Federal Circuit Expands Lanham Act to Cover False Patent Claims
By: Dana J. Finberg, Partner and James R. VanCamp, Jr., Associate
On October 3, 2024, the United States Court of Appeals for the Federal Circuit opened the door to false patent claims under the Lanham Act in Crocs, Inc. v. Effervescent, Inc., No. 2022-2160. The distinguished panel consisted of Circuit Judges Reyna and Cunningham of the Federal Circuit and District Judge Albright of the Western District of Texas, sitting by designation. District Judge Albright is known to maintain one of the country’s most active patent litigation dockets.
In this case, Defendants-Appellants Double Diamond Distribution, Ltd.; U.S.A. Dawgs, Inc.; and Mojave Desert Holdings, LLC (collectively, “Dawgs”) appealed from a decision of the District of Colorado granting summary judgment in favor of Plaintiff-Appellee Crocs, Inc. (“Crocs”). Crocs sued Dawgs for patent infringement, and Dawgs counterclaimed, alleging false advertising violations of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).
Dawgs alleged that Crocs had engaged in a campaign to mislead its customers as to the characteristics of “Croslite,” the primary material in its footwear products. According to Dawgs, Crocs falsely described Croslite as “patented,” “proprietary,” and “exclusive.” Dawgs further alleged that by promoting Croslite as “patented,” Crocs misled customers to believe its molded footwear is made of novel material and deceived consumers into believing its competitors’ molded footwear products are inferior.
During discovery, Crocs moved for summary judgment, contending Dawgs’ counterclaim was legally barred by Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003) and Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009). The district court agreed with Crocs and granted summary judgment in its favor. The district court concluded that given Dastar and Baden, Dawgs failed as a matter of law to state a cause of action under Section 43(a) as the terms “patented,” “proprietary,” and “exclusive” are claims of “inventorship.” Thus, Dawgs’ inventorship claims were directed to a claim of false designation of authorship and not the nature, characteristics, or qualities of Crocs’ products.
Dawgs raised a single issue on appeal: “whether the district court erred in granting summary judgment against Dawgs’ counterclaim for failure to state a cause of action under Section 43(a)(1)(B).” Dawgs argued that when commercial misrepresentations that a product is “patented,” “proprietary,” and “exclusive” are linked to the nature, characteristics, or qualities of the product, those misrepresentations are actionable under Section 43(a)(1)(B). Moreover, Dawgs asserted that the district court’s conclusion that Dastar and Baden are dispositive in this case was erroneous.
Circuit Judge Reyna clarified that Dastar warns that a false claim of origin, and nothing more, is a claim of authorship and does not give rise to a cause of action under Section 43(a)(1)(B) or (A). In this case, however, the false claim that a product is patented did not stand alone. Dawgs presented evidence that Crocs’ promotional statements’ falsities are based on its products’ nature, characteristics, or qualities.
Circuit Judge Reyna continued that Baden does not suggest that allowing a Section 43(a)(1)(B) claim based on linking “patented” with a product characteristic would contravene Dastar by allowing reframing of a claim based on false designation of authorship. A claim that a product is constructed of “patented” material is not solely an expression of innovation and, therefore, authorship. Baden did not involve false advertisements linking such claims to a product’s tangible nature, characteristics, or qualities. Dawgs submitted evidence of Crocs’ promotional materials stating that a patent covers Croslite and that Croslite has numerous tangible benefits.
The Federal Circuit agreed with Dawgs that its allegations concerning Crocs’ advertisements are directed to the shoes’ nature, characteristics, or qualities. The Federal Circuit held that “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.” Accordingly, the Federal Circuit reversed the district court’s grant of summary judgment on Dawgs’ counterclaim and remanded for further proceedings.
Following this decision, product designers, manufacturers, and retailers should review and potentially revise their marketing strategies and product claims to ensure compliance with the Lanham Act, avoiding misleading assertions of patent status and product characteristics. For more information, please contact any member of our Intellectual Property Practice Team, including Dana Finberg and James VanCamp.
