Crocs, Inc. v. Effervescent, Inc.
| Decision Date | 31 March 2017 |
| Docket Number | Civil Action No. 06-cv-00605-PAB-KMT. (Consolidated with Civil Action No. 16-cv-02004-PAB-KMT.) |
| Citation | 248 F.Supp.3d 1040 |
| Parties | CROCS, INC., Plaintiff, v. EFFERVESCENT, INC., Holey Soles Holdings, Ltd., Double Diamond Distribution, Ltd., and U.S.A. Dawgs, Inc., Defendants. U.S.A. Dawgs, Inc. and Double Diamond Distribution, Ltd., Plaintiffs, v. Ronald Snyder, Daniel Hart, Thomas J. Smach, Andrew Rees, Gregg Ribatt, Andrew Reddyhoff, George B. Boedecker, Jr., Lyndon Hanson, Donald Lococo, Raymond Croghan, Ronald Frasch, Michael Margolis, Jeffrey Lasher, Michael E. Marks, Prakash Melwani, John P. McCarvel, Erik Rebich, Sara Hoverstock, and John and Jane Doe Defendants 1–30, Defendants. |
| Court | U.S. District Court — District of Colorado |
Natalie Marie Hanlon–Leh, Wilmer Cutler Pickering Hale & Dorr, LLP, Jared Barrett Briant, Faegre Baker Daniels LLP, Paul Wayne Rodney, Arnold & Porter Kaye Scholer LLP, Denver, CO, Julie Kent, Lara Palanjian, Michael Anthony Berta, Sean Michael Callagy, Arnold & Porter Kaye Scholer LLP, San Francisco, CA, for Plaintiff/Defendants.
Michael G. Martin, Michael Martin Law, Alexander Christian Clayden, Stephen J. Horace, Lathrop & Gage, LLP, Dan Cleveland, Jr., Fennemore Craig, P.C., Denver, CO, Mitchell Craig Shapiro, MC Shapiro Law PC, Great Neck, NY, Brian John Elliott, Brian J. Elliott, Attorney at Law, Austin, TX, Christopher W. Hellmich, Hellmich Law Group P.C., Anaheim Hills, CA, David Joseph Kaplan, Jeffery Kyle McClain, USA Dawgs, Inc., Las Vegas, NV, for Defendants/Plaintiffs.
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.
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 Dawgs2 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.
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 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 w as 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 claim s 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...
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