By Eric Schweibenz
On February 24, 2010, the Federal Circuit issued its opinion in Crocs, Inc. v. Int’l Trade Comm’n, No. 2008-1596.  This was an appeal from the ITC’s final determination in Certain Foam Footwear (Inv. No. 337-TA-567) that U.S. Patent No. 6,993,858 (the ‘858 patent) was obvious, that U.S. Patent No. D517,789 (the ‘789 patent) was not infringed by intervenors, and that Complainant Crocs, Inc. (“Crocs”) had not satisfied the technical prong of the domestic industry requirement for the ‘789 patent.

By way of background, Crocs filed a complaint and an amended complaint with the ITC on March 31, 2006 and April 27, 2006, respectively, naming eleven respondents that allegedly violated Section 337 by importing and selling certain foam footwear.  After the ITC instituted an investigation and held an evidentiary hearing, ALJ Charles E. Bullock issued an initial determination (“ID”) on April 11, 2008, in which he concluded that (i) there was no violation because the design of the ‘789 patent was not infringed by respondents’ shoes, (ii) Crocs’ shoes did not satisfy the technical prong of the domestic industry requirement in connection with the ‘789 patent, and (iii) the ‘858 patent was obvious.  Crocs, Respondents Collective Licensing International, LLC, Effervescent Inc., Holey Soles Holding Ltd., and the Commission Investigative Staff filed petitions for review of the ID.  Respondents Gen-X Sports, Inc. and Double Diamond Distribution Ltd. subsequently filed joinders to the petition.  The Commission granted the petitions in part and upheld the ID on July 25, 2008 with modifications and clarifications set forth in a separately issued opinion.  Crocs appealed the ITC’s final determination to the Federal Circuit.

The Federal Circuit reversed the ITC’s finding that the ‘858 patent was obvious on the grounds that the ITC erred in finding that the prior art taught all of the claimed elements of the ‘858 patent and incorrectly weighed the secondary considerations evidence.  The Federal Circuit also reversed the ITC’s findings on the ‘789 patent on the grounds that the Commission erred in claim construction, in applying the ordinary observer test for infringement, and in applying the technical prong of the domestic industry requirement.

Noting lower courts’ often misplaced reliance on detailed verbal descriptions in design patent infringement cases, the Federal Circuit found that the verbal claim construction provided by ALJ Bullock erroneously focused on particular features of the ‘789 patent design and led the ITC away from proper consideration of the design as a whole.  Specifically, the Federal Circuit found that two details required by the written claim construction – uniform strap width and uniform hole spacing – were contrary to the claimed invention.

According to the decision, the claim construction error in turn distorted the infringement analysis under the ordinary observer test.  In particular, the Federal Circuit found that the ITC placed undue emphasis on the details of its written description of the patented design, which “became a mistaken checklist for infringement.”  The proper analysis instead required a side-by-side comparison of the drawings of the patented design and the accused products, which, according to the Federal Circuit, showed that the shoes appeared nearly identical to an ordinary observer familiar with the prior art designs.  The Federal Circuit held that the accused products embodied the overall effect of the patented design in sufficient detail to cause market confusion, and thus infringed the ‘789 patent.

The Federal Circuit went on to find that because the test for the technical prong of the domestic industry requirement is essentially the same as for infringement, the ordinary observer test should be used to compare Crocs’ own shoe products to the ‘789 patent design.  Noting again that the test applies best in a side-by-side comparison, the Federal Circuit found that an ordinary observer familiar with the prior art designs would consider the Crocs shoes the same as the patented design.  Thus, the Federal Circuit determined that the technical prong of the domestic industry requirement was satisfied.

Regarding obviousness, the Federal Circuit found that the record showed that the prior art actually taught away from the use of foam straps as claimed in the ‘858 patent because foam was likely to stretch and deform, and cause the wearer discomfort.  According to the Federal Circuit, the record also showed that, contrary to the ITC’s final determination, choosing foam as the material for a strap for a shoe that is otherwise made of foam is not a logical modification because foam was known to be an unsuitable material that was prone to tearing.  The new combination was therefore not found to have been obvious.  Moreover, the Federal Circuit found that even if the ‘858 patent claimed a combination of known elements, it yielded more than predictable results because the “passive restraint system” employed by the patent (whereby frictional forces that develop between the foam components keep the strap in place so that it can maintain the shoe in the correct position without constant contact with the Achilles part of the foot) facilitates a loose anatomical fit that makes the claimed invention more comfortable than prior art products.  Finally, with respect to secondary considerations of non-obviousness, the Federal Circuit found that (1) Crocs established a prima facie case of nexus between its shoes that practice the ‘858 patent and the commercial success they enjoy, and that the record contained little or no rebuttal evidence; (2) the ITC’s finding of substantial industry praise for the claimed invention and the products covered by it deserved even more credit than commercial success; and (3) the ITC’s finding of copying tips the scale still farther in the direction of non-obviousness.

Accordingly, the Federal Circuit reversed the ITC’s final determination that the ‘789 patent was not infringed, that Crocs did not satisfy the technical prong of the domestic industry requirement of Section 337 relating to the ‘789 patent, and that the ‘858 patent would have been obvious.  Further, the Federal Circuit remanded the investigation to the ITC for a determination of infringement of the ‘858 patent and any appropriate remedies.