Letters of the Law: Drafting Cease and Desist Letters in the United States Under the New Declaratory Judgment Actions Standard
August 2010

Trademark owners frequently and routinely send cease and desist letters to alleged infringers in an effort to convince them to stop their allegedly infringing conduct without the expense or burden of litigation. Owners may decide to send cease and desist letters for marginal infringements on the assumption that the letters are cheap and that if they have their intended effect, the owners will have succeeded in enforcing their rights in their marks with little effort and minor investment. If an accused infringer refuses to stop the conduct at issue or ignores the letter, the trademark owner can determine whether to take additional steps, such as filing an infringement action.

However, upon receipt of the cease and desist letter, the accused infringer may turn the tables on the trademark owner and file suit for a declaration under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), that it is not infringing the mark. Thus, by sending a cease and desist letter, the trademark owner could unwittingly be drawn into litigation that it otherwise would not have filed.

Three Types of Letters
Historically, trademark owners could avoid a declaratory judgment action by sending a “soft” cease and desist letter—one that did not create a reasonable apprehension of litigation. See, e.g., Dunn Computer v. Loudcloud, Inc., 133 F. Supp. 2d 823 (E.D. Va. 2001).

Trademark owners could also avoid the prospect that the accused infringer’s suit in response to the cease and desist letter would proceed in the unfavorable forum by sending a “hard” cease and desist letter—one that included a direct threat of imminent litigation in the trademark owner’s forum. If, in response to the “hard” cease and desist letter, the accused infringer “raced to the courthouse” to file suit, the trademark owner could argue that the accused infringer’s suit was an anticipatory filing or forum shopping, which are exceptions to the general rule that a first-filed action will proceed over a second-filed action with substantially overlapping issues. See Gunthy-Renker Fitness, L.L.C. v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 271 (C.D. Cal. 1998) (“[A]n action is anticipatory when the plaintiff files it after receiving ‘specific, concrete indications that a suit by the defendant is imminent.’”).

Only cease and desist letters that created a controversy but did not threaten imminent litigation could legitimately form the basis for the accused infringer to file a declaratory relief action. See, e.g., Starter Corp. v. Converse, Inc., 84 F.3d 592, 595 (2d Cir. 1996).

MedImmune: The Supreme Court Lowers the Standard
In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Supreme Court complicated the trademark owner’s strategy for crafting cease and desist letters by rejecting the “reasonable apprehension” test and establishing a lower and broader standard—“totality of the circumstances”—for determining whether a case or controversy sufficient to support a declaratory relief action exists. While this case related to a patent matter, it is reasonable to assume that the same standards would be used in evaluating a trademark matter.

The Court found the existence of an actual controversy even though a patent licensee had complied with demands of the patent holder by paying patent royalties under protest and had not infringed any of the patent holder’s rights, and therefore had no reasonable fear of imminent suit. All that is required to create an actual controversy under the Declaratory Judgment Act, the Court held, is that the patent holder take some affirmative act that puts a party “to the choice between abandoning his rights or risking prosecution.” The Court adopted a totality-of-the-circumstances test: the “question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”

Lower Court Decisions After MedImmune
Based on MedImmune, some courts have found the existence of an actual controversy based on cease and desist letters that did not contain any threat of litigation. In Poly-America, L.P. v. Stego Industries, L.L.C., No. 3:08-CV-2224 (N.D. Tex. Mar. 8, 2010), Stego sent a letter to Poly-America in 2006 to discourage it from selling a yellow vapor-barrier product; in 2008, Stego reaffirmed its intention to protect its mark. In response, Poly-America filed a declaratory relief action, which Stego moved to dismiss, claiming that there was no actual controversy. The district court denied the motion, holding that Stego’s assertion of trademark rights based on Poly-America’s existing and planned activity presented a justiciable controversy, even though Stego did not threaten litigation.

Similarly, in Express Scripts, Inc. v. Intel Corp., Case No. 4:09CV00796 (E.D. Mo. Mar. 3, 2010), Intel sent a cease and desist letter asking Express Scripts to abandon an intent-to-use application it had filed for the mark INTELLACT and informing Express Scripts that its use of the mark would infringe Intel’s trademark rights. In response, Express Scripts filed a declaratory judgment action, which Intel sought to dismiss based on the argument that there was no actual controversy. Intel apparently did not know at the time it sent the cease and desist letter that Express Scripts had started using the INTELLACT mark. The court held Intel’s letter was sufficient to amount to an express charge of infringement (even if Intel did not know at the time that Express Scripts was using the mark at issue), which created an actual controversy sufficient to support a declaratory relief action.

In contrast, in World Religious Relief v. Gospel Music Channel, 563 F. Supp. 2d 714 (E.D. Mich. 2008), the court found that there was no actual controversy, despite clear allegations of infringement, based, in part, on the “tone” of the correspondence between the parties. In that case, the Gospel Music Channel (GMC) informed World Religious Relief (WRR) that its use of the words “gospel music” in a particular font and in connection with television programming was “likely to cause confusion with GMC’s registered marks.” GMC further stated that WRR’s use of the mark infringed and diluted GMC’s trademark rights.

WRR filed a declaratory relief action, and GMC moved to dismiss the action. The court found that the parties’ correspondence was insufficient to create an “actual controversy” of “sufficient immediacy” required for conferring jurisdiction under the Declaratory Judgment Act. It noted that the parties had exchanged only three letters (which the court characterized as “cordial”); that the prospect of litigation was not mentioned by either party; and that GMC’s “tone in its letters, while protective of what it perceives to be its legal interests, was certainly not threatening.” Accordingly, the court dismissed the action.

Effect of TTAB Filing
Based on MedImmune, courts will consider the existence and nature of opposition or cancellation proceedings in determining whether an actual controversy exists. In Surefoot LC v. Sure Foot Corp., 531 F.3d 1236 (10th Cir. 2008), the court made it clear that the pendency of Trademark Trial and Appeal Board (TTAB) proceedings is a relevant factor in determining whether there is an actual controversy sufficient to support a declaratory judgment action. The court noted that a party may oppose a trademark registration for reasons having nothing to do with any infringement dispute, but observed that, in other situations, oppositions are “indicative of, or even a proxy fight for, an underlying infringement dispute.” It concluded that a TTAB opposition filing by itself was not conclusive evidence of a live infringement dispute, but implied that the nature of the proceeding would be probative of the existence of an actual controversy.

Filing a TTAB action based on grounds other than likelihood of confusion or dilution may not create an actual controversy. In Wham-O, Inc. v. Manley Toys, Ltd., No. CV 08-07830 (C.D. Cal. Aug. 13, 2009), Manley Toys filed a TTAB proceeding seeking to cancel Wham-O’s trademark registrations for SLIP N’ SLIDE, HULA HOOP and FRISBEE based on genericness. In response, Wham-O filed a declaratory judgment action against Manley Toys. The court dismissed the action based on MedImmume, holding that “Wham-O is not under any imminent threat of harm” from Manley Toys. Even though Wham-O would lose its rights to exclusively use its marks if Manley Toys succeeded in the TTAB action, there was no evidence of a threat of civil litigation. Accordingly, the court dismissed the action.

These cases leave open the question of whether an opposition or cancellation proceeding based on likelihood of confusion or dilution would be sufficient to establish an actual controversy, but they leave little doubt that, in addition to initiating such a proceeding, sending a cease and desist letter claiming liability would be sufficient to establish an actual controversy.

Practical Tips
Trademark owners that want to send cease and desist letters in the United States without triggering litigation by the accused infringer in an unfavorable or inconvenient forum face a more difficult and less certain standard under MedImmume. Threatening litigation will certainly create an actual controversy. Demanding that the accused infringer stop using the disputed mark would likely create an actual controversy. Sending a cease and desist letter, coupled with initiating an opposition or cancellation proceeding based on likelihood of confusion or dilution, may also create a controversy. Claiming that the accused infringer’s use of a mark constitutes infringement or dilution would also seem to create a controversy, but other factors, such as an invitation to negotiate an amicable resolution and use of a more cordial tone, could result in a finding that there was no controversy.

The trademark owner’s strategy for sending a “hard” cease and desist letter—one with a direct threat of imminent litigation if the accused infringer fails to comply—remains the same. Although such a letter would create an actual controversy, if it results in the accused infringer’s filing a declaratory relief action, the trademark owner should have a strong basis for dismissal of the infringer’s action if it promptly files an infringement or dilution action in its home forum.

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