IP Alert: Federal Circuit Rules False Patent Claims Can Trigger Lanham Act Liability

On October 3, in Crocs, Inc. v. Effervescent, Inc., the Federal Circuit held that a party who falsely alleges that its product is patented and innovative can be liable under the Lanham Act. Specifically, where “a party falsely claims that it possesses a patent on a product feature” and where that party “advertises that product feature in a manner that causes consumers to be misled about the nature, characteristics, or qualities of its product,” a competitor can bring suit under the Lanham Act.

Crocs is the well-known manufacturer of slippers, clogs, and other footwear. Dawgs, Inc., a competitor, asserted that Crocs was falsely advertising its products. Crocs’ footwear products are made of a foamed resin material that Crocs calls “Croslite.” In Crocs’ advertising, the company has marketed this material as “patented,” “proprietary,” and “exclusive.”

In fact, as Crocs conceded, the Croslite material is not patented. The Lanham Act generally allows competitors to sue a company that has made a false statement about the “nature, characteristic, or quality” of its goods that is materially misleading to consumers. Dawgs brought a Lanham Act claim against Crocs based on this false attribution of patented status.

An earlier line of cases has held that the Lanham Act does not apply to claims of authorship or inventorship. In Baden Sports, Inc. v. Molten USA, Inc., for example, the defendant had advertised its product as made of an “innovative” material. The defendant, however, was not in fact the party that had invented the material. The court held that, even if the “innovative” statement might lead consumers to assume that the defendant was the inventor of the material, the identity of the inventor does not relate to the “nature, characteristic, or quality” of the goods as was required to sustain a Lanham Act case.

Based on the above line of cases, the district court dismissed Dawg’s Lanham Act claim. But the Federal Circuit reversed. Here, the allegation was that “Crocs’ statements referring to the closed-cell resin that [it] call[s] ‘Croslite’ as ‘exclusive,’ ‘proprietary,’ and/or ‘patented’” causes customers to believe that “Crocs’ molded footwear is made of a material that is different than any other footwear.” Dawgs also alleged that “Crocs’ statements deceived consumers into believing that its competitors’ molded footwear products are ‘made of inferior material compared to Crocs’ molded footwear.’” The court held that, unlike a false allegation of inventorship, these statements did relate to the “nature, characteristic, or quality” of Crocs’ and Dawgs’ products. So, the court allowed the Lanham Act case to proceed.

In short, a false statement that “we invented this stuff” is likely not actionable under the Lanham Act. But a false statement that “this stuff is patented, unique, and better than anyone else’s stuff” might be actionable. This might be a fine line to draw in some cases. Nonetheless, those Fitch Even clients that use the patented status of their products in marketing materials should take note of this case.

For more information on this ruling, please contact Fitch Even partner Allen E. Hoover, author of this alert.

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