, the threat of a lawsuit should not be treated as the end of the world, either. It may be just a savvy client enlisting his or her counsel in a business use of the legal system.

At no time should you just ignore the letter, nor do you treat it like the end of the world. Remember, people are always making accusations. Some have merit ' some don't. (Emphasis added.)

Maybe Wait a Minute

So in fact, unlike the stereotypical thief running down the street with a stolen loaf of bread, often the recipient of a cease and desist letter should not stop running, but instead should slow down to evaluate the circumstances. You may decide that abiding by the demands in the letter is the best choice, but you may also decide that you can respond more effectively to execute your own business strategy.

In one case I handled, our client received not only a trademark cease and desist letter, but also a complaint filed with the U.S. Patent and Trademark Office. In response, it did exactly what Cohen warned those who send such letters about ' it filed a declaratory judgment action claiming that its use of a product name did not infringe the complainant's registered mark, and, to boot, filed it in a remote area of Texas, where our client was based. Faced with having to hire local counsel in a “foreign” location, where our alleged infringing client was a major employer represented by the local district attorney, the mark owner quickly settled the case, on terms that allowed our client to continue use of its product name.

Ultimately, therefore, acting with all of the haste and urgency typically associated with cease and desist letters may be the most counterproductive step one can take, whether as sender or recipient of such a letter. The spectrum of reasons for sending such letters, and variations on whether they are truly threats, warrants deliberate consideration of each situation.

Perhaps the best advice to the “IP cop's” demand to stop using its property is that instead of stopping just because the demand was made, the recipient ' and sender as well, when it feels that a nastygram must immediately be sent to a competitor ' should take a minute to think about whether making that demand will help its cause or, with the ironic twist of fate created by the constant scrutiny and mockery of the always-vigilant Internet audience, just make the situation worse.