What to Do if a Claim of Infringement Is Made against Your Company

If a claim for intellectual property infringement is made, the company should conduct an immediate internal investigation to determine whether there is a valid basis for the claim. If so (for example, the company may have innocently used a trademark similar to that of another), some companies contact the owner of the mark or the attorney who wrote the letter setting forth the claim and ask whether there might be a way to resolve the matter amicably. In some instances, the owner of the mark is satisfied if the company agrees to cease use of the infringing matter. If a company has a significant amount of marketing materials that display the infringing matter, the company may be able to obtain an agreement that it can continue to use the offending materials until they are depleted, at which time new noninfringing materials will be prepared. In other cases, the company may be required to agree to destroy any infringing materials on hand.

If a claim is made for patent infringement or any infringement for which there may be a basis in fact, seek the immediate advice of experienced intellectual property counsel. You do not want to jeopardize any defense you may have by making an innocent remark to the adverse party or its counsel. In some instances, infringement that continues after notice gives rise to claims for punitive damages. Thus, a letter informing the company that it is infringing another's patent must be given immediate attention. Simultaneously, review the company's insurance policies to determine whether coverage exists for the claim and whether the company is required to notify the insurer of any such claims within a certain period of time. Similarly, agreements with bankers, lenders, and strategic partners must be reviewed to determine whether the claim must be disclosed to them. Finally, the company must consider whether the claim has any effect on the company's contracts with its suppliers, customers, or licensees. For example, if the company must cease use of a patented item, will this affect any company customers who are using the invention?

Experienced counsel will be able to assist the company in considering the many issues that arise once a claim has been made against the company. In the event of any claim, whether well founded or not, maintain all correspondence, notes, and other materials. If the company is approached by a buyer, even years later, it is customary for the buyer to ask, ''Has a claim been made against the company within the past five years that it infringed the intellectual property or proprietary rights of another?'' Maintaining accurate records gives the company the opportunity to resolve any issues relating to such claims and assure the buyer that it will not be subject to liability.

In sum, claims relating to infringement are serious, distracting, and expensive and often have far-reaching effects on a company. Companies that implement and enforce vigorous intellectual property policies are in the best position to avoid claims by third parties.