In an important decision broadening the options for relief for businesses who have been harmed by their competitors’ untrue claims of patent coverage, the United States Court of Appeals for the Federal Circuit (Federal Circuit) recently held that false claims of patent protection are actionable as false advertising under Section 43(a) of the Trademark (Lanham) Act, as in Crocs, Inc. v. Effervescent, Inc. et al., Case No. 2022-2160. Claims of patent protection may be construed as advertising claims, which should be substantiated prior to public use in order to avoid claims of false advertising by a competitor or the reputational harm that will follow if consumers feel duped. Previously, false claims of patent coverage were actionable under the Patent Act as false patent marking, but there was an open question about whether the Lanham Act created a separate right of action.

Crocs, Inc. (Crocs) and its competitors U.S.A. Dawgs, Inc. (Dawgs), Effervescent, Inc., Holey Soles Holdings, Ltd., Double Diamond Distribution, Ltd., and Mojave Desert Holdings, LLC have been embroiled in intellectual property litigation since 2006. In 2016, Dawgs filed a counterclaim against Crocs alleging that Dawgs was damaged by Crocs’ false advertising and commercial misrepresentations that Crocs’ material used to make its molded footwear, “Croslite,” was “patented,” “proprietary,” and “exclusive.” Dawgs claimed that Crocs’ misrepresentations concerning Croslite deceived customers into believing that any molded footwear made by Crocs’ competitors is made of material that is inferior to Crocs’ material.

The district court granted Crocs’ motion for summary judgment, dismissing Dawgs’ false advertising claim in accordance with the U.S. Supreme Court’s decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) and the Federal Circuit’s decision in Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009). In granting summary judgment for Crocs, the district court viewed Dawg’s claims as akin to a claim of false authorship of a copyrighted work – which the Supreme Court in Dastar found was not actionable under Section 43(a) of the Lanham Act – or merely a claim of inventorship, which the Federal Circuit held not actionable under Section 43(a) in Baden Sports. Distinguishable under the facts here, no one patented Croc’s Croslite material. This teed up the dispute for the Federal Circuit’s review and subsequent reversal.

Because Crocs admitted that it never received a patent for Croslite, the Federal Circuit agreed with Dawgs that Crocs’ misrepresentations that its product was “patented,” “proprietary,” and “exclusive” were actionable misrepresentations under Section 43(a)(1)(B) of the Lanham Act. The Federal Circuit also agreed with Dawgs that Crocs’ advertising statements were directed to the nature, characteristics, or qualities of Crocs’ shoes. The Court concluded that Dawgs could raise a cause of action from “Section 43(a)(1)(B) whe[n] 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 reversed and remanded the case to the district court for further proceedings.

Prior to this decision, a competitor who suffered monetary injury in the marketplace as the result of a false claim that a product was patented or patent pending only had recourse through the patent statute: false patent marking under 35 U.S. Code § 292(b). Section 292(b) permits a person to sue in federal court to recover damages adequate to compensate for a competitive injury caused by a person’s claim that an unpatented article is patented or caused by a claim that an application for a patent has been filed and is pending when no application is pending.

The Crocs case not only provides another arrow in the litigation quiver for an aggrieved competitor, but it opens the door to the enhanced damages and attorneys’ fees that may be awarded in false advertising cases under the Lanham Act. Companies need to affirmatively inform their marketing departments that the terms “patented,” “proprietary,” and any terms implying a right to exclude others, are not to be used in product or service marketing unless the claims can be proven to be true.

For more information about false advertising claims or patent marking, please contact Holiday Banta, Jacqueline Lesser, or the Ice Miller Intellectual Property attorney with whom you regularly work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.