Crocs Case still has bite

In Crocs Canada Inc v Holey Soles Holdings Ltd, the Federal Court has dismissed a motion for summary judgment brought by Holey Soles Holdings Ltd against Crocs Canada Inc and Crocs Inc, seeking dismissal of Crocs’s passing off and copyright infringement claims with respect to moulded footwear. The decision deals with the issue of functionality and its relationship to both trademark and copyright protection in Canada.

Crocs initiated sales of expanded ethylene-based footwear (clogs) in North America. Holey Soles began purchasing several models of clogs from Crocs for distribution. A number of features of various models of Crocs footwear were argued to comprise its trade dress or distinguishing guise (eg, a raised and bumpy upper edge or crown design, a circles design comprising 13 holes on the top of the upper portion of the clog, the semi-circles design comprising seven vents on the side of the upper portion, the nubs design in the heel, the tread design on the sole and the composite design of the entire clog).

Holey Soles subsequently began selling two models of foam shoes which it had manufactured for it in China. These did not bear the word marks used by Crocs for its clogs. Eventually, Holey Soles stopped selling all Crocs products and continued distributing its own footwear manufactured in China. Crocs sued for passing off under Paragraphs 7(b) and (c) of the Trademarks Act and copyright infringement under the Copyright Act. Holey Soles moved to have the action dismissed on summary judgment, arguing that:

• the claims of passing off were defeated by application of the doctrine of functionality; and
  
  
• the copyright claim was defeated by Subsection 64(2) of the Copyright Act on the basis that only industrial design protection should be available.

First, the court held that the clogs produced by Holey Soles were so similar to those of Crocs that a finding of likelihood of confusion would be open to the trial judge. The court noted that the various holes and vents had a functional purpose, but found that the particular arrangement of these elements was not purely functional and could arguably constitute the non-functional basis for a claim of passing off. In particular, the court relied on the recent decision of the Supreme Court of Canada in Kirkbi AG v Ritvik Holdings Inc ([2005] 3 SCR 302). Given that a court at trial could find that the pattern and arrangement of the Crocs clogs constituted a distinguishing guise, summary judgment on the passing off claim was denied.

The court then considered the copyright claim. Subsection 64(2) of the Copyright Act provides that there is no infringement of copyright where copyright subsists in a design applied to a useful article or in an artistic work from which the design is derived and the article is reproduced in a quantity of more than 50 or, where the article is a plate, engraving or cast, the article is used for producing more than 50 useful articles. Such protection is normally provided under the Industrial Design Act in exclusion to the Copyright Act. However, Paragraphs 64(3)(b) and (c) of the Copyright Act state that Subsection 64(2) does not apply insofar as an artistic work is used as a trademark, a representation, a label or for material suitable for making wearing apparel. Given its previous finding that the design of the Crocs clogs could constitute a distinguishing guise, the court held that the artistic work could qualify as a trademark. In addition, the shoes were clearly wearing apparel and might also benefit from that exclusion depending on the findings at trial. Accordingly, summary judgment on the copyright claim was also denied.

The case illustrates some of the limits on the doctrine of functionality in trademark law and the dichotomy between the Copyright Act and the Industrial Design Act. In addition, it reinforces the position of the Federal Court that matters which may be affected by factual or expert evidence at trial will generally not be determined on summary judgment. A further deterrent to the bringing of such motions is that the court indicated its intention to order costs against the defendant in a lump sum approaching a solicitor-and-client scale for the unsuccessful motion.

Gordon Zimmerman, Borden Ladner Gervais LLP, Toronto