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No More Worldwide Trademarks

A decision of the Supreme Court of the United States has concluded that a plaintiff must show use in commerce in the United States of the impugned mark in order to establish infringement.


The Facts

Hetronic International, Inc. (Hetronic) a U. S. company, manufactures remote controls for construction equipment. Its products employ a distinctive black -and- yellow colour scheme to distinguish them from the products of its competitors. Abitron Austria GmbH, once a licensed distributor for Hetronic, claimed ownership of the rights to much of Hetronic’s intellectual property and began employing Hetronic’s marks on products it sold. Abitron mostly sold its products in Europe but there were some direct sales in the U.S.


The Proceedings

Hetronic sued Abitron Austria GmbH and six foreign parties (collectively “Abitron”) in the Western District of Oklahoma for trademark infringement under two provisions of the Lanham Act, both of which prohibit the unauthorized use in commerce of protected marks when the use is likely to cause confusion.


Hetronic sought damages for Abitron’s infringing acts on a worldwide basis. Abitron argued that Hetronic was seeking an impermissible extraterritorial application of the Lanham Act. The District Court rejected Abitron’s argument, and a jury later awarded Hetronic approximately $96 million in damages related to Abitron’s global employment of Hetronic’s marks. The District Court also entered a permanent injunction preventing Abitron from using Hetronic’s marks anywhere in the world.


On appeal, the Tenth Circuit narrowed the injunction, but otherwise affirmed the judgment, concluding that the Lanham Act extended to all of Abitron’s foreign infringing conduct.

Abitron applied to the Supreme Court of the United States who granted certiorari to resolve a Circuit split over the extraterritorial reach of the Lanham Act.


The Supreme Court of the United States

In a unanimous decision the majority of the Judges referred to the longstanding principle of American law that legislation of Congress, unless a contrary intent appears, applies only within the territorial jurisdiction of the United States. https://www.supremecourt.gov/opinions/22pdf/21-1043_7648.pdf


The Court has repeatedly explained this principle -the presumption against extraterritoriality- refers to a presumption against the application to conduct in the territory of another sovereign. Exclusively foreign conduct is generally the domain of foreign law. The presumption avoids the international discord that can result when U. S. law is applied to conduct in foreign countries and reflects the commonsense notion that Congress generally legislates with domestic concerns in mind.


In the U.S. applying the presumption against extraterritoriality involves a two-step framework. The first step is to determine whether a provision is extraterritorial, or whether Congress has affirmatively and unmistakably instructed that the provision at issue should apply to foreign conduct. The sections of the Act were not extraterritorial.


The second step resolves whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provisions. To make that determination, courts must start by identifying the focus of congressional concern underlying the provisions in issue. Step two applies the presumption against extraterritoriality to claims that involve both domestic and foreign activity, separating the activity that matters from the activity that does not.


Given the wording of the two sections, “use in commerce” is the conduct relevant to any potential focus because Congress deemed a violation of either provision to occur each time a mark is used in commerce in the way Congress described, with no need for any actual confusion. Under step two of the extraterritoriality standard “use in commerce” provides the dividing line between foreign and domestic applications of these Lanham Act provisions.


The majority said to hold otherwise would create international discord. In nearly all countries, including the United States, trademark law is territorial—i.e., a trademark is recognized as having a separate existence in each sovereign territory in which it is registered or legally recognized as a mark. Each country is empowered to grant trademark rights and police infringement within its borders. This principle has long been enshrined in international law including the Paris Convention for the Protection of Industrial Property. Under the Convention a “mark duly registered in a country of the Union shall be regarded as independent of marks registered in other countries of the Union,” and the seizure of infringing goods is authorized “on importation” to a country “where such mark or trade name is entitled to legal protection.” The Convention likewise provides mechanisms for trademark holders to secure trademark protection in other countries under the domestic law of those countries.


This approach was not lost on other sovereign nations who intervened in the application to the court. The European Commission gravely warned against applying the Lanham Act “to acts of infringement occurring . . . in the European Union” and outside of the United States. The Brief for European Commission on Behalf of the European Union asserted that to “police allegations of infringement occurring in Germany,” would be an “unseemly” act of “meddling in extraterritorial affairs,” given “international treaty obligations that equally bind the United States.” As the Commission and other foreign amici recognize, the “system only works if all participating states respect their obligations, including the limits on their power.” It bears repeating the Court’s longstanding admonition that “United States law governs domestically but does not rule the world.”


Comment

It appears from this decision that “use in commerce” is now required to allow an action to be brought in the U.S. because trademarks are territorial. Hedtronic cannot sue for worldwide infringement and can only sue in relation to direct sales in the U.S. based on use in commerce in the U.S.


If a trademark owner wishes to protect its trademark in multiple countries it will be necessary to obtain a registration in each country and sue in the courts of each country concerning infringement in that country.


If you have questions, please contact me at mckeown@gsnh.com.


Goldman Sloan Nash & Haber LLP

480 University Avenue, Suite 1600

Toronto, Ontario M5G 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370


These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.


A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.

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