Lanham Act Ruled No Protection Against Foreign Infringing Use

With the figurative stroke of a pen, the Supreme Court overturned a company’s $96 million damage award for a foreign competitor’s use of its trademark. More significantly, the Court struck a blow to companies seeking U.S. trademark protection against foreign infringing use.

The case was Abitron Austria GmbH et al. v. Hetronic Int'l, Inc. Hetronic manufactures radio transmitters and receivers used for remote control in the construction industry. Its products, which are sold in more than 45 countries, have a “distinctive black-and-yellow color scheme” that is trademarked in the U.S. Abitron had been a distributor of Hetronic’s products and began selling its own products using Hetronic’s mark. Most of the sales were in Europe, with some direct sales to the U.S.

Hetronic, a U.S. company, sued Abitron and six other foreign entities for trademark infringement under the Lanham Act. On June 29, 2023, the Supreme Court unanimously held that the Lanham Act does not extend to this extraterritorial use.

A Look at the Lanham Act

Enacted in 1946, the Lanham Act provides for federal registration of trademarks and protects trademark owners against unauthorized use. Specifically, the law prevents competitors from using the same or similar mark in a way that is likely to cause confusion among consumers.

To be eligible for protection, a trademark must have two characteristics. First, it must be distinctive, meaning that it must distinguish a particular product as coming from a particular source. Second, it must be used in commerce. If the mark is not used in commerce at the time of application for registration, the applicant must establish a good faith intent to use it in commerce in the future.

To establish an allegation of trademark infringement, the plaintiff must show that the defendant used the plaintiff’s protectable mark in commerce and that the use will likely create confusion. The question in the Abitron case is whether the sale of products with Hetronic’s mark constituted “use in commerce” under the Lanham Act.

The Supreme Court Decision

The lower court found that the Lanham Act’s prohibitions against trademark infringement extend to foreign use, and the Tenth Circuit affirmed the decision on appeal. The Supreme Court vacated that judgment, citing the principle that U.S. law applies only within U.S. territorial jurisdiction unless Congress clearly demonstrates a different intent. The Court unanimously found no such intent in the sections of the Lanham Act at issue. The majority noted that to hold otherwise would create international discord given that each country has the authority to grant trademark rights within its jurisdiction.

The Court then proceeded to determine if the presumption against extraterritoriality precluded the claims involved in the Abitron case. To do that, the Court analyzed which elements of the statute represented the focus of Congressional concern. The Court found that use in commerce was the focal point and that in the case before it, the use occurred in Europe.

Concurring Opinions

Justice Sonia Sotomayor, joined by Justices Amy Coney Barrett and Elena Kagan and Chief Justice John Roberts, concurred with the majority’s judgment but disagreed with the Court’s analysis in the second step. They found that consumer confusion is as important as use in commerce. If consumer confusion occurs in the U.S., the statute can be applied to the domestic result of foreign conduct. To do otherwise “would absolve from liability those defendants who sell infringing products abroad that reach the United States and confuse consumers here.” Justice Samuel Alito, writing for the majority, disagreed, arguing that Sotomayor’s analysis defeats the presumption against extraterritoriality because the use of a mark in commerce will often have extraterritorial effects.

Justice Ketanji Brown Jackson joined in the majority opinion but wrote a separate concurrence. She wrote that use in commerce is the focal point of the statute but delved into the nuances of what that means. In her view, use in commerce occurs “wherever the mark serves its source-identifying function.” She uses as an example a product that is generally sold in Europe but enters the resale market in the U.S. Justice Alito wrote in a footnote that the Court had “no occasion to address the precise contours” of Justice Jackson’s approach.

Key Takeaways

In fact, Justice Alito’s opinion does not elaborate on the meaning of “use in commerce,” other than to restate the Lanham Act’s definition. That leaves trademark owners with little guidance as to what foreign activities constitute infringement. However, the Abitron case does make it clear that U.S. trademark protection alone is not enough to establish a claim for foreign infringement. Unless Justice Jackson’s more nuanced approach is brought to bear in a future case, trademark owners should assume that they can only sue in U.S. courts when the infringing use occurs in the U.S.

In light of that, companies will likely need to adjust their brand-protection strategies to include registering their trademarks in foreign jurisdictions where the marks are used or licensed. Additionally, companies should monitor those markets for potentially infringing use and be prepared to file suit in each country to enforce their trademarks and stop foreign infringement.

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