On June 29th, the Supreme Court decided whether two provisions of the Lanham Act, specifically 15 U.S.C. § 1114(1)(a) and § 1125(a)(1) protect domestic trademark holders from extraterritorial infringement. The Supreme Court held that the above provisions are not extraterritorial in nature and that they extend only to claims where the claimed infringing use in commerce is domestic. Justice Alito authored the opinion for the Court and Justices Jackson and Sotomayor each filed concurring opinions.
Hetronic, based in Oklahoma, manufactures and sells radio remote controls that operate heavy-duty construction equipment. It owns U.S. trademarks for the distinguishing features of its remote controls. Abitron agreed to serve as Hetronic’s distributor in Europe. It was authorized to assemble and sell Hetronic’s remote controls under Hetronic’s brand, but was contractually required to purchase parts from Hetronic.
Hetronic alleges that Abitron secretly used confidential information to which it had access under the licensing agreement to reverse-engineer Hetronic’s products; Abitron then sold those products to Hetronic’s customers as if they were genuine Hetronic devices. Hetronic further alleges that Abitron continued selling Hetronic-brand products even after the parties’ licensing agreements were terminated.
Even though the misconduct took place in Europe, Hetronic sued Abitron in the United States for trademark infringement pursuant to the Lanham Act. A jury in Oklahoma City awarded Hetronic more than $90 million. Of that amount, only $240,000 was for products that Abitron had sold directly from abroad into the United States. About $2 million was for products that had been sold abroad to foreign buyers who listed the United States as the ultimate destination where the products were intended to be used. The balance ($87 million, or almost 97% of the jury award) was for products that Abitron had sold abroad to foreign buyers for use outside the United States.
The Lanham Act, 15 U.S.C. § 1051, was enacted by Congress in 1946. The Act provides for a national system of trademark registration and protects the owner of a federally registered mark against the use of similar marks if such use is likely to result in consumer confusion, or if the dilution of a famous mark is likely to occur. To establish a trademark infringement under the Lanham Act for either a registered mark under 15 U.S.C. § 1114, or an unregistered mark under 15 U.S.C. § 1125(a), the plaintiff must demonstrate that (1) the plaintiff has a valid and legally protectable mark; (2) the plaintiff owns the mark; and (3) the defendant’s use of the mark to identify goods or services causes a likelihood of confusion.
The majority stated that “neither provision [of the Lanham Act] at issue provides an express statement of extraterritorial application or any other clear indication that it is one of the ‘rare’ provisions that nonetheless applies abroad.” Applying the presumption against extraterritoriality involves a two-step framework. [1] Under the two-step test for applying the presumption against extraterritoriality, courts first “determine whether a provision is extraterritorial,” which involves evaluating whether “’Congress has affirmatively and unmistakably instructed that the provision at issue should ‘apply to foreign conduct’” and then if it is not extraterritorial, “move to step two, which resolves whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision.”[2] The Court determined that the relevant provisions of the Lanham Act are not extraterritorial in nature because the provisions lack an express statement of extraterritoriality. [3]
Since the § 1114(1)(a) and § 1125(a)(1) provisions are not extraterritorial, the Court then determined whether the claims at issue in the case involve domestic application of the Lanham Act. The proper test thus requires determining the provision’s focus – which the Court held to be the domestic application of the Lanham Act. [4] In applying this test, the ultimate question regarding permissible domestic application turns on the location of the relevant infringing conduct and whether this conduct encapsulates “use in commerce” as Congress intended. In the instant case, the majority of the infringing “use in commerce” occurred in a foreign country. The Court concluded that applying the Lanham Act in this context would be inappropriate. The Court vacated and remanded the case back to the Tenth Circuit.
On its face, the Court’s decision is aligned with the scope of protection afforded by the Lanham Act. Applying and receiving a federal trademark in the United States affords protection within the confines of the United States. Filing for trademarks in all the countries a product or service may be rendered is the best way to ensure ironclad protection on a global scale. However, in the context of this case, some infringing products were sold to consumers in the United States. At what point is the number of sales or profit earned enough to trigger the protections of the Lanham Act? Should any infringing sale made to the United States from a foreign country afford Trademark owners the right to sue for infringement? While the Court has answered the question on the reach of the Lanham Act when applied to foreign infringement in a foreign country only, it has not provided clear or convincing guidance on the reach of the Lanham Act when applied to foreign infringement that flows into the United States.
The case is Abitron Austria GmbH et al. v. Hetronic International, Inc., 600 U.S. (2023). The opinion is available here.
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[1] RJR Nabisco, Inc. v. European Community, 579 U. S. 325, 337 (2016).
[2] 600 U.S. 3 (2023).
[3] See id. at 6.
[4] See id. at 7,8
