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Patent Minefield Now a Risk for Trademark Owners

Posted in Patent Law, Trademark Law

by Matt Massari

Patent lawyers have understood the consequences of sending a cease and desist letter to a potential infringer since the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). After MedImmune, a party contemplating sending such a letter risks that the recipient may file for a declaratory judgment in their own jurisdiction.  This may require the sender to appear in a distant court, at their own expense.  Thus, the patent owner must be very careful when communicating with possible infringers. Several recent decisions have applied the MedImmune standard for declaratory judgment jurisdiction to trademark controversies, making it difficult for trademark lawyers to avoid exposure to a declaratory judgment action after contacting a potential infringer. 

The most recent case is Express Scripts Inc. v. Intel Corp., No. 4:09CV00796 ERW, 2010 U.S. Dist. LEXIS 18933 (E.D. Mo. Mar. 3, 2010). Express Scripts, Inc. (“Express”) provides pharmacy benefit management and related healthcare consulting services. Express filed an intent-to-use trademark application for the mark INTELLACT for these services and began use of the INTELLACT mark in connection with some of these services as early as February 2009.

In May 2009, Express received a letter from Intel concerning the INTELLACT trademark application, stating in relevant part:

Given Intel’s strong presence in the computer industry and the fact that Intel actively provides a wide range of medical and healthcare products and services, Intel believes that your client’s use of INTELLACT is likely to deceive or confuse consumers…. Furthermore, any use of INTELLACT is likely to dilute the famous INTEL mark…. Use of the INTELLACT trademark thus constitutes infringement of Intel’s established trademark rights and violates Intel’s rights…. Accordingly, Intel must insist that your client abandon its INTELLACT trademark application.

Please note that our intention is not to disrupt your client’s business but to protect Intel’s trade name and trademark rights. We are therefore interested in settling this manner [sic] in an efficient and amicable manner.

In response to Intel’s letter, Express filed suit, seeking a declaratory judgment that its use of INTELLACT in connection with its pharmacy benefit management services does not violate Intel’s rights in the INTEL mark. Intel moved to dismiss the declaratory judgment action for lack of subject matter jurisdiction on the ground that no case or controversy existed under Article III. The court found that although MedImmune was a patent case, courts have concluded it is equally applicable to other types of intellectual property disputes. 

Intel argued that there was no actual controversy here because its letter only requested that Express abandon its intent-to-use application for the INTELLACT mark, and that it therefore, at most, threatened an opposition before the U.S. Patent and Trademark Office. However, Express presented evidence that it was in fact already using the mark in connection with providing certain pharmacy benefit management services. Although Intel apparently did not know that Express was using the INTELLACT mark when it sent its letter, Intel did expressly state that Express’s use of the mark would infringe its trademark rights. The court concluded that because Express knew that it was using INTELLACT when it received Intel’s letter, the letter put Express in the position of either pursuing arguably illegal behavior or abandoning that which it claims a right to do. The court thus concluded that there was subject matter jurisdiction to entertain Express’s claim for a declaratory judgment.

Intel next argued that the court should exercise its discretion to dismiss Express’s claim because (1) Express’s action attempted to usurp Intel’s choice of forum as the true plaintiff; (2) Express could not show any adverse effects on its use of the INTELLACT mark; and (3) allowing the action to go forward would discourage settlement efforts.

In rejecting these arguments, the court first found that Express’s actual, ongoing use of the INTELLACT mark was the principal factor in creating a concrete dispute that warranted resolution by declaratory judgment. The court stated it might have agreed with Intel that declaratory relief would not serve any purpose if Express were not using the mark. But because of Express’s use and the specific allegation of infringement, a declaratory ruling on infringement was necessary to clarify Express’s right to use INTELLACT going forward. The court also found Intel’s arguments in favor of discretionary dismissal unpersuasive. 

The MedImmune standard presents a dilemma for the sender of a cease and desist letter. If a trademark owner suggests in the letter that the alleged infringer is engaging in trademark infringement, the alleged infringer may file a lawsuit.  The alleged infringer – as plaintiff in the suit – can choose the venue of the suit, subject to constitutional restrictions and the state long-arm statute of the forum in question. The trademark owner who has been sued for a declaratory judgment has created a situation where he or she has lost the “home field advantage” and has caused a lawsuit he or she may not have otherwise intended to pursue. Travel costs to a distant courthouse can be substantial, and a party that is litigating in a distant forum may have to hire a local attorney, if required by the local rules, in addition to its regular IP litigation counsel.  Further, distant juries sometimes prefer the “home town” team over the foreigner.

In light of the newfound and costly potential consequences of sending a cease and desist letter, strategies should be reviewed prior to sending such a letter in order to preserve a jurisdiction advantage without engaging in full-blown litigation, or to lower the risk that the recipient files a declaratory judgment lawsuit. As in patent practice, one strategy may be to send a “notice” letter merely suggesting that the alleged infringer might be interested in licensing a certain trademark. This is a common approach taken by patent lawyers whose goal is to force the recipient to pay license fees. A more aggressive strategy may be to file a lawsuit before sending the letter to secure jurisdiction. This may be difficult, however, if the alleged infringer has not yet begun using the mark, as in the Intel case. There may also be a “middle of the road” approach where the attorney carefully crafts the letter so that it serves the function of providing a stern and candid warning without rising to the level of creating an actual case or controversy under MedImmune.

Whichever approach, the trademark attorney or general counsel must carefully consider the unintended consequences before “firing off” a cease and desist letter. Until recently, such a letter offered lawyers and their clients an inexpensive and often expedient method for immediately addressing potential infringement. That may no longer be the case.