Extraterritorial Reach of Lanham Act: Landmark Case in Trademark Law

This case involves a dispute over trademarks between Hetronic International, Inc. and Abitron, a U.S. company, and six foreign parties. Hetronic manufactures radio remote controls for construction equipment and distributes them in over 45 countries. Abitron, a former licensed distributor for Hetronic, began selling Hetronic-branded products after reverse engineering them. Although Abitron primarily sold its products in Europe, it also made direct sales in the United States.

In response to Abitron's trademark violations, Hetronic sued them in Oklahoma under two provisions of the Lanham Act. Hetronic sought damages for Abitron's unauthorized use of their trademarks worldwide. The District Court ruled for Hetronic, awarding them $96 million in damages and issuing a permanent injunction. The Tenth Circuit upheld the decision, stating that the Lanham Act applied to Abitron's infringing conduct abroad due to its impact on the United States. The Supreme Court granted certiorari to resolve the Circuit split regarding the extraterritorial reach of the Lanham Act.

The presumption against extraterritoriality is a well-established principle in U.S. law, which states that legislation enacted by Congress only applies within the territorial jurisdiction of the United States. This presumption aims to prevent international conflicts that may arise when U.S. laws are enforced in foreign countries. Applying this presumption involves a two-step framework: determining if a provision has extraterritorial effects and evaluating whether the lawsuit seeks a domestic or foreign application of the provision. In the second step, courts identify the underlying congressional concern related to the provision.

The second step entails applying the presumption against extraterritoriality to claims involving domestic and foreign activities. If the conduct relevant to the focus of the statute occurs within the United States, it is considered a permissible domestic application. However, if the relevant conduct occurs in another country, it is considered an impermissible extraterritorial application. The focus test is unnecessary if all the conduct regarding the violations occurs outside the United States.

The Lanham Act does not explicitly state that it applies extraterritorially. Its purpose is to prohibit the use of protected trademarks in commerce if it is likely to cause confusion. Hetronic's argument that the definition of "commerce" supports extraterritorial application is not enough to justify a different conclusion. The definition does not provide a basis for confirming extraterritoriality, even if it differs from other statutes.

In the case of Steele v. Bulova Watch Co., the Court considered a similar case involving a violation of the Lanham Act through the production and sale of watches with a protected trademark in both the United States and Mexico. Although the decision in Steele was limited to its specific facts, it emphasized the importance of domestic conduct and the likelihood of domestic confusion. Hence, it does not offer guidance on determining the domestic applications of the relevant provisions. Instead, the focus should be on the location of the conduct relevant to the violation, as specified in § 1114(1)(a) and § 1125(a)(1) of the Act. Congress has explicitly prohibited the unauthorized use of a protected trademark in commerce, particularly when it is likely to cause confusion. This specific action is the conduct relevant to any focus on offer today.

To summarize, the "use in commerce" is the critical conduct for the application of § 1114(1)(a) and § 1125(a)(1). This conduct serves as the boundary between foreign and domestic applications of these provisions. If the relevant conduct occurred within the United States, it is considered a permissible domestic application. However, it is considered an impermissible extraterritorial application if it occurred in a foreign country.

Justice Sotomayor’s interpretation of the Lanham Act's domestic applications poses a risk to the presumption against extraterritoriality, potentially leading to uncertainty and international conflicts. Trademark law is territorial, granting each country the authority to enforce trademark rights within its borders.

The Paris Convention for the Protection of Industrial Property and other international agreements recognizes the territorial nature of trademarks. It gives each country the power to enforce trademark rights within its jurisdiction. The Lanham Act, which incorporates these treaties and conventions, mandates that the registration of a foreign trademark in the United States is independent of its registration in the country of origin. The rights of that mark in the United States are governed by domestic law. Given the territorial nature of trademarks, applying the Lanham Act to foreign conduct would create conflicts with foreign laws and procedures, potentially resulting in international discord. Using a trademark in commerce serves as the dividing line between foreign and domestic applications of the Lanham Act provisions.