Three Ways A Cease-and-Desist Letter Can Help Protect Your Intellectual Property Rights
A cease-and-desist letter (or “demand letter”) is often the first step taken by an intellectual property rightsholder upon discovering that someone has infringed those rights. Most cease-and-desist letters provide contact information for the sender and detail the rights that are alleged to have been infringed, the nature of the allegedly infringing activity, and the “demand”—or what the rightsholder wants to see happen. To encourage the recipient to take prompt notice and action, senders usually stipulate a deadline to respond in the letter. The sender may indicate its intention to take further action if a response is not received within the specified timeframe.
Cease-and-desist letters are often employed in an initial attempt to avoid costly and drawn-out litigation. While the thought of a substantial court award may be motivating to some, the reality is that lawsuits are typically expensive and time-consuming. Further, although a successful litigant may obtain a costs award, costs are often awarded on a partial indemnity basis. That is, successful parties often receive only partial reimbursement of their total litigation costs.
Note that a cease-and-desist letter is not legally enforceable on its own—the recipient may disregard the communication altogether. If a cease-and-desist letter goes unanswered or otherwise does not produce its intended result, the sender’s next step may be to initiate legal proceedings.
Notwithstanding their limitations, cease-and-desist letters can help protect your rights in three ways:
1. Facilitate resolution
A cease-and-desist letter alone may be sufficient to resolve the issue. In some cases, the recipient is simply not aware that its conduct infringes someone’s rights—on receipt of such a letter, the recipient may quickly agree to cease the infringing activity and comply with any other demands outlined in the letter. In other cases, recipients who are fully aware of the nature of their conduct may nonetheless cease their activities to avoid the risk of a lawsuit.Even where the recipient disagrees with your interpretation of the facts or the rights at issue, a cease-and-desist letter may lead to negotiations that ultimately resolve the dispute. Considering the time and expense associated with litigation, initiating a dispute though a cease-and-desist letter may result in a better outcome for both parties than what might be achieved by the rightsholder immediately commencing legal proceedings.
2. Control the terms of resolution
Disputes initiated via a cease-and-desist letter can often be resolved according to the parties’ own terms. Disputes resolved in court, however, often involve significant uncertainty—a court may not decide the case in your favor or according to your expectations. Parties may thus prefer the certainty of a freely negotiated resolution.As an additional consideration, pursuing litigation through to a court decision may result in more information relating to the dispute being made public than you would otherwise prefer. Settlement negotiations, however, are typically not public, and the parties may include a confidentiality clause as part of a final settlement agreement.
3. Effect notice of your rights
Even if you send a cease-and-desist letter and receive an unfavourable response or no response at all, you have still notified the recipient of your rights. While ignorance is generally not a defence to intellectual property infringement allegations, an alleged infringer’s awareness of your rights may be relevant to other issues. For example, if a defendant in a Canadian copyright infringement proceeding can show that it was unaware that it was infringing copyright, a court may reduce the amount awarded to a successful plaintiff.Finally, note that courts and legislators may each take steps to restrict the contents and tone of cease-and-desist letters. For example, courts in Canada have drawn a distinction between letters alleging patent infringement that are informative and those that are threatening: the former merely set out a patentee’s rights and provide particulars of the infringement allegations, while the latter contain explicit or veiled threats of litigation. Letters to customers of an alleged patent infringer that contain threats of litigation may give rise to claims against the sender under legislation governing unfair competition. Recent amendments to the Canadian Patent Act now allow the Governor in Council to make regulations relating to written demands.
Altogether, while extra caution is warranted in specific scenarios, cease-and-desist letters remain an effective tool for initiating and, in many cases, resolving intellectual property disputes. If your rights are being infringed, consulting counsel regarding the preparation of a cease-and-desist letter may be an appropriate first course of action.
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Posted - 07/15/2021
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