Receiving a cease and desist letter is a legal conflict that demands immediate, considered attention rather than avoidance, according to guidance from Ward and Smith, P.A.
Authors Amy G. Fitzhugh and E. Knox Proctor V of Ward and Smith, P.A. argue that businesses must respond to such letters like problem-solving crows, not conflict-avoiding ostriches.
A cease and desist letter is a type of demand letter that calls for an end to a course of conduct, often one that forms a source of income for the recipient.
Common triggers for these letters include alleged violations of non-compete agreements, intellectual property rights, licensing requirements, or ongoing property trespasses.
These letters can be sent by private parties or by governmental authorities, making the range of potential consequences wide and sometimes severe.
The first and most important rule, according to Fitzhugh and Proctor, is that cease and desist letters should never be ignored and almost always require legal review.
One critical early step is to determine whether any liability insurance coverage might apply, and if so, to notify the carrier immediately regardless of how valid the claim appears.
Failing to notify an insurer promptly could result in a business losing the coverage it paid for, leaving it to absorb legal defence costs that would otherwise be covered.
Legal counsel must then analyse the specifics of the claims, which may involve reviewing employment contracts, investigating intellectual property registrations, or assessing licensing requirements.
Fitzhugh and Proctor stress that a response should almost always be sent, as silence is typically interpreted by the sender as grounds to proceed with formal legal action.
“Most cease and desist letter senders plan to follow up with suits or other actions if they receive no response,” the authors write, underscoring the danger of inaction.
Where a business holds a strong position, the response can open productive discussions aimed at resolving the dispute and avoiding the cost and disruption of litigation.
Tone is described as critically important, with the goal being to convey confidence without provoking unnecessary aggression from the opposing party.
Where a business faces a weaker or more uncertain position, the response should strike a more conciliatory tone while still seeking the most favourable realistic outcome.
All responses, regardless of the strength of the position, should include standard language such as a denial of liability and a reservation of rights, which the authors pointedly note litigators consider “very important” rather than mere boilerplate.
When an insurer is involved in managing a cease and desist claim, businesses and their independent legal counsel must remain actively engaged, particularly where intellectual property concessions may be on the table.
In rare cases involving wholly unreasonable demands, the most appropriate response may be brief, or involve forwarding the offending communication to a relevant regulatory or law enforcement agency.
Occasionally, the most strategically sound response is for a business to initiate its own legal proceedings first, a move that can shift the dynamic significantly in the business’s favour.