A patent demand letter arrived — reading it, and the move that comes before any reply

Two questions decide almost everything that follows, and neither is "do we infringe". First: is somebody else — the manufacturer, the reseller, the software vendor — contractually obliged to take this off your desk? Second: does the sender have a case worth the price of finding out? Answering them in that order is what separates a manageable letter from an expensive one.

Why the letter came to you and not to the manufacturer

Using an infringing product is itself an act of infringement. That makes the end user a valid defendant even though they designed nothing, have never read a patent, and bought the thing in a shop. It also makes them the cheapest defendant in the chain: no in-house counsel, no prior-art archive, no engineers who can explain the product, no appetite for a federal case.

The economics are documented. The Federal Trade Commission's 2016 study of patent assertion entities separated two models. Portfolio PAEs bought patents outright and negotiated licences worth over a million dollars, mostly without suing. Litigation PAEs filed first and licensed afterwards: 93 per cent of their agreements came out of litigation, they brought 96 per cent of the suits in the study, and they produced 20 per cent of the revenue. The finding on price is the one to remember — the royalties those licences typically yielded were less than the lower bounds of early-stage litigation costs.

Read the letter for what it does not say

The omissions are more informative than the text. More than thirty states have written a list of them into statute — Virginia's § 59.1-215.2, one of the clearer versions, treats a demand letter that leaves out the patent number, the owner's identity, or any factual allegation about which of the target's products infringe where, as an indication that the assertion was made in bad faith. A letter that is missing all three is not being careless. It is avoiding the two documents that would let you evaluate it.

Check one more thing before anyone replies. If the patent claims software or a business method, the *Alice* line is still live and still dangerous to patentees: in March 2026 the Federal Circuit vacated a $185m judgment in *Trustees of Columbia University v. Gen Digital*, holding that claims to spotting anomalous program behaviour by combining models built on different computers were abstract at step one. That is not a defence you can run in a letter, but it changes what the demand is worth.

The two replies that make it worse

Silence is the more common error and the more expensive one. It does not produce a default — no court is involved yet — but it burns the only window in which the cheap options exist. Notice periods in supply contracts run from the date you learn of the claim, not from the date you decide to act on it. An indemnity tendered late is an indemnity a supplier can argue about.

The second error is answering on the merits: explaining how the product works, conceding that a feature does roughly what the patent describes, or offering a technical distinction drafted by whoever built it. Every sentence of that is a document in someone else's case, written by a witness who has not read the claims. A reply that acknowledges receipt, asks for the asserted claims and a chart, and says nothing else is complete.

The old answer to this was a formal opinion of counsel, and it is not the answer now: the America Invents Act added 35 U.S.C. § 298, under which the failure to obtain the advice of counsel, or to present it in court, may not be used to prove willfulness or intent to induce. There is no penalty for not buying an opinion. What matters is that somebody senior read the claims, formed a view and wrote it down at the time. In Columbia v. Gen Digital the district court pointed to a development team that had never investigated infringement at all.

The first real move is a tender, not a reply

If the accused thing is something you bought — a scanner, a router, a plugin, a hosted service — the supplier has the engineers, the prior art and sometimes an existing licence to the very patent family. Getting the claim onto their desk — the mechanics are the same as any other indemnity tender — is worth more than any argument you could make yourself.

Tendering also unlocks the procedural answer to being sued as a customer. Where a manufacturer is litigating the same patent over the same product, courts apply the customer-suit exception: in *In re Nintendo of America* the Federal Circuit ordered claims against a set of retailers severed and stayed while the case against Nintendo went forward, the manufacturer being the true defendant. A stay is not automatic, and the exception does not reach one suit naming manufacturer and customers together — but it is why a supplier's involvement changes your position, not just your bill.

If nobody owes you a defence

Then the choice is between paying and spending, and it should be made with real numbers rather than indignation. Each rung below is genuinely available, and the top three cost more than most demands.

The state statutes that attack the letter itself

Since Vermont went first in 2013, more than thirty states have made a bad-faith assertion of patent infringement unlawful in its own right — the only remedies aimed at the letter rather than at the patent. They vary enough that your state is a strategic fact. Virginia's § 59.1-215.3 reserves enforcement to the Attorney General, caps the penalty at $2,500 a violation and expressly excludes any private cause of action. Idaho sits at the other end: the target sues in its own name for damages, costs, fees and punitive damages, and can ask the court to make the sender post a bond. There is no norm between them, so read your own statute rather than a summary, including this one.

Settling is often the right answer

This site does not usually recommend paying someone who may have no case, but pretending otherwise here would be dishonest about the arithmetic. A demand of a few thousand dollars against a defence measured in hundreds of thousands is not a close question for a business with twelve employees. What matters is that the money buys something durable rather than a receipt.

Two of those do most of the work. A family-wide licence defeats the continuation practice that turns one disclosure into a second patent and a second letter three years later. The customer and supplier releases defeat the tier-shifting that makes the model scale. A settlement without them has bought a pause.

The uncomfortable thing about these letters is that the sender is usually right about the economics and often wrong about the patent, and there is no cheap way to prove the second. That is a policy failure rather than a personal insult, and taking it personally is what leads businesses to spend forty thousand dollars refusing to spend four. Establish who owes you a defence, record what you believe about infringement and when you formed that belief, find out what the same letter has settled for elsewhere, then decide. The reply itself is the least important part.