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Are you getting sued? What getting a Cease and Desist letter means for you.

January 26, 2011 by · Comments Off
Filed under: law 

The dreaded Cease and Desist letter.  The Demand letter.  The C&D.  These are the tools in every lawyer’s repertoire when the client decides a private letter may accomplish their goals more effectively than a spending years and many thousands (or millions) of dollars in litigation.  Litigation is almost always preceded by a Cease and Desist letter.  The logic being: why spend time, money, and energy to have a judge order someone to do something that they would have agreed to anyway had you just asked (with the right persuasion, of course).

The vast majority of lawsuits end in a settlement.  Additionally, an untold amount of claims are settled even before a lawsuit is filed.  (Lawsuits are a matter of public record, but if a settlement is reached before a lawsuit is filed there is no public record of a settlement being reached.)

How do you know you’ve received a Cease and Desist letter?

Large companies can just forward legal looking documents to their in-house counsel or law firm on retainer.  For small businesses and individuals a potential lawsuit means a significant unbudgeted expense, even if it’s just paying a lawyer to tell you it’s ok to ignore the letter.  Knowing what you are looking at and its implications can be extremely important when establishing how best to respond to a Cease and Desist letter.

Here are some tell tale signs that the document you are looking at is a Cease and Desist letter:

  • You had to sign for it.  C&D’s will often be sent with a “return receipt requested” so there is proof that you received the letter.  This is not a requirement, however.
  • The letter contains language like “In light of your ongoing infringement we hereby DEMAND that you CEASE & DESIST all actions relating to…”.  Frequently (but not always) the term “Cease and Desist” will be right there in the letter.
  • Anytime a letter demands that you take an action (take down your website, pay $10,000, etc.) based on activity that they claim is unlawful it is likely a Cease and Desist letter.
  • The letter is on a law firm’s stationary and/or is signed by a lawyer.  (Lawyers will often follow their name with the abbreviation “Esq.”, though they do not have to.  Ex: John Doe, Esq.)

Understanding a Cease and Desist letter.

Lawyers frequently use language that is hard to understand or downright archaic.  If you aren’t familiar with reading legal documents your only option may be to hire a lawyer to interpret the letter for you.  Let me be clear: hiring a lawyer is your safest action for ensuring you don’t make a legal miss-step that may be detrimental to you or your business’ well being.  Even if the hereins, wherefores, run-on sentences, and legal code make the letter incomprehensible to someone with a sensible appreciation for the English language, there are still a few things you can learn from the letter before going to see a lawyer.

  • An important first question is: did a lawyer write this letter?  I’ve seen Cease & Desist letters written by non-lawyers that have a double dose of legal sounding words and no substance.  If a lawyer has written the letter it tells you two things: 1.) It is likely not an outright lie, as lawyers can lose their license to practice by making frivolous legal claims or sending out fraudulent letters (all lawyer jokes aside), and 2.) The person who sent the letter is fairly serious as they have shown their willingness to hire a lawyer to pursue the claim.  Just because a letter is not from a lawyer does not necessarily mean the sender is not serious about pursuing the matter further, however.  The sender can always hire a lawyer after they send the letter.
  • Do some research into who wrote the letter.  Are they writing on behalf of a company or an individual?  Is it the legal department of a Fortune 500 company, or Joe Schmoe from across town?  The bottom line is you want to find out how much money they are willing to spend.  The more money they have the greater the chance they are going to be willing to spend it on pursuing a legal claim against you (all other things being equal).  Be happy if you can’t find information about the sender on the internet.
  • Look for legal citations.  The citations will often look like “17 U.S.C. §205”, “Va Code Chapter 22, Section 3”, or “Marbury v. Madison”, amongst many other forms (Cornell has a good resource on legal citation if you’re having trouble going to sleep).  Individuals will often get form Cease & Desist letters off the internet.  Sometimes lawyers will offer a cheap version of a C&D which involves the lawyer filling out their own template and signing the bottom.  These form C&D’s will have a lack of citation, because citation to relevant law generally requires legal research.  If the letter you received does not use legal research as its foundation you can assume: 1.) The sender has not spent a great deal of money and/or effort on having the letter drafted, and 2.) The sender may not have a deep understanding (or any understanding) of their legal claims against you because they have not researched it thoroughly.  A lack of legal citation is a good sign for the recipient.

What is a Cease and Desist letter really?

A Cease and Desist letter is an offer to enter into a contract with the sender or the sender’s client.  That’s it.  The police are not involved, neither are judges or the courts.  You have no obligation to accept the terms of the offer, or even respond (though it is often in your best interest to respond).  The letter is not a public document, its form and contents are not specifically governed by law, and receiving a Cease and Desist letter does not mean a lawsuit has been filed against you.  (It is important not to confuse a Complaint or similar document that is filed with a court as a C&D.  If you think the document you received may be notice of a lawsuit being filed against you do not ignore it.  I strongly suggest you obtain legal advice if you think you might have been named in a lawsuit.)

A C&D is an offer to enter into a contract, and generally speaking a contract is an agreement between people or companies where each side exchanges promises to the other.  In the context of a C&D you may promise to pay the sender $10,000 and the sender may promise not to sue you.  The value of a lawyer is in telling you whether this contract is a good deal for you or not.  Of course, a refusal to enter into a contract with the sender of the Cease and Desist may end in you being sued.  However, not everyone that sends a C&D is prepared to take on the risk and expense of litigation, and it’s possible that the Cease & Desist sender may never contact you again.  Betting on them not filing suit can be a big risk to take, however.

Conclusion

Receiving a Cease and Desist letter is not the end of the world, it’s just a letter.  Even if it looks like gibberish you can still take the time to get some idea of the position you’re in.  Keep in mind, however, that there is no substitute for the advice of a lawyer, especially when it’s you or your company in the crosshairs.

Calculating Damages for Copyright Infringement

November 5, 2010 by · Comments Off
Filed under: Copyright Articles, law 

Calculating potential damages for copyright infringement is critical in determining your legal strategy.  The analysis is the same regardless of whether you’re the one suing (the copyright owner/plaintiff), or the one being sued (the infringer/defendant).

The first question to ask is: ‘Has the infringed work been registered with the copyright office?’  The answer to this question will have a large impact on damages.  All creative works are automatically protected by copyright law (check out this page for a background on copyright law), but registered works are afforded much greater protection.  Copyright registration records are held in a free online database that you can access from the Copyright Office website.

There are 2 types of damages for copyright infringement: Statutory Damages and Actual Damages.  For a copyrighted work that has been registered prior to infringement the plaintiff may choose to claim Statutory Damages or Actual Damages (in addition to claiming for attorney’s fees).  A plaintiff who is claiming infringement for an unregistered work may only make a claim for Actual Damages.

Statutory Damages

The vast majority of plaintiffs in copyright infringement cases will choose to pursue Statutory Damages (if they can) because they are easier to calculate and will often be higher than Actual Damages.  Illegal file sharing cases, for example, will choose Statutory Damages because while their Actual Damages may be around $1 per illegally copied song, they are entitled to much higher damages through the use of Statutory Damages.  (This case awarded the RIAA $9,250 for each song, while this case awarded $22,500 for each song.)
Statutory Damages get their name because the amount of damages is set by law, regardless of the actual damages suffered by the plaintiff (17 USC § 504).  They usually range from $750-$30,000 per infringement, though awards can go as low as $200 per infringement for ‘innocent infringers’ and up to $150,000 per infringement when the court determines that the defendant acted ‘willfully’.  The court may not award damages outside of this range.
While a plaintiff will always ask for the maximum amount of damages, it is at the court’s discretion how much to award within the defined damages range.  Some factors the courts consider are:

1.      The purpose of the infringing use.  (e.g. – were you selling bootleg CDs on the street, or did you copy a CD for your Mom?)

2.      The value of the work that was infringed.  (e.g. – was it a $1 song or a $5,000 computer program?)

3.      The infringer’s state of mind or intent.  (e.g. – did you download a picture off the web unaware that it constituted copyright infringement, or did you know it was illegal and decided to copy it anyway?)

Statutory Damages are a powerful tool for the plaintiff in copyright litigation and infringers of registered copyrights should beware.

Plaintiffs for copyright infringement of registered copyrights are also allowed to ask the court for attorney’s fees (17 USC § 505).  If awarded, the defendant will owe all or part of the plaintiff’s legal fees, in addition to the fees for the defendant’s own lawyer.  When litigation costs can run upwards of tens of thousands of dollars this is another big stick that the plaintiff can hold over the defendant’s head.  While the awarding of attorney’s fees is at the courts discretion, the plaintiff of an unregistered copyright is never allowed to ask for attorney’s fees (17 USC § 412).

Actual Damages

This is the type of damages pursued by people who have had their work infringed, but didn’t have their work registered prior to the infringement (and in rare cases a registered copyright holder may also select to pursue Actual Damages over Statutory Damages).

Actual Damages is the quantifiable monetary loss the plaintiff has suffered, or the profit the infringer has gained, from infringing your copyrights.

There are 2 general ways courts determine Actual Damages.  One method involves seeing what the plaintiff’s average income from their copyrighted work was before (and after) the infringement and compare it to the income from when their work was being infringed.  The difference is the Actual Damages.  This method is useful when there are extensive financial records backing up average sales and clear evidence that the dip in sales was due to the infringing activity.

The other method looks at how many instances of infringement took place and awards damages based on what the copyright owner would have received had she sold or licensed the work instead of having it stolen.  This method is easier to use when the plaintiff does not have extensive sales records, because the only numbers that need to be determined are the number of infringements and the value of the work.  This still may be difficult, however, because of the problems associated with pricing a work if it has not been commercially sold (e.g. – a piece of original art from an artist’s private collection).

What makes claiming Actual Damages more difficult, however, is that the plaintiff must prove to the court that their amount for Actual Damages is accurate.  The plaintiff will likely have to have a forensic accountant testify as their expert witness, and often the opposing party will have their own forensic accountant testify that the damages are lower than the plaintiff claims.  To reach these conclusions the forensic accountants and the opposing party will take an in-depth look into the plaintiff’s financial records and many records may become a part of the public record.  It is possible to have the plaintiff’s financial records kept private from the general public (if the court is convinced there is good cause to do so), but the plaintiff will have no choice in turning over financial records to the opposing party.  As all of this arguing in court over damages takes more time, it will also result in increased legal fees (not to mention the fees for your expert witnesses).  As litigation costs are so high and there is no option to recover attorney’s fees, often a claim that would have been pursued if Statutory Damages were available will not be pursued if all the plaintiff is entitled to is Actual Damages.

The more documentation the plaintiff has for showing lost profits the stronger the case becomes. Historical sales records are very important for showing expected sales. As you can only claim lost profits (not revenue), you are going to have to be able to document the average profit you receive the sale of your work. While the plaintiff is going to claim that lost sales are the result of the infringing activity, the defendant is going to do their best to show other factors that caused the reduced profits.  Any documentation that was done in the normal course of business will carry more weight than documents generated specifically for the infringement claim.

Conclusion

The vast majority of copyright cases will never get to trial.  Many will never even leave the pre-litigation stages before there is a settlement.  With the large costs of litigation many clients will choose to settle before their legal fees grow too large.

So why does it matter how damages will be assessed in court?  It’s because the parties will always be assessing the strength of their own and their opponent’s case.  If the plaintiff can claim a large amount in damages, then the plaintiff is in a more powerful position for negotiating a settlement.

Doing a proper analysis of potential damages from copyright infringement will allow you to get a better understanding of your case’s strength, which plays an integral role in determining a legal strategy.

While this article will hopefully give you a basic understanding of calculating damages for copyright infringement, there is much more involved when determining a person’s rights or liability under copyright law.  If you feel that your work is being infringed, or you have been contacted for infringing another’s work, it is strongly recommended that you contact a lawyer.  The individual specifics of every case play a role in determining your best legal actions, and a lawyer will be able to help you determine your best course of action based on your unique circumstance.

Rosetta Stone Gears up for a Battle Against Google and the Future of Adwords

November 5, 2010 by · Comments Off
Filed under: law, trademark, Trademark Articles 

By Caroline Kotila

Google has been the target of a tremendous amount of litigation in regards to intellectual property, as would be expected for such an industry giant.  The most recent target has been their tool AdWords, which generates ads based on keywords that users input into Google’s search engine.  The problem occurs when a company has trademarked a term, and a competitor uses that term to have their product show up as an ad next to the relevant links .  For example, if Lexus were to buy the keyword “BMW” through AdWords, anyone who searched for the BMW X5 could expect to see an advertisement for the Lexus RX350.  This method of advertising leads many companies to argue that Google has infringed their trademark.

In 2007, Rosetta Stone filed a lawsuit against Google, claiming that their trademark had been infringed by the use of AdWords to advertise competing language software. The company lost its case this August and has sought appeal by the 4th Circuit Court of Appeals.  Rosetta Stone argues that Google’s use of AdWords to generate revenue by selling these trademarked competitors, who ultimately piggy-back off the success of the larger companies, is unlawful.  Additionally, Rosetta Stone alleges that the use of AdWord has caused widespread “consumer confusion” due to conflicting ads.  The company is hoping that the Circuit Court will overturn the Virginia Federal District Court’s decision in favor of Google.

Rosetta Stone has many supporters in their case, as many companies disapprove of Google’s AdWords policy.  Numerous large companies have stated that they will file Amicus Briefs supporting Rosetta Stone, including Ford Motor Company, Carfax, PetMed Express,  1-800 Contacts, and many others. As the market for web advertising is growing this case will have a major impact on how search engines can generate their revenue and the power of registered marks in the context of internet technology.

New Rules Proposed on Gene Patenting

November 5, 2010 by · Comments Off
Filed under: law, Patent Articles 

The US Justice Department filed an Amicus Brief with the US Court of Appeals for the Federal Circuit that surprised many of the people that have been closely following the case (link to full brief here).  What surprised people was not that the brief was filed, but that it supported the party challenging the patents and goes against the policies of the US Patent and Trademark Office (USPTO) as well as decades of case law on the subject.

The Justice Department made the claim that human genes in their natural isolated state are unacceptable for patent protection because the genes are not human-made and thus are more akin to a discovery than an invention.  This brief has received its fair share of criticism.  While this will certainly have far-reaching effects on the bio-medical industry, it is not as far reaching as it may at first seem.  While the brief states that the Justice Department feels that patents shouldn’t be granted for isolated genes, many of the valuable patents dealing with genes actually refer to scientific processes or altered genes, which the Justice Department states should be able to receive patent protection.

Many of those who oppose the patenting of genes say that it will stifle the ability of new medical techniques, such as the ability of a person to have their personal genome read and reviewed for various diseases.  Proponents of gene patents claim that the ability to patent genes fosters innovation in the field by ensuring that those who do research will be compensated for their work.

Currently the USPTO is not following the opinion of the Justice Department as stated in their Amicus Brief, but with such a respected authority coming down on this side of the argument the industry is on very uncertain ground in their ability to receive patent protection in the coming years.