[co-author: Sadie Mlika]

The U.S. Supreme Court issued a decision on June 29, 2023, addressing the scope of federal trademark law on conduct occurring outside of the United States.

The case, Abitron Austria GmbH v. Hetronic International, Inc., involved Hetronic International, an Oklahoma-based radio control maker, and its former partners based in Europe. Abitron Austria GmbH had distributed Hetronic International's U.S.-made products in Europe, but then began making and selling its own products using the HETRONIC brand. Hetronic brought an action in federal court in Oklahoma and, after a jury trial, received an award of more than $90 million in damages, despite the fact that only 3 percent of Abitron's sales took place in the U.S.

On appeal, the Supreme Court asked whether the longstanding principle of American law that congressional legislation only applies within the territorial jurisdiction of the United States, or the "presumption against extraterritoriality," had been rebutted. After determining that the presumption had not been rebutted, the Court then held that the next step was to examine whether the conduct relevant to the focus of the Trademark Statute occurred in the United States. The dispute was remanded to trial court to address how many sales actually took place in the U.S.

In an opinion authored by Justice Samuel Alito, the Court vacated and remanded a lower court's judgment, holding that the Lanham Act can extend only to claims of trademark infringement where the allegedly infringing conduct takes place within U.S. borders. In other words, where the majority of infringing sales were made outside of the U.S., and none of the defendants is based within the borders of the United States, federal trademark law does not apply – and plaintiffs will have to seek to enforce their rights in the relevant foreign courts, unless they can show sufficient US contacts.

Ultimately, the Supreme Court's ruling serves to limit the application of federal trademark law when it comes to foreign conduct and serves as notice to brand owners seeking to enforce their trademark rights in the global marketplace. Those working with licensees, partners or agents outside the U.S. must have strong agreements with these third parties and obtain trademark protection in the nations where the U.S. brand owners hope to make sales.