What if I receive a letter that I am infringing another’s patent?

Receiving a letter that you are infringing someone else’s patent is never happy news. Even when the complaint is completely without merit, it is akin to getting a brown bag lunch invitation from your local IRS auditor. For large businesses, patent infringement accusations are often routine hassles – one of the many costs of running a successful business. To the entrepreneur or small business owner, the threat of an infringement lawsuit can be a serious distraction, at best.

You should keep in mind that many patent licensing companies and some patent owners send blizzards of threatening infringement letters, hoping for easy license fees. Before becoming the proverbial low hanging fruit, assess the basic facts. Specifically, are you even producing any goods or services related to the patent?

A modem company contacted me recently, having been sued for patent infringement on a patent that issued only two months earlier. The defendant company had been out of business and bankrupt for three years. I suggested that this ex-company consider defaulting on the lawsuit. Since the patent just issued there were no back damages, and no assets over which to sue.

In another somewhat recent incident, a small business owner called, explaining that he had received a threatening letter from an attorney, claiming ownership of an Internet commerce patent and wanting to collect a $5,000 licensing fee. The business owner makes and sells tombstones from a remote rock quarry in Nevada. All sales are wholesale to a small number of distributors, and he did not own a computer. There is no conceivable argument that this rock company could be infringing an Internet commerce patent. My suggestion was to ignore the letter.

My general advice is that when you receive an infringement threat letter, consult a patent lawyer to help sort out the threat. Over the years, the large majority of threatening patent letters have been meritless. Either the patent owner was too lazy to research my client's products, or was hoping that a scary letter would produce an easy payment.

If you are accurately accused of patent infringement, your patent attorney can help you identify options to limit liability and avoid unnecessary disruption to your business. These options might include negotiating a license for payment, designing around the patent, seeking a cross license settlement, or something as exotic as engaging in a cross licensing strategy with a white-knight third party.

Contact John Ferrell at JFerrell@carrferrell.com if he can further assist you. 

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About the Author

John Ferrell is a founding partner of Carr & Ferrell LLP, one of Silicon Valley's foremost technology law firms, and specializes in patent and intellectual property law matters. He is the Chair of the firm's Intellectual Property Practice Group.