[co-author: Amit Saha*]

In a decision that may make it more difficult for brand owners to enforce their marks against infringers located outside of the United States, the Supreme Court of the United States vacated the judgment of the US Court of Appeals for the Tenth Circuit and held that Sections 32(1)(a) and 43(a)(1)(A) of the Lanham Act are not extraterritorial and extend only to claims where the alleged infringing trademark use in commerce is domestic. Abitron Austria GmbH v. Hetronic Int’l, Inc., No. 21-1043, 2023 U.S. LEXIS 2789 (June 29, 2023).

Justice Samuel Alito delivered the opinion of the Court, in which Justices Clarence Thomas, Neil Gorsuch, Brett Kavanaugh and Ketanji Brown Jackson joined. There were two separate concurrences, one by Justice Jackson and one by Justice Sonia Sotomayor, in which Chief Justice John Roberts and Justices Elena Kagan and Amy Coney Barrett joined.

IN DEPTH

BACKGROUND

This case focuses on the foreign reach of two Lanham Act provisions, namely, 15 U.S.C. § 1114(1)(a) and 15 U.S.C. § 1125(a)(1), which prohibit the unauthorized use of protected marks in commerce, whether registered or unregistered, when such use creates a likelihood of consumer confusion.

Hetronic, a US company that manufactures radio remote controls for heavy-duty construction equipment, sued six foreign distributors and one individual (which were collectively referred to as Abitron) in the US District Court for the Western District of Oklahoma for trademark infringement when Abitron reverse-engineered Hetronic’s products and began manufacturing and selling (mostly in Europe) their own copycat products bearing Hetronic’s “distinctive black-and-yellow color scheme.” The district court rejected Abitron’s argument that Hetronic sought an impermissible extraterritorial application of the Lanham Act, and a jury awarded Hetronic $96 million in damages related to Abitron’s global use of Hetronic’s marks. Abitron was also permanently enjoined from using the marks anywhere in the world.

The Tenth Circuit upheld the district court’s ruling but narrowed the injunction to only the countries where Hetronic currently marketed or sold its products. Abitron appealed, and the Supreme Court granted certiorari to resolve a circuit split over the Lanham Act’s extraterritorial reach.

OPINION OF THE COURT

The Supreme Court held that the Lanham Act provisions at issue in this case extend only to trademark infringement claims where the alleged infringing use in commerce is domestic. Applying the Court’s long-standing presumption against extraterritoriality, the Court explained that there are two steps in applying the presumption against extraterritoriality. The first step is to ask whether Congress has “affirmatively and unmistakably instructed” that a particular statute “should apply to foreign conduct.” If there are such explicit instructions, the provision is extraterritorial. Otherwise, the analysis then moves to step two, which sets out to determine whether a claim seeks a domestic or foreign application of a statute. To prove that a claim involves a domestic application of a statute, a plaintiff must establish that the conduct relevant to the statute’s “focus” occurred within the United States. Nevertheless, the Court clarified that there is no need to determine the focus of a statute at all if the claimed violations all took place outside the United States.

Applying the first step of the analysis, the Court found that neither section of the Lanham Act at issue provides any express instruction about extraterritorial application, nor do they provide any indication that they would nevertheless apply abroad. When Hetronic pointed to the Foreign Commerce Clause to support its argument for extraterritorial reach of the Lanham Act, the Court further confirmed that its precedent and presumption against extraterritoriality have held that “even statutes . . . that expressly refer to ‘foreign commerce’ when defining ‘commerce’ are not extraterritorial.” Therefore, the Lanham Act provisions were found not to apply extraterritorially.

The Court then sought to determine whether Hetronic’s trademark infringement claims involve domestic applications of Sections 32(1)(a) and 43(a)(1)(A) of the Lanham Act by examining the “focus” of the statute and whether Hetronic can establish that the alleged conduct relevant to the statute’s focus occurred in the United States. Here, the parties argued over the “focus” of the Lanham Act provisions. Abitron claimed that the focus was preventing infringing use of trademarks, whereas Hetronic insisted they focus on protecting the goodwill of mark owners and on preventing consumer confusion. The United States, as amicus curiae, argued that the Lanham Act provisions in contention focus on likely consumer confusion only.

Interestingly, all parties sought support for their respective positions in Steele v. Bulova Watch Co., in which the Supreme Court applied the Lanham Act to trademark infringement and unfair competition activities that occurred via watch sales in Mexico but caused consumer confusion in the United States. The Court nevertheless rejected that reliance since the two-step extraterritoriality framework was developed several years after Steele. Further, the Court found that the parties missed the “focus” point by failing to examine the conduct at issue relevant to the statute’s focus and examining whether such conduct occurred in the United States or in a foreign country.

The Court’s majority found that “use in commerce” is the conduct relevant to any potential focus of Sections 32(1)(a) and 43(a)(1)(A) of the Lanham Act. Thus, the Court openly criticized the concurring opinion by Justice Sotomayor, which the majority interpreted as giving “the Lanham Act an untenably broad reach that undermines” the extraterritoriality framework of the Court.

The majority cautioned against any approach that would threaten to negate the presumption against extraterritoriality and the potential for resulting “international discord.” Here, the Court separately cited the European Commission’s amicus curiae advising against applying the Lanham Act to trademark infringement occurring in the European Union. The Court concluded its reasoning with a reminder that “United States law governs domestically but does not rule the world,” and therefore held that Sections 32(1)(a) and 43(a)(1)(A) of the Lanham Act are not extraterritorial and the infringing conduct, being “use in commerce” of a trademark, determines the dividing line between foreign and domestic application of these Lanham Act provisions. The Court, therefore, vacated the findings of the Tenth Circuit and remanded for further proceedings.

CONCURRENCE

Justice Sotomayor filed a concurring opinion, joined by Chief Justice Roberts and Justices Kagan and Barrett, arguing that the Lanham Act extends “to activities carried out abroad when there is a likelihood of consumer confusion in the United States.” While Justice Sotomayor agreed with the majority’s conclusion, she opined that the majority’s approach converted the “Court’s extraterritoriality framework into a myopic conduct-only test,” and disagreed with the majority’s second step of the framework. Citing the US government’s amicus curiae brief, which took the position that the focus of the Lanham Act provisions in contention is likely consumer confusion, according to Justice Sotomayor, since the statutory focus is to protect against consumer confusion, it covers foreign infringement activities if there is a likelihood of consumer confusion in the United States caused by those activities (provided other conditions for liability are met). The concurrence also stated that the Court deviated from its well-established precedent, which otherwise “supports the view that an application of a statute can be considered domestic even when foreign conduct is implicated.” Taken together, Justice Sotomayor concluded that the use of a trademark is actionable under the Lanham Act when it results in a likelihood of consumer confusion in the United States, regardless of foreign conduct.

The concurrence fears that the majority’s approach would essentially absolve defendants who sell infringing products in foreign markets that ultimately reach the United States. But any resulting consumer confusion in the United States, Justice Sotomayor noted, would fall “squarely within the scope of the interests that the Lanham Act seeks to protect.”

Addressing the majority’s “overblown” concern over international discord, Justice Sotomayor pointed out that “purely foreign sales with no connection to the United States are unlikely to confuse consumers domestically.” Moreover, there are procedural options available to foreign defendants for dismissing the case when applicable, such as for lack of personal jurisdiction, or due to forum non conveniens. Lastly, the concurrence clarified that the amicus brief filed by the European Commission only warns against the adoption of the sweeping view that all foreign uses that might confuse consumers abroad fall under the scope of the Lanham Act (consistent with the Tenth Circuit’s opinion).

Justice Jackson filed a separate concurring opinion, despite joining in full in the majority opinion. This concurrence aimed at addressing two things: what it means to “use [a trademark] in commerce” and (2) how “that meaning guides the permissible-domestic-application question.” Since the majority did not elaborate on these aspects, Justice Jackson aimed to do so in her concurrence (and reading this concurrence prior to reading the majority opinion might be beneficial in better understanding its holding).

Justice Jackson stated that “use in commerce” does not solely depend on where the mark is first affixed or where the item is first sold; rather, a “use in commerce” occurs wherever the mark serves its source-identifying function. This, according to Justice Jackson, is the “use in commerce” to which the Lanham Act provisions refer, which should make the permissible domestic application inquiry “straightforward.” Namely, if a trademark is serving a source-identifying function as intended by Congress and is in domestic commerce, then the provisions of the Lanham Act may reach the infringer.

*Amit Saha, Summer Associate in the San Francisco office.

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