Hetronic International, Inc. manufactured radio remote controls used in construction equipment and sold its products in numerous countries. The company used registered trademarks and a distinctive color scheme to identify its goods. Abitron Austria GmbH and related foreign entities previously served as licensed distributors of Hetronic products in Europe.
After the distributor relationship deteriorated, Abitron took the position that it owned rights to certain intellectual property associated with Hetronic’s products. Abitron began manufacturing and selling remote controls bearing Hetronic’s trademarks. Most of these sales occurred outside the United States, though some products were sold directly into the United States or later entered the United States through downstream channels.
Hetronic filed suit in the United States District Court for the Western District of Oklahoma, alleging violations of two provisions of the Lanham Act that prohibit unauthorized use of trademarks in commerce when that use is likely to cause confusion. Hetronic sought damages for Abitron’s trademark use worldwide.
A jury returned a verdict in Hetronic’s favor and awarded approximately $96 million in damages based on Abitron’s global sales. The district court also entered a permanent injunction barring Abitron from using Hetronic’s trademarks anywhere in the world. Abitron appealed, arguing that the Lanham Act did not apply to its foreign conduct.
The United States Court of Appeals for the Tenth Circuit reviewed whether the Lanham Act could reach Abitron’s conduct occurring outside the United States. The court concluded that the statute applied to Abitron’s foreign trademark use because that conduct had effects within the United States that were sufficient to justify applying federal trademark law. The court narrowed the scope of the injunction but otherwise affirmed the judgment.
Abitron sought review in the Supreme Court of the United States, raising a circuit split regarding the extraterritorial reach of the Lanham Act.
The Supreme Court examined whether the Lanham Act provisions at issue applied extraterritorially. The Court applied the established presumption that federal statutes apply only within the territorial jurisdiction of the United States unless Congress clearly indicates otherwise.
The Court followed a two-step framework. First, it asked whether Congress had expressly stated that the trademark provisions applied to foreign conduct. The Court found no such indication. Although the Lanham Act defines commerce broadly as all commerce that Congress may regulate, prior precedent established that such language does not overcome the presumption against extraterritoriality.
Because the provisions were not extraterritorial, the Court proceeded to determine whether Hetronic’s claims involved a permissible domestic application of the statute.
To determine whether an application of the statute was domestic, the Court identified the conduct relevant to the statute’s focus. The Court explained that both provisions prohibit the unauthorized use of a trademark in commerce when that use is likely to cause confusion. The relevant conduct was therefore the infringing use of the trademark in commerce.
The Court rejected approaches that focused solely on consumer confusion or on the effects of foreign conduct. Instead, it emphasized that liability under the Lanham Act turns on where the infringing use in commerce occurred. Consumer confusion was a required characteristic of the prohibited conduct but was not itself the conduct that defined the statute’s reach.
Under this framework, claims could proceed only when the infringing use of the trademark occurred domestically. Foreign sales that did not involve domestic use in commerce fell outside the statute’s scope, even if they caused downstream effects in the United States.
Applying this standard, the Supreme Court concluded that the lower courts had applied an incorrect legal test. The jury’s damages award and the injunction were based on Abitron’s worldwide sales, including foreign transactions that did not involve domestic use of Hetronic’s trademarks in commerce.
Because the Lanham Act did not apply extraterritorially, and because domestic use in commerce provided the dividing line between permissible and impermissible applications of the statute, the Court held that the judgment could not stand as entered.
The Supreme Court held that the Lanham Act provisions at issue were not extraterritorial and applied only to claims involving domestic use of a trademark in commerce. The Court vacated the judgment of the Court of Appeals and remanded the case for further proceedings consistent with that interpretation.
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