Federal Circuit Holds Falsely Advertising Product as Patented Can Violate Lanham Act

In Crocs, Inc. v. Effervescent, Inc., the U.S. Court of Appeals for the Federal Circuit reversed a summary judgment against Double Diamond Distribution, USA Dawgs Inc. and others (which the court collectively called Dawgs) on their counterclaim that Crocs violated Section 43(a) of the Lanham Act by advertising the material from which its shoes are made as “patented.”

According to the court, “a cause of action arises from Section 43(a)(1)(B) 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.”

Crocs sued Dawgs and others for patent infringement in 2006 and lengthy litigation ensued. In 2017, Dawgs filed an amended counterclaim alleging that Crocs had misled consumers by advertising that the material from which its products are made, Croslite, was “patented,” “exclusive,” and “proprietary.” Dawgs alleged that as a result consumers were deceived into believing that the products of Croc’s competitors were made of inferior material.

Based on Dastar Corp. v. Twentieth Century Fox Film Corp. and Baden Sports, Inc. v. Molten USA, Inc., Crocs argued and the district court agreed, Dawgs’ counterclaim did not state a viable claim for relief. Accordingly, the district court entered summary judgment in favor of Crocs on the counterclaim.

Analysis

The court began its analysis by setting forth Section 43(a) in full, including subsection (B) which provides a claim against any person who “in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities….” The court also noted that Crocs had conceded that its claim Croslite was “patented” was false.

The court next turned to a review of Dastar and Baden Sports. Dastar had purchased the rights to distribute an old television series, copied the tapes, made minor changes to them, and then distributed them as its own product. The Supreme Court concluded that Section 43(a) was not intended to protect originality or creativity, and that “[t]o hold otherwise would be akin to finding that § 43(a) created a species of perpetual patent and copyright, which Congress may not do.” Because Dastar was the originator of the products it sold, the Lanham Act claim failed.

In Baden Sports, the defendant, Molten, advertised that its basketballs were made with “dual-cushion technology,” which it claimed was “innovative.” Baden alleged this claim was misleading because it suggested Molten had invented the dual-cushion technology. The court ruled that Molten’s claim to be the innovator or “author” of the technology was not a claim about the “nature, characteristic, or quality” of goods, so it did not violate Section 43(a) subsection (B).

The court distinguished Dastar and Baden Sports because in Dawgs’ counterclaim “the false claim that a product is patented does not stand alone.” The court went on to say Dawgs presented allegations and evidence that the falsity of Crocs’ promotional statements is rooted in the “nature, characteristics, or qualities” of Crocs’ products, in the language of subsection (B).

That is, Crocs not only falsely claimed that Croslite was patented, but Dawgs further alleged that as a result consumers were misled into believing that competitors' products were made of inferior material. Dawgs submitted promotional material from Crocs stating that Croslite has numerous tangible benefits that were found in all of its products.

The Federal Circuit reversed the lower court’s decision and remanded for further proceedings.

Key Takeaways

Of course, it is never a good idea to include false claims in advertising. Further, claims are often tied to particular benefits or features of the relevant product. In light of Crocs, this combination can lead to a claim under Section 43(a) of the Lanham Act, whether the allegedly false claim is that the product is “patented,” “innovative” or “proprietary” or any other type of false claim.

Companies that decide to make such claims should monitor the expiration dates of the relevant patents and, to be conservative, consider removing the claims when the patent expires or revising them so they do not suggest the products are currently patented.

For more information, please contact the Barnes & Thornburg attorney with whom you work or Lynn Tyler at 317-231-7392 or lynn.tyler@btlaw.com.

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