Supreme Court Sets Limits on Extraterritorial Application of Lanham Act

In a recent landmark ruling, the US Supreme Court limited the extraterritorial application of federal trademark law, overturning a $96 million damages award for Hetronic International and finding the infringement provisions of the Lanham Act do not apply to conduct outside of the United States. Abitron Austria GmbH et al. v. Hetronic Int’l, Inc., No. 21-1043 (June 29, 2023). The court emphasized the presumption against extraterritoriality, which ensures that US laws generally do not cover foreign activity.

This case involved a dispute between Hetronic, a US company specializing in radio remote controls, and Abitron, its former European partner. Hetronic is known for its distinctive black-and-yellow color scheme and sells its products in over 45 countries worldwide.

Abitron was initially a licensed distributor, but later sold Hetronic-branded product without a license, mostly in Europe, with some direct sales to the US. Thus, Hetronic filed suit against Abitron in the Western District of Oklahoma, alleging trademark violations under the Lanham Act, which prohibits the unauthorized use of protected marks in commerce where such use is likely to cause confusion.

The district court awarded Hetronic approximately $96 million in damages for Abitron’s direct sales to US consumers and foreign sales of products ultimately destined for the United States.

The Supreme Court overturned the damages award. Writing the majority opinion, Justice Alito concluded that certain provisions of the Lanham Act do not apply to conduct outside the United States. This opinion relied on a long-standing presumption against the extraterritorial application of US law, thus clarifying that trademark violations under the Lanham Act must involve domestic use in commerce to fall within its purview.

The court applied a two-step framework to reach this decision.

First, had Congress explicitly intended for the Lanham Act’s trademark infringement provision to cover foreign conduct? In this case, the Lanham Act's relevant provisions lacked a “clear and affirmative indication” of extraterritorial application.

Second, if Congress did not intend to cover foreign trademark infringement, then what are the limits of domestic trademark infringement? The court found that the distinction between foreign and domestic applications of the Lanham Act is found in the concept of “used in commerce.” Activities that occur within US borders are considered domestic, while those taking place abroad are foreign. (The Court did not elaborate on what it means to use a trademark “in commerce.”) Consequently, the Lanham Act’s protections are limited to claims involving domestic infringing use in commerce.  

This ruling reaffirms the presumption against extraterritoriality and potentially limits conflicts between US and foreign companies. It also underscores Congress’ primary goal of legislating with domestic concerns in mind and clarifies application of US laws to foreign conduct.

In light of this decision, brand owners should continue to monitor foreign sales and other cross-border activities. Current and potential litigants will need to carefully assess the domestic and foreign nature of alleged infringements, as this distinction will play a pivotal role in determining the applicability of the Lanham Act’s protections and the ability to recover damages.

This piece was co-authored by Amber Policelli (not admitted to the bar), a 2023 summer associate in our New York office and rising third-year law student at Cornell Law School.