Cease and Desist Letters: Why We Don't Rush to Send Them

My law firm often gets calls from companies telling us that "someone is selling our product under our trade name on Amazon" and asking us to send a cease and desist letter "right away" to get that company to stop violating their IP. Our typical response is to say it is seldom a good idea to just "whip out" a cease and desist letter. We need to know more of the facts first, and then plan a strategy. Those facts determine whether a cease and desist letter makes sense at all (it usually does), and what we will say in that letter.

Far too often, companies seem to believe one of our IP lawyers can send out a "template" cease and desist letter within 24 hours, and within another 24 hours the counterfeit sales will magically cease. Were it only that easy. I remember a company that paid a lawyer $250 to send out a cease and desist letter and then got sued for millions by the big company that received it. The company contacted us wanting to know if we could defend it in this complicated international litigation matter for a $25,000 flat fee, because that was all it could pay. I said that would not be possible and suggested it might want to see if the lawyer who sent the $250 letter would at least share in the litigation costs. I never heard back from this company and, from what I could tell, it subsequently went out of business.

Our goal in these cases is usually to get the infringing company to stop selling and shipping its products into the United States, or into other countries where our client has enforceable IP rights, without our client having to incur the cost, hassle, and delay of bringing a lawsuit. The products may be coming from China (or Vietnam or Malaysia or Thailand or Mexico or Indonesia or India, or wherever else they are being made). But having U.S. IP rights does not necessarily give you the right to stop a factory from manufacturing or selling its products everywhere in the world. In Abitron Austria GmbH v. Hetronic International, Inc., the U.S. Supreme Court held that the relevant U.S. trademark infringement provisions apply only when the infringing use in commerce is domestic.

For us to send out a cease and desist letter to a company that is allegedly counterfeiting (note the switch to alleged here), we first must determine the legal grounds we have for threatening to sue. Is the alleged counterfeiter actually infringing a trademark, copyright, or patent? Is it illegally using a trade secret? Too often, we find the facts simply do not support the infringement claims the caller wants us to make.

A trademark does not always have to be registered to be enforceable in the United States. A business can acquire trademark rights through use. Similarly, copyright protection generally exists from the moment an original work is created and fixed. But for U.S. works, copyright registration (or refusal of registration) is generally required before filing a federal infringement lawsuit, and when you register can affect whether you can recover statutory damages and attorney fees. These things matter when deciding whether to threaten someone with a lawsuit.

We also need to determine whether we are dealing with counterfeit goods at all. A company reselling genuine products does not ordinarily commit trademark infringement merely because it is not an authorized dealer. There are exceptions, including where the goods are materially different or the reseller interferes with legitimate quality-control protections. Confusing unauthorized resellers with counterfeiters is a good way to get yourself into trouble.

If the allegedly infringing products are being sold on Amazon, a cease and desist letter may not even be the best first move. Amazon has a Report a Violation process for brands enrolled in its Brand Registry program, and rights owners who are not enrolled can use its separate Report Infringement process. These procedures can be faster and cheaper than sending a demand letter, especially when the immediate goal is to get an infringing listing removed. Of course, getting a listing removed from Amazon does not necessarily stop the company behind it from selling the same products elsewhere.

Do cease and desist letters work internationally? Sometimes they do, and really well. We have sent cease and desist letters that achieved great results within days. We've also sent cease and desist letters that were completely ignored. A cease and desist letter regarding IP infringement usually works well when we have strong legal grounds for sending it and the company receiving it is a legitimate, established business with something to lose. These letters are far less effective when the legal grounds are weak or nonexistent or when the "company" to which we are sending it is little more than a pop-up operation set up merely to engage in global counterfeiting.

Why send a cease and desist letter? What can such a letter accomplish? One reason is to get the recipient to stop infringing. Another is to put the recipient on notice of our client's IP rights. Sometimes we send these letters not so much to stop infringement, but to get the recipient to pay a licensing fee to use our client's IP. And if the letter does not work and we end up in litigation, the letter itself and the recipient's subsequent conduct can help our case. In certain patent cases, for example, giving proper notice can affect how far back damages may be recovered. But sending a cease and desist letter does not automatically establish willful infringement or entitle you to increased damages.

Something few seem to consider or even realize is that sending out cease and desist letters is not without its own, sometimes substantial risks. Many years ago, a company sent a cease and desist letter to one of my law firm's clients. The letter caused our client to investigate the products of the company that sent it. Our client determined that not only was it not violating the sender's IP rights, but the company that sent the letter was violating our client's patent rights. To make a long story short, the company that sent the letter ended up millions of dollars poorer from having acted so precipitously.

It is also not uncommon for the recipient of a cease and desist letter to turn around and sue the sender, seeking a court ruling that it is not infringing the sender's IP rights. The recipient needs an actual legal controversy and a court with jurisdiction, but a cease and desist letter can provide the basis for just such a lawsuit. We have seen companies get themselves into expensive litigation they never anticipated simply because they sent a letter without thinking through what might happen next.

Sending cease and desist letters also alerts recipients to your IP concerns, which may cause them to destroy or conceal evidence that would help you pursue an IP claim or collect damages. Sometimes the better tactic is to gather up infringement evidence before sending the letter. Unsupported accusations can also expose the sender to claims for defamation or tortious interference, depending on what the letter says, who receives it, and the law that applies.

Sending a cease and desist letter to those who buy allegedly counterfeit products can be particularly risky. If you accuse a seller of counterfeiting in a letter to its customers, and your accusations turn out to be false or otherwise wrongful, you risk being sued for tortious interference with that seller's business. I would much rather spend my client's money establishing the facts beforehand than defending a lawsuit afterward.

I was reminded of all this by an email exchange between a couple of my law firm's international IP lawyers. I was cc'ed on their discussion of whether to send a cease and desist letter for a client, and what they needed to know before sending one. The email listed the following questions, the answers to which our lawyers needed before they could determine an appropriate cease and desist strategy:

• When were you founded, and when did you begin commercial operations?
• When did you start selling ______ product?
• When did your website first go live?
• When did you begin selling _____ product on your website?
• Do you sell and/or ship ______ product in every state?
• What marketing activities have you undertaken in the various states?
• When were you made aware that ______ company's products were being sold in the United States?
• Are ________ company's products sold only through Amazon?
• When did you file your U.S. Patent and Trademark Office ("USPTO") trademark applications, and what is their current registration status?
• What pre-application trademark searches did you or anyone else conduct in the United States concerning the marks _______ and _______? If you have any pre-application search results/materials, please email those to us.
• Have you registered your image copyrights? If so, when?
• Did you create the images, or were these created by an employee or an outside agency? If by an agency, did you sign an agreement addressing copyright ownership? If so, please email us a copy of the agreement, including any written copyright assignment or license.
• If possible, please email copies of the images the _____ company is infringing.

Depending on the case, we will also want to know whether the products are genuine or counterfeit, who actually manufactures and sells them, and where they are coming from. We will want screenshots of the allegedly infringing listings, their URLs or Amazon ASINs, and, where appropriate, product samples or other evidence. We also need to know whether our client has already contacted the seller or filed an infringement complaint with Amazon or another platform. What has already been said or done can matter, sometimes a great deal.

Sometimes the best tactic is not to send any cease and desist letter at all. It pays to have the facts before acting.