Supreme Court Rejects Extraterritorial Application of Lanham Act in Abitron Austria GMBH v. Hetronic Int’l Inc., 600 U.S. ___ (2023).

On June 29, 2023, the Supreme Court decided the question of whether a party can be held liable in the United States for trademark infringement based on infringing use of a mark in other countries. After an analysis of the foreign reach of §§ 1114(1)(a) and 1125(a)(1) of the Lanham Act, the Supreme Court unanimously answered “No.”  This case arose due to a trademark dispute between Hetronic (a U.S. company) and Abitron (a foreign company).  Abitron was once a licensed distributor for Hetronic and after reverse engineering Hetronic’s products, it began selling Hetronic-branded products.  While some of the products were directly sold  into the United States, most of its products were sold in Europe.  Hetronic sued Abitron for unauthorized use of its mark under § 1114(1)(a) and for use that was likely to cause confusion under § 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 Supreme Court applied a two-step framework: (1) determine whether a provision is extraterritorial, which turns on whether “Congress has affirmatively and unmistakably instructed” that the provision should “apply to foreign conduct”; and (2) if not, determine whether the suit seeks a permissible domestic or impermissible foreign application of the provision by identifying the focus of congressional concern underlying the provision at issue, including the conduct it seeks to regulate and the interests it seeks to protect.

The Supreme Court determined that neither section of the Lanham Act provides an express statement of extraterritorial application.  Rather, the sections simply prohibit use “in commerce” (“all commerce which may lawfully be regulated by Congress”) of protected trademarks when that use is “likely to cause confusion.”  The Court determined that Abitron’s conduct (infringing use in commerce of Hetronic’s mark) provides the dividing line between foreign and domestic applications of §§ 1114(1)(a) and 1125(a)(1) of the Lanham Act and concluded that these sections of the Lanham Act are not extraterritorial.

Justice Sotomayor, in a concurring opinion joined by 3 other justices, disagreed with the majority’s application of the two-step framework and argued that the focus of the Lanham Act is to prevent U.S. consumer confusion, rather than a defendant’s conduct.  Based on this reasoning, the Lanham Act could apply to foreign use if it caused confusion in the U.S.  However, the majority rejected this view and cautioned that domestic application of a statute where foreign conduct is implicated likely negates a presumption against extraterritoriality and threatens “international discord.”

The U.S. Supreme Court’s decision that federal trademark law cannot be applied to foreign conduct creates new obstacles for American brand owners seeking to curtail infringement and counterfeiting and leaves open many questions, including what counts as domestic use in commerce, for lower courts to address.