E.T. — EXTRATERRITORIAL TRADEMARK —PHONES CONGRESS
U.S. Supreme Court denies U.S. trademark owner ability to sue infringer for European-based infringement
On June 29, 2023, in a unanimous decision, the U.S. Supreme Court (the “Court”) held that the Lanham Act did not apply to foreign conduct, even if such conduct had a profound effect on U.S. commerce, thereby narrowing and clarifying the definition of the essential “use in commerce” requirement under U.S. trademark law.
Takeaways:
If the “use in commerce” for a trademark at issue is not domestic (literally within the U.S.), the Lanham Act cannot reach it and a challenge against extraterritorial conduct will likely fail.
The Court, in making this decision, clarifies the definition of “use in commerce.” Simultaneously, the definitional scope is narrowed for the “use in commerce” trademark requirement.
This decision is a unique and rare intermingling of international and U.S. intellectual property law.
Summary of the Case:
Hetronic International (“Hetronic”) is a U.S. company that develops and manufactures radio remote controls for construction equipment. Hetrronic sells its products and services in 45 different countries, with a distinctive yellow-black color scheme trademark.
Abitron Austria GmbH is a collection of 5 companies and 1 individual based in Europe, who also develop and manufacture radio remote controls.
Abitron Austria (“Abitron”) once had a licensing agreement with Hetronic to produce and sell Hetronic’s radio remote controls. When the licensing relationship broke down, however, Abitron continued developing and selling Hetronic’s radio remote controls throughout Europe.
Hetronic filed suit against Abitron for trademark infringement.
Legal Procedure
U.S. District Court: found in favor of Hetronic, Abitron appealed.
U.S. Court of Appeals for the 10th Circuit: affirmed the U.S. District Court decision, finding in favor of Hetronic because, while the infringing conduct occurred abroad, it had a significant impact on U.S. commerce. Abitron petitioned the U.S. Supreme Court to hear the case.
U.S. Supreme Court: reversed both the Court of Appeals and District Court decisions, finding in favor of Abitron, determining that §1114(1)(a) and §1125(a)(1) of the Lanham Act (the sections upon which Hetronic based its claims) are not extraterritorial and thus did not apply outside of a domestic context to foreign conduct.
In this unanimous decision, the U.S. Supreme Court used a two-prong test which applied the “use in commerce” trademark requirement to a question of international law which outlines a presumption against extraterritoriality: a U.S. statute cannot regulate foreign conduct unless it explicitly states otherwise. Applied to the use in commerce standard, the court’s ultimate test first asked (1) whether the statute covered extraterritorial conduct and then, if not, (2) whether the statute is attempted upon a domestic or foreign application. If the former, it is a permissible application; if the latter, it is impermissible. This test asks what the concentration of the statute is, and then whether the conduct relevant to the statute occurred within the U.S.
In regards to Abitron’s use of Hetronic’s trademark, that is, the sale and distribution of Hetronic’s products in Europe under Hetronic’s trademark, the Court determined the conduct was certainly extraterritorial and therefore outside the Court’s jurisdiction. The Court reasoned that the suit was an impermissible application of the statute towards foreign affairs. This two-step analysis rejected the Court of Appeal’s contention that a “substantial effect” on U.S. commerce justifies regulating a foreign party, thereby clarifying the essential “use in commerce” requirement of trademark law. It also narrows the Lanham Act, tailoring the statute to more purely domestic altercations, even if such alterations may currently or in the future heavily impact U.S. commerce. The upshot of this Court decision is in line with other recent Court decisions narrowing the scope of respective trademark and copyright laws, for example, read our analyses of the Warhol Foundation and Jack Daniel’s decisions, linked here.
