U.S. businesses selling abroad cannot enforce domestic trademarks against foreign entities selling infringing goods into the United States through strawmen, according to a recent ruling by the U.S. Supreme Court in Abitron. In the Abitron case, European distributors of Hetronic’s (a U.S. company) products unilaterally appropriated all of Hetronic’s intellectual property including its trademarks, reverse engineered perfect knockoffs and sold them to strawmen in Europe knowing they would be delivered to U.S. customers.  Hetronic had no recourse through the Lanham Act’s provisions against trademark infringement and unfair competition because all of the infringing conduct occurred outside the U.S. by foreign entities.  In finding against Hetronic, the Supreme Court held that, under the RJR test, the Lanham Act does not apply extraterritorially; it only applies to infringing activity occurring within the United States.  U.S. businesses can take several actions to mitigate risk of infringement by foreign distributors and other foreign entities:

• Obtain foreign trademark registrations in any foreign nation where you do significant business.  Having a valid registration in the jurisdiction where infringement occurs provides access to relief in the courts of that jurisdiction.
• If you sue in the United States, sue the importer in addition to the foreign manufacturer.
• Build restrictions and penalties into your contracts with foreign distributors that compensate you in the event that the distributor sells outside its territory or otherwise competes against you.