by Dennis Crouch
The Federal Circuit is set to consider the use of terms like “patented,” “proprietary,” and “exclusive” in commercial advertising can be actionable under § 43(a)(1)(B) of the Lanham Act when their use is not entirely accurate. The key issue on appeal is whether the district court erred in granting summary judgment for Crocs on Double Diamond Distribution and U.S.A. Dawgs’ (“Dawgs”) counterclaim for false advertising under the Lanham Act.
This case began back in 2006 when Crocs sued Double Diamond and others for patent infringement of Crocs’s design patents. That case was stayed while related proceedings played out before the International Trade Commission and on appeal to the Federal Circuit. Crocs largely prevailed in those actions.
In 2016, Dawgs added new asserted counterclaims against Crocs, including a claim for false advertising under the Lanham Act. Dawgs alleged that Crocs falsely marketed its “Croslite” shoe material as “patented,” “proprietary,” and “exclusive” when in fact the material ethyl vinyl acetate, a well known compound used by many footwear companies.
Crocs moved for summary judgment on Dawgs’ Lanham Act counterclaim, arguing that under Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), false claims about the inventorship or authorship of a product are not actionable under the Lanham Act. Dawgs countered that its claim was not about inventorship, but that Crocs’ advertisements using the terms “patented,” “proprietary,” and “exclusive” misled consumers about the nature, characteristics and qualities of Crocs’s footwear.
The district court sided with Crocs and granted summary judgment, concluding that under Dastar and related Federal Circuit precedent, Dawgs’ claim was barred because it amounted to nothing more than an allegation that “Crocs falsely claimed it created Croslite, when, in fact, Croslite is merely the common ethyl vinyl acetate used by many footwear companies around the world.” Dawgs appealed. In addition to the party briefs, the International Trademark Association (INTA) filed an amicus brief urging the Federal Circuit not to adopt an overly broad reading of Dastar that would foreclose false advertising claims based on the use of terms like “patented,” “proprietary” or “exclusive.”
The Lanham Act allows for a civil action for false advertising. The relevant statute provides:
(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce 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 — (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,
15 U.S.C. 1125(a)(1)(B) (Section 43 of the Lanham Act).
In Dastar, the defendant had copied footage from an old television series that had entered the public domain, made minor edits, and sold the resulting videos as its own product without attribution to the original creators. The Court held that “origin” in the Lanham Act refers only to the source of the physical products sold in the marketplace, not to the creator of the underlying creative content. Therefore, Dastar‘s unaccredited copying did not constitute a false designation of origin actionable under § 43(a) of the Lanham Act. Under Dastar, false statements about the origin of physical goods are actionable, while mere failure to credit the original creator of intellectual property embodied in those goods is not. But, as I explain below, Dawgs’ is not looking designation of inventorship credit — but rather arguing that the patented/exclusive material statement misled consumers about the qualities and characteristics of the Croslite material.
Arguments on Appeal:
On appeal, Dawgs argues that the district court overextended Dastar and its progeny by adopting a per se rule that terms like “patented,” “proprietary,” and “exclusive” can never be actionable under § 43(a)(1)(B). Dawgs maintains that it consistently alleged that Crocs used these terms to convey false messages about the nature, characteristics and qualities of its footwear, not just who invented the Croslite material. “The falsity of Crocs’ advertising is that Croslite is simply not patented—neither to Crocs nor to anyone else. And the evidence showed that consumers believed that the term ‘patented’—standing alone and in the context of Crocs’ advertisements—implies superior product qualities.” Dawgs brief.
At oral arguments, Judge Albright, sitting by designation, hit on this point: “by putting ‘it’s patented’ on it, you’re telling the world this is novel, but you’re lying.’
In its amicus brief, INTA takes no position on the ultimate merits but urges the Federal Circuit to narrowly construe Dastar and reject any categorical bar on false advertising claims based on words like “patented,” “proprietary,” or “exclusive.” INTA argues that the meaning and effect of advertising using such terms is context-specific and depends on the messages conveyed to and understood by consumers in each case.
The briefs also discuss, to a limited extend, patent law’s false marking statute, 35 U.S.C. § 292, though they disagree about its implications for this case.
INTA argues that the existence of the false marking statute, which prohibits deceptively marking an unpatented article as patented, supports the notion that false claims about patent protection are actionable under the Lanham Act. INTA also argues that the two statutes provide complementary causes of action, with the false marking statute focused on harm to the public from misuse of a patent claim, and the Lanham Act focused on harm to competitors from false advertising. See Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340 (Fed. Cir. 1999).
On the other hand, Crocs contends that the false marking statute actually undercuts Dawgs’s Lanham Act claim. Crocs suggests that because a more specific statute already governs false marking, such claims should not be shoehorned into the Lanham Act’s more general false advertising provision.
In addition to the legal arguments, the parties also disputed issues of whether the court actually considered evidence of record regarding false advertising and had improperly excluded additional evidence. For example, Dawgs presented an advertising quote from Crocs president that “The reason the shoes are so comfortable is that they are made of a patented closed-cell” material.
On her blog, Professor Rebecca Tushnet discussed the district court opinion and argued that the district court likely erred because Crocs’ claims of patented and exclusive likely convey a false message to consumers that Crocs’ products are made of a unique material that provides superior qualities compared to competitors’ products. In Tushnet’s view, such claims about the physical nature and characteristics of Crocs’ products should be actionable as false advertising, even if an implication about product origin is not actionable under Dastar. She distinguishes Dawgs’ claim from that in Baden Sports, arguing Baden’s claim was essentially about losing credit for innovation, whereas Dawgs’ claim is that Crocs falsely advertised having a unique material it does not actually use.
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The panel consists of Circuit Judges Reyna and Cunningham, alongside District Judge Albright sitting by designation. Matt Berkowitz argued for for Double Diamond and Dawgs; Michael Berta argued for Crocs, Inc.
In a well run technology products company new advertizements are run by the corporate legal department, including the patent department, to catch advertizing claims that could be accused by a competitor of false advertizing under § 43(a)(1)(B) of the Lanham Act [both legally expensive and a public relations risk]. Espeically since advertizing people are rarely technicially sophisticated, and may simply be be technically confused about some feature of a new product or whether or not it is patented. However, that internal review is not always conducted.
The Lanham Act provides that a successful plaintiff may “subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” 15 USC 1117(a). In many cases, damages are hard to prove, but profits are not.
Also, the Lanham Act allows “any damages” while the Patent Act only allows compensation for “competitive injury.” So it’s possible there could be a difference there, but I can’t think of any offhand.
And, as you say, 292(c) insulates those who mark with expired patents, which the Lanham Act doesn’t.
Also, 292 has a mens rea requirement, that the false marking was made “for the purpose of deceiving the public” which the Lanham Act false advertising claim does not.
So a Lanham Act claim has a lot of advantages that a 292 claim does not. I tend to agree with you that 292 in effect pre-empts the Lanham Act claim.
That was meant to be a reply to Kotodama.
Thank you for the thoughtful response. Everything you say makes sense and would explain a lot of what’s going on here.
Interesting topic.
On the face of it, I am not persuaded by the argument in favor of extending Dastar. It seems like a fairly different factual scenario here.
However, I am somewhat persuaded by Crocs’ argument based on 35 U.S.C. § 292. Especially subsection (b), which expressly covers a scenario like here involving alleged competitive injury caused by false marking. And that also raises a question of why didn’t Dawgs just pursue the 35 U.S.C. § 292 claim instead? Does the Lanham Act provide more generous damages? Is Crocs just being lazy and failing to remove marking for patents that did cover the material, but which have since expired, meaning that subsection (c) insulates them from liability?