1. Patent Infringement Prelitigation Letter
2. What Is a Patent Demand Letter?
3. Sending Demand Letters Under Bad Faith
4. Receiving a Patent Demand Letter
5. Reasons to Send a Patent Infringement Letter

Patent Infringement Prelitigation Letter

A patent infringement letter, also called a cease and desist letter, is sent by a patent owner to a person or business believed to be infringing on the intellectual property (IP) in question. Many patent owners decide to sue the alleged infringer rather than sending a prelitigation letter. This is because in some cases, the recipient of the letter responds by countersuing the patent owner in his or her chosen venue for declaratory judgment. 

Patent owners prefer to litigate in districts that tend to protect intellectual property, including the Eastern District of Texas and the District of Delaware. Sending the notice letter gives the infringer a chance to file first in a less preferred venue. 

However, sending a patent infringement letter has the benefit of establishing a date for damages to begin. This is not necessary if the product is marked with a patent number and date. Another option is to file a suit without first notifying the alleged infringer.

What Is a Patent Demand Letter?

Any communication a patent owner sends to an alleged infringer before filing a lawsuit can be considered a demand letter. However, a demand letter can be sent for many legitimate reasons. Some examples include:

  • An inquiry letter without the intention of litigation to determine whether a product includes the patent in question.
  • An offer of licensing for the purpose of starting negotiations. This may result in litigation if favorable licensing terms are not met.
  • A cease and desist letter demanding either discontinuation of using the patent or royalty payment.

All these demand letters are important tools for patent owners who need to protect their intellectual property. They allow for an agreement to be reached without a lawsuit.

Sending Demand Letters Under Bad Faith

Sending multiple patent demand letters to users and small business owners with no intention of filing a lawsuit is considered harmful. That's because those who receive letters sent in this matter may be unfamiliar with patent law and without the resources to defend themselves in court. As a result, they may agree to pay a licensing fee or settlement even when not actually guilty of infringement.

This practice, known as sending demand letters in bad faith, is under attack through multiple legal channels. Legislative proposals currently in Congress require specific information to be included in a demand letter for it to prove willful infringement. They may also require the Federal Trade Commission (FTC) to consider bad faith demand letters a deceptive trade practice.

In 2014, a company known as MPHJ Technology Investments LLC had to settle with the FTC over claims that they sent abusive patent demand letters to thousands of small business owners. The claims included fake legal threats and deceptive sales claims. State attorney generals are pursuing abusive patent litigators at the state level. In addition, more than 18 states have attempted to end this practice legally with consumer protection laws.

Receiving a Patent Demand Letter

Although these state laws are designed to prevent abuse of patent demand letters, they have created some confusion about obligations and liability. If you receive a letter from a competitor accusing you of patent infringement, consult a patent attorney. Do not ignore a patent litigation infringement letter, as doing so can be quite costly in the long term.

A response to this type of letter must be crafted strategically, with consideration of factors that include:

  • Whether the patent owner has sued others previously for infringement.
  • Whether you have a commercial relationship with the patent owner who sent the letter.
  • How profitable, successful, and popular the patent in question is expected to be.
  • How strong the infringement allegations are against you.
  • What demands are included in the letter.

Reasons to Send a Patent Infringement Letter

Most courts look favorably upon the practice of sending a cease and desist letter to the alleged infringer before filing a lawsuit. Although suing first gives you the benefit of choosing your venue, the jury may show sympathy to the infringer if you jump straight to court without attempting to negotiate. Due to the recent onslaught of patent litigation in the United States, some consider the plaintiffs in these cases as attempting to exhort small business owners and individuals. 

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