Hardly a week goes by without an American or a European company contacting one of our China lawyers wanting to retain us to “stop the counterfeits” of their products online and offline. Far too often these people believe one of our IP lawyers can within 24 hours send out a “template” cease and desist letter and within another 24 hours of that, the counterfeit sales will magically cease.Were it only that easy.For us to send out a cease and desist letter to a Chinese company that allegedly is engaging in counterfeiting (note the switch to alleged here), we first must determine the legal grounds we have for threatening to sue. Is the alleged counterfeiter actually infringing any registered trademark, copyright or patent? Is any trade secret being illlegally employed? Unfortunately, about half the time, there is no legal grounds for claiming either infringement or counterfeiting at all. Do cease and desist letters work with Chinese companies? Sometimes they do, and really well. We have sent cease and desist letters that achieved great results within days. We’ve also sent cease and desist letters that were completely ignored. A cease and desist letter regarding IP infringement usually works well when we have strong legal grounds for sending it and the company to which we are sending it is a legitimate registered company. These letters are far less effective when the legal grounds is weak or non-existent or when the “company” to which we are sending it is little more than a pop-up operation set up merely to effectuate global counterfeiting. Why send a cease and desist letter? What can such a letter accomplish? One reason is to get the recipient to cease the infringing. Another is to stake out your rights so as to avoid any potential waiver of those rights. Sometimes we send these letters not so much to stop infringing, but to get the recipient to pay a licensing fee to be able to use our client’s IP. If the letter does not work and we need to pursue litigation, the letter itself — and the recipient’s subsequent ignoring of it — can help prove intentional copying and thereby increase damages at trial or in settlement. Something few seem to consider or even realize is that sending out a cease and desist letter is not without its own, sometimes substantial risks. Many years ago, a company sent a cease and desist letter to a client of my law firm that caused our client to investigate the products of the company that sent it. Our client determined that not only was it not violating the IP of the company from which it received the letter, but that company that sent the letter was violating our client’s patent rights. To make a long story short, the company that sent the letter ended up millions of dollars poorer from having acted so precipitously. It is also not uncommon for the recipient of a cease and desist letter to flip around and sue the sender to seek a court ruling of non-infringement.Sending a cease and desist letter alerts the recipient of your IP concerns and may cause them to destroy evidence that would aid you in pursuing an IP claim or in collecting large damages. Sometimes the better tact is to gather up infringement evidence before sending out the cease and desist letter. It is also possible your cease and desist letter will give the recipient a claim against you for defamation, libel or tortious interference in their business.Sometimes the best tact is not to send any cease and desist letter at all. 24 hours from hiring to firing (off) of a cease and desist letter? I don’t think so, and hopefully, you now don’t either.
Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.