Supreme Court Vacates and Remands 10th Circuit's Decision in Abitron Austria GmbH v. Hetronic International, Inc.
Written June 29, 2023
On June 29, 2023, the Supreme Court vacated and remanded the 10th Circuit's decision in Abitron v. Hetronic. The Court held that the Lanham Act’s causes of action for trademark infringement do not rebut a canon of statutory construction—the presumption against extraterritoriality. Accordingly, any triggering conduct for Lanham Act liability must be domestic, and the Court held that the relevant triggering conduct is “infringing ‘use in commerce.’” The decision is in part inconsistent with the amicus brief filed by AIPLA on December 26, 2022. To read the opinion of the Court, please click here.
Oklahoma-based Hetronic manufactures remote controls for heavy construction equipment. Abitron distributed products from Hetronic in Europe. But then Abitron began making and selling its own products using the “Hetronic” brand, in alleged violation of its distribution agreement.
Hetronic sued Abitron for trademark infringement in federal court in Oklahoma. Abitron lost a challenge to personal jurisdiction. Abitron also failed to wrest ownership of the “Hetronic” brand in Europe from Hetronic via EUIPO proceedings that were appealed all the way to the European Court of Justice. The Oklahoma jury found Abitron liable for >$90M in trademark infringement damages, despite Abitron’s claim that only 3% of these sales ended up in the United States.
On appeal, the Tenth Circuit affirmed the damages award, concluding that the Lanham Act has extraterritorial applicability as a matter of law, and that Hetronic proved a “substantial effect” on U.S. commerce that was sufficient to justify the award. This proof was based on sales that ended up in the United States, confusion in the United States and sales diversion (i.e., but for the infringement, Hetronic would have made tens of millions more in sales).
In January 2022, Abitron appealed the case to the U.S. Supreme Court and in November 2022, the Court agreed to hear the case. The question before the Court was whether the Court of Appeals erroneously applied the Lanham Act extraterritorially to Abitron’s foreign sales, including purely foreign sales that never reached the U.S. or confused U.S. consumers.
OPINION OF THE COURT
To evaluate extraterritoriality of the Lanham Act, the Court applied a two-step framework. The first step is “whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.”
Concluding that the Lanham Act did not rebut the presumption, the Court proceeded to the second step, namely determining whether there was a “domestic application” of the statute. At this step, the Court ruled that any domestic application of the Lanham Act’s causes of action turned on whether infringing uses in commerce occurred in the United States. The Court remanded for further proceedings consistent with this interpretation of the Lanham Act.
CONCURRING OPINION: JUSTICE JACKSON
Justice Jackson concurred, noting that “a ‘use in commerce’ does not cease at a place the mark is first affixed … .” Echoing a hypothetical raised at oral argument, Justice Jackson suggested that a third party’s domestic resale of an otherwise noninfringing imported product may make the product’s manufacturer liable.
CONCURRING OPINION: JUSTICE SOTOMAYOR, CHIEF JUSTICE ROBERTS AND JUSTICES KAGAN AND BARRETT
Four justices disagreed with the majority’s application of the second step of the framework, stating that the Lanham Act causes of action extend “to activities carried out abroad when there is a likelihood of consumer confusion in the United States.” In other words, four justices believe that there only needs to be a likelihood of confusion—not an actual infringing use in commerce—in the United States in order to have trigger Lanham Act liability.