The Federal Circuit recently issued a significant ruling in Crocs, Inc. v. Effervescent, Inc., reversing the District Court for the District of Colorado’s summary judgment in favor of Crocs, Inc. The ruling addresses key issues at the intersection of patent law and false advertising under the Lanham Act, providing a critical clarification on how misrepresentations regarding patent protection can impact commercial competition.

Background of the Case

The litigation between Crocs, Inc. and its competitors has spanned over a decade, with disputes arising over patent infringement, false advertising, and unfair competition. In this case, Crocs sued Dawgs, a competing footwear manufacturer, for patent infringement. In response, Dawgs counterclaimed, alleging that Crocs engaged in false advertising by misrepresenting that its proprietary material, “Croslite,” was patented when, in fact, it was not.

The District Court’s Ruling

The District Court granted summary judgment in favor of Crocs, holding that Dawgs failed to state a claim under Section 43(a) of the Lanham Act. The court determined that Crocs’ statements regarding its product’s patent status were akin to claims of inventorship and, under precedent established in Dastar Corp. v. Twentieth Century Fox Film Corp., such claims do not give rise to a cause of action under the Lanham Act.

The Federal Circuit’s Decision

On appeal, the Federal Circuit reversed the District Court’s decision, holding that false claims of patent protection can, in certain circumstances, form the basis for a false advertising claim under Section 43(a)(1)(B) of the Lanham Act. The court reasoned that:

1. Misrepresentation of Patent Status Can Mislead Consumers – The court emphasized that Crocs’ statements about Croslite being “patented” could mislead consumers into believing that its competitors’ products were inferior or unauthorized copies, thereby affecting purchasing decisions.
2. Distinguishing False Patent Claims from Authorship Claims – The court clarified that while Dastar precludes claims based on misrepresentation of authorship, it does not shield companies from liability when they falsely claim patent protection in a way that misrepresents the qualities of their products.
3. Legal Standards for False Advertising Under the Lanham Act – The Federal Circuit reiterated that to establish a claim under Section 43(a)(1)(B), a plaintiff must show that a false or misleading statement was made in commercial advertising, deceived or had the tendency to deceive consumers, and was material to purchasing decisions. The court found that Dawgs sufficiently alleged these elements.

Implications for Patent Law and False Advertising

This ruling underscores the potential legal risks for companies that overstate the patent protection of their products. Businesses must ensure that their marketing materials accurately reflect their intellectual property status to avoid false advertising liability. The decision also signals that courts may be more willing to scrutinize patent-related claims in advertising, particularly when they have the potential to mislead consumers and stifle competition.

Conclusion

The Federal Circuit’s ruling in Crocs, Inc. v. Effervescent, Inc. highlights the fine line between intellectual property protection and misleading commercial statements. By reversing the summary judgment in favor of Crocs, the court reaffirmed that companies cannot use false claims of patent protection to gain an unfair competitive advantage. This case serves as an important precedent for businesses navigating the complex interplay between patent law and consumer protection statutes.

By Charles Gideon Korrell