Supreme Court to Decide Whether the Lanham Act Reaches Outside the US for Foreign Infringement

In March, the Supreme Court heard important trademark arguments regarding whether the U.S. Lanham Act was intended to apply outside the United States. In Abitron Austria GmbH v. Hetronic International, Inc., the Supreme Court justices have heard varying arguments over whether a party can recover for infringing conduct that occurred outside the U.S. borders and what the legal standard should be for recovering damages. A decision is expected this month.

Abitron v. Hetronic – Should the Lanham Act Apply Outside US? 

Hetronic, Inc. is an American manufacturer that sells construction equipment and remote controls. It has registered numerous federal trademarks for a variety of goods, including radio remote controls that are at the heart of the suit. Outside the United States, Hetronic has authorized and relied on distributors abroad to assemble, sell, and distribute these remote controls with the caveat that they must purchase genuine and authorized parts from Hetronic. The defendant, Abitron, serves as Hetronic’s distributor in Europe, agreeing to purchase, manufacture, and license products from Hetronic.

In the lawsuit, Hetronic claims Abitron purposely reverse engineered Hetronic’s products to make its own counterfeit products which it proceeded to sell to consumers under the Hetronic name. Consumers that bought these products were located both in the United States and abroad. And according to the lawsuit, to add further insult to injury, Abitron allegedly continued to sell Hetronic’s products even after Hetronic terminated their licensing agreement with Abitron.

Although the crux of the infringing conduct seemed to have occurred in Europe, Oklahoma-based Hetronic brought suit in the United States. In the original suit, a jury found for Hetronic and awarded the manufacturer over 90 million dollars for Abitron’s acts.

Supreme Court to Decide if Lanham Act Reaches Outside the US for Foreign Infringement

Abitron appealed the decision, raising multiple arguments that included, among others, that the Lanham Act was not intended to be applied this way. Specifically, Abitron argues that the court’s finding invalidates the two-step test that is typically used to determine whether a federal law was intended to apply abroad. This two-step test first asks whether there is a “clear, affirmative indication” that the law was intended to apply abroad. If there is no clear indication, then the court must determine whether the law’s “focus” implicates a domestic application for it.

In today’s world of interconnected global commerce, it has become increasingly difficult to affirmatively declare what commerce and what conduct U.S. federal law looks to govern. Both Abitron and the White House have said that congressional intent behind the Lanham Act should not be assumed to apply as broadly as Hetronic claims. Specifically, Abitron argues that if found liable, it should only be on the hook for $240,000, the amount that resulted from sale of infringing goods sold to customers located in the United States. This is a far cry from the ninety million dollars Hetronic originally won, and with such a drastic difference in damages and interpretation, it behooves counsel to follow this case as it has far-reaching implications for trademark holders both domestic and abroad.

Key Takeaways on the Pending Supreme Court Decision on Application of Lanham Act to Foreign Misconduct

An important trademark law case decision is pending before the U.S. Supreme Court this month that seeks to answer whether:

• The Lanham Act can be applied to infringing conduct abroad and how damages would be calculated;

• The two-step extraterritoriality test applies to the Lanham Act; and

• Whether the unauthorized use of a trademark by itself is actionable under the Lanham Act.

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