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Companies did not violate Crocs' patents, judge rules

By Joyzelle Davis, Rocky Mountain News (Contact)

Published April 17, 2008 at 7:30 p.m.

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Penny-pinching consumers aren't Crocs only concern these days.

The Niwot-based maker of colorful plastic clogs this month lost its initial attempt to block U.S. imports of what it considers knockoff footwear sold at Payless and other retailers.

A U.S. International Trade Commission judge on April 11 ruled that Crocs' patent rights weren't violated by companies that the shoemaker claims are copying its iconic $35 clunky soft-soled shoes. One of those companies, Vancouver, British Columbia- based Holey Soles Holdings Ltd., argues that it has been selling the same clog base as Crocs since 2002 and all Crocs did was add a pivoting strap.

"We have always believed that Crocs' claims were part of a business strategy meant to divert resources and attention from building our company," Holeys CEO Joyce Groote said.

The ITC ruling comes after the European Union in December similarly struck down one of Crocs' patents.

Crocs CEO Ron Snyder told investors on a conference call Tuesday that the company plans to appeal and he believes "there are good grounds" for overturning the decision.

The patent decision came as Crocs' once-soaring shares plummeted back to earth this week after the company sharply revised first-quarter guidance, blaming deteriorating economic conditions and unseasonably cold weather.

Shares of the company, which traded as high as $74.75 in October, have fallen below their split-adjusted initial public offering price of $10.50. Its stock market value has dropped from $6.1 billion to $843 million.

Crocs' shoes, which were once so popular that the company couldn't keep pace with demand, are now piling up in warehouses. That prompted many analysts to worry whether the 6-year-old company, which has branched out to some 250 different styles, is ultimately a passing fad.

Crocs' Snyder said on the call that while the company was disappointed with its first-quarter results, "we do feel very confident" going into spring and summer "that we have some great new products that are already beginning to sell quite well."