Whether for patents, trademarks, copyrights or other types of intellectual property, they are incredibly inexpensive to send. Litigation easily costs well into the five figures, but to send someone a letter saying "stop"... that's fairly inexpensive. Thus,cease and desist letters are both a good tool and are overused.
A lawyer who sees such letters regularly can often identify almost immedietely whether a cease and desist letter is serious or not. The number one reason to hire a lawyer, to write one or to respond to one, is so as not to get bullied by a lawyer on the other side taking advantage of you. While we can't give specifics in a public article, this law firm has quite a collection of cease and desist leters with all kinds of demands. Sometimes, they're just fishing expeditions to see how the other party will respond - why waste the time researching whether you have a valid claim or not, when you can scare the other side, with a threat of litigation, in hopes that they will give something to you? What they give may be information or money, though unless it's a serious or willful case of infringement, it's rare that money changes hands. Most of the time, the other side simply wants you to stop infringing.
Here are a few tips - does it come from a reputable law firm? Does the letterhead have full contact information and list what state the lawyer is registered in? Is their alleged client a legitimate company? How big are they? Does it reference a patent registration number or trademark registration number? Does it beat around the bush, or does it get to the point? Does it reference case law or statutes? Are the claims too crazy to be true? Are the demands reasonable or do they look like something that was copied and pasted?
For example, is the letter is from a company like Microsoft, the letter cites an actual trademark registration number and they took the time to attach copies of your infringing material and compare it to their trademark registrations ... I'd take that seriously. All the way on the other end of the spectrum, we've seen letters from people who use the copyright and trademark symbol repeatedly from solo law firms with virtual addresses which fail to point out a specific case of infringement or reference an actual copyright or trademark being infringed. Such a letter with wanton allegations might even be malpractice in some states, and these are fairly easy to push off.
These are a few issues which should help lead you in the right direction.
How do you know if your infringing? Well, that's where even a simple consultation with a lawyer, again, comes in useful.
For trademarks, the issue is "likelihood of confusion" but this depends on how many others use similar names in commerce already and how close your goods and usage is to the trademark holder. That is, if they have an actual trademark. A registered trademark is not required to obtain damages for trademark infringement, but the damages obtainable are exceedingly higher, and making such a claim is much easier.
For patents, to infringe you must be carrying out each and every limitation of at least one claim in a patent. Even if you are able to figure out how to read the claims, their interpretation often depends on what happened while the patent owner was trying to obtain the patent. Thus, for example, if they narrowed their independent claims from "a candle" to "a pink candle", if your product is not pink, it is not infringing due to the purposeful narrowing. However, as "candle" wasn't narrowed, it may be that a "wax ball" is seen as an equivalent thereof, and is still infringing. An actual registered patent is required to obtain patent damages.
For copyrights, the issue is whether your work is a derivative work. Did you copy it, did one of your employees, or is your work having artistic quality based off of the same prior work? Perhaps it's just coincidence.
Finally, there's trade dress, which is really a form of unregistered trademark in most cases. This is where you copy the look of someone's product, usually their packaging so closely as to cause confusion in the marketplace.
Carefully. You do not want to say something which could be used against you. It's not that expensive to hire a lawyer to deal with this. At our firm, we charge for a minimum of two hours of time to deal with cease adn desist letter responses and negotiations whic in most cases, is enough time to settle the matter. Oftentimes, this settlement is simply getting the other side to "go away" or, if you really are potentially infringing... to give you a chance to stop selling and end the matter peacefully without money changing hands. These are, in our experience, the most common outcomes. Give us a call and we'll help you out.