US Supreme Court Case – Abitron Austria GmbH v. Hetronic Int’l, Inc., 600 U.S. 412 (U.S. 2023)

The Facts

The case is a trademark dispute between a United States company (Hetronic International, Inc.) and six foreign parties (five companies and one individual (collectively Abitron)).  Hetronic manufactures radio remote controls for construction equipment. It sells and services these products, which employ “a distinctive black-and-yellow color scheme to distinguish them from those of its competitors,” in more than 45 countries.

Abitron originally operated as a licensed distributor for Hetronic, but it later concluded that it held the rights to much of Hetronic’s intellectual property, including the marks on the products at issue in this suit. After reverse engineering Hetronic’s products, Abitron began to sell Hetronic-branded products that incorporated parts sourced from third parties. Abitron mostly sold its products in Europe, but it also made some direct sales into the United States.

Hetronic sued Abitron in the Western District of Oklahoma for the unauthorized “use in commerce [of] any reproduction . . . of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services” when “such use is likely to cause confusion” and Hetronic also invoked §1125(a)(1), which prohibits the “us[e] in commerce” of a protected mark, whether registered or not, that “is likely to cause confusion.”

Abitron argued that Hetronic sought an impermissible extraterritorial application of the Lanham Act. However, the District Court rejected this argument, and a jury later awarded Hetronic approximately $96 million in damages related to Abitron’s global employment of Hetronic’s marks.

This amount thus included damages from Abitron’s direct sales to consumers in the United States, its foreign sales of products for which the foreign buyers designated the United States as the ultimate destination, and its foreign sales of products that did not end up in the United States. The District Court also entered a permanent injunction preventing Abitron from using the marks anywhere in the world.

On appeal, the Tenth Circuit narrowed the injunction to cover only certain countries but otherwise affirmed the judgment. It concluded that the Lanham Act extended to “all of [Abitron’s] foreign infringing conduct” because the “impacts within the United States [were] of a sufficient character and magnitude as would give the United States a reasonably strong interest in the litigation.”

The ruling of the US Supreme Court

On page 415 of Abitron Austria GmbH, Mr. Justice Alito, for the US Supreme Court, wrote, “This case requires us to decide the foreign reach of 15 U.S.C. §1114(1)(a) and §1125(a)(1), two provisions of the Lanham Act prohibit trademark infringement. Applying the presumption against extraterritoriality, we hold that these provisions are not extraterritorial and that they extend only to claims where the claimed infringing use in commerce is domestic.”

How the US Supreme Court reached the Conclusion

“It is a ‘longstanding principle of American law “that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.” Abitron Austria GmbH at 417.

“Applying the presumption against extraterritoriality involves “a two-step framework.” Id., at 337, 136 S. Ct. 2090, 195 L. Ed. 2d 476. At step one, we determine whether a provision is extraterritorial, and that determination turns on whether “Congress has affirmatively and unmistakably instructed that” the provision at issue should “apply to foreign conduct.” “If Congress has provided an unmistakable instruction that the provision is extraterritorial, then claims alleging exclusively foreign conduct may proceed, subject to the limits Congress has (or has not) imposed on the statute’s foreign application.” Abitron Austria GmbH, 417, 418.

“If a provision is not extraterritorial, we move to step two, which resolves whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision.” Abitron Austria GmbH, 418.

“Step two is designed to apply the presumption against extraterritoriality to claims that involve both domestic and foreign activity, separating the activity that matters from the activity that does not. After all, we have long recognized that the presumption would be meaningless if any domestic conduct could defeat it. Thus, “‘[i]f the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application’ of the statute, ‘even if other conduct occurred abroad.’” And “if the relevant conduct occurred in another country, ‘then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in US territory.’”

Of course, if all the conduct “‘regarding [the] violations ‘took place outside the United States,” then courts do “not need to determine . . . the statute’s ‘focus’” at all. In that circumstance, there would be no domestic conduct that could be relevant to any focus, so the focus test has no filtering role to play. Abitron Austria GmbH, 419.

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