Crocs’ officials aided firm’s monopolization of foam clog market, suit says

August 15, 2016

Crocs sandals are seen in a store in Quebec CityA competing footwear maker alleges in a suit filed in Colorado federal court that certain directors and officers of Crocs Inc. have aided the company in its effort to monopolize the market for molded clog-type footwear.

U.S.A. Dawgs Inc. and its Canadian counterpart, Double Diamond Distribution Ltd., claim in a suit filed in the U.S. District Court for the District of Colorado that the “conspirator defendants conceived of and implemented a multi-faceted anticompetitive scheme to exclude all of Crocs’ actual and potential competitors.”

The plaintiffs collectively refer to themselves as Dawgs.

According to the suit, Crocs has been monopolizing the market for the colorful foam clogs by fraudulently accumulating patents and engaging in sham patent infringement litigation.

The suit names as defendants two of Crocs’ three co-founders who also served as officers of the company, a former CEO, a former CFO, and its current chief legal and administrative officer, among others.

The suit does not name a third co-founder, Scott Seamans, or Crocs as defendants.

2006 patent infringement suit

Dawgs named Crocs as a counterclaim defendant in a patent infringement suit that Crocs filed in 2006 against several of its competitors, including Dawgs, in the District Court. Crocs Inc. v. Effervescent Inc., No. 6-cv-605, complaint filed (D. Colo. Apr. 3, 2006).

The counterclaim, filed Aug. 31, 2012, asserts claims of monopolization and attempted monopolization in violation of Section 2 of the Sherman Act, 15 U.S.C.A. § 2, deceptive trade practices and intentional interference with business advantage, in addition to seeking declarations that the patents at issue are invalid and have not been infringed.

On May 31 Dawgs amended its counterclaim to name Seamans as a defendant. In addition to being a co-founder of Crocs, Seamans is the sole listed inventor on the patents at issue, U.S. Patent Nos. 6,993,858 and D517,789, which were both issued in 2006.

Both the instant action and Dawgs’ counterclaim allege Seamans obtained the ’858 and D’789 patents through fraud on the Patent and Trademark Office.

Crocs’ and Seamans’ motions to dismiss Dawgs’ counterclaim are currently pending before U.S. District Judge Philip A. Brimmer.

Conspiracy claims

The suit claims that since 2002, Crocs has been misleading the public by claiming its footwear is made of an exclusive and proprietary closed-cell resin that they call Croslite, when, in fact, Croslite is merely the common ethyl vinyl acetate used by many footwear companies around the world, including Dawgs.

When Seamans sought the ’858 and D’789 patents, he failed to disclose relevant prior art for the designs of the shoes, the suit says.

Dawgs claims Seamans had no right list himself as the sole inventor on the applications for the ’858 and D’789 patents because they were based on an a existing design by an Italian designer that is the subject of an Italian utility patent granted in March 2002.

The suit claims the conspirator defendants had knowledge of and were complicit in Seamans’ fraud on the PTO.

The defendants have perpetuated the fraud by participating in Crocs’ “sham lawsuit campaign” to enforce the patents, Dawgs alleges.

As a result, many of Crocs’ competitors have ceased doing business in the United States, the suit says.

Dawgs further alleges that due to the conspirator defendants’ “knowingly unlawful” actions in obtaining and maintaining the ’858 and D’789 patents “under false pretenses and Crocs’ past and ongoing misuse of those patents,” the plaintiffs have “incorrectly become widely deemed and stigmatized as counterfeiters and providers of merely knock-off footwear.”

The instant suit asserts claims of monopolization, attempted monopolization and conspiracy to monopolize in violation of Sherman Act Section 2.

It also alleges the conspirator defendants have engaged in unlawful exclusionary conduct in violation of Section 3 of the Clayton Act, 15 U.S.C.A. § 14, and false advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C.A. § 1125(a).

Dawgs seeks declaratory and injunctive relief, damages, treble damages, attorney fees and costs.

U.S.A. Dawgs Inc. et al. v. Snyder et al., No. 16-cv-2004, complaint filed, 2016 WL 4165915 (D. Colo. Aug. 5, 2016).