The arrival of a cease-and-desist letter is an obvious warning; your choice among less obvious options in response may have a profound effect on your defense of any resulting lawsuit.
It is usually less costly to bring or to defend a lawsuit in your home city and state than it is to litigate in unfamiliar territory. And with some exceptions, a business cannot be forced to defend a lawsuit in a state where it has no offices or employees, and where it has never sold or offered to sell any product or service. A recent federal court case in a copyright infringement lawsuit, however, demonstrates that a company’s failure to act after receiving a cease-and-desist letter from a potential plaintiff could drastically change the lawsuit landscape.
The case concerned a small shoe store in Alma, Arkansas that did not sell shoes over the internet or from any location other than its store in Arkansas. The store was selling Chinese-made knock-off boots that infringed a copyrighted design belonging to the Washington Shoe Company, headquartered in Seattle. The Seattle company caught wind of the knock-offs and sent the Arkansas merchant a cease-and-desist letter. The Arkansas store owner immediately pulled all infringing boots from the shelves. Then, without the Seattle company’s knowledge, the retailer sold the boots to an out-of-state thrift store. When the Washington Shoe Company learned of the second sale it sued in Washington State for copyright infringement.
The Arkansas company moved to dismiss the case, arguing that it never sold any goods of any kind to any person, business or entity in Washington. The judge, however, ruled that the lawsuit was properly brought in Washington because the thrift store sale was an intentional act that was purposefully aimed at causing harm to the Seattle-based copyright owner. Recently, a federal appeals court upheld that decision. Clearly, it was the resale of the boots after receipt of the notice of infringement that created jurisdiction over the Arkansas company in Washington. Otherwise, the Seattle company’s lawsuit would likely have been dismissed or transferred to Arkansas.
The case demonstrates the danger of ignoring a cease-and-desist letter, or even worse, committing further acts of copyright or trademark infringement after receiving an infringement letter (at least, not without a thorough investigation of the claims). To copyright and trademark owners, the case also demonstrates the value of putting infringers on early notice of a potential claim.
For more information please contact Josh Glikin at 410-583-2400 or firstname.lastname@example.org.