Supreme Court Limits Lanham Act’s Extraterritorial Application

Supreme Court Limits Lanham Act’s Extraterritorial Application

In a recent milestone ruling, the U.S. Supreme Court held in Abitron Austria GmbH, et al. v. Hetronic International, Inc  (“Abitron”)  that the Lanham Act cannot be invoked as a remedy for instances of trademark infringement that transpire exclusively beyond the borders of the United States.

Trademark Infringement Lawsuit

The case involved a trademark dispute between Hetronic (a U. S. company) and six foreign parties (collectively Abitron). Hetronic manufactures remote controls for construction equipment. Abitron, once a licensed distributor for Hetronic, claimed ownership of the rights to much of Hetronic’s intellectual property and began employing Hetronic’s marks on products it sold.

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 that use is likely to cause confusion, seeking damages for Abitron’s purported infringing acts worldwide. In response, Abitron argued that Hetronic sought to impermissibly apply the Lanham Act extraterritorially.

The District Court rejected Abitron’s argument, and a jury later awarded Hetronic approximately $96 million in damages related to Abitron’s global use in commerce 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 Court of Appeals narrowed the injunction, but it ultimately affirmed the remainder of the judgment, finding that the Lanham Act extended to “all of [Abitron’s] foreign infringing conduct.“

SCOTUS Restricts Lanham Act’s Reach

In an opinion authored by Justice Samuel Alito, the Supreme Court, by a vote of 5-4, held that by “[a]pplying the presumption against extraterritoriality, we hold that these provisions are not extraterritorial and that they extend only to claims where the claimed infringing use in commerce is domestic.“

In reaching its decision, the majority emphasized that the presumption against extraterritoriality is a “longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.“ Applying such presumption involves a two-prong analysis, which first examines whether the statute is extraterritorial. If not, the next prong examines whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision. In order to make that determination, courts must identify the “focus“ of congressional concern underlying the provision at issue, and then determine whether the conduct relevant to that focus occurred in United States territory.

In applying this analysis to Abitron, the Court first found that the two Lanham Act provisions at issue were not extraterritorial.  The provisions of the Lanham Act did not contain (i) any express statement of extraterritorial application; or (ii) any other  clear indication that such provisions were of the “rare” sort that nonetheless applied to conduct abroad.  The Court noted that “[b]oth [provisions] simply prohibit the use of protected trademarks ‘in commerce,’ under congressionally prescribed conditions, when that use ‘is likely to cause confusion.’“

Moving to the second prong, the Court focused on the location of the conduct as it relates to the provisions.  The Court ultimately concluded that “use in commerce“ provides the dividing line between foreign and domestic applications of the Lanham Act provisions at issue. The Court found that the Lanham Act is violated “each time a mark is used in commerce in the way Congress described, with no need for any actual confusion.“

Justice Sonia Sotomayor authored a concurrence, which was joined by Chief Justice John Roberts Jr. and Justices Elena Kagan and Amy Coney Barrett. The concurring Justices agreed  with the judgement but argued that the Lanham Act could apply to overseas infringement when there is a likelihood of consumer confusion in the United States, stating that since “the statute’s focus is protection against consumer confusion, the statute covers foreign infringement activities if there is a likelihood of consumer confusion in the United States and all other conditions for liability are established.“

Key Takeaway

Abitron and its application to foreign infringement activities has significant implications for  trademarks.  Given that solely extraterritorial activities are now outside the reach of the Lanham Act, trademark owners must now more fully investigate claims that involve foreign infringement and determine whether there is domestic “use in commerce” prior to bringing suit in the United States.  In conjunction with this, trademark owners must now consider whether foreign trademark registration is now necessary to protect their trademarks, as foreign enforcement proceedings may now be necessary.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Michael Sheppeard, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.