On October 3, 2024, in Crocs, Inc. v. Effervescent, Inc., the U.S. Court of Appeals for the Federal Circuit (“CAFC”) issued a precedential opinion ruling that a brand’s false claim of patent ownership in a product advertisement may give rise to a deceptive advertising claim under the Lanham Act. This precedent could have significant implications for advertisers, as promotional materials touting patents may now face heightened scrutiny and could lead to potential legal repercussions.
Background and Procedural History
The dispute harkens back to 2006 when Crocs, Inc. (“Crocs”) sued Double Diamond Distribution, Ltd., U.S.A. Dawgs Inc., Mojave Desert Holdings, LLC (collectively, “Dawgs”), and several other shoe distributors for patent infringement in the U.S. District Court for the District of Colorado. In 2016, Dawgs counterclaimed, alleging that Crocs violated the Lanham Act’s prohibition against false or misleading descriptions of goods or services that (1) obfuscate or cause confusion as to the origin of goods or services or (2) mispresent “the nature, characteristics, qualities, or geographic origin” of goods, services, or commercial activities.
Dawgs alleged that Crocs misleadingly marketed the foam material of its shoes, branded “Croslite,” by advertising it as “patented,” “proprietary,” and “exclusive,” despite the fact that Croslite had never been patented. Dawgs claimed that this misrepresentation gave consumers the impression that Crocs’ shoes were made from a material that was distinct from other footwear brands’ and, in doing so, implied that competitors’ products were “made of inferior material.”
The primary issue at summary judgement before the District Court was whether Crocs’ representations that Croslite was “patented,” “proprietary,” and “exclusive” merely reflected the inventorship of the material, which would be insufficient to give rise to a Lanham Act claim, or if this language influenced consumer perception of the nature, characteristics, qualities, or origin of the product, which would support a false advertising claim.
The District Court held that Crocs was entitled to summary judgement, noting that, while Dawgs alleged that Crocs falsely claimed to invent the Croslite material, which is used widely by other footwear companies around the world, there was no disagreement that Crocs actually produced Croslite and the shoes it offered for sale. Further, even assuming Crocs misrepresented that it was the exclusive source of the Croslite material, such deception was not a misrepresentation of the nature, characteristics, or qualities of Crocs-brand shoes. According to the Court, Dawgs had limited its argument by suggesting that it was Crocs’ claim of invention that implied Dawgs’ brand was inferior, rather than any comparison to specific attributes. Moreover, any claims of superiority were mere puffery. As such, the District Court held that Dawgs failed to assert an actionable Lanham Act claim. Dawgs appealed to the CAFC.
Federal Circuit Decision
The CAFC reversed the District Court’s decision, ruling that Crocs’ advertising was in fact directed at the nature, characteristics, or qualities of its footwear and that, as a result, Dawgs had a basis to assert a Lanham Act claim. The CAFC ruled that, when 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,” a cause of action arises under the Lanham Act.
The CAFC disagreed with the District Court’s conclusion that “[f]alsely claiming to have ‘patented’ something is akin to claiming to have ‘invented’ it.” Key to the CAFC’s analysis was evidence demonstrating that Crocs’ false patent claim was intertwined with promotional materials touting Croslite’s tangible benefits. This advertising, the CAFC concluded, deceptively suggested that Croslite possessed unique attributes that made Crocs’ footwear superior to other brands’. By linking these misleading advertisements directly to the false claim of having patented Croslite, consumers may have been misled not only about the existence of a patent but also about the actual characteristics or qualities of Croslite and Crocs’ shoes.
Comments
The CAFC’s decision is a stark reminder of the importance of pre-publication clearance and review for advertisers. Companies should ensure close cooperation between their marketing and legal teams to evaluate ad copy for compliance with applicable law. As this ruling makes clear, an activity that may be permissible under one area of law may be impermissible under another. For example, marking a product with an expired patent does not constitute false marking under patent law; however, following Crocs v. Effervescent, continuing to advertise that same product as patented, in conjunction with other statements that speak to the benefits or characteristics of the product, could give rise to a false advertising claim under the Lanham Act. Therefore, brands should implement a careful review process to ensure that product advertising does not run afoul of false advertising prohibitions, including carefully reviewing for accuracy materials that reference intellectual property rights and scrutinizing statements that may amount to puffery to ensure they do not cross the line into fallacy.
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The case is Crocs, Inc. v. Effervescent, Inc., No. 22-2160 (Fed. Cir. 2024). The opinion is available here.