The Supreme Court Limits the Foreign Reach of U.S. Trademark Law

On June 29, 2023, the Supreme Court of the United States issued a landmark decision in Abitron Austria GMBH et al. v. Hetronic International, Inc., a case that involved a trademark dispute between a U.S. company and six foreign parties over the use of the Hetronic mark on remote controls for construction equipment. The Court held that the Lanham Act, the comprehensive trademark statute in the United States, does not apply extraterritorially and extends only to claims where the infringing use in commerce is domestic. The Court vacated and remanded the judgment of the Tenth Circuit, which had affirmed a jury award of approximately $96 million in damages and a worldwide injunction against the foreign parties for their global employment of the Hetronic mark.

the frong of the Supreme Court of the United States building

On June 29, 2023, the Supreme Court of the United States issued a landmark decision in Abitron Austria GMBH et al. v. Hetronic International, Inc., a case that involved a trademark dispute between a U.S. company and six foreign parties over the use of the Hetronic mark on remote controls for construction equipment. The Court held that the Lanham Act, the comprehensive trademark statute in the United States, does not apply extraterritorially and extends only to claims where the infringing use in commerce is domestic. The Court vacated and remanded the judgment of the Tenth Circuit, which had affirmed a jury award of approximately $96 million in damages and a worldwide injunction against the foreign parties for their global employment of the Hetronic mark.

Background of the Case

Hetronic International, Inc., a U.S. company, manufactures radio remote controls for heavy-duty construction equipment. By agreement, Abitron, a foreign corporation, distributed Hetronic’s products, mostly in Europe. The relationship deteriorated when Abitron decided that it, not Hetronic, owned the rights to Hetronic’s trademarks and other intellectual property. Abitron began manufacturing products identical to Hetronic’s and selling them under the Hetronic brand, mostly in Europe. Hetronic terminated their contractual relationship, but Abitron continued to manufacture and sell the products, making tens of millions of dollars.

Hetronic sued Abitron in the Western District of Oklahoma for trademark violations under two related provisions of the Lanham Act, both of which prohibit the unauthorized use in commerce of protected marks when, inter alia, that use is likely to cause confusion. See 15 U.S.C. §§1114(1)(a), 1125(a)(1). Hetronic sought damages for Abitron’s infringing acts worldwide. Abitron argued that Hetronic sought an impermissible extraterritorial application of the Lanham Act.

The District Court rejected Abitron’s argument, and a jury later awarded Hetronic approximately $96 million in damages related to Abitron’s global employment of Hetronic’s marks. The District Court also entered a permanent injunction preventing Abitron from using Hetronic’s marks anywhere in the world.

On appeal, the Tenth Circuit narrowed the injunction, but otherwise affirmed the judgment, concluding that the Lanham Act extended to “all of [Abitron’s] foreign infringing conduct.”

The Supreme Court’s Decision

The Supreme Court granted certiorari to decide whether the Lanham Act permits the owner of a U.S.-registered trademark to recover damages for the use of that trademark when the infringement occurred outside the United States and is not likely to cause confusion in the United States.

The Court applied the presumption against extraterritoriality, which reflects the longstanding principle that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States. The Court found no clear indication that Congress intended to give §1114(1)(a) and §1125(a)(1) extraterritorial effect.

The Court reasoned that both provisions are focused on domestic commerce, as they require that an infringing use occur “in commerce” and define “commerce” as “all commerce which may lawfully be regulated by Congress.” The Court also noted that both provisions are designed to protect U.S. consumers from confusion about the source or quality of goods or services sold in U.S. markets.

The Court rejected Hetronic’s argument that §1114(1)(a) and §1125(a)(1) should apply extraterritorially whenever an infringing use abroad has some effect on U.S. commerce or consumers. The Court explained that such an expansive interpretation would disregard the statutory text and context, as well as create serious conflicts with foreign trademark laws and international comity principles.

The Court concluded that §1114(1)(a) and §1125(a)(1) are not extraterritorial and extend only to claims where the infringing use in commerce is domestic. The Court clarified that a use in commerce is domestic when it occurs within or affects U.S. territory or commerce.

The Court vacated and remanded the case for further proceedings consistent with its opinion.

Our Opinion

We agree with the Supreme Court’s decision to limit the foreign reach of U.S. trademark law. We believe that U.S. trademark law and the Lanham Act relate to the protection of trademarks in the United States and thus cannot extend that protection overseas through other jurisdictions.

We think that applying U.S. trademark law extraterritorially would create uncertainty and inconsistency for trademark owners and users around the world, as well as interfere with foreign sovereigns’ authority to regulate their own markets and intellectual property rights.

We also think that U.S. trademark owners can still protect their marks abroad by registering them in foreign countries and enforcing them under foreign laws, as well as by seeking relief under international treaties and agreements that address cross-border trademark issues.

We commend the Supreme Court for reaffirming the territorial scope of U.S. trademark law and respecting the diversity and autonomy of foreign trademark systems.

References