A trademark demand letter has just landed in your inbox. The trademark owner may be alleging infringement, confusion, depreciation, or “passing off,” among other claims. The letter may be intimidating, confusing, or both. This article will help you focus on key considerations that should guide your response strategy.
1. Don’t ignore the demand letter.
You should generally avoid ignoring a trademark demand letter, as silence can escalate the dispute and may negatively affect your position later. If you need more time, it is often better to acknowledge receipt and request an extension, rather than saying nothing. Any response should be carefully framed to avoid admissions and to preserve your options.
2. Don’t reply on impulse.
Don’t feel pressured to respond immediately. Anything you say in an impulsive reply can later be used as an admission against you if the demand letter is followed by litigation. In some cases, your reply might be protected by “settlement privilege” or even one of Canada’s provincial Apology Acts. But you should still be careful and deliberate in your response, and if you are making a settlement offer, clearly frame it as such and leave no room for ambiguity about your intentions.
3. Use AI cautiously when preparing your response.
AI can be helpful to summarize a demand letter, explain some of the legal jargon it contains, or to organize information, but you should be cautious about overusing AI at an early stage. Generative AI tools are prone to errors like inventing cases and misstating legal principles. Even experienced lawyers have been caught out by these AI “hallucinations,” and the danger of missing one is even higher for those without formal legal training.
An additional consideration about AI is that the messages you exchange with your lawyer are generally confidential. By contrast, several courts have held that information shared with an AI tool is not entitled to the same protection and could potentially need to be disclosed to the other side if litigation results. For that reason, you should avoid inputting sensitive details about the dispute or confidential business information into an AI tool.
4. Don’t assume the sender is right – you may have stronger trademark rights.
A demand letter is an allegation by the rightsholder or their lawyer, not a decision by an impartial court of law. It is perfectly possible that you are the party with the better rights, even if the sender holds a trademark registration, since registrations can be challenged. For example, the registration may be invalid because it is descriptive or generic. Or if you believe you used your trademark first, you should preserve and gather your evidence of prior use immediately, including your earliest records of sales, packaging, marketing materials, online presence (like domain name registrations, social media accounts among other relevant materials.”). If your trademark use predates that of the other party, then you may be able to turn the tables, and contest the other party’s rights or registration.
5. Check what trademark rights the sender actually owns and what they cover.
You should check what trademark registrations the sender actually owns and what it covers. You can start by looking up the mark in the CIPO Canadian Trademarks Database to confirm whether the sender is relying on a registration or a pending application, and to see the exact goods and services they cover. If the sender does not have a registration, they may be asserting use-based rights, which are often more fact-dependent and may be tied to geographic areas where the mark is known. These are normally areas, where the mark has been in use for many years. If they are relying on a registration, compare the CIPO-listed goods and services to your actual products and services and the way you use the mark, since that scope can materially affect your risk and your response strategy.
6. Check their trademark status and key dates.
If the sender is relying on a trademark registration or mentions an application, you should immediately check its status. If it is still a pending application, you may be able to oppose it and prevent or delay its registration.[1] If the trademark is already registered, that opposition route is not available, but other options may still exist depending on the facts. For example, it may be possible to attack the registration because the trademark has not been used in Canada for the past three years, and the registration should therefore be cancelled[2]. The registration can also be challenged in Federal Court, for example, if you believe you used the trademark prior to the other side’s application date or first use, or if the trademark should never have been allowed to register in the first place (for example, because it is descriptive, functional, or otherwise invalid). In any case, you should assess whether there is a solid basis to confirm or challenge the scope and strength of the other party’s rights before deciding how to respond.
7. Assess real‑world confusion, including coexistence of the two marks.
To help you assess the true risk of confusion, consider how similar the marks are, whether in terms of their appearance, sound, or the ideas they suggest to consumers. If there are similarities, consider whether any shared words or characteristics are descriptive or commonly used by others in the relevant market (such the prefix “nutri-” for health and vitamin businesses), and would thus make less of an impact on how the brands are actually perceived in the marketplace.
If the marks have coexisted for a long time with little or no evidence of confusion, that may support your position that consumers are unlikely to believe the goods or services come from the same source.[3] But keep in mind that confusion is assessed on a “first impression” basis from the perspective of the average consumer. This means that in some cases, there can still be confusion even if there are differences.
8. Anticipate urgent court steps.
In some situations, the other side can ask a court for an emergency court order on very short notice (sometimes as short as 24 or 48 hours). There are many types of emergency orders, with names like interim injunctions, interlocutory injunctions, safeguard orders, seizures before judgment, temporary restraining orders, etc. They can require you to stop using the disputed trademark, notify customers who purchased the accused products, or even result in seizure of your goods or advertising material.
If the demand letter mentions one of these emergency proceedings, or gives you a very short deadline to respond and states that time-sensitive litigation will follow absent a satisfactory response, it may be a sign that the sender is already preparing, or about to start, this kind of urgent court process. For that reason, you should generally treat these timelines seriously, and begin organizing key documents and evidence right away so you are ready to act quickly if needed. You may want to involve experienced trademark litigation counsel sooner rather than later.
9. Understand the financial stakes early.
When you review the demand letter, look closely at what the other side says they want. They may claim the damages they suffered or the profits you earned from using the trademark[4]. You should quickly pull the numbers tied to the specific products or services at issue, including sales by channel, margins, and estimated profits, inventory on hand, and marketing spend linked to the mark. Having these figures early helps you make practical decisions, such as whether to keep selling as is, pause sales temporarily, or negotiate a transition or sell-off period.
10. Consider filing your own application and whether to expedite it.
If you believe you have rights that are superior to those of the other party, you could file a trademark application of your own. CIPO allows accelerated examination in certain situations, including where litigation is expected or underway in Canada.[5] If the required criteria are met, your application may be examined on an expedited basis. Once you hold a trademark registration, it can provide a powerful defensive benefit.
11. Settlement is generally an option worth considering, so don’t dig in just yet.
Since trademark law protects branding, rather than the underlying products or services, it is often possible to settle a trademark lawsuit by promising to change your branding. It can be particularly advantageous when you want to reduce cost and disruption, avoid a fast‑moving court fight, keep products on shelves during a planned transition, or create certainty for your business and customers. It may be possible to propose a settlement that includes a transition period, meaning an agreed window to phase out use of the trademark at issue and phase in a compliant solution rather than stopping overnight. To craft an effective and legally-binding settlement, you should involve a lawyer early in the process, and ensure that any settlement proposals are clearly marked as such.
