Crocs Case at Federal Circuit Set to Shape False Advertising Law

The Federal Circuit is poised to decide whether Crocs Inc. can be liable for false advertising after describing its foam technology as “patented” over several decades when the company didn’t actually have such a patent.

A federal judge in Colorado likened the advertising references to a form of “plagiarizing” that’s “not covered by the Lanham Act’s false advertising prohibition.” But a panel of judges on the US Court of Appeals for the Federal Circuit appeared skeptical of that analysis, suggesting Crocs may ultimately be on the hook for its promotional statements.

“Crocs undertook a definitive marketing plan that’s grounded on a falsehood,” Judge Jimmie V. Reyna said during oral arguments in the case.

Cases based on the specific provision in the false advertising law rarely reach the appeals stage, and so the pending appellate ruling “has the potential to serve as a precedential ruling” that would provide guidance to lawyers, courts and company’s advertising departments, said Michael Mattioli of University of Indiana’s Maurer School of Law. As the Colorado judge put it, neither the US Supreme Court nor the Federal Circuit has considered the use of the word “patented” in marketing statements under the Lanham Act in their respective leading cases discussing the statute.

Competitor USA Dawgs Inc. counter-sued Crocs for false advertising based on promotional materials issued as early as 2004 that used the words “patented,” “proprietary,” and “exclusive” to describe a foam used in Crocs clogs that it called Croslite.

The counterclaim is the final chapter in a long-running patent suit Crocs filed in 2006. The company accused Dawgs and several other defendants of infringing patents covering design features and a pivoting strap. But Crocs’ own statements describing its ‘patented’ Croslite material — a common ethyl vinyl acetate used by other shoemakers — violate the false advertising law, Dawgs countered.

“There’s this risk of misleading advertisements deceiving consumers or making consumers feel or think the government put its stamp of approval on a product and they think it’s safer or more effective than it is,” said Mattioli. “I think that’s the concern.”

‘You Didn’t Have a Patent’

The Federal Circuit—which frequently has exclusive appellate jurisdiction over patent cases—rarely wades into false advertising disputes. But because the litigation started as a patent case, Dawgs’ appeal from the ruling in favor of Crocs was sent to the Washington, D.C.-based court rather than the Tenth Circuit.

During oral arguments in April, Judge Alan Albright—a district court judge sitting by designation—disagreed with Crocs’ characterization of a case and the applicability of a provision in the Lanham Act that creates civil liability for a company that “misrepresents the nature, characteristics, qualities, or geographic origin” of a product.

“I’m not following you at all when you say, I can start selling stuff clearly for competitive advantage and say ‘it’s patented,’” Albright told Michael Berta of Arnold & Porter, who represented Crocs. “I don’t know why consumers would care about it but they did, and there’s evidence of that.”

“You didn’t have a patent,” Albright said, sounding almost perplexed by Crocs’ arguments.

Screenshots of Crocs’ statements, compiled by Dawgs, about the “patented” Croslite material weren’t properly admitted during the district court case, Berta said. But even if they were, Crocs should still win the case, he said in response to questioning from Judge Tiffany P. Cunningham.

Under the applicable provision in the Lanham Act—calling an un-patented product ‘patented’ isn’t actionable, he argued. “If all you say that is false is ‘patented,’ that cannot be” a claim under the provision , he argued.

Dawgs flagged various Crocs statements to the district court, including:

• Language from a 2004 version of a Crocs webpage: “The special Patented Closed Cell Resin (PCCR) warms and softens with your body heat and molds to your feet . . . Because the resin is closed cell, it is anti-microbial in nature. That means that it is resistant to the bacteria and fungus that cause shoe and foot odor.”
• A 2009 blog post: “We’ve discussed our Proven comfort from our patented Croslite TM material to certifications with the U.S. Ergonomics Council, American Podiatric Medical Associations, and others.”

Chief Judge Philip A. Brimmer of the US District Court for the District of Colorado said the promotional statements and Dawgs’ related allegations amounted to “nothing more than a false designation of authorship” about who invented Croslite.

But a misrepresentation about the source of an idea “is not a misrepresentation about the nature, characteristics, or qualities of the object” in violation of the Lanham Act, Brimmer said, citing a Sixth Circuit opinion about the marketing of specialized lighting products.

‘Patented’ as Superior

Several academics familiar with the case disagreed with Crocs’ position.

“It seems like they’re saying the patent is what makes the product superior and I think that’s something for the district court to look at” on the merits, Mattioli said.

Crocs may have additional arguments if the Federal Circuit ultimately revives the suit, including whether the statements involving the word “patented” did, in fact, deceive consumers, he said. “There’s theoretically a line between puffery and outright misleading, and these all hover near it,” said Mattioli, who has studied and published recently about false and misleading advertising and the laws that regulate such ads.

Alex Roberts, a law professor at Northeastern University who has written extensively about false advertising law, also took issue with the Colorado district court’s conclusion that because the promotional references concern patents, they aren’t subject to the Lanham Act.

“The idea of preemption or false advertising law doesn’t play a role here because it’s more governed by patent law or authorship feels inapt,” she said of the ruling.

“If what the term “patented” communicates to you is ‘Crocs has this level of support that’s good for me or makes me comfortable,’ that could lead you to pay more for this product than what you’re willing to pay for a competitor’s product,” Roberts said.

That’s the type of activity the statute is meant to discourage, she said.

“There’s a lot of conventional wisdom about how consumers and investors perceive “patent’ but hard numbers are hard to come by,” said Greg Reilly, a professor of intellectual property at Chicago-Kent College of Law.

Still, he said the term appears to mean different things to different audiences.

“In the patent law system, it means it’s technologically different from what existed,” Reilly said. But “in popular perception, it’s a mark of significance or a mark of quality.”

The case is Crocs, Inc. v. Effervescent, Inc., Fed. Cir., No. 22-2160.