Should You Fight a Patent Infringement Demand Letter or Ignore it?

Dec
02

cease and desistRecently in The Wall Street Journal, Colleen Chien—an associate professor at Santa Clara University School of Law—suggests that the best way to respond to a cease and desist letter alleging patent infringement “may be to take a deep breath—and then do… nothing.”  Ms. Chien clarifies that “[t]his means… looking at the claim, determining that a license isn’t needed—and then filing the letter away, rather than responding.”  According to Ms. Chien, patent infringement demand letters often originate from so-called “patent trolls” on fishing expeditions looking for a quick settlement.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  The Wall Street Journal article found patent trolls brought the majority of patent cases in the U.S. between January-June of 2015 and half the time targeted companies making less than $100 million.  Patent trolls also embark on campaigns that target entire industries for their use of another’s technology, such as Wi-Fi.  In these cases, a company’s contract with its technology provider might provide for patent infringement indemnification.  Ms. Chien recommends that “[a] company that keeps cool and does nothing is more likely to fly below the radar.”

On the other hand, The Wall Street Journal article cautions that there are times when doing nothing simply “won’t work.”  For instance, a larger competitor might file a patent infringement lawsuit against a startup to disrupt their business or squash the competition.  Other times, patent holders may be seeking high damage awards from a jury and are therefore more willing to pursue a patent infringement claim.  Indeed, The Wall Street Journal article points out that “any company that’s worth investing in will likely eventually appear on the radar of a patent troll.”  Ms. Chien recognizes that in these circumstances such attacks “aren’t likely to go away if ignored.”  Unless addressed quickly, a legitimate patent infringement claim could result in a finding of willful patent infringement and an award of treble damages.  Thus, it is important to speak with a patent professional at the onset of receiving a cease and desist letter to investigate the merit of any patent infringement allegation, determine the validity of the patent and recommend an appropriate response, whether it be a design-around, obtaining a license, or simply filing the letter away and resolving the threat by “doing nothing.”  See Colleen Chien, The Best Way to Fight a Patent Demand May Be to Do Nothing, The Wall Street Journal, November 23, 2015 at R5, available at http://www.wsj.com/articles/the-best-way-to-fight-a-patent-demand-may-be-to-do-nothing-1448248065.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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