ITC grants exclusion order for Crocs on infringing shoes

On 15th July 2011 the US International Trade Commission (ITC) concluded a prolonged patent investigation, issuing a general exclusion order prohibiting the import of footwear that infringes Crocs Inc's utility and design patents (Certain Foam Footwear, Inv No 337-TA-567 (15th July 2011) (final)). The general exclusion order serves as the remedy resulting from a finding by the ITC in April 2011 that Crocs' patents were enforceable and that remaining respondents Effervescent Inc, Holey Soles Holdings Ltd and Double Diamond Distribution Ltd had violated Section 337 of the Tariff Act of 1930 by importing into the United States footwear that infringed Crocs' patents (Certain Foam Footwear, Inv No 337-TA-567, 76 Fed Reg 24052-53 (29th April 2011) (preliminary)).

The ITC's order bars footwear based on Crocs' "breathable footwear pieces", detailed in a utility patent (US Patent 6,993,858) and a design patent (US Patent D517,789), from being imported into the country for consumption, no matter whether the named respondents are importers or other companies.

The footwear company commenced the ITC investigation in March 2006 by filing a complaint accusing 11 companies of importing and selling shoes that infringed on the two named patents (Certain Foam Footwear, Inv No 337-TA-567, 71 Fed Reg 27514-15 (11th May 2006) (preliminary)). Only three respondents remained following various settlements and ITC determinations of non-infringement. In prior proceedings in April 2008, the presiding administrative law judge held that there had been no violation of Section 337 with respect to the '789 patent due to non-infringement and the domestic industry requirement, and additionally ruled that the '858 patent was invalid for obviousness (Certain Foam Footwear, Inv No 337-TA-567 (11th April 2008) (preliminary)).

On appeal in February 2010, the US Court of Appeals for the Federal Circuit reversed the administrative law judge's findings for both invalidity and non-infringement claims, remanding the investigation to determine whether the '858 patent was infringed and appropriate remedies (Crocs, Inc v US Int'l Trade Comm'n, 598 F 3d 1294, 1311 (Fed Cir 2010)). The administrative law judge determined on remand that the patents were enforceable, and the ITC requested submissions on the issues of remedy, public interest and bonding.

The ITC found that Effervescent had infringed claims 1 and 2 of the '858 utility patent, and that Double Diamond had infringed claim 2 of the '858 utility patent. These conclusions went along with the Federal Circuit's earlier finding that Double Diamond, Effervescent and Holey Soles had infringed with respect to the '789 design patent (see Crocs, 598 F 3d at 1306).

Concluding that there was an "unlawful importation and sale of certain foam footwear" that infringed on Crocs' named patents, the ITC determined that the appropriate form of relief was: "(1) a general exclusion order prohibiting the unlicensed entry of foam footwear that infringe one or more of [the patent claims]; and (2) cease and desist orders prohibiting [respondents] from conducting any of the following activities in the United States: importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation), and soliciting U.S. agents or distributors for, foam footwear that infringe one or more of [the patent claims]."

Recognising the expansiveness of a general exclusion order, the ITC explained that: "a general exclusion from entry for consumption is necessary to prevent circumvention of an exclusion order limited to products of named persons and because there is a pattern of violation of section 337 and it is difficult to identify the source of infringing products."

In so doing, the ITC likewise concluded that the public interest did not preclude the issuance of either the general exclusion order or the cease and desist orders for each respondent.

The general exclusion order "prohibiting the unlicensed importation of infringing foam footwear" also allows US Customs and Border Protection, at its discretion, to require those seeking to import foam footwear to certify that they are familiar with the terms of this order, and that they "have made appropriate inquiry, and thereupon state that, to the best of their knowledge and belief, the products being imported are not excluded from entry".

The order has been submitted for review by the president. If the order is not disapproved or if the president affirmatively approves it during the 60-day review period, it will become final. The respondents may continue to import accused articles during the review process by posting a bond specified by the ITC in the cease and desist orders. However, once the order becomes final, the goods will be subject to exclusion (19 CFR § 12.39 (2010)).

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