ITC Issues Foam Footwear Exclusion & CD Orders After Crocs Appeal

Investigation Based on Complaint Filed by Crocs

The ITC instituted this investigation in May 2006 based on a complaint filed by Crocs, Inc. of Niwot, Colorado, which alleged violations of section 337 of the Tariff Act of 1930 in the importation into the U.S., the sale for importation, and the sale within the U.S. after importation of certain foam footwear, by reason of infringement of certain claims of U.S. Patent Nos. 6,993,858 (the '858 patent) and D517,789 (the '789 patent), among other claims.

The complaint was filed against Double Diamond Distribution Ltd. of Saskatoon, Saskatchewan; Effervescent Inc. of Fitchburg, Massachusetts; and Holey Soles Holding Ltd. of Vancouver, British Columbia, among others¹.

CAFC Remanded ITC’s 2008 Finding of no Violation Following Appeal by Crocs

In July 2008, the ITC affirmed an administrative law judge's (ALJ’s) final initial determination of no violation of section 337 with certain modifications and clarifications, and terminated the investigation with a finding of no violation of section 337. The ITC took no position regarding the issue of enforceability of the '858 and '789 patents. (See ITT's Online Archives or 08/14/08 news, 08081435, for BP summary.)

Crocs, Inc. appealed the decision to the Court of Appeals for the Federal Circuit, and in February 2010, the CAFC issued its judgment overturning the ITC's findings regarding the invalidity of the '858 patent, and non-infringement/lack of domestic industry concerning the '789 patent. The CAFC also specifically remanded the investigation for a determination of infringement of the '858 patent, and in July 2010, the ITC remanded the investigation to the ALJ to decide the remaining issue of enforceability of the patents.

ITC Found on Remand that Patents are Enforceable, Determined to Issue Orders

In February 2011, the ALJ issued his remand initial determination finding that the asserted patents were not unenforceable, which the ITC determined not to review, and requested written submissions on the issues of remedy, the public interest, and bonding from the parties and interested non-parties, among other things.

These actions, along with the CAFC's decision, resulted in a finding of a violation of section 337 with respect to both asserted patents by Double Diamond and Effervescent.

Holey Soles was found in violation with respect to the '789 patent based on the Federal Circuit's reversal of non-infringement and lack of domestic industry as to this patent. Therefore, the ITC has determined to issue a general exclusion order and cease and desist orders as described below.

General Exclusion Order Excludes Infringing Articles Except Under License

According to the general exclusion order, foam footwear covered by one or more of claims 1 and 2 of the '858 patent or by the '789 patent are excluded from entry into the U.S. for consumption, entry for consumption from a foreign-trade zone, or withdrawal from warehouse for consumption, for the remaining terms of the patents, except under license of the patent owner or as provided by law.

60-Day Bond is $0.01/$0.05 for Holey/Effervescent, 100% of Value for All Others

The general exclusion order states that the excluded foam footwear is entitled to entry into the U.S. for consumption, entry for consumption from a foreign trade zone, or withdrawal from a warehouse for consumption, under a bond in the amount of $0.00 for Double Diamond's covered products, a bond of $0.01 per pair of shoes for Holey Soles' covered products, and a bond of $0.05 per pair of shoes for Effervescent's covered products, and 100% of the entered value for all other covered products, from the day after the order is received by the U.S. Trade Representative until such time as the USTR notifies the ITC that the order is approved or disapproved but, in any event, not later than 60 days after the date of receipt of the order.

CBP May Require Certification that Imports are Not Subject to Order

At the discretion of CBP and pursuant to procedures it establishes, persons seeking to import foam footwear that is potentially subject to the general exclusion order may be required to certify that they are familiar with the terms of the order, 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 under the order. At its discretion, CBP may require persons who have provided such certification to furnish such records or analyses as are necessary to substantiate the certification.

Cease and Desist Orders Issued Against 3 Companies

The ITC has also issued cease and desist orders which prohibit the importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation), and soliciting U.S. agents or distributors for, certain foam footwear against: (1) Double Diamond, for foam footwear that infringe one or more of claim 2 of the '858 patent and the '789 patent, for which no bond is required during the 60 day review period; (2) Effervescent, for foam footwear that infringe one or more of claims 1 and 2 of the '858 patent and the '789 patent, subject to a bond in the amount of $0.05 per pair of shoes for Effervescent's covered products during the 60 day review period; and (3) Holey Soles, for foam footwear that infringe the '789 patent, subject to a bond in the amount of $0.01 per pair of shoes for Holey Soles' covered products during the 60 day review period.

¹Nine respondents have been terminated from the investigation on the basis of a consent order, settlement agreement, or undisputed ITC determination of non-infringement are: Collective Licensing International, LLC of Englewood, Colorado; Gen-X Sports, Inc. of Toronto, Ontario; Australia Unlimited, Inc. of Seattle, Washington; (2) Cheng's Enterprises Inc. of Carlstadt, New Jersey; D. Myers & Sons, Inc. of Baltimore, Maryland; Inter-Pacific Trading Corp. of Los Angeles, California; Pali Hawaii of Honolulu, Hawaii; Shaka Shoes of Kaliua-Kona, Hawaii; and Old Dominion Footwear, Inc. of Madison Heights, Virginia.

(See ITT's Online Archives or 05/24/06 news, 06052450, for BP summary of ITC's initiation of this investigation.)

ITC contact - Clint Gerdine (202) 708-5468

(FR Pub 07/21/11, Inv. No. 337-TA-567)

The general exclusion and cease & desist orders (as posted on EDIS) are available by emailing documents@brokerpower.com.