On Thursday, June 29, 2023, the United States Supreme Court delivered a decision in the case Abitron Austria GmbH et al. v. Hetronic International Inc., striking a blow to the extraterritorial reach of two provisions of the Lanham Act. Ruling in favor of Petitioner Abitron, the Court, led by Justice Alito, found that because Congress did not clearly intend for 15 U. S. C. §1114(1)(a) and §1125(a)(1) to apply internationally, and because the Lanham Act’s focus is a trademark’s use in commerce, the provisions do not extend to conduct abroad when applying the presumption against extraterritoriality.
Hetronic International Inc. (“Hetronic”), a U.S. based company, brought a trademark infringement suit against Arbitron Austria GmbH’s 6 collective entities. Hetronic manufactures, sells and services radio remote control equipment for use in the construction industry in a “distinctive black-and-yellow color scheme” in more than 45 countries. Abitron was once a licensed distributor for Hetronic, and subsequently claimed rights in much of Hetronic’s IP, applying Hetronic’s marks on its own products.
At trial, the Western District of Oklahoma, and later on appeal the Tenth Circuit, found that Lanham Act provisions 15 U.S.C. §1114(1)(a) and §1125(a)(1), which prohibit trademark infringement, permissibly applied extraterritorially to the actions of Abitron. In doing so, a jury awarded Abitron a $96 million in damages.
Vacating the lower court’s findings, Justice Alito, joined by Justices Jackson, Thomas, Gorsuch and Kavanaugh, overturned, applied a two-step framework to determine whether the relevant provisions of the Lanham Act can successfully reach extraterritorially to Abitron’s German operations. Justice Alito grounded his analysis in the presumption against extraterritoriality, which is aimed at avoiding international discord that may arise when U.S. law is applied beyond its intended, or appropriate, reach.
In applying this presumption against extraterritoriality to 15 U.S.C. §1114(1)(a) and §1125(a)(1), as a first step, the Court looked to whether the language of the statute reflects that “‘Congress has affirmatively an unmistakably instructed that’ the provision at issue should ‘apply to foreign conduct.’” Finding no clear indication of the statute’s applicability to foreign conduct, the Court turned to the second step, asking whether the “focus” of Congressional concern in the statute, use in commerce, occurred in the U.S.. Justice Alito quickly resolved this inquiry noting that “commerce” under the statute was not clearly intended to include foreign commerce, and as such declined to extend §1114(1)(a) and §1125(a)(1) extraterritorially to Abitron’s conduct.
Notably, Justice Alito highlighted that the Court has repeatedly held that even statutes that expressly refer to “foreign commerce” when defining commerce, may not be extraterritorial in grasp. In support, Justice Alito cited Supreme Court case law finding that unless contrary intent appears, legislation is meant to apply only in the United States, and further, that the presumption against extraterritoriality seeks to avoid tension when U.S. law is applied to conduct in foreign countries. Citing Morrison v. National Australia Bank Ltd.,561 U. S. 247, 255; see also citing RJR Nabisco, Inc. v. European Community, 579 U. S. 325, 335–336. Finding that the “use in commerce” in the Lanham Act did not extend to foreign commerce, Justice Alito found in favor of Arbitron, vacating the lower courts’ judgement and remanding for application of his test consistent with the opinion.
Justice Sotomayor, joined by Chief Justice Roberts, and Justices Kagan and Barrett, concurring with the Court’s opinion, diverged from this analysis on the second step. Instead, the Justices asked “whether the object of the statute’s focus”–in this case, consumer confusion—“is found in, or occurs in, the U.S.” This analysis allows for the application of a statute to be applied domestically, even when foreign conduct is involved, when activities that spur domestic consumer confusion originate abroad. Ultimately, Justice Sotomayor reached the same result and vacated the lower court’s decision, as it did not apply this test.
Justice Sotomayor criticized Justice Alito’s analysis, stating that it “would absolve from liability those defendants who sell infringing products abroad that reach the United States and confuse consumers here. That resulting consumer confusion in the United States, however, falls squarely within the scope of the interests that the Lanham Act seeks to protect."
In response, Justice Alito defended the presumption against extraterritoriality driving his decision, stating that Justice Sotomayor’s approach to the second step threatens to dismantle its influence.
In a solo concurrence, Justice Jackson delved into interpreting “use in commerce” to guide her opinion in this case. She determined that “use in commerce” “can occur wherever the mark serves its source identifying function.”
Practically, the impact of this holding will be felt most by U.S. based companies attempting to protect their brands from unauthorized uses and other counterfeiting activities abroad. Following Justice Alito’s analysis, brands are tasked with proving that infringing actions taken by others abroad align with the “focus” of the Lanham Act, which is use of the trademark in commerce in the U.S.. However, this will likely prove challenging as Justice Alito provides little to no guidance on what “use in commerce” means, expressly declining to stake out the parameters of the term. Perhaps Justice Jackson’s concurrence will prove to be a helpful roadmap to practitioners attempting to navigate the aftermath of this decision.