A client recently asked whether they should file their trademark not only in the US, but in other countries where they manufacture or sell their products. In Abitron Austria v. Hetronic, the U.S. Supreme Court provided the answer — and also served an opinion salad.
The case began in the Western District of Oklahoma when a group of businesses in Europe (“Abitron”) was sued by Hetronic International for trademark infringement. At issue were remote controllers for construction equipment with a distinctive yellow and black trade dress. Before Abitron reverse-engineered Hetronic’s product and trade dress, it had been an authorized licensee of Hetronic’s trademarks.
The trial ended with Hetronic securing a $96 million jury verdict enforcing its trademark against Abitron. The district court upheld Hetronic’s right to apply the Lanham Act against the European conglomerate that had brazenly infringed on its trademark. The district court imposed an injunction on Abitron that enjoined it from using the trademarks anywhere in the world.
On appeal, the Tenth Circuit limited the scope of the injunction to only certain countries.
In its analysis of the case, the Supreme Court majority first pointed to the longstanding presumption that Congress’s reach only applies to the territorial jurisdiction of the United States. This so-called “presumption against extraterritoriality” could only be overridden if Congress expressly states such in a statute.
To gauge whether the presumption had been expressly overridden, the court referenced a two-step framework:
- The statutory provision is “affirmatively and unmistakably extraterritorial”; or
- The suit “seeks a (permissible) domestic or (impermissible) foreign application of the provision.”
According to the majority (led by Justice Alito), “use in commerce” provides the dividing line between foreign and domestic applications of the Lanham Act. With this in mind, the court found that manufacturing something outside of the United States — that is, use outside of U.S. commerce — was not relevant to enforcing trademark laws. In this case, the product was manufactured in Germany. Accordingly, the district court’s judgment was vacated, and the case was remanded back to the District Court to determine whether Abitron’s conduct outside the United States was impactful and likely to cause confusion.
Justice Sotomayor (joined by Roberts, Kagan, and Barett) filed a concurring opinion in judgment only. Sotomayor agreed with the result, but asserted that the court had improperly created a new, three-step process to determine a provision’s extraterritoriality; the third step being an assessment of whether the conduct (such as manufacturing the goods bearing the infringing trademark in Germany) determines whether the statute was violated domestically — even though the Lanham Act (that is, the Trademark Act) does not concern itself with conduct. Sotomayor emphasized that the Lanham Act focuses on commerce (sales in the U.S.) rather than conduct (manufacturing in Germany). But because on remand the district court would determine whether sales occurred in Germany or the U.S., Sotomayor joined in the majority opinion — even though, in her view, the Court did not address what the statute really does.
Justice Jackson’s concurrence is most memorable for her hypothetical example about a fictional, bootleg handbag manufacturer that used the trademark COACHE. If such bags were manufactured in Germany and never resold in the United States, she said, that would not create a cause of action under the Lanham Act. However, if the handbags were later sold in the U.S., that could create confusion among U.S. consumers. According to Jackson, this is the “conduct” emphasis of the Court, and that focus is appropriate.
Unfortunately, these three different opinions do nothing to create clarity for practitioners. The justices all agree that the district court should not have applied the Lanham Act extraterritorially in this instance — but they disagree as to what guidance practitioners should glean from this decision.
For example, Justice Jackson had suggested that another entity could infringe a U.S. company’s trademark and not be held liable if the sale only occurs in Europe…but that foreign entity might be subject to a lawsuit if whoever bought the goods decides to resell them in the United States. That’s not a very good reference for guiding foreign clients with trademarks that are confusingly similar to US trademarks. This ruling makes it difficult to recommend what clients should do.
One thing that seems clear is that registering trademarks internationally has now become much more important. If U.S. courts are forbidden from enforcing trademark law outside the U.S., then you’ll need to have registrations in those foreign jurisdictions to protect your trademark rights. Maintaining a network of foreign counsel is more necessary than ever.
Fortunately, at Kaufman & Kahn, we can file for registration in many jurisdictions through the USPTO, and we know trademark counsel in just about every other country.
