You Got a Patent Demand Letter

Don't

Do

Do nothing (after analysis)

WhenClaims clearly don't read on your product; sender has a history of never following through; exposure is small.

Trade-offCheapest path, but the knowledge clock is running — if you're wrong about non-infringement, post-letter sales carry willfulness risk. Often paired with a non-infringement opinion of counsel to cut that risk.

Respond with a non-infringement / invalidity position

WhenCounsel's analysis shows strong defenses and you want to deter escalation without paying.

Trade-offA substantive counsel-drafted response often ends matters with opportunistic senders. It also educates the other side — disclose only what strategy dictates.

Design around

WhenThe claims arguably read on a feature you can change at acceptable cost.

Trade-offEliminates go-forward exposure (past sales remain exposed). The redesign must avoid the claims as properly construed — and avoid the doctrine of equivalents — so it needs counsel sign-off, not just engineering judgment.

Negotiate a license or settlement

WhenThe patent is plausibly valid and infringed, or the cost of certainty beats the cost of fighting.

Trade-offBuys peace; price should reflect litigation risk, not the sender's opening demand. Watch for terms that cover future products, require audits, or destroy small entity fee status.

File an IPR at the PTAB

WhenPrior art searching turns up strong § 102/103 art against the asserted claims.

Trade-offInter partes review historically cancels some or all challenged claims in most instituted cases, and the threat alone is settlement leverage. Costs run well into six figures; a petition must be filed within 1 year of being served with a complaint; estoppel attaches to grounds raised or reasonably could have been raised.

File a declaratory judgment action

WhenThe letter creates a real, immediate controversy and you want to choose the forum before they do.

Trade-offSeizes venue and momentum (MedImmune v. Genentech lowered the bar for DJ jurisdiction; a specific infringement assertion usually suffices). But it converts a letter into live litigation — only worth it when suit looks inevitable and forum matters.

What is a patent demand letter and what does receiving one mean?

A patent demand letter (also called a cease-and-desist letter, notice letter, or licensing inquiry) is correspondence from a patent owner or its counsel asserting that your product or service may infringe one or more of its patents, and typically demanding that you stop the accused activity, take a license, or open negotiations. What it means legally: (1) You now have knowledge of the patent — which matters because enhanced damages for willful infringement under 35 U.S.C. § 284 (up to treble damages, Halo Electronics v. Pulse Electronics, U.S. 2016) generally require that the infringer knew of the patent; continued sales after notice are the classic willfulness fact pattern. (2) It may start a duty to preserve documents, since litigation is now reasonably foreseeable. (3) It may create declaratory judgment jurisdiction — a sufficiently specific assertion lets YOU sue first in your preferred forum for a declaration of non-infringement or invalidity (MedImmune, Inc. v. Genentech, Inc., U.S. 2007). What it does NOT mean: that you actually infringe (demand letters routinely overread claims); that the patent is valid (many asserted claims do not survive scrutiny); or that a lawsuit is imminent (many senders — especially non-practicing entities running volume campaigns — never sue most recipients). The letter is an opening negotiating position backed by uncertain facts. The correct response is neither panic nor the trash can: it is preservation, counsel, and an element-by-element analysis of the asserted claims against your actual product.

Should I respond to a patent demand letter or ignore it?

Almost never ignore it outright — but 'respond' does not mean a substantive reply written by a founder. The decision framework: First, always do the internal steps regardless of whether you reply: preserve documents (litigation hold), calendar dates, notify insurers if you may have coverage, and get patent counsel's claim analysis. Whether to send a reply depends on the analysis: (1) If the claims clearly don't read on your product and the sender appears to be running a volume campaign with little litigation follow-through, counsel may advise a short acknowledgment or measured silence — engaging can put you higher on the target list. The willfulness risk of silence can be managed with a written non-infringement opinion of counsel. Note that under 35 U.S.C. § 298, failure to obtain an opinion of counsel may not be used to prove willfulness — but an actual competent opinion remains powerful evidence against it. (2) If the sender is an operating competitor, or the letter is specific (claim charts, named products), a substantive response from patent counsel setting out non-infringement or invalidity positions often ends the matter or shapes a reasonable license discussion. (3) If suit looks likely, strategic choices dominate: respond while preparing an IPR petition, or file a declaratory judgment action to choose the forum. The one universally wrong answer is a casual reply from a non-lawyer — emails like 'we were inspired by your product but changed it' become Exhibit A. Time matters too: insurance policies require prompt notice, and evidence (including the design history that proves independent development) is best preserved immediately.

What is willful infringement and how does a demand letter create that risk?

Willful infringement is egregious infringement behavior — deliberate or wanton disregard of another's patent rights — that allows a court to enhance damages up to three times the compensatory award under 35 U.S.C. § 284. The controlling standard comes from Halo Electronics, Inc. v. Pulse Electronics, Inc. (U.S. 2016): district courts have discretion to enhance damages for conduct that is 'willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or — indeed — characteristic of a pirate,' judged on the totality of circumstances, generally measured at the time of the challenged conduct. Knowledge of the patent is the practical prerequisite — and that is exactly what a demand letter delivers. The classic enhancement fact pattern: company receives a specific notice letter identifying the patent and accused product, does no analysis, and keeps selling unchanged for years. How to cut the risk after receiving a letter: (1) Take it seriously, promptly — document a good-faith investigation; (2) Obtain a competent opinion of counsel concluding non-infringement and/or invalidity, based on an element-by-element analysis — courts treat a timely, competent opinion as strong evidence against willfulness; (3) Note the statutory protection of 35 U.S.C. § 298: the FAILURE to obtain an opinion (or to waive privilege over one) may not be used to prove willfulness — so not having an opinion isn't itself damning, but having one affirmatively helps; (4) If you redesign, document that the redesign was adopted to respect the patent; (5) Avoid internal communications mocking the patent or acknowledging copying — they surface in discovery. Willfulness also matters beyond damages: it is a factor in awarding attorney fees under § 285 in exceptional cases.

What is different about a demand letter from a patent troll (NPE)?

A non-practicing entity (NPE, colloquially 'patent troll') is an entity whose business is monetizing patents through licensing demands and litigation rather than selling products. Demand letters from NPEs differ from competitor letters in motive, economics, and optimal response. Key differences: (1) No market overlap — an NPE cannot get an injunction shutting down its own competition (and post-eBay v. MercExchange, NPEs rarely obtain injunctions at all); the endgame is money. (2) Volume economics — many NPE campaigns send substantially similar letters to dozens or hundreds of companies, priced so that settling (often $25K–$100K) is cheaper than even early-stage defense. The sender may sue only a small fraction of recipients. (3) Litigation funding and shell structures — the asserting entity is often a special-purpose LLC holding only the asserted patents, making fee-shifting awards hard to collect. Response adjustments for NPE letters: pull the entity's full litigation docket (how many cases filed, how fast they settle, for how much — much of this is public or available via litigation analytics); check the asserted patents' IPR history (claims may already be cancelled); investigate chain of title; consider joint defense groups with other recipients (shared prior art searching and defense costs change the economics); weigh an IPR petition — for a patent being asserted broadly, killing the claims once protects against the entire campaign and is the single biggest settlement-leverage move; and know the policy backdrop — multiple states have statutes against bad-faith patent assertions targeting deceptive mass demand campaigns, and the FTC has pursued enforcement against abusive senders. What stays the same: preserve documents, no substantive founder replies, and a real claim analysis — some NPE-asserted patents are genuinely strong, and treating every letter as a bluff is its own mistake.

What is a declaratory judgment action and when should an accused infringer file one?

A declaratory judgment (DJ) action is a lawsuit the accused infringer files first, asking a federal court to declare that it does not infringe the patent and/or that the patent is invalid — flipping the script before the patent owner sues. Legal basis: the Declaratory Judgment Act (28 U.S.C. § 2201) requires an 'actual controversy.' Under MedImmune, Inc. v. Genentech, Inc. (U.S. 2007), the test is whether, under all the circumstances, there is a substantial controversy of sufficient immediacy and reality — a demand letter that specifically identifies a patent and accuses specific products typically suffices; even license offers framed in polite terms can create DJ jurisdiction (which is why sophisticated patent owners draft initial letters vaguely, as pure 'licensing discussions'). Why file a DJ action: (1) Forum choice — instead of defending in the patent owner's preferred venue, you sue where you have a home-field advantage (note: TC Heartland v. Kraft (2017) restricted where corporations can be sued for infringement, but DJ venue follows general venue rules); (2) Momentum and certainty — you control timing, end the slow-bleed of an open-ended threat, and signal you will not pay nuisance value; (3) First-to-file benefits — the first-filed action generally takes precedence when mirror-image suits are filed in different districts. Why NOT to file: it converts a letter — which might never have become a case — into guaranteed litigation with seven-figure defense potential; it can foreclose quiet, cheap settlement; and a weak DJ filing on shaky jurisdiction gets dismissed and signals fear. The strategic sweet spot: suit appears inevitable (competitor with litigation history, escalating correspondence, parallel suits against others), the merits favor you, and forum matters. The DJ decision should be made with counsel early — DJ jurisdiction can evaporate if the patent owner files first.