IP Law Daily, PATENT—Fed. Cir.: Federal Circuit revives false advertising claim against Crocs, (Oct 3, 2024)

By George Basharis, J.D.

Ruling allows competitors to challenge shoe company’s “patented” material claims.

The U.S. Court of Appeals for the Federal Circuit has reversed a lower court’s dismissal of false advertising claims against Crocs, Inc., ruling that competitors can potentially sue the shoe company for falsely claiming its “Croslite” material is patented. The decision revives a long-running legal battle and clarifies when companies can be held liable under the Lanham Act for misrepresenting patent status in product marketing (Crocs, Inc. v. Effervescent, Inc., No. 22-2160 (Fed. Cir. Oct. 3, 2024)).

The case stems from a 2006 patent infringement lawsuit Crocs filed against several competitors, including Double Diamond Distribution, Ltd. In 2016, one of the defendants, U.S.A. Dawgs, filed a counterclaim alleging Crocs had engaged in false advertising by promoting its proprietary Croslite material as “patented,” “proprietary,” and “exclusive” when in fact it did not have a patent on the material.

Crocs moved for summary judgment, arguing that under the Supreme Court’s decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), claims about patent status or authorship are not actionable under the false advertising provisions of the Lanham Act. The U.S. District Court for the District of Colorado agreed and dismissed Dawgs’ counterclaim.

District court ruling. The district court found that Crocs’ statements about its Croslite material being patented, proprietary, and exclusive were claims of inventorship or authorship, not statements about the nature, characteristics, or qualities of the product covered by the Lanham Act. The district court relied heavily on Dastar and the Federal Circuit’s ruling in Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009). Based on Dastar and Baden Sports, the court concluded that false claims of authorship or inventorship are not actionable under the false advertising provisions of the Lanham Act.

While Dawgs argued that Crocs linked the patented claims to statements about the superior qualities of its shoes, the district court found this was not reflected in Dawgs’ actual pleadings. The court determined Dawgs was simply trying to reframe an authorship claim as a statement about product qualities to avoid the holdings of Dastar and Baden Sports. Ultimately, the district court ruled that even if Crocs misrepresented the source of the material in its shoes, this was not sufficient to sustain a Lanham Act false advertising claim.

Federal Circuit analysis. On appeal, the Federal Circuit reversed the district court’s ruling. The appellate court distinguished this case from Dastar and other cases that had found claims of false authorship or origin were not covered by the Lanham Act’s false advertising prohibitions. The key difference, according to the Federal Circuit, is that Dawgs alleged Crocs used the false patent claims to mislead consumers about the actual qualities and characteristics of its shoes, not just to claim credit as the originator or inventor.

“We hold that a cause of action arises from Section 43(a)(1)(B) [of the Lanham Act] where a party falsely claims that it possesses a patent on a product feature and advertises that product feature in a manner that causes consumers to be misled about the nature, characteristics, or qualities of its product,” explained the court in its unanimous opinion.

The court emphasized that its ruling does not open the door for all false patent claims to be actionable under the Lanham Act. Rather, it clarified that when such claims are specifically linked to statements about a product’s tangible qualities or characteristics, they may fall within the scope of false advertising law. This approach seeks to balance the concerns raised in Dastar about creating a “species of perpetual patent” with the Lanham Act’s goal of protecting consumers and competitors from false or misleading advertising claims that impact purchasing decisions.

Crocs admitted false statements. Crocs conceded during the appeal that its statements about Croslite being patented were false. The company admitted it was never actually granted a patent specifically covering the Croslite material.

With the Federal Circuit’s reversal of summary judgment, the false advertising counterclaim will now return to the district court for further proceedings. Dawgs will have the opportunity to present evidence that Crocs’ false patent claims were material to consumers and caused actual harm to competitors. Consequently, the district court will need to evaluate whether Crocs’ statements about Croslite being patented were sufficiently linked to claims about the material’s unique qualities to sustain a Lanham Act violation.

The Case is No. 22-2160.

Judge: Reyna, J.

Attorneys: Michael Berta (Arnold & Porter Kaye Scholer LLP) for Crocs, Inc. Matt Berkowitz (Reichman Jorgensen Lehman & Feldberg LLP) for Double Diamond Distribution, Ltd., U.S.A. Dawgs, Inc., and Mojave Desert Holdings, LLC.

Companies: Crocs, Inc.; Effervescent, Inc.; Holey Soles Holdings, Ltd.; Double Diamond Distribution, Ltd.; U.S.A. Dawgs, Inc.; Mojave Desert Holdings, LLC

Cases: Patent FedCirNews GCNNews