calling an accepted Rule 68 offer a judgment of infringement could be defamatory

Double Diamond Distribution Ltd. v. Crocs, Inc., 2024 WL 1051951No. 23-cv-01790-PAB-KAS (D. Colo. Mar. 11, 2024)

I have a long-running interest in Rule 68 offers of judgment, and this case involves an interaction with false advertising law! The parties compete in the shoe market.

In 2006, Crocs sued now-plaintiff Double Diamond and Dawgs, its affiliate. Trial was scheduled for 2022 (!), but then-defendants sent offers of judgment to Crocs. Double Diamond’s offer stated: “This offer is made for the purposes specified in Rule 68 and is not to be construed either as an admission that Double Diamond is liable in this action or that Crocs has suffered any damage.” Dawgs’ offer was similar (though it offered $6 million, where Double Diamond offered $55,000, and contemplated bankruptcy).  Crocs accepted.

Crocs then issued a press release, “Crocs secures long sought-after judgment of infringement against USA Dawgs and Double Diamond Distribution.” The press release announced

a judgment of infringement against USA Dawgs and Double Diamond Distribution as a result of both companies’ sales of imitation Crocs shoes. In conjunction therewith, Crocs also obtained $6 million and $55,000 in damages, respectively, against the companies.

This case is the culmination of years long battles between the parties after USA Dawgs and Double Diamond Distribution began selling shoes that infringed Crocs’ patents in 2006. Both USA Dawgs and Double Diamond Distribution have since conceded the validity of Crocs’ patent rights.

“We are fiercely protective of the Crocs brand and our iconic DNA. We have zero tolerance for infringement of our intellectual property rights or for anyone who tries to benefit off the investments that we have made in our brand,” said Daniel Hart, Executive Vice President and Chief Legal & Risk Officer at Crocs. “This judgment not only reinforces the validity of our patent rights, it also reinforces our unrelenting determination to take forceful steps to protect our brand equity.”

This judgment of infringement comes nearly one year to the day after Crocs filed lawsuits against 21 companies alleging infringement of its registered trademark rights in its clog designs. …

The court declined to dismiss Double Diamond’s resulting defamation claim. This was not a case where the “gist” was true on the facts alleged. A Rule 68 offer of judgment does not require an admission of liability, which may be disclaimed. If that happens, the court’s judgment does not constitute a finding of or an admission of liability against the defendant.

The statements that Crocs obtained “a judgment of infringement against USA Dawgs and Double Diamond Distribution as a result of both companies’ sales of imitation Crocs shoes” and “[t]his judgment...reinforces the validity of [Crocs’] patent rights” were plausibly false because the statements would have a “different effect on the mind of the reader” from that which the Rule 68 offer of judgment would have produced. And they were plausibly material because the statements would likely cause reasonable people to think “significantly less favorably” about Double Diamond than they would if they knew the truth. Unlike the difference between “stalking” and “harassment,” this was not “a minor, technical error in legal terminology.”

Trade libel claims survived for the same reason.

Lanham Act false advertising: Crocs argued that the press release was not “commercial advertising,” because (a) the press release was directed at investors, not the relevant purchasing public; and (b) Double Diamond never alleged that the press release promoted Crocs’ shoes to consumers. However, Crocs published the press release on its website and had the press release published to 440,000 websites, newsrooms, and direct feeds using PRNewswire. And it stated that Crocs “is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love.” This was enough to plausibly allege commercial advertising, along with the allegation that Crocs made the statement in order to obtain increased sales and brand differentiation; the press release repeatedly referred to Crocs’ brand and products and included the invitation “To learn more about our brands, please visit www.crocs.com or www.heydudeshoesusa.com or follow @Crocs or @heydudeshoes on Facebook, Instagram and Twitter.” Because the websites that posted the press release have a combined viewership of 6 billion people per month, the allegations were sufficient to show that the statements were “disseminated sufficiently to the relevant purchasing public.” This also allowed a claim under the Colorado Consumer Protection Act.

Intentional interference with contractual relations failed, however, because there was no identified specific relationship with a third party.