Crocs shoes isolated on white

Crocs v. Effervescent was a case appealed from the District of Colorado to the Federal Circuit. The appellants were Double Diamond and Mojave Desert Holdings, who make “Dawgs” shoes. 

After suing a number of other companies for patent infringement, Crocs had turned its sights on Dawgs — but Dawgs filed a counterclaim that Crocs was engaging in false advertising. The District of Colorado agreed with Crocs, and granted summary judgments in favor of Crocs against those counterclaims. 

On appeal, the Federal Circuit reversed the District Court.

The original lawsuit relied on two cases: the Dastar Supreme Court case and the Baden decision from the Federal Circuit. Both cases considered different sub-parts of the Lanham Act’s Section 43-A, which addresses false advertising. (It’s sometimes used as a catch-all that provides a private cause of action for trademark infringement, even if the plaintiff doesn’t have a registered trademark.)

In its complaint, Crocs had asserted that it had a patent or a proprietary ownership of the rubber in its shoe. That suggested that everyone else didn’t have as good a shoe because they didn’t have the patented process that Crocs claimed to have. Crocs actually conceded that it did not have any such patent, but maintained that falsely claiming an invention is not an example of false advertising and does not violate the Lanham Act. They relied on the Supreme Court precedent from Dastar to make this point. 

•Dastar had purchased tapes of a 1949 television series, copied and edited them, and then sold them as if Dastar was the originator of the series.  The Court held that “origin” of goods or services in Section 43-A(1)(a) (“likely to cause confusion… as to the origin” of the goods or services”) refers to whether the user of the mark is the producer of the goods/services that are offered for sale. The word “origin” does not refer to the initial author of an idea or concept. So, the Supreme Court concluded that the Lanham Act’s Section 43-A was not intended to protect originality, but merely identify who the producer was. Dastar was the producer of the series that it had copied, even if it was not the originator.

•In Baden, the Federal Circuit considered what would happen if Dastar was applied to Lanham Act Section 43-A(1)(b) (“misrepresents the nature, characteristics, qualities, or geographic origin” of the goods/services). Baden argued that a competitor’s advertisement violated the Lanham Act because the competitor promoted its basketballs as having “dual cushion technology.” Baden based its false advertising claims on allegations that the defendant was improperly presenting itself as the innovator.  Consistent with the Supreme Court in Dastar, the Federal Circuit said that Baden had no claim because the person or entity that created the work doesn’t matter. It’s whether the false claim relates to a quality or characteristic of the product that’s being advertised — not whether someone is the first person to use it. 

However, neither Dastar nor Baden prevented this claim for false advertising because in this case the false claim that the product was patented didn’t stand alone. Instead, statements that the rubber of Crocs’ shoes was patented reflected the “nature, characteristics, or quality” of Crocs’s products. Crocs was saying that their shoes had something that no other shoe has, and that goes to the very quality of Crocs’s product. 

Dawgs successfully argued that the statements that Crocs’s “Croslite” rubber was patented could induce customers to believe that it’s made of a material that’s different from any other footwear, and that deceives customers. And the Federal Circuit agreed with counter-claimant Dawgs:  such advertised representations are directed to the nature, characteristics or qualities of the shoes. Such a cause of action arises out of section 43-A(1)(b), where someone falsely claims it possesses a feature, in this case, a patent, in a manner that causes consumers to be misled. So, the Federal Circuit reversed the summary judgment that Crocs had won, and remanded the case back to the District of Colorado in order to determine the rest of the case. 

Let this be a lesson to the overly enthusiastic advertiser: plaintiff’s falsely bragging about having a patent meant that the defendant had a viable counterclaim — not because Crocs falsely claimed to be original, but because it falsely claimed something that represented the quality of the shoe. 

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