U.S. Supreme Court Eliminates Extraterritorial Applications of the Lanham Act

Can a party be held liable in the United States for trademark infringement based on use of a mark in other countries? In Abitron Austria GmbH et al. v. Hetronic Int’l, Inc., 600 U.S. __ (2023), the Supreme Court recently answered no, holding that liability for trademark infringement under the Lanham Act extends only to use of the mark in commerce in the United States.

Background

Hetronic manufactures and distributes radio remote controls for construction equipment in more than 45 countries. Originally a licensed distributor of Hetronic products, Abitron began to produce its own Hetronic-branded products, selling them primarily in Europe but with some direct sales in the United States. Hetronic responded with a lawsuit in the Western District of Oklahoma for trademark infringement under 15 U.S.C. §§ 1114(1)(a) and 1125(a)(1) and sought damages for all of Abitron’s allegedly infringing acts worldwide.

Throughout the proceedings, the District Court rejected Abitron’s arguments that damages based on non-U.S. conduct, including wholly foreign sales, represented an impermissible extraterritorial application of the Lanham Act. At trial, a jury awarded $96 million to Hetronic based on Abitron’s global use of Hetronic’s marks, which included damages for Arbitron’s: (1) direct sales to consumers in the United States; (2) foreign sales of products where the United States was the final destination; and (3) foreign sales of products that did not end up in the United States. The District Court also entered a permanent injunction preventing Abitron from using Hetronic’s marks anywhere in the world. 

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

Supreme Court Limits the Lanham Act’s Reach

In a 5-4 majority opinion authored by Justice Alito—joined by Justices Thomas, Gorsuch, Kavanaugh, and Jackson—the Supreme Court vacated the judgment and remanded. At the outset, the Court invoked the general presumption against extraterritoriality of U.S. laws, which requires following a two-step test to determine whether the statutory provisions at issue, 15 U.S.C. §§ 1114(1)(a) and 1125(a)(1), can extend to the defendant’s extraterritorial conduct. Under the first step, which “turns on whether ‘Congress has affirmatively and unmistakably instructed that’ the provisions at issue should ‘apply to foreign conduct,’” the Court concluded that these provisions of the Lanham Act do not provide the required “clear, affirmative indication.” Thus, the Court moved on to the second step, which requires determining whether the plaintiff’s claims seek a permissible domestic application of the statute to the defendant’s conduct. At this step, “[t]he ultimate question regarding permissible domestic application turns on the location of the conduct relevant to the focus” of the statutory provisions. Here, the Court held that the relevant inquiry for trademark infringement is whether the allegedly infringing use in commerce occurred in the United States. 

In vacating the Tenth Circuit’s decision, the Court distinguished its decision in Steele v. Bulova Watch Co. 344 U.S. 280 (1952), which has long been cited as support for the extraterritorial reach of the Lanham Act. In Steele, the Court held that the Lanham Act could extend to an individual who was manufacturing and selling products bearing the plaintiff’s mark in Mexico. The Court found that Steele was not instructive because it was decided before the Court established its two-step extraterritoriality test, the conduct at issue involved essential steps in the United States, and the conduct had caused consumer confusion in the United States.

Notably, the Court declined to clarify what circumstances would constitute an actionable “use in commerce,” finding that the question presented did not provide the “occasion to address the precise contours of that phrase here.” In contrast, Justice Jackson, who authored a separate concurring opinion, offered a broad definition of “use in commerce” that would encompass situations in which a consumer purchased a foreign entity’s product abroad and later sold that product secondhand in the United States. 

In an opinion concurring only in the judgment, Justice Sotomayor, joined by the Chief Justice and Justices Kagan and Barrett, also disagreed with the majority’s rationale at the second step. The concurring Justices opined that the relevant inquiry is not whether the mark is used in commerce in the United States, but whether it creates a likelihood of confusion in the United States. Because the courts below did not consider whether activities occurring abroad were likely to cause confusion in the United States, the concurring Justices agreed that the judgment should be vacated. 

What’s Next?

Until now, many courts have extended the reach of the Lanham Act to foreign conduct with a substantial effect on U.S. commerce, allowing litigants to bring claims in U.S. courts over infringing acts abroad. By ruling that the Lanham Act’s infringement provisions are not extraterritorial and extend only to “use in commerce” in the United States, the Supreme Court has shifted the landscape of cross-border trademark disputes and reinforced the importance of securing trademark registrations in other countries. The decision will likely make it more difficult for trademark owners to secure worldwide injunctions through U.S. courts and recover damages for infringing acts occurring abroad. However, the Court did not expressly overrule Steele, and the concurring opinions suggest the door has not closed entirely on claims involving foreign acts of infringement.