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Enforcing Intellectual Property Without Unintentionally Triggering Litigation

Fri, 03/23/2018 - 14:47 -- admin25

by Kelly J. Kubasta and Trey Parham

Your client is irate! A competitor has copied its product, and justice demands that the competitor be swiftly and ruthlessly brought to justice “no matter the cost” … that is, until you calmly explain to your client what that “cost” may actually be. Suddenly, the client’s definition of justice may be a bit more flexible.

Sound familiar? What is next in this scenario? When an intellectual property (IP) owner becomes aware of a potential infringer, carefully considering the first step for enforcement is critical to how the potential dispute will be resolved and at what cost. Because the threshold for establishing declaratory judgment jurisdiction is quite low, a cease and desist (C&D) letter may unintentionally trigger a lawsuit forcing the IP owner to pursue claims in an unfavorable jurisdiction. Moreover, many IP disputes do not merit the costs of litigation, regardless of jurisdiction. It is therefore important that both client and attorney consider all potential avenues for initiating enforcement using a strategy that is most likely to lead to a resolution that is a “success” for the IP owner.

Choosing the best enforcement strategy depends on factors such as:

(a) value and importance of the IP to the client;

(b) financial resources of the client/competitor and willingness to risk those resources;

(c) resolutions acceptable to the client (e.g., injunction, monetary damages, license);

(d) timeframe for resolution;

(e) scope of infringement by the competitor;

(f) risk-tolerance for the uncertainty of litigation; and

(g) desire to set a precedent for other potential infringers; and many others.

In short, there is no “one size fits all” strategy—rather, a careful assessment of the totality of circumstances should shape the strategy.

The first step in IP enforcement can take any number of forms, including: a friendly businessperson-to-businessperson phone call (or an attorney-to-attorney phone call); a “notice” letter advising of IP but making no allegations of infringement; a “cease and desist” letter alleging infringement and making demands; or a filed lawsuit. Of course, there are also many other potential variations.

In extreme scenarios, the enforcement strategy may be clear. Consider, for example, an Etsy shop selling t-shirts bearing the client’s copyrighted photograph. Most likely, a C&D letter will resolve the matter, with minimal risk that the Etsy shop would initiate a declaratory judgment action. The primary consideration is whether to demand immediate cessation or to permit an inventory sell-off period, and whether monetary compensation will be required. At the other extreme, consider a direct competitor of substantial size selling a knock-off of the client’s “crown jewel” product. An aggressive strategy involving an immediate lawsuit is likely appropriate.

The more challenging enforcement scenario is the middle ground. For example, a client with multiple product lines discovers a single infringing product with an annual revenue of a few hundred thousand dollars—enough to hurt, but not enough to fund a patent litigation through trial. The enforcement strategy ideally grabs the attention of the infringer and leads to a prompt resolution. One possibility is to file a lawsuit but not formally serve, and to subsequently send a demand letter enclosing a courtesy copy of the lawsuit. This strategy sends a message of aggression and lays the groundwork for a favorable jurisdiction, but still indicates a willingness to communicate before commencing all-out litigation. Of course, this is just one of many possibilities, but illustrates that the first step in IP enforcement can help shape the path to resolution.

One recent example of a brilliant “outside the box” IP enforcement strategy involved the Bud Light “Dilly Dilly” advertising campaign. When Anheuser-Busch InBev (Bud) learned that a Minnesota craft brewery planned to launch a Double IPA using the brand “Dilly Dilly.” Bud could have crushed the small infringer. Instead, hours after the launch, Bud sent a fully-costumed town crier to the brewery’s headquarters to read a medieval-themed cease and desist letter from a scroll. The video can be seen at: https://www.youtube.com/watch?v=hCvPtSxxVkU. In a final flair, Bud not only permitted the brewery to sell off the “limited edition, one-time only run” but also provided the brewery with two tickets to the Super Bowl. Needless to say, the video went viral and Bud turned a standard IP enforcement into a tremendous marketing success.

In summary, while it may be tempting to both client and attorney, employing a “ready … fire … aim” strategy is risky—potentially triggering an unwanted fight that can be incredibly costly and lengthy. Every scenario is different when enforcing IP, and care should be taken to craft an enforcement strategy that closely matches the needs, expectations, and resources of the client.

Kelly J. Kubasta is a Shareholder and IP Practice Group Leader, and Trey Parham is an incoming Associate, with Ferguson Braswell Fraser Kubasta PC (FBFK). Dilly Dilly!

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