Once a trademark is registered with the United States Patent and Trademark Office, the owner must enforce it. A vigilant trademark owner must periodically search for possible trademark infringement, which is the unauthorized use of a mark on or in connection with goods and/or services in a manner that is likely to cause confusion, deception, or mistake about the source of the goods and/or services. Examples of trademark infringement include: counterfeiting, unfair
competition (tarnishment or dilution), cybersquatting, or false advertising.
Be assured that a competent trademark attorney can promptly and efficiently deal with this matter. However, before any action is taken, I would like to take this opportunity to discuss the risks and benefits of the first step: sending a cease-and-desist letter (“C&D letter”) to the infringer.
A C&D letter is used to demand that a person or organization immediately stop doing something and refrain from any future repetitive behavior. Several types of C&D letters exist, each based on the emotional state that the sender is trying to impart. There are three main examples: angry, laid-back, and thoughtful.
The Angry Cease-and-Desist Letter
The Angry C&D letter expresses outrage that the alleged infringer dared to enter the same atmosphere as the sender and attempt to share the oxygen. The purpose of these C&D letters is to instill enormous fear into the recipient, normally a non-lawyer, in such a way that all demands are immediately complied with and no further action need be taken. This letter demands:
- an instantaneous halt to all business operations involving the alleged infringement,
- the destruction of all questionable products,
- a calculation of all questionable products produced and sold over the product’s lifespan,
- a tabulation of gross and net profits from the product,
- an identification of everyone who purchased the products,
- the threat of enormous penalties and costly litigation,
- an opportunity to settle once the sender receives all of the information requested, and
- a response within a short timeframe.
This all sounds very good, and indeed, this type of C&D letter can be very effective when sent to unrepresented individuals or small businesses. The threat of anything costly, such as penalties or litigation, normally makes the recipient very submissive to the sender’s demands. At the very least, a response to your letter will be received within the stated deadline.
However, the Angry C&D letter has several potential drawbacks. This type of letter is generally short on specific facts and heavy on threats. For example, eBay users who sell large volumes of items often receive an angry C&D letter accusing them of selling illegal copies. An unsophisticated recipient might immediately capitulate to any demand of settlement to avoid costs of litigation and penalties. However, a sophisticated recipient would reply by stating, for example, that the First Sale Doctrine allows such behavior, in addition to demanding proof of illegal activities. Therefore, as is true with all communications, you must know who your recipient is.
A sophisticated recipient necessitates a well-thought-out plan of action or else the C&D letter, could be used against you. First, the recipient could beat you at your own game by filing for a declaratory judgment of non-infringement, thereby making you the defendant. Defendants usually spend more money than plaintiffs due to the travel expenses of counsel, witnesses, and experts. If your lawyers are not licensed in the infringer’s chosen forum, you will also need to retain local counsel to represent you during pretrial motions before the judge. A C&D letter is extremely inexpensive compared to the potential cost of a full trial.
Second, the plaintiff’s chosen forum dictates the pace of litigation. If the court is very busy, the litigation could be drawn out over several years. Alternatively, it might be a “rocket docket” and decide to hear the case in six to nine months, necessitating a team of lawyers working around the clock to adequately prepare. In either scenario, time is money.
Third, the plaintiff has a statistically better chance of winning because he or she usually decides to litigate in a home forum where the likelihood of bias is in his or her favor. Motions to change venue to your home forum can be tricky, and are not guaranteed. Regardless of venue, come trial, the angry C&D letter could be floated in front of the jury to cast you in a negative light. Worse, it could also be used in support of court sanctions under Rule 11 if it is found to be harassing, frivolous, legally unreasonable, or devoid of factual foundation. The letter could even be slipped to the media. This could serve to cast a black eye on your business, resulting in negative sales and deterioration of business associations. At the same time, it could cast a favorable light on the recipient of such an awful letter and increase his or her sales.
Last but not least, adequate research needs to be done to ensure that the recipient is not the senior user. It has happened that a junior trademark user unsuspectingly sent a demand letter to a senior user of a trademark, resulting in a reversal of fortune. The senior user then demanded a hefty license in his or her favor and the junior user is left with very few options. Therefore, adequate research must be performed to determine what type of priority rights the C&D letter recipient might possess. Competent counsel should conduct this research and report back to you. In the meantime, when making your decision, it is essential that the angry C&D letter only be used against an unsophisticated recipient where the cards are stacked in favor of the sender. Otherwise, the negative repercussions can be extensive and costly.
The Laid-Back Cease-and-Desist Letter
Alternately, the laid-back C&D letter is non-threatening in tone. It is light on specific details because the burden is placed on the recipient to research whether the alleged infringement is actually taking place. Recipients rarely jump the gun and race to court for declaratory judgment. If the recipient does run to the courthouse and litigation is commenced, the tone of the laid-back C&D letter puts you, the sender, in a much more favorable light with the jury because it is so non-threatening.
This type of letter is most often seen amongst patent owners, and although it should be considered, it should not be recommended in a trademark infringement situation. Once a patent infringer is notified, the remedies at trial can be greatly increased in favor of the patent owner for the infringer’s continuous, willful activity. If the alleged infringer performs the necessary due diligence and determines that his or her actions are likely infringing, the laid-back C&D letter provides a much easier meeting of the minds for licensing deals and avoidance of costly litigation.
The ultimate goal of a trademark owner is rarely a licensing deal. Due to the Bare License Rule in the Lanham Act, the trademark owner is required to maintain some sort of quality control over all products or services that bear his or her mark. Quality can go down and have a negative impact on the bottom line if the licensees are not policed. On the flip side, costs go up if a rigorous quality control protocol is set in place. Likelihood of confusion could still result as the two products are conformed, deterring loyal customers. Basically, it would be better to simply buy out the infringer or turn it into a franchisee to inform customers that a new sheriff is in town.
Additionally, a laid-back C&D letter can be too easygoing. First, the recipient might not take it seriously and choose to ignore it, forcing a second letter or other form of follow-up.
Second, a sloppily drafted letter could possibly be misinterpreted to be giving permission to the infringing activity. Again, follow up would be necessary to explain the true purpose of the first letter. Failure to follow up could result in laches, estoppels, acquiescence, or waiver. These equitable doctrines essentially prevent the sender from any recourse other than a straight acquisition of the infringer because it allows the recipient to continue exactly what he or she is doing. Failure to follow up can also prevent the issuance of a preliminary injunction should litigation result, because a judge would not believe that a substantial threat of irreparable damage could take place when activities were allowed to continue for longer than two weeks.
Last, public perception could be negatively affected. If the sender has a reputation as a no-nonsense business leader, a laid-back C&D letter could be used as fodder for ridicule. The tone of the letter should be consistent with the normal business practices of the sender.
The Thoughtful Cease-and-Desist Letter
Notably, there are very few risks to a thoughtful C&D letter. The intellectual tone of the letter neutralizes any negative reactions by the consumers, media, or business associates that become aware of the situation. However, the biggest concern is still who gets to the courthouse first. Before sending, it is advisable to have a complaint ready to file with your home forum. If the recipient does not respond within the allotted time, the complaint would be filed and served as soon as possible. If a preliminary injunction is warranted, then the window of response should only be seven to ten days. In this way, you can control the forum and increase your statistical chance of success. If the C&D letter is introduced as evidence during trial, the judge and jury will have a more favorable view of your company because you provided the recipient with a reasonable time to settle.
Because there are so many options with far-reaching ramifications, a trademark owner’s approach towards infringers should involve a thoughtful conversation with an attorney wherein together you create a strategy for success.