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Crocs, Inc. v. Effervescent, Inc.

United States District Court, D. Colorado

March 31, 2017

CROCS, INC., Plaintiff,


          PHILIP A. BRIMMER United States District Judge

         This matter is before the Court on Crocs, Inc.'s Motion to Dismiss Counterclaims V-XII [Docket No. 227] and Scott Seamans' Motion to Dismiss Counterclaims VI-IX [Docket No. 231]. The Court has jurisdiction pursuant to 28 U.S.C. § 1331.

         I. BACKGROUND [1]

         A. Procedural Background

         Plaintiff Crocs, Inc. (“Crocs”) filed Case No. 06-cv-00605-PAB-KMT on April 3, 2006, alleging, inter alia, infringement of United States Patent Nos. 6, 993, 858 (the “'858 patent”) and D 517, 789 (the “'789 patent”). Docket No. 1.

         On May 12, 2006, defendants Effervescent, Inc., Holey Soles Holdings, Ltd., and former defendant Collective Licensing International, LLC moved to stay this case pending proceedings under Section 337 of the Tariff Act of 1930 before the International Trade Commission (“ITC”). Docket No. 26. The Court granted the motion on May 16, 2006 and administratively closed the case. Docket No. 31. In 2012, during a brief reopening of the case, Crocs added one of the Dawgs[2] entities as a named defendant and Dawgs asserted counterclaims, Docket No. 119, before the action was stayed pending a reexamination of the patents-in-suit. Docket No. 137. In February 2016, Dawgs filed motions to reopen the case and lift the stay, Docket Nos. 167, 168, which the Court granted. Docket No. 184. On May 31, 2016, Dawgs filed its first amended answer to the amended complaint and counterclaims against Crocs, Scott Seamans, and John and Jane Does 1 through 100. Docket No. 209. On June 28, 2016, Crocs and Seamans moved to dismiss Dawgs' counterclaims. Docket Nos. 227, 231.

         On February 24, 2017, Crocs filed a second amended complaint, adding claims for infringement of U.S. Patent No. D632, 465 (“'465 Patent”). Docket No. 473. On March 10, 2017, Dawgs filed a second amended answer and counterclaims. Docket No. 487. The second amended answer and counterclaims added three claims for declaratory judgment relief related to the '465 Patent. Docket No. 487 at 50-51, ¶¶ 130-33; 52, ¶¶ 143-46; 70-72, ¶¶ 223-35. The second amended answer and counterclaims also added minor factual details to Crocs' remaining counterclaims. Compare Docket No. 209 at 39-83, ¶¶ 75-262 with Docket No. 487 at 49-108, ¶¶ 122-347. The parties dispute the propriety of Dawgs' modifications of its counterclaims in response to the filing of a second amended complaint. See Docket No. 448 at 4-6; Docket No. 493 at 5.

         Because the modified factual allegations in the second amended counterclaims do not change the Court's analysis with respect to the pending motions to dismiss, the Court finds it appropriate to consider Crocs and Seamans' motions despite the fact that they are directed to the first amended answer and counterclaims. Where the second amended answer and counterclaims provides relevant additional factual detail, the Court notes as much. The findings of the Court apply to the equivalent counterclaims in the second amended answer and counterclaims.

         B. Factual Allegations

         Crocs is the leading manufacturer of “molded clog-type footwear products.” Id. at 18, ¶ 20. Dawgs is a competitor of Crocs and sells a variety of footwear, including molded clogs. Id. at 20, ¶ 24. According to the counterclaims, Crocs had been manufacturing and selling clog-shaped shoes made from ethyl vinyl acetate (“EVA”) since 2002. Id. at 18, ¶ 20. At its inception, Crocs “decided to market the exact shoe that had already been developed and was already being manufactured and distributed by Foam Creations, Inc.” Id. That shoe, in turn, was made using molds designed by Ettore Battiston, an Italian inventor. Id. The “Battiston Molded Clog” was sold in the United States as the “AquaClog, ” “Explorer, ” and “Waldies, ” among other names. Id. In the early 2000s, other rubber clogs were available for sale in the United States. For example, BIHOS S.R.L. (“BIHOS”), an Italian shoe designer and manufacturer, distributed and sold molded clog footwear under the brand name Calzuro starting in the mid-1980s. Id. at 19, ¶ 21. By 2001, Calzuro was selling a molded clog that featured a “pivoting strap” in the United States. Id.

         On February 7, 2006, the U.S. Patent and Trademark Office (“PTO”) issued the '858 patent. Id. at 20, ¶ 25. Crocs' co-founder, Scott Seamans, was listed as the sole inventor. Id. Dawgs alleges that “[e]ach and every functional feature disclosed in the ['858] patent application, except the heel strap, already existed in the Battiston Molded Clog.” Id. at 21, ¶ 26. The '858 patent also contains diagrams and descriptions of the Battiston molded clog, with the addition of a pivoting strap. Id. According to Dawgs, “[s]traps have existed for many years on a wide variety of footwear.” Id. By 2001, Calzuro sold a molded clog with a pivoting strap attached by a rivet. Id. In addition, the features identified in the '858 patent “were disclosed and described in Italian (utility) Patent 00245068 filed in June 1998, published on December 22, 1999, and granted in March 2002” (“the BIHOS Patent”). Id.

         On March 28, 2006, the PTO issued the '789 design patent. Id. at 22, ¶ 28. Seamans was again listed as the sole inventor. Id. According to Dawgs, the '789 patent “contains diagrams of the base shoe that are substantially similar to the diagrams that were created by Ettore Battiston in 2000 and assigned from Battiston to [Foam Creations, Inc.], with a strap added that serves a functional purpose and such as had previously existed for many years on a wide variety of footwear, including clogs.”[3]Id. Accordingly, the shoe in the '789 patent is “not new and inventive nor invented and designed by Seamans or by Crocs.” Id.

         Crocs has been unable to secure patents similar to the '858 and '789 patents outside the United States because of the “well-known existence of prior sales, the widely-recognized existence of invalidating prior art, and the established identity of the true and proper inventorship and origin of the shoe.” Id. at 24-25, ¶ 34; see also id. at 25-30, ¶¶ 35-49.

         On March 31, 2006, just after the '789 patent issued, Crocs filed a complaint with the ITC against Double Diamond Distribution, Ltd. (“Double Diamond”) and other respondents, alleging infringement and seeking a General Exclusion Order to ban the importation of molded clogs that infringed on Crocs' patents. Id. at 30, ¶ 50. The presiding Administrative Law Judge (“ALJ”) and the ITC initially found that Double Diamond did not infringe the '789 patent and that the '858 patent was invalid as obvious in view of prior art. Id. at 31, ¶¶ 52-53. However, the Federal Circuit reversed the determination that the '858 patent was obvious and remanded the case to the ITC for further consideration. Id., ¶ 54. The ALJ and the ITC then determined that Double Diamond and others had failed “to establish that the asserted patents were unenforceable.” Id. at 32, ¶¶ 55-56. According to Dawgs, Crocs acted in the ITC proceedings “knowing that these patents were invalid and unenforceable.” Id., ¶ 57.

         On April 3, 2006, Crocs filed the instant lawsuit alleging patent infringement even though Crocs “knew the patents identified incorrect inventorship and had been obtained by withholding material information from the patent examiner.” Id. at 30, ¶ 51. On August 6, 2012, Crocs filed its first amended complaint, adding U.S.A. Dawgs, Inc. (“U.S.A. Dawgs”) as a named defendant. Id. at 32, ¶ 58. Dawgs claims that this litigation is objectively baseless in light of the unenforceability of the patents and because, by the time Crocs filed the first amended complaint, it “knew or should have known” that the BIHOS patent “rendered the claims of at least the '858 patent” invalid. Id.

         On August 3, 2012, Double Diamond filed an application for inter partes reexamination of the '858 patent with the PTO. Id. at 33, ¶ 60. On August 8, 2012, as retaliation for the filing of the application for reexamination, Crocs initiated a lawsuit against CVS Pharmacy, a retailer who sold USA Dawgs products. Id. at 33-34, ¶¶ 61-62. On August 24, 2012, USA Dawgs filed an application for inter partes reexamination with the PTO of the '789 patent. Id. at 34, ¶ 63. On April 29, 2013, the PTO issued a non-final Office Action rejecting the single claim of the '789 patent. Id., ¶ 64. Crocs filed a response on July 29, 2013, which included a declaration from Scott Seamans stating that he is “the sole inventor” of the '789 patent. Id. at 34-35, ¶ 65. On February 11, 2016, the PTO once again rejected the sole claim of the '789 patent as unpatentable and closed the reexamination prosecution related to that patent. Id. at 35, ¶ 66.

         C. Dawgs' Counterclaims

         Dawgs claims that, as a result of the foregoing conduct, Crocs has secured its own success, obtaining a market share for “molded clog-type footwear” in excess of 90%, and negatively impacted Dawgs. Id. at 36-38, ¶¶ 69-74.

         Dawgs brings twelve counterclaims against Crocs, Scott Seamans, and John and Jane Does 1-100. Dawgs seeks several forms of declaratory relief against Crocs: a declaratory judgment for non-infringement of the '858 patent (first claim for relief); a declaratory judgment for non-infringement of the '789 patent (second claim for relief); a declaratory judgment of invalidity of the '858 patent (third claim for relief); a declaratory judgment of invalidity of the '789 patent (fourth claim for relief); and a declaratory judgment of unenforceability of the '858 patent and the '789 patent based on inequitable conduct (fifth claim for relief). Id. at 39-54, ¶¶ 75-149. In addition, Dawgs alleges claims related to anticompetitive conduct against, variously, Crocs, Seamans, and subsets of the John and Jane Does: actual monopolization in violation of § 2 of the Sherman Act (sixth claim for relief); attempted monopolization in violation of § 2 of the Sherman Act (seventh claim for relief); conspiracy to restrain trade in violation of § 1 of the Sherman Act (eighth claim for relief); conspiracy to monopolize in violation of § 2 of the Sherman Act (ninth claim for relief); unlawful exclusionary arrangements, agreements and conduct in violation of § 3 of the Clayton Act and §§ 1 and 2 of the Sherman Act (tenth claim for relief); intentional interference with business advantage (eleventh claim for relief); and violation of § 43(a) of the Lanham Act (twelfth claim for relief). Id. at 54-83, ¶¶ 150-262.

         Crocs has moved to dismiss counterclaims five through twelve.[4] Docket No. 227. Scott Seamans has moved to dismiss counterclaims six through nine[5] (the subset of counterclaims brought against him). Docket No. 231.


         Dismissal of a claim under Rule 12(b)(6) is appropriate where a party fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Rule 8 requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. (8)(a)(2). Rule 8(a)'s “short and plain statement” mandate requires that a party allege enough factual matter that, taken as true, makes his “claim to relief . . . plausible on its face.” Bryson v. Gonzales, 534 F.3d 1282, 1286 (10th Cir. 2008) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         “The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003). In doing so, the Court “must accept all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff.” Alvarado v. KOB-TV, L.L.C., 493 F.3d 1210, 1215 (10th Cir. 2007).

         Generally, “[s]pecific facts are not necessary; the statement need only ‘give the defendant fair notice of what the claim is and the grounds upon which it rests.'” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Twombly, 550 U.S. at 555) (ellipses omitted). The “plausibility” standard requires that relief must plausibly follow from the facts alleged, not that the facts themselves be plausible. Bryson, 534 F.3d at 1286.

         However, “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (internal quotation marks and alteration marks omitted). Thus, even though modern rules of pleading are somewhat forgiving, “a complaint still must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.” Bryson, 534 F.3d at 1286 (quotation marks and citation omitted).

         III. ANALYSIS

         A. Inequitable Conduct (Fifth Claim for Relief)

         Dawgs contends that the '789 patent and the '858 patent are unenf orceable as a result of false declarations of inventorship and Crocs' failure to disclose information material to patentability. The elements of inequitable conduct are: (1) an individual associated with the filing and prosecution of a patent application made an affirmative misrepresentation of a material fact, failed to disclose material information, or submitted false material information; and (2) the individual did so with a specific intent to deceive the PTO. Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 n.3 (Fed. Cir. 2009) (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178, 1181 (Fed. Cir. 1995); and 37 C.F.R. § 1.56 (2008)). A heightened pleading standard applies to claims for inequitable conduct. Id. at 1326. It is therefore necessary for a party claiming inequitable conduct to “identify the specific who, what, when, where, and how of the material misrepresentation or omission [] before the PTO.” Id. at 1328.

         1. Inventorship

         Dawgs argues that the '858 and '759 patents are unenforceable as a result of misrepresentations made by Seamans and Crocs in the patent applications. According to Dawgs, Crocs filed U.S. Application No. 10/603, 126 (“'126 application”) on June 23, 2003. Docket No. 209 at 41, ¶ 93. The '126 application was granted as the '858 patent. Id. at 45, ¶ 113. The '126 application included a declaration from Scott Seamans, which provided that:

I/we believe that I/we am/are the original and first inventor(s) of the subject matter which is claimed and for which a patent is sought;
I/we have reviewed and understand the contents of the above-identified application, including the claims, as amended by any amendment specifically referred to above;
I/we acknowledge the duty to disclose to the United States Patent and Trademark Office all information known to me/us to be material to patentability as defined in 37 CFR 1.56, including for continuation-in-part applications, material information which became available between the filing date of the prior application and the national or PCT International filing date of the continuation-in-part application.
All statements made herein of my/our own knowledge are true, all statements made herein on information and belief are believed to be true, and further that these statements were made with the knowledge that willful false statements and the like are punishable by fine or imprisonment, or both, under 18 U.S.C. 1001, and may jeopardize the validity of the application or any patent issuing thereon.

Id. at 43-44, ¶ 109. Dawgs alleges that the Seamans declaration is false because Seamans was not “the original and first inventor of the subject matter which is claimed.” Id. at 44, ¶ 110. Dawgs does not specifically allege who should have been named as an additional inventor on the '126 application. Instead, the fifth counterclaim alleges that the three independent claims of the '126 application were “directed to, intended to cover, and [did] in fact cover” the molded clog designed by Ettore Battiston (“Battiston molded clog”) and the work-shoe created by Battiston (“Battiston work-shoe”). Id. at 42-43 ¶¶ 96, 100, 102. Dawgs goes on to allege that, “at the time the '126 application was filed, ” both Seamans and Crocs were “aware” of the Battiston work-shoe, the Battiston molded clog, and that Battiston conceived of the Battiston molded clog. Id. at 43, ¶¶ 104-107. In its response to the motion to dismiss, Dawgs reiterates that the claims of the '858 patent “were directed to the Battiston Molded Clog and the Battiston work-shoe” and that “Seamans was not the inventor of this subject matter.” Docket No. 249 at 5. Dawgs asserts that the misrepresentation of inventorship was material to the patentability of the '126 application. Docket No. 209 at 46, ¶ 118.

         On May 28, 2004, Crocs filed U.S. Application No. 29/206, 427 (“'427 application”), which was granted as the '789 patent. Id. at 47, ¶ 121; 49, ¶ 135. Dawgs states that, because the '427 application claimed priority to the '126 application, the '427 application is infected by the Seamans declaration. Id. at 47, ¶¶ 122-23.

         Dawgs claims that Seamans also issued a false declaration during the prosecution of the '858 patent, which Dawgs claims infected the '427 application. Id. at 47, ΒΆΒΆ 121-23. During the prosecution ...

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