Last week, the U.S. Court of Appeals for the Federal Circuit issued an opinion in Crocs, Inc. v. Effervescent, Inc. et al., No. 2022-2160 (Oct. 3, 2024), reversing the U.S. District Court for the District of Colorado’s summary judgment holding that the defendants’ Lanham Act false advertising counterclaim was barred as a matter of law.
Crocs, Inc. (“Crocs”) sued U.S.A. Dawgs, Inc. and other shoe-distribution defendants (collectively, “Dawgs”) for patent infringement. In response, Dawgs asserted a false advertising counterclaim under Section 43(a) of the Lanham Act, which prohibits, among other things, false or misleading representations regarding the “nature, characteristics, [or] qualities” of a party’s goods or services. Dawgs alleged that Crocs’ website falsely advertised that the primary material Crocs uses to make its footwear, Croslite, was “patented,” “proprietary,” and “exclusive,” when in fact it was not. Crocs conceded that Croslite was not patented and that its statements that Croslite was covered by a patent were false. Nevertheless, Crocs moved for summary judgment, arguing that the false advertising counterclaim was “legally barred” under the Lanham Act because Crocs’ false claims of patent coverage were not directed to “a nature, characteristic, or quality” of its footwear. The district court agreed, finding that the terms “patented,” “proprietary,” and “exclusive” were claims regarding inventorship and did not falsely describe the nature, characteristics, or qualities of Crocs’ products. The district court granted summary judgment in favor of Crocs. Dawgs appealed.
The Federal Circuit reversed, finding that Dawgs’ false advertising counterclaim was not limited to false claims of inventorship. The Court determined that Crocs’ website described a key product feature, Croslite, as unique (a cornerstone of patentability) and having numerous functional benefits, which implied that its competitors’ products were inferior. In other words, Crocs’ advertising statements falsely created the commercial impression that its Croslite material was unique and superior by virtue of patent coverage. The Court held that a viable cause of action arises under Section 43(a) 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.” The Court determined that Dawgs’ Lanham Act counterclaim was viable and remanded for further proceedings.