Don’t Ignore A “Cease And Desist” Letter

Ostriches do not actually bury their heads in the sand when frightened, but they do run away from or otherwise avoid conflict.

Crows, however, address problems with innovative approaches.

If a business receives a cease and desist letter, it has been challenged with a conflict. That business should deal with it like a crow, not like an ostrich.

Nature of Cease and Desist Letters

Businesses – and individuals – sometimes receive communications demanding that they “cease and desist” from some activity. For example, the letter may demand that the recipient cease and desist from:

• Employing an individual in violation of a claimed covenant not to compete, or from being employed in violation of such a covenant;

• Violating an intellectual property right, such as patent, trademark, copyright, or similar right;

• Operating or practicing without a permit, registration, license, or similar authorization claimed to be required to conduct an activity; or

• Engaging in a claimed ongoing real property trespass or another property right violation.

The above examples are merely examples. A cease and desist letter is a species of “demand letter” that demands not simply a sum of money, but an end to a course of conduct – often a course of conduct that is a source of income. A cease and desist letter may be sent by or on behalf of a private party or by a governmental authority.

Initial Analysis of Cease and Desist Letters

Cease and desist letters should never be ignored. These communications almost always should be reviewed by a lawyer.

A first step in every review should be to consider whether liability insurance may apply. If any coverage might apply, the insurance carrier ordinarily should be put on notice immediately, even if the recipient believes the sender is a lunatic with no valid claim. If that lunatic brings a lawsuit, and insurance applies, a business wants to have fulfilled all policy conditions so that the insurance coverage the business paid for absorbs the legal costs of the defense.

With legal counsel, a business needs to analyze the particulars of the claims made in the cease and desist letter, and this analysis may require some effort. For example:

• A claimed violation of a covenant not to compete requires review of the purported employment contract and legal analysis of the enforceability of the non-compete provisions;

• A claimed violation of an intellectual property right may require a search as to that right and analysis of various factors affecting the claimed right; and

• A claimed license violation and other lack of authorization claims will require factual investigation of the activity conducted and legal analysis of the actual need for the license or authorization.

Responses to Cease and Desist Letters

One should almost always respond to a cease and desist letter. Most cease and desist letter senders plan to follow up with suits or other actions if they receive no response. A response gives one the chance to attempt a resolution, or at least not look as if one willfully ignored a legitimate concern. Sometimes, one needs to send an initial reply explaining that one is still evaluating the claim with a promise of a fuller response in the near future.

A lot of analysis and planning should go into the response.

If the analysis a business has conducted indicates that its position is strong, the response may present an opportunity to begin discussions that can resolve the dispute and save the trouble and expense of future litigation. It will be important in these cases for the response to set out a strong factual and legal position, but not to commit too rigidly to a factual or legal position that may need to evolve. Tone is also very important. It will be critical to use a tone that does not demonstrate fear but also does not foment truculence in the other side. A business’ goal should not be to demonstrate the righteousness of its position so much as the futility of the opponent wasting its time and money with a lawsuit.

If initial analysis indicates a business’ position is weak, or that each side’s position has strengths and weaknesses, then content and tone will be equally important, but addressed differently. The respondent’s goal will be to try to resolve the matter in the manner that is, realistically, most favorable to it. In these responses, a business will try to show some confidence, evince more conciliation, and begin the effort to reach compromise.

All responses usually should contain some standard language, including a denial of liability and a reservation of rights. Some people call this kind of language “boilerplate.” Litigators call this kind of language “very important.”

If an insurance carrier is involved in resolving a cease and desist claim, a business and its independent counsel usually also need to stay involved. If a business tenders the defense of, say, an automobile wreck claim to its insurance company, the business ordinarily can rely on the carrier to resolve the claim unless there is an issue with the existence or amount of coverage. On the other hand, if a company has coverage for, say, an intellectual property claim, it will need to discuss with the insurer what concessions the company is willing make, if any, with respect to the continued use of the claimed intellectual property, in resolving the insurance claim.

Occasionally, cease and desist letters come from completely unreasonable people who make absolutely absurd demands. A company and its counsel may, in these cases, decide that a very short response to the person making the demand, or no such response at all, is appropriate. In many such cases, however, the best response is to send a copy of the offending communication, with a brief cover letter, to an appropriate law enforcement or regulatory agency. It may often be a good idea to copy the person making the demand with your cover letter.

On some occasions, a business’ best response, for various strategic reasons, may be to file its own lawsuit or other proceeding first.

Being a Crow

Another bird myth is that a crow is a bad omen. Crows are remarkably clever birds with complex social structures, and are revered as symbols of wisdom in some cultures. And a crow would deal with a cease and desist letter thoroughly and effectively if it happened to receive one.