Received a cease-and-desist declaration: What to do?
For founders and entrepreneurs, one of the primary goals in the area of IP should always be to avoid legal disputes. Nevertheless, many receive a warning letter along with a cease-and-desist declaration during their business career.
A trade mark or patent attorney advising a client who has received such a letter will often face a variety of questions. In particular, the correct approach is crucial when handling a cease-and-desist declaration to avoid further legal actions such as a lawsuit.
At the same time, it's essential to effectively and sustainably protect your own business. In this article, we explain what you need to consider and how to avoid cease-and-desist letters in the future.
What is a cease-and-desist declaration?
A cease-and-desist declaration, often accompanying a warning letter, essentially refers to a declaration by which the recipient commits to refrain from a certain action in the future. In trade mark law, this typically means that the recipient must stop infringing on the third-party trade mark rights.
Specifically, this means that a company accuses the recipient of violating an existing trade mark right. Usually, the accusation is that an identical or similar trade mark is being used. To prevent this action, the recipient is required to either cease using their own trade mark entirely or restrict its use.
To give weight to the warning letter including the cease-and-desist declaration, the recipient signs the declaration, committing to two points: Firstly, to cease the unrestricted use of the trade mark in the future, and secondly, to pay a penalty in case of further infringement.
To avoid recurring legal consequences, you should never sign a cease-and-desist declaration without legal consultation. We recommend seeking professional legal advice in advance to understand your options and the implications of your actions – and we would be happy to help.
Difference between a warning letter and a request to show authorization
For better understanding, it is important to distinguish between a warning letter and a request to show authorization. Not all rights holders immediately take legal action or threaten such action through a warning letter; instead, they may first request information through a request to show authorization.
The goal is to check whether comprehensive usage rights exist (e.g., through licenses or prior use rights) or to demonstrate that no valid rights are being violated.
For example, in response to a request to show authorization, the recipient may be able to prove that no trade mark or patent infringement has occurred because the actual usage is different from what the requester assumed. The outcome of a request to show authorization often determines whether the rights holder will take further legal action, such as a warning letter or a lawsuit, and how likely their success will be.
How should I respond to a warning letter with cease-and-desist declaration?
Most individuals, including inventors, founders, and entrepreneurs, tend to shy away from legal disputes and may quickly sign a cease-and-desist declaration to avoid costly and time-consuming litigation.
However, an experienced trade mark or patent attorney will advise against acting too hastily and signing a cease-and-desist declaration without prior legal consultation. Doing so could have mid and long-term consequences for your company's freedom of action.
A warning letter with cease-and-desist declaration does not automatically mean that a legal violation has occurred. In fact, anyone can draft and send a warning letter, even if no actual IP or legal rights have been violated. However, the sender of an unjustified warning letter may be liable for damages, meaning you do not have to comply, and you can actively defend yourself.
An experienced trade mark or patent attorney will review your options and develop a strategy to respond effectively and professionally to the cease-and-desist letter.
Not signing the cease-and-desist declaration and pursuing litigation
Sometimes signing a cease-and-desist declaration is not the better option, even if the allegations are correct. Many penalty clauses involve fines of over €5,000, largely because cases exceeding this amount fall under the jurisdiction of the higher regional courts.
Particularly when it cannot be guaranteed that a future violation of the agreement will be completely avoided (e.g., due to employee errors), it may be strategically disadvantageous to submit too early.
A court case provides the opportunity to win and poses a risk for the other side. Depending on how the infringement situation plays out and the potential court costs, this might deter the other party, and the damages might be lower than the contractual penalty.
However, such decisions always depend on the individual case and require careful consideration of all available options.
Modified cease-and-desist declaration
If the allegations are justified and cessation is feasible, it is still advisable not to sign the original cease-and-desist declaration immediately. A more sensible option could be to submit a modified cease-and-desist declaration.
A modified cease-and-desist declaration still contractually guarantees the cessation but with your own adjustments. For example, the penalty amount can be reduced or left open, to be determined by the other party in the event of future infringement (while agreeing that this discretion is subject to judicial review).
In contrast, fixed contractual penalties do not allow for such flexibility. Here, you would have to pay the full agreed penalty regardless of the severity of the violation or the circumstances.
Additionally, modifying the clauses regarding what exactly must be refrained from (what am I not allowed to do?) is generally necessary. The party issuing the warning letter will often formulate these as broadly as possible, exceeding their legitimate claim. If you sign the cease-and-desist declaration without modification, it may excessively limit your future actions.
Unlawful cease-and-desist declaration
If you have received an unjustified warning letter with cease-and-desist declaration, you can legally challenge it. In practice, several defenses have been established to contest a warning letter.
For general guidance, we provide a few examples below. However, this does not replace individual legal advice from an experienced and specialized attorney.
- Private actions are being challenged (e.g., § 11 PatentG): Trade mark or patent infringements can only occur in a commercial context. Trade mark or patent rights do not extend to purely private actions.
- Decriptive use (e.g., § 23 MarkenG): Particularly with accessories and replacement parts for products, it is generally permissible to name the trade marks the product is compatible with. In most cases, such a warning letter is unlawful.
- Failure to comply with the obligation to use the mark: After a five-year grace period, the trade mark can be attacked with a cancellation request if it is not seriously used for the registered goods and services. For German trade marks, the grace period starts on the day when no opposition can be filed or the opposition procedure is concluded (§ 25(1) MarkenG in conjunction with § 26(5) MarkenG). For EU trade marks, the grace period generally starts from the date of registration (Art. 18(1) EUTMR). Special rules apply to calculating deadlines for international trade marks (IR trade marks) (§ 115(2) MarkenG).
- The trade mark has been exhausted (§ 24 MarkenG): Once trade-marked products are placed on the European market, they can be freely traded thereafter, even if third parties do not hold trade mark rights to them. Thus, products can be resold second-hand with the trade mark indicated without constituting an infringement.
How to avoid a warning letter with cease-and-desist declaration: This is how you protect your business preventively
Ideally, you can avoid receiving a warning letter with cease-and-desist declaration altogether. To prevent such a situation, there are crucial steps you can take early on, before entering the market and/or registering your trade mark or patent, that could help you avoid costly and complicated warning letters.
One key step is conducting a freedom-to-operate search. This allows you to assess the competitive landscape before launching your product and determine what room you have to operate. Together, we can analyze early on how high the risk of receiving a warning letter may be.
Individuals typically have limited experience with patent and trade mark office databases and, therefore, may not fully uncover potential legal risks. As patent and trade mark attorneys, we use specialized, often AI-driven tools to assist with searches.
In addition, legal expertise is needed to assess the scope of protection for patents, trade marks, and designs in order to deliver reliable results. We are happy to assist you with your search and registration. Feel free to contact us anytime for a non-binding consultation!
Received a warning letter with cease-and-desist declaration? This is how a trade mark and patent attorney can help
If you receive a cease-and-desist declaration from a third party, a trade mark and patent attorney will review the letter and advise you on your options. Should a court case arise, you will be represented both in and out of court.
Furthermore, we provide long-term support through collision monitoring, helping to identify infringements of your own intellectual property (such as illegal imitations) and taking active legal action, e.g. sending warning letters.