Don’t ignore it, and don’t answer it yourself. Send the letter to a patent litigator before anyone on your team replies, researches the patent or discusses it in email or Slack, because a letter that names a patent and your product can start the clock on damages and set up a claim of willful infringement. Then work out who sent it (a patent assertion entity looking for a license fee, or a competitor that wants you to stop), check whether a vendor’s or customer’s contract shifts the cost, and choose a response: a short reply, a detailed rebuttal, a negotiated license or a challenge to the patent at the Patent Office.
Key takeaways
- Forward the letter to counsel and keep internal discussion to a minimum. Don’t reply, and don’t have engineers analyze the patent in writing.
- A specific letter can start pre-suit damages and gives the sender evidence that you knew about the patent, which matters for willfulness and up to triple damages.
- Most letters to startups come from patent assertion entities, which usually want a license fee, not your product off the market.
- If the accused feature comes from a vendor’s product, the vendor may owe you a defense.
- The right response depends on what the claim could cost you compared with what it costs to fight.
- Once a lawsuit is reasonably likely, preserve relevant documents.
Why shouldn’t I ignore it or reply myself?
Three legal rules make the first week matter.
Notice can start damages. If the patent owner or its licensees sell products covered by the patent and haven’t marked them with the patent number, it can generally recover damages only from the date the infringer received actual notice. An owner that sells no products, as is typical of patent assertion entities, or that asserts only method claims, isn’t limited this way. Either way, damages are limited to the six years before a lawsuit is filed. Courts read actual notice as a specific charge that a specific product infringes. A letter that names your product and the patent can be that notice.
Knowledge sets up willfulness. A court can increase damages up to three times in egregious cases of willful infringement, and knowing about the patent is the starting point for that claim. Federal law says that not getting a formal opinion of counsel can’t be used to prove willfulness, but a reasoned, good-faith assessment by counsel is still the best answer to a willfulness claim.
Your words become evidence. A founder’s reply saying “we do something similar” or an engineer’s Slack message speculating about the patent can be used against you. Your conversations with your lawyer are privileged. Your team’s internal chatter usually isn’t.
Ignoring the letter entirely doesn’t make it go away. A competitor may sue without further warning, and an assertion entity will usually follow up with something more specific.
Is it a patent troll or a competitor?
The response depends on who sent it.
| Patent assertion entity (PAE) | Competitor | |
| What it wants | A license fee | Money, changes to your product, or your product gone |
| Typical first letter | Often a form letter sent to many companies | Specific, with claim charts mapping your product |
| How fast it escalates | Slowly, through rounds of letters | Can sue without warning, sometimes seeking an injunction |
| Your leverage | Validity challenges and the cost of litigation for both sides | Also your own patents, if it infringes them |
| Usual resolution | A license or settlement priced below defense costs | Litigation, a design-around or a cross-license |
A patent assertion entity, sometimes called a nonpracticing entity or patent troll, owns patents but doesn’t make products. Its letters often go to dozens or hundreds of companies at once, cite a patent number without explaining how your product infringes and offer a license for less than it would cost to defend a lawsuit. Many states, starting with Vermont in 2013, have laws against patent demand letters sent in bad faith, which can give you leverage against the most abusive letters.
A competitor letter is more dangerous. Competitors usually do their homework, and they may want your product changed or off the market, not just a check.
What should we check first?
The patent. Your lawyer will confirm the patent is still in force (patents generally expire 20 years after filing and lapse if maintenance fees aren’t paid), who owns it according to the Patent Office’s assignment records, and what the claims actually cover. Infringement is judged against the claims, not the title or abstract, and your product must meet every element of a claim to infringe it.
Validity. Many software patents are vulnerable because claims directed to an abstract idea aren’t patentable under the Supreme Court’s 2014 decision in Alice v. CLS Bank. Older prior art can also invalidate a patent. See Startup Patents: Are They Worth It?
Where the accused feature comes from. Assertion entities often target the users of a vendor’s technology, such as a payment processor, a cloud service, a chat widget or an open source library. Check your vendor contracts for an IP indemnity, and tell the vendor. It may defend you or already be fighting the same patent.
Your own promises. Many customer contracts include an IP indemnity from you. If a customer receives a letter about your product, it may ask you to defend it. Check what you agreed to, including any cap.
Insurance. Many standard business policies exclude patent claims, but check with your broker and give notice under any policy that might apply.
Your exposure. The revenue the accused feature brings in, and how hard it would be to design around, drive the economics of every option below.
What are my options?
No substantive reply, for now. For a vague form letter, counsel may recommend not engaging until the sender says something specific. That is a judgment for your lawyer to make after reviewing the letter, not a default.
A rebuttal. A letter from counsel explaining why your product doesn’t infringe, or why the patent is invalid, ends some campaigns and lowers the price of others.
A license or settlement. Paying can be the rational choice when the price is well below what a defense would cost. Get a release covering past and future use, your customers, your affiliates and any successor, with no admission of infringement.
A challenge at the Patent Office. Inter partes review lets you ask the Patent Office’s trial board to cancel claims based on prior patents and publications. You must file within one year after you’re served with an infringement complaint, and since 2025 the Patent Office has used its discretion to deny many petitions, so it is less available than it was. Ex parte reexamination is cheaper and open to anyone, but after you file the request your role is very limited.
Going on offense. Where the letter creates a real dispute, a company can sometimes sue first in a court of its choosing and ask it to declare that it doesn’t infringe or that the patent is invalid. Courts can also award attorney’s fees to the winner in exceptional cases, which deters weak lawsuits.
How do the numbers usually work?
Example. An assertion entity sends a form letter offering a license to a patent for $60,000. The accused feature is a checkout flow powered by a payment vendor. According to the American Intellectual Property Law Association’s 2025 survey, the median cost of a patent infringement case with $1 million to $10 million at risk is about $1 million through trial and appeal. Against those numbers, $60,000 can look cheap, which is exactly how these campaigns are priced. Before paying, your lawyer would check whether the payment vendor’s terms include an indemnity, whether the patent has expired or has an obvious validity problem, and whether a short rebuttal makes the sender move on. Paying the first company that writes to you can also invite the next one.
What if we’ve already been sued?
Engage litigation counsel the day you’re served. In federal court, you generally have 21 days after service to respond to the complaint, or 60 days from the date the request was sent if you agreed to waive formal service. The one-year deadline for an inter partes review starts at service. Notify any vendor that owes you an indemnity and any insurer right away. Venue rules matter too. A US company can generally be sued for patent infringement only where it is incorporated or where it has a regular and established place of business and the alleged infringement took place. For a Delaware corporation, that always includes Delaware.
How can we reduce the risk next time?
Be careful about technical claims in public marketing and documentation, since patent owners use them as evidence. Ask for IP indemnities from key vendors, and cap and limit the IP indemnities you give customers. If your product is hard to design around, as in hardware and biotech, consider a freedom-to-operate review before launch. And if competitors are your real risk, patents of your own can be useful leverage in a dispute. See How Should a Startup Prioritize IP Protection on a Limited Budget?
For related topics, see Trademark vs Copyright vs Patent, How Do I Negotiate Customer Contracts?, How Do I Draft a Strong Contract? and Startup Intellectual Property.
If you’ve received a patent demand letter, contact us and we’ll help you find the right patent counsel and review your vendor and customer contracts.
