This Report summarizes cases granted review on November 4 and 10, 2022
Case Granted Review: Abitron Austria GmbH v. Hetronic Int’l, Inc., 21-1043
Abitron Austria GmbH v. Hetronic Int’l, Inc., 21-1043. The question presented is “[w]hether the court of appeals erred in applying the Lanham Act extraterritorially to petitioners’ foreign sales, including purely foreign sales that never reached the United States or confused U.S. consumers.” The Lanham Act provides a cause of action against anyone who “use[s] in commerce” a “counterfeit, copy, or colorable imitation of a registered mark” in a way “likely to cause confusion, or to cause mistake, or to deceive.” 15 U.S.C. §1114(1)(a). It also creates a right of action against anyone who uses in commerce any word, symbol, or device that is likely to confuse or deceive consumers about the origin of goods. Id. §1125(a)(1). The Court has considered the Act’s application to foreign conduct once before, in Steele v. Bulova Watch Co., 344 U.S. 280 (1952). There, it held the Lanham Act could apply to “acts of trade-mark infringement and unfair competition consummated in a foreign country by a citizen and resident of the United States” where the products were sold in Mexico but trickled into the United States and “essential steps” in the scheme were taken in the United States.
Petitioners are German and Austrian companies that sell radio remote controls for heavy equipment. Petitioners long distributed respondent Hetronic’s remote controls. In more recent years, petitioners also began manufacturing identical remote controls, claiming that they, not Hetronic, own the rights to the trademarks. Petitioners sold about $240,000 worth of these identical remote controls in the U.S. Additionally, around 1.7 million euros worth of the products sold abroad made their way into the U.S.—about three percent of petitioners’ $90 million in total sales. Hetronic sued petitioners in U.S. district court. A jury awarded Hetronic $96 million in damages, reflecting all of petitioners’ worldwide sales, and the district court entered a permanent worldwide injunction. The Tenth Circuit affirmed in relevant part. 10 F.4th 1016. It recognized that there is a circuit split regarding whether and when the Lanham Act applies to foreign sales by foreign corporations. It adopted a test that asks first if the defendant is a U.S. citizen; if so, the Lanham Act likely applies. If not, it then asks whether the activity at issue has a substantial effect on U.S. commerce. If it does, it finally asks “whether extraterritorial application of the Lanham Act would create a conflict with trademark rights established under the relevant foreign law.” Because petitioners are foreign corporations and did not argue the third element, the appeal turned on the second element—substantial effect. The Tenth Circuit found substantial effect, noting that millions of euros worth of infringing products made their way into the U.S. Although this was a small proportion of total sales, the Tenth Circuit held that “it’s irrelevant what proportion of Defendants’ global sales entered the United States” because “[o]therwise, billion-dollar-revenue companies could escape Lanham Act liability by claiming that millions of dollars of their infringing products entering the United States represented only a fraction of their sales.” Additionally, the Tenth Circuit held that Hetronic had established substantial effect because petitioners had diverted tens of millions of dollars in international sales that Hetronic could otherwise have made.
Petitioners argue that the Tenth Circuit erred in extending the Lanham Act’s reach extraterritorially. They point out that “[w]hen a statute gives no clear indication of an extraterritorial application, it has none.” Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247, 255 (2010). The Lanham Act does not state that it applies in foreign countries and thus should not apply extraterritorially. Petitioners argue that the Tenth Circuit’s “diversion of foreign sales from a U.S. company” theory has no limiting principle and “would allow the Lanham Act—a statute concerned with preventing domestic consumer confusion—to be asserted extraterritorially whenever a U.S. plaintiff claims lost sales abroad, on the theory that monetary loss to a U.S. plaintiff anywhere in the world is a ‘loss to U.S. commerce’ warranting extraterritorial application.” They argue that the Tenth Circuit’s interpretation is unmoored from the Lanham Act’s focus on “confusion,” “mistake,” or “dece[ption]” of American consumers. 15 U.S.C. §§1114(1)(a), 1125(a)(1). Additionally, petitioners claim that the Tenth Circuit’s decision is at odds with international law requiring each country’s trademark law to have only domestic application. Next, they argue, the Tenth Circuit’s expansive interpretation of the Lanham Act should not be embraced because the Act as so interpreted would exceed Congress’s powers under the Foreign Commerce Clause. Finally, petitioners suggest that Steele should be overruled or confined to its facts because it cannot be squared with the Court’s subsequent holding that a statute will be applied extraterritorially only if its language explicitly says it should.