What You Need To Know
- The Federal Circuit recently found that falsely claiming a product or feature is patented can give rise to a cause of action under the Lanham Act.
- The appeals court rejected the notion that using words like “patented,” “exclusive,” and “proprietary” are claims of authorship or inventorship. Instead, the court said, those terms speak to the nature, characteristics, or qualities of the product in question.
- The court did not differentiate between terms like “patented,” which can be verified, and others like “exclusive” and “proprietary,” which may mean different things to consumers depending on the context.
- This raises questions about the extent to which software companies and other innovators can make claims about things like proprietary algorithms or machine-learning models that might be kept as trade secrets or have patents unrelated to the feature being advertised.
Patented technologies or features can be valuable selling points, setting your products apart from the competition. But when advertising or marketing materials overstate the scope of patent or other IP rights, they may create the risk of a false advertising claim. A recent decision by the Federal Circuit found that a cause of action can arise under Section 43(a)(1)(B) of the Lanham Act 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 products.”
In Crocs, Inc. v. Effervescent, Inc., Crocs sued Dawgs, Inc., for patent infringement. Dawgs countersued, alleging that Crocs violated Section 43(a)(1)(B) of the Lanham Act by falsely describing the “Croslite” material used to make Crocs footwear as “patented,” “exclusive,” and “proprietary” on its website, misleading consumers to believe that competitors’ footwear was made from inferior material. Crocs admitted that it was never granted a patent for Croslite, but argued that Dawgs had failed to state a cause of action under Section 43(a). According to Crocs, its admittedly false statements about Croslite were merely claims of “authorship” or “inventorship.” Under 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), these types of statements are not actionable under the Lanham Act because they only misrepresent the identity of the author or inventor, not the qualities or characteristics of the product. The district court agreed and granted summary judgment to Crocs.
The Federal Circuit reversed the district court’s grant of summary judgment, finding that Crocs’ claims that Croslite was “patented,” “exclusive,” and “proprietary” were directed to the nature, characteristics, or qualities of Crocs’ footwear products. In making these statements, Crocs did not just claim to have developed or invented Croslite (a type of closed-cell resin that Crocs touted as having “numerous tangible benefits”). It also claimed to be the only seller who could offer shoes made from Croslite, falsely suggesting Crocs’ footwear had specific qualities that competitors’ did not.
This decision expands the potential liability for falsely marking a product as patented. Section 292 of the Patent Act does prohibit false patent marking, but that section requires that the false marking be made “for the purpose of deceiving the public.” The Lanham Act has no requirement of deceptive intent—any false or misleading statement about a product’s nature, characteristics, or qualities may be actionable.
Though the effect of the decision may be limited by its particular facts, it raises questions about the scope of potential claims under Section 43(a)(1)(B) of the Lanham Act. The Federal Circuit found statements that Croslite was “patented,” “exclusive,” and “proprietary” to be misleading when linked to the product’s “tangible nature, characteristics, or qualities,” but did not draw any distinctions among those terms. If Crocs had only claimed that Croslite was “exclusive” or “proprietary,” would the result have been the same? If so, that would be another difference from Section 292 false patent marking, which is limited to claims specifically about products being patented or patent pending.
Unlike “patented,” terms such as “proprietary” and “exclusive” may have different meanings to consumers depending on context. Can a company truthfully claim its product is “exclusive” and “proprietary” if the product is protected through trade secret, rather than through patent? Software companies may tout their proprietary algorithms or machine-learning models, but these may be kept as trade secrets. Similarly, what if the product has patent protection, but the protected product feature is not the feature being advertised?
What’s Next
In view of this decision, companies advertising their products may want to take care that their advertisements or promotional materials do not falsely or misleadingly suggest that their products are protected intellectual property. In particular, when advertising a product as “patented” or “patent pending,” companies may want to ensure that the advertised feature or benefit matches the scope of their patent protection.
