NEWS: 02.24.10: Bloomberg.comcom / Business Week

Crocs Wins Appeal in Patent Claims Over Copycat Shoes

By Susan Decker and Tian Huang

Feb. 24 (Bloomberg) -- Crocs Inc., the maker of colorful plastic clogs with holes, won an appeals court ruling that revived patent-infringement claims over what it considers copycat footwear.

A U.S. appeals court sent the case back to the U.S. International Trade Commission in Washington for further proceedings. Crocs, based in Niwot, Colorado, can seek an order to prevent imports of rival Holeys, Dawgs and Waldies shoes made in Asia and brought to the U.S.

Crocs, whose stock peaked at $75.21 in October 2007 and now trades at less than $10, has been fighting look-alikes of its shoes as sales in that category slumped 16 percent in 2008 to $660.73 million. The shoe manufacturer is expected to post a fourth-quarter loss of 11 cents tomorrow, the average of three analysts' estimates compiled by Bloomberg.

The company originally filed an ITC complaint in 2006 against 11 companies. The only ones remaining in the case are Double Diamond Distribution Ltd., a company based in Saskatoon, Saskatchewan, that owns the company making Dawgs shoes; Holeys Canada Inc. in Vancouver; and Effervescent Inc. of Fitchburg, Massachusetts, maker of Waldies Comfy Clogs.

The ITC had decided that one Crocs patent, for "breathable footwear pieces," was invalid and that the other, for a shoe design, wasn't infringed. The U.S. Court of Appeals for the Federal Circuit today said the design patent was infringed by the three companies.

'Minor Differences'

"Without a view to the design as a whole, the Commission used minor differences between the patented design and the accused products to prevent a finding of infringement," Circuit Judge Randall Rader said for the three-member panel. "In one comparison after another, the shoes appear nearly identical."

The Federal Circuit overturned the finding of invalidity of the second patent, and said the ITC must instead determine whether it was infringed as well as "any appropriate remedies."

Tia Mattson, a spokeswoman for Crocs, said the company is "pleased with the ruling and will evaluate and determine which actions to take from here." Don Burley, who represents Holeys and Effervescent, said his clients are reviewing the case and considering their next steps.

Crocs rose 18 cents, or 2.4 percent to $7.61 in Nasdaq Stock Market Trading. The stock has risen six fold since former Reebok International Ltd. executive John Duerden was named Crocs chief executive officer in March.

The case is Crocs Inc. v. International Trade Commission, 2008-1596, U.S. Court of Appeals for the Federal Circuit (Washington). The ITC case is In the Matter of Foam Footwear, 337-567, U.S. International Trade Commission.

--Editors: Glenn Holdcraft, Steve Farr

• Back to News