The US Supreme Court today, June 29, vacated a damages award of $96 million in a trademark case that centred primarily on foreign sales.
The case, Abitron Austria v Hetronic came from the Court of Appeals for the Tenth Circuit, which upheld a lower court’s decision to award $96 million to manufacturer Hetronic. Damages had been awarded even though 97% of the defendant Abitron’s infringing sales had occurred outside the US.
In today’s ruling, SCOTUS determined that two provisions of the Lanham Act that prohibit trademark infringement – Sections 1114(1)(a) and 1125(a)(1) and which were at issue in this case – did not apply extraterritorially.
Failing the test
The court, in an opinion authored by Justice Samuel Alito, noted that federal legislation should only apply to the US unless it was clear that it was intended to apply to foreign conduct.
Alito noted that the two Lanham Act provisions did not contain a clear indication that they applied extraterritorially.
SCOTUS added that if a piece of legislation wasn’t clearly intended to be applied extraterritorially, courts had to consider whether the conduct at issue occurred outside the US.
The court determined that the conduct was the defendant’s use of the marks in commerce.
Since the lower courts hadn’t properly considered this issue, the ruling and subsequent damages award did not apply.
Although SCOTUS’s decision was unanimous, the reasoning was not.
Diverging opinions
Justice Sonia Sotomayor, joined by Chief Justice John Roberts and Justices Elena Kagan and Amy Coney Barrett, stated that she disagreed with the extraterritoriality framework that Alito’s opinion adopted.
She argued that instead of just focusing on the defendant’s use of the mark in commerce, the court should have considered the likelihood of confusion in the US to determine whether the Lanham Act applied.
Sotomayor stated that the Lanham Act extended to activities abroad when there was a likelihood of consumer confusion in the US.
“Because the courts below did not apply that test, I agree vacatur and remand is required,” she stated.
“The court’s opinion, however, instructs the court on remand to apply a test that is not supported by either the Lanham Act or this court’s traditional two-step extraterritoriality framework. I, therefore, concur only in the judgment.”
The Tenth Circuit will now have to weigh in on the issues in this case on remand.
