Visit the site tightpod.com and you will be redirected to a webpage that sells a product called TightJacket, a cloth laptop case. Oddly, despite the domain name there is no mention of the brand name TightPod anywhere on the site or any indication of the legal troubles that led to the product’s rebranding.

The problems began in 2006 when web designer Terry Wilson launched a small business to market her custom-made laptop cases. Because the cases were designed to protect a laptop, like a pod protects a seed, and because she perceived “pod” to be an appealing buzz word, Wilson dubbed her product the TightPod, registered a trademark and began making sales at the domain of the same name. To her surprise, she received a letter from Apple, the company first to file for the trademark “pod”, requesting that she cease using the TightPod name and undertake the costly procedure of rebranding her product.

Intimidation Factor

Cease and desist letters can unexpectedly wreak havoc on a new venture when the subject of the letter is innovation, branding or a product that is central to the business plan. Usually sent by an attorney, a cease and desist letter is a document informing the recipient of someone’s legal rights against the recipient, commonly in the areas of libel, slander, copyright infringement, trademark infringement and patent infringement. The letter may take the form of a generic template or may be drafted to include points of law and specific facts to support a case for liability, much like legal memoranda filed with a court.

For a business owner, the first response to a cease and desist may be panic over the threat of legal action. But despite the intimidation factor, a cease and desist letter is simply a letter giving notice of an issue that needs to be addressed. Further legal action may follow if the recipient fails to comply, but doesn’t have to be evitable. By evaluating the facts, acknowledging the letter and formulating an appropriate response, a business owner can proactively address the problem identified in the letter and shape a savvy response strategy, which may even involve a resolution for all parties on mutual terms.

Assessing The Risk

It is important to realistically assess the risk of legal action, based not only on copyright, patent or trademark law, but also on straightforward business considerations. As a practical matter, an individual who sends a cease and desist letter might lack the resources to pursue action, whereas a major corporation like Apple can rely on both in-house and external counsel to rigorously defend its trademarks and other intellectual property. Likewise, an individual who sends a cease and desist letter might be more likely to pursue action against a solvent company that can afford to pay out damages.

A trademark owner may have a compelling incentive to defend a mark at the risk of otherwise losing trademark protection, whereas a copyright owner may not have the same incentive, since copyrights do not expire as a result of infringing uses. A writer may feel sufficiently motivated to send a cease and desist letter but lack the initiative to aggressively pursue the matter to the same extent as a company that has invested heavily in development of a patent. In the case of the trade name “pod”, Apple had filed for protection of its mark in several countries and planned to also register the mark in the United States at the time that it challenged Terry Wilson’s use of the TightPod name. Defending the brand was necessary step in strengthening Apple’s claim for trademark protection in the United States.

Performing Due Diligence

Another point to consider is whether the use does in fact infringe on someone else’s intellectual property. In the case of trademark or copyright law, it is important to assess the extent of liability and whether the use may fall into one of the protected categories of intellectual property, such has fair use. When liability is debatable, a copyright holder might be more amenable to negotiation.

In the case of patent infringement, a company actually has a legal duty of due care to investigate the allegedly infringing activity once the company has received actual notice of another’s patent rights. The cease and desist letter does not necessarily require the company to cease the activity or use, but it does trigger an obligation to investigate before proceeding. If proper due diligence measures are taken, the objecting party will have difficulty establishing willful infringement and will be much less likely to obtain penalties such as treble damages and attorneys fees. Courts have held that such due diligence measures usually involve receiving the go-ahead from a competent patent attorney.

As a general precautionary measure, it may be worth ceasing use of the brand name, product, technology or content until the issue has been resolved, whether by negotiating a deal or determining that the use is in fact not infringing. Intellectual property laws tend to yield harsher results for an infringing company when the company had knowledge of the infringement. By ignoring a cease and desist letter for patent, trademark or copyright infringement, a company may bolster the case for willful infringement and be subject to statutory penalties such as treble (triple) damages or reimbursement of attorney’s fees and costs.

Evaluating The Options

If complying with the cease and desist letter will cause significant losses for the business, it is advisable to consult with an attorney to determine the strength of the rights holder’s claims and the possibility of raising defenses or a counter-argument. If the cost of acquiescing is too high, it may be possible to negotiate in good faith with the rights holder and reach an agreement, such as a content licensing deal or language on a website to distinguish one trade name from the other. Rather than risk the unfavorable press, Apple ultimately offered to pay Terry Wilson an undisclosed sum to re-brand her product so that it would not include the word “pod.” The end result was the removal of the word “pod” from Wilson’s website and the emergence of a new product name: TightJacket.

-By Dava Casoni, Annie Lin