Crocs, Inc. v. Effervescent, Inc., Holey Soles Holdings, Ltd.

United States Court of Appeals
for the Federal Circuit
______________________
CROCS, INC.,
Plaintiff-Appellee
v.
EFFERVESCENT, INC., HOLEY SOLES HOLDINGS,
LTD.,
Defendants
DOUBLE DIAMOND DISTRIBUTION, LTD., U.S.A.
DAWGS, INC., MOJAVE DESERT HOLDINGS, LLC,
Defendants-Appellants
______________________
2022-2160
______________________
Appeal from the United States District Court for the
District of Colorado in No. 1:06-cv-00605-PAB-MDB, Judge
Philip A. Brimmer.
______________________
Decided: October 3, 2024
______________________
MICHAEL BERTA , Arnold & Porter Kaye Scholer LLP,
San Francisco, CA, argued for plaintiff-appellee. Also rep-
resented by S EAN MICHAEL CALLAGY , I SAAC RAMSEY ;
ANDREW T UTT , Washington, DC.
MATT BERKOWITZ , Reichman Jorgensen Lehman &
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CROCS, INC. v. EFFERVESCENT, INC. 2
Feldberg LLP, Redwood Shores, CA, argued for defend-
ants-appellants. Also represented by N AVID CYRUS BAYAR .
______________________
Before REYNA, CUNNINGHAM , Circuit Judges, and
ALBRIGHT , District Judge1.
REYNA, Circuit Judge.
Appellants Double Diamond Distribution, Ltd.; U.S.A.
Dawgs, Inc.; and Mojave Desert Holdings, LLC (collec-
tively, “Dawgs”) appeal from a decision of the United States
District Court for the District of Colorado granting sum-
mary judgment in favor of Appellee Crocs, Inc. (“Crocs”).
Crocs sued Dawgs for patent infringement. Dawgs
counterclaimed, alleging that Crocs was liable for damages
for false advertising in violation of Section 43(a) of the Lan-
ham Act. Crocs moved for summary judgment on grounds
that Dawgs’ counterclaim failed as a matter of law. Crocs
argued that the circumstances in this case do not give rise
to a Section 43(a) cause of action. The district court agreed
and entered summary judgment in Crocs’ favor. We hold
that a cause of action arises from Section 43(a)(1)(B) where
a party falsely claims that it possesses a patent on a prod-
uct feature and advertises that product feature in a man-
ner that causes consumers to be misled about the nature,
characteristics, or qualities of its product. We reverse and
remand.
BACKGROUND
The pertinent history of this appeal begins in 2006
when Crocs sued Double Diamond Distribution, Ltd. and
several other competitor shoe distributors for patent
1 Honorable Alan D Albright, District Judge, United
States District Court for the Western District of Texas, sit-
ting by designation.
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CROCS, INC. v. EFFERVESCENT, INC. 3
infringement.2 See Crocs’ Complaint for Patent Infringe-
ment, Crocs, Inc. v. Effervescent, Inc., No. 06-cv-00605-
PAB-KMT (D. Colo. Apr. 3, 2006), ECF No. 1; see also In
the Matter of Certain Foam Footwear, 71 Fed.
Reg. 27514-01 (May 11, 2006).
In May 2016, Dawgs filed a counterclaim against Crocs
alleging false advertising violations of Section 43(a) of the
Lanham Act, 15 U.S.C. § 1125(a). In March 2017, Dawgs
filed its operative pleading in the case, its Second Amended
Answer and Counterclaims (“SACC”). See J.A. 469–580.
The counterclaim alleges Dawgs was damaged by Crocs’
false advertisements and commercial misrepresentations.
See, e.g., J.A. 576, ¶ 345. Dawgs alleges that Crocs had
2 This appeal rises from a group of cases spanning
multiple forums that have a long and complex history of
litigation involving Crocs and its competitors. The district
court case against Double Diamond Distribution, Ltd. was
stayed for almost five years pending a contemporaneously-
filed Section 337 action before the International Trade
Commission, which proceeded to an appeal before this
court and a remand. See Crocs, Inc. v. Int’l Trade Comm’n,
598 F.3d 1294 (Fed. Cir. 2010). U.S.A. Dawgs was added
as a defendant in the district court litigation after it re-
sumed in 2012. The district court case was stayed again
from 2012 to 2016 pending inter partes review proceedings.
It was also stayed from 2018 to 2020 while U.S.A. Dawgs
was engaged in bankruptcy proceedings, during which time
Mojave Desert Holdings, LLC became involved in the liti-
gation. Between these two stays, in 2016, Dawgs sued
eighteen current and former Crocs officers and directors,
alleging the same counterclaims against them as Crocs.
The district court consolidated the cases and the individual
defendants were later dismissed from the action. The facts
and circumstances of the consolidated case are not at issue
in this appeal.
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CROCS, INC. v. EFFERVESCENT, INC. 4
engaged in a “campaign to mislead its customers” about the
characteristics of the primary material Crocs uses to make
its footwear products, a material it promoted as “Croslite.”
J.A. 495, ¶ 51; J.A. 481, ¶ 7. According to Dawgs, Crocs’
website falsely described Croslite as “patented,” “proprie-
tary,” and “exclusive” (collectively, “patented”). J.A. 575,
¶ 342; see also J.A. 603 (Ex. 21 to SACC); J.A. 608 (Ex. 23
to SACC). Dawgs alleges that by promoting Croslite as “pa-
tented,” Crocs misled current and potential customers to
believe that “Crocs’ molded footwear is made of a material
that is different than any other footwear.” J.A. 575, ¶ 342.
Dawgs alleges that Crocs’ statements deceived consumers
into believing that its competitors’ molded footwear prod-
ucts are “made of inferior material compared to Crocs’
molded footwear.” J.A. 576, ¶ 345.
During discovery, Crocs moved for summary judgment
on grounds that Dawgs’ counterclaim was “legally barred”
by the Supreme Court’s decision in Dastar Corp. v. Twen-
tieth Century Fox Film Corp., 539 U.S. 23 (2003), and this
court’s decision in Baden Sports, Inc. v. Molten USA, Inc.,
556 F.3d 1300 (Fed. Cir. 2009). J.A. 1398–99; see generally
J.A. 1393–99.
The district court agreed with Crocs and granted sum-
mary judgement in its favor. Crocs, Inc. v. Effervescent,
Inc., No. 06-cv-00605-PAB-KMT, 2021 WL 4170997, at *9
(D. Colo. Sept. 14, 2021) (“Decision”). The district court de-
cided that in view of Dastar and Baden, Dawgs failed as a
matter of law to state a cause of action under Section 43(a)
of the Lanham Act. Id. at *7. The district court concluded
that the terms “patented,” “proprietary,” and “exclusive”
were claims of “inventorship.” Id. at *6; see also J.A. 1977.
Applying Dastar and Baden to the SACC, the district court
determined that Dawgs’ claims of inventorship were di-
rected to a claim of false designation of authorship of the
shoe products and not the nature, characteristics, or qual-
ities of Crocs’ products. Decision, 2021 WL 4170997, at *7;
see also J.A. 1969 (quoting 15 U.S.C. § 1125 (a)(1)(B)).
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Dawgs moved for reconsideration, which the district
court denied. J.A. 1966; J.A. 1981. Dawgs appeals. We
have jurisdiction under 28 U.S.C. § 1295(a)(1).
S TANDARD OF REVIEW
We review appeals involving interpretation of the Lan-
ham Act de novo, applying the law of the regional circuit in
which the relevant district court sits, in this case the Tenth
Circuit. Baden, 556 F.3d at 1304; Strauss v. Angie’s List,
Inc., 951 F.3d 1263, 1267 (10th Cir. 2020). Since the Tenth
Circuit has not spoken on the legal issue, we must “predict
how that regional circuit would have decided the issue in
light of the decisions of that circuit’s various district courts,
public policy, etc.” Panduit Corp. v. All States Plastic Mfg.
Co., 744 F.2d 1564, 1575 (Fed. Cir. 1984).
Similarly, we review appeals of summary judgment un-
der the law of the regional circuit. Baden, 556 F.3d at 1304.
The Tenth Circuit reviews a district court’s grant of sum-
mary judgment de novo, applying the same legal standard
as the district court. Faustin v. City & Cnty. of Denver,
Colo., 423 F.3d 1192, 1195 (10th Cir. 2005); Hull v. IRS,
656 F.3d 1174, 1177 (10th Cir. 2011). In determining
whether to grant a motion for summary judgment, the dis-
trict court considers whether the moving party is entitled
to judgment as a matter of law. Faustin, 423 F.3d at 1198.
D ISCUSSION
Dawgs raises a single issue on appeal: whether the dis-
trict court erred in granting summary judgment against
Dawgs’ counterclaim for failure to state a cause of action
under Section 43(a)(1)(B) of the Lanham Act. Appellant
Br. 6. We first address the Lanham Act.
The Lanham Act was enacted to “protect persons en-
gaged in . . . commerce against unfair competition.” 15
U.S.C. § 1127. Section 43(a)(1) of the Lanham Act estab-
lishes a federal cause of action for unfair competition.
Dastar, 539 U.S. at 29.
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Section 43(a)(1) of the Lanham Act states,
Any person who, on or in connection with any goods
or services, or any container for goods, uses in com-
merce any word, term, name, symbol, or device, or
any combination thereof, or any false designation
of origin, false or misleading description of fact, or
false or misleading representation of fact, which—
(A) is likely to cause confusion, or to cause mistake,
or to deceive as to the affiliation, connection, or as-
sociation of such person with another person, or as
to the origin, sponsorship, or approval of his or her
goods, services, or commercial activities by an-
other person, or
(B) in commercial advertising or promotion, mis-
represents the nature, characteristics, qualities, or
geographic origin of his or her or another person’s
goods, services, or commercial activities,
shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged
by such act.
15 U.S.C. § 1125(a)(1) (emphasis added).
The district court found no genuine issue of material
fact in dispute supporting a cause of action under Sec-
tion 43(a)(1)(A). Decision, 2021 WL 4170997, at *4. Dawgs
does not appeal this ruling. Instead, Dawgs only chal-
lenges the district court’s decision on whether its counter-
claim allegations sufficiently raise a cause of action under
Section 43(a)(1)(B) of the Lanham Act.3 We therefore do
not separately address Section 43(a)(1)(A).
3 Various courts have taken the approach that “na-
ture, characteristics, [or] qualities” in Section 43(a)(1)(B)
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CROCS, INC. v. EFFERVESCENT, INC. 7
In addition, as a threshold matter, the key question of
whether Crocs’ representation that Croslite is patented is
in fact false is not in dispute. Section 43(a)(1)(B) creates a
cause of action for a person damaged by false or misleading
commercial advertising or promotions that mislead con-
sumers about the nature, characteristics, or qualities of
goods or services. See 15 U.S.C. § 1125(a)(1)(B). Crocs con-
ceded in its briefing, and at oral argument before this court,
that its statements that Croslite was covered by a patent
are false. See Appellee Br. 70–71; Oral Arg.
Tr. 16:22–16:33. Stated differently, Crocs admits that it
was never granted a patent for Croslite. Oral Arg.
Tr. 16:22–16:33.
Dawgs’ appeal focuses on Section 43(a)(1)(B). Dawgs
argues 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) of the Lanham Act. See, e.g., Appellant
Br. 23.
Dawgs asserts that the district court’s conclusion that
Dastar and Baden are dispositive in this case is erroneous.
relate to “the characteristics of the good itself,” not intan-
gibles involving the source of ideas embodied in a product,
like product authorship. Baden, 556 F.3d at 1307 (quoting
Sybersound Recs., Inc. v. UAV Corp., 517 F.3d 1137, 1144
(9th Cir. 2008)); see also Kehoe Component Sales Inc. v. Best
Lighting Prod., Inc., 796 F.3d 576, 590 (6th Cir. 2015). At
least one circuit court has suggested in passing that there
is an “open . . . possibility that some false authorship claims
could be vindicated under the auspices of § 43(a)(1)(B)’s
prohibition on false advertising.” Zyla v. Wadsworth, Div.
of Thomson Corp., 360 F.3d 243, 252 n.8 (1st Cir. 2004); see
also Baden, 556 F.3d at 1308 n.1.
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Appellant Br. 36; see Decision, 2021 WL 4170997, at *6–7.
First, Dawgs argues that those cases were based on circum-
stances different from the circumstances in this appeal.
Appellant Br. 28–33, 36. Second, Dawgs argues that its
counterclaims adequately allege that Crocs used the terms
“patented,” “proprietary,” and “exclusive” in its advertise-
ments in a manner that misled consumers about the na-
ture, characteristics, or qualities of its own products and
the products of its competitors. Id. at 46–51. As such,
Dawgs argues that it has sufficiently alleged a cause of ac-
tion under Section 43(a)(1)(B) and therefore the district
court should not have granted summary judgment. Id.
at 6.
Dastar and Baden
The district court concluded that based on binding
precedent established in Dastar and Baden, Crocs’ false
claims to have “patented” Croslite are not actionable under
Section 43(a)(1)(B). Decision, 2021 WL 4170997, at *6. The
district court likened falsely claiming to have “patented”
something as similar “to plagiarizing or reverse passing off,
which Dastar held not . . . covered by the Lanham Act’s
false advertising prohibition.” Id. (footnote omitted). The
district court similarly concluded that this court in Baden
found non-actionable “terms that the court likened to
claims of inventorship” and that in this case, “[f]alsely
claiming to have ‘patented’ something is akin to claiming
to have ‘invented’ it.” Id. The district court determined
that Dawgs’ counterclaim could not stand because any
claim that a product was patented was directed to inven-
torship, and thus the counterclaim was precluded by
Dastar and Baden. Id. We disagree.
In Dastar, the Supreme Court considered the scope of
unfair competition that is actionable under Sec-
tion 43(a)(1)(A) of the Lanham Act, which relates to mis-
representations about the “origin, sponsorship, or
approval” of goods or services. Dastar, 539 U.S. at 31.
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Dastar involved a World War II television series first
broadcast in 1949. Id. at 26. Although the copyright on
the television series expired in the 1970s, the respondents
acquired exclusive rights to distribute the series on video
in the late 1980s. Id. In 1995, petitioner Dastar purchased
tapes of the original 1949 series, copied them, and edited
them with minor changes. Id. at 26–27. It then sold the
video set as its own product, with no reference to the origi-
nal series. Id. at 27. Respondents brought an action
against Dastar under Section 43(a)(1)(A) of the Lanham
Act for false designation of origin. Id. at 27, 31.
The Court found that “origin” in Section 43(a)(1)(A) of
the Lanham Act means “the producer of the tangible goods
that are offered for sale, and not . . . the author of any idea,
concept, or communication embodied in those goods.” Id.
at 37. The Court concluded that this section of the Lanham
Act 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.” Id. Because Dastar was the
originator of the products it sold, the Court found the Lan-
ham Act claim failed. Id. at 38. The Court concluded that
parties in respondents’ shoes might still have other forms
of relief for conduct like Dastar’s. Id. If, for example, a
party substantially copied a series but suggested in adver-
tising that the work was “quite different” from the earlier
series, they might be entitled to relief under Sec-
tion 43(a)(1)(B). Id. The Court observed that a Lanham
Act cause of action does not arise for merely claiming that
a party is the producer of the video. Id.
In Baden, this court considered the effect of Dastar in
a Section 43(a)(1)(B) action brought in the Ninth Circuit.
Baden, 556 F.3d at 1304–08. In a suit between two com-
peting basketball manufacturers, Baden argued that its
competitor Molten’s advertising violated the Lanham Act.
Id. at 1302. Molten promoted its basketballs as having a
“dual-cushion technology” that its advertisements
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CROCS, INC. v. EFFERVESCENT, INC. 10
described as “innovative.” Id. at 1302–03. Baden argued
that by advertising its basketballs as “innovative,” Molten
deceived consumers into believing that it was the origina-
tor of the dual-cushion technology. Id. at 1303. At trial,
the jury issued a verdict in favor of Baden. Id. at 1304. We
reversed.
We explained that in the Ninth Circuit, a claim based
on false designation of authorship is not actionable under
Section 43(a)(1)(A) or Section 43(a)(1)(B). Id. at 1307. Ba-
den had argued that Molten’s advertisements were false
“precisely because Molten was not the source of the inno-
vation,” i.e., not the author. Id. We held that “authorship,
like licensing status, is not a nature, characteristic, or qual-
ity, as those terms are used in Section 43(a)(1)(B) of the
Lanham Act.” Id.; see Sybersound, 517 F.3d at 1144. Be-
cause Baden based its false advertising claims on allega-
tions that Molten was improperly asserting itself as the
innovator, i.e., the author, of the technology, Baden had no
claim under Section 43(a)(1)(B). Id.
Although Dastar and Baden are based on different cir-
cumstances, the analysis used by the Supreme Court and
this court in those cases is informative in this appeal.
Dastar cautions 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)(A) or (B). But, here,
the false claim that a product is patented does not stand
alone. Dawgs presents allegations and evidence that the
falsity of Crocs’ promotional statements is rooted in the na-
ture, characteristics, or qualities of Crocs’ products.
Both the district court and Crocs quote Baden to sug-
gest that permitting a Section 43(a)(1)(B) claim based on
linking “patented” with a product characteristic would con-
travene Dastar by allowing reframing of a claim that is
based on false attribution of authorship. Baden, 556 F.3d
at 1307; see Decision, 2021 WL 4170997, at *7; Appellee
Br. 59. We disagree. A claim that a product is constructed
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of “patented” material is not solely an expression of inno-
vation and, hence, authorship. Again, Baden did not in-
volve false advertisements linking such claims to a
product’s tangible nature, characteristics, or qualities. In
this case, for example, Dawgs submitted webpage printouts
that purported to show promotional statements by Crocs
that a patent covers Croslite. See, e.g., J.A. 603 (Ex. 21 to
SACC), J.A. 608 (Ex. 23 to SACC). Those promotional ma-
terials further included statements that Croslite has nu-
merous tangible benefits found in all of Crocs’ shoe
products. J.A. 603 (Ex. 21 to SACC), J.A. 608 (Ex. 23 to
SACC).
Dawgs argues it has stated a cause of action because
the falsehood that Croslite is patented was used by Crocs
to ascribe characteristics that go to the nature and quali-
ties of Croslite. Dawgs alleges that “Crocs’ statements re-
ferring to the closed-cell resin that [it] call[s] ‘Croslite’ as
‘exclusive,’ ‘proprietary,’ and/or ‘patented’” causes custom-
ers to believe that “Crocs’ molded footwear is made of a ma-
terial that is different than any other footwear.” J.A. 575,
¶ 342. Dawgs further alleges that Crocs’ promotional ma-
terials “deceive consumers and potential consumers into
believing that all other molded footwear . . . is made of in-
ferior material compared to Crocs’ molded footwear.”
J.A. 576, ¶ 345.
We agree with Dawgs that these allegations about
Crocs’ advertisement statements are directed to the na-
ture, characteristics, or qualities of Crocs’ shoes. We hold
that a cause of action arises from Section 43(a)(1)(B) where
a party falsely claims that it possesses a patent on a prod-
uct feature and advertises that product feature in a man-
ner that causes consumers to be misled about the nature,
characteristics, or qualities of its product.
CONCLUSION
We have considered Crocs’ remaining arguments and
find them unpersuasive. Because Dawgs timely presented
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a theory under Section 43(a)(1)(B) of the Lanham Act link-
ing Crocs’ alleged misrepresentations in commercial adver-
tisements to the nature, characteristics, or qualities of
Crocs’ shoes, the district court erred in granting summary
judgment on Dawgs’ Lanham Act counterclaim. We ac-
cordingly reverse and remand for further proceedings.
REVERSED AND REMANDED
COSTS
Costs against Crocs.
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