International Trade Commission ruling slaps down Crocs' claims of patent infringement against Waldies and Holey Soles

An April 11 ruling by the presiding administrative law judge of the International Trade Commission has been affirmed, and the ruling now made public, stating that Waldies, Holey Soles and three other footwear manufacturers are not violating Crocs' design patent. In addition, the ruling found that yet another of the Niwot, Colo.-based, company's patents is invalid.

An April 11 ruling by the presiding administrative law judge of the International Trade Commission has been affirmed, and the ruling now made public, stating that Waldies, Holey Soles and three other footwear manufacturers are not violating Crocs' design patent. In addition, the ruling found that yet another of the Niwot, Colo.-based, company's patents is invalid.

The ruling (click here to read) means that Waldies and Holey Soles, along with Collective Licensing, Double Diamond Distribution and Gen-X Sports are free to continue importing and selling their shoes in the United States.

Crocs filed the case with the ITC on May 11, 2006, seeking to prevent 12 companies that Crocs alleged to have violated its '858 and '789 patents from selling foam sandals in the United States. Of the 12 defendants, the number shrank due to some settling with Crocs, as well as consent orders from the ITC stating, "undisputed commission determination of non-infringement."

Bill Hearn, president of Waldies, told SNEWS®, "I have always felt personally that Crocs is using litigation as a business tool to try to eliminate competition. This ruling provides us vindication. It re-establishes that Waldies were the original and that Crocs' claims of lack of originality or copying or patent infringement by us are just not true."

Regarding the '858 patent being declared invalid, Hearn said, "None of us making foam clogs could ever understand why they were ever granted any patents. There was no invention because the design was obvious -- heel straps have existed on clogs for hundreds of years."

Crocs spokeswoman Tia Mattson did not respond to phone and email requests for an interview on Aug. 1.

This is the second major patent setback for Crocs in recent months. In December 2007, the European Union's Office for Harmonization in the Internal Market, responding to a Holey Soles-initiated complaint seeking an investigation, found that Crocs' Registered Community Design was invalid -- click here to read the report from the EUOH.

SNEWS View®: No matter what, let it never be said that Crocs is not a magnificent marketing machine. While few insiders will dispute the fact that Crocs did not actually invent the foam sandal category (that honor for the outdoor industry goes to Waldies with a proven shoe debut at Outdoor Retailer in 2001), it was Crocs that revved up the marketing machine to a high whine, soon flooding the market with foam and color in a manner that seemed almost unimaginable. Crocs became a household name -- which was great. However, what was not so great was the company's seeming desire to rewrite history with regard to the ubiquitous foam clog's origination and originators.

What the company can no longer escape, though, are these recent legal rulings and the spotlight of flagging sales. It's second-quarter revenue estimates place revenue at $218 million to $223 million with diluted earnings per share from $0.03 to $0.07 -- well below what the Street wanted to hear. Could it be the colored footwear is, gasp, no longer cool? True, some of that drop in financials is due to the closure of its Canadian manufacturing plant -- the same one it bought in June 2004 to secure exclusive rights to the Croslite foam which is not patented, but remains a closely guarded trade secret. For historians, that Quebec-based manufacturing plant was Foam Creations otherwise known in the '90s as Fin Project NA. And it was that plant which sold foam sandals designed by one Ettore Battiston to various distributors, including Walden Kayaks (hence the name Waldies), Holey Soles and Western Brands LLC. Western Brands became, yes, Crocs.

We would be remiss not to point out a bit of further irony. A quote in a Feb. 1, 2008, article appearing in ColoradoBiz magazine, "If the foam shoe fits," attributed to Don LoCoco, one of the four founding partners of Crocs, said, "Waldies were made by the same company. They offered them at a lower price and confused the marketplace. So we raised the money and bought the bricks and mortar and the factory and eliminated Waldies from the face of the Earth." To read the full and excellent investigative story by Eric Peterson, click here.

Though it likely means little to LoCoco now, since he sold his shares in the company long ago, that statement has a ring of wishful thinking and little more. Waldies is still very much around, as is Holey Soles. And recent rulings by the courts seem to indicate Crocs is in for a bit more painful revisiting of its true history.

It would be good for Crocs to stop with the legal silliness fighting over a foam sandal that is anything but original, but that's not likely as long as hundreds of attorneys around the world are involved and making their mortgage and fancy car payments on the back of Crocs filings. It recently filed yet another multi-million dollar lawsuit in Australia against Rivers Australia alleging copying, for example.

What Crocs needs to focus on is its diversification if it is not to be a one-hit wonder. And it does appear to be making the right moves there: In 2006, it acquired accessory-maker Jibbitz for $10 million; EXO, an Italian fashion brand, for $7.5 million; and Fury, a Canadian hockey gear and apparel manufacturer, for $1.5 million. In February 2007, it acquired Ocean Minded, a California-based manufacturer of leather sandals and accessories, for $1.75 million. In July 2007 it acquired Bite, the Washington-based inventor of the golf sandal, for $1.75 million. And, in August 2007, it announced it was launching men's and children's apparel lines with women's wear to follow in 2008.



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