Cease and Desist Letter - What Do I Do Now?
By Jeffrey Kass for
Startup Denver, March 2012
Jeffrey Kass is a shareholder in the Denver and St. Louis offices of Polsinelli Shughart in the firm's Intellectual Property and Business Litigation practice groups. This article is the fourth in a five-part series of important legal questions for small business owners and entrepreneurs.
I had a client who was operating an increasingly successful social media website. It was actually one of the precursors to Facebook. Net revenues had started to exceed $50,000 per month for the two 20-year-old college student owners. As things were just starting to hum along, with Wall Street Journal articles featuring the website, the client received a cease and desist letter from a lawyer in Texas. The letter was on behalf of a company which claimed to own a patent covering Internet pop-up advertisements. It accused my client of infringing the patent and gave my client two options: pay a pricey license fee to use pop-up ads or be sued. At the time, pop-up ads were the number one source of revenue for the client. I called the lawyer on the other side, told him that I thought his patent had serious weaknesses (which it did) and that these were just a couple of young college kids with a website. Ultimately, the client settled the matter for pennies, in large part because of the pushback and approach we took with the patent owner.