by John P. Dyro and Emily M. Chilson
For those who don’t regularly read Supreme Court opinions, it may be entertaining to know that the highest Court in our nation does not shy away from imaginative metaphors in its written opinions. For instance, in a recent case in which the Supreme Court decided the territorial limits of the Lanham Act, the Court invoked the image of a “muzzled Chihuahua” as an ineffective watchdog against the presumption against extraterritorial application of United States laws. In Abitron Austria GmbH v. Hetronic Intl., Inc., the Supreme Court decided that the Lanham Act is not extraterritorial and that domestic use in commerce, rather than a likelihood of domestic customer confusion, provides the dividing line between impermissible foreign and permissible domestic applications of the Lanham Act.
Abitron concerned a trademark dispute between a United States company (Hetronic) and several foreign parties (collectively, Abitron). Hetronic is a manufacturer of radio remote controls for construction equipment. Abitron wrongly used Hetronic’s branding to sell the same products, both in the United States and abroad. Abitron’s foreign sales included sales to customers who subsequently imported the infringing equipment into the United States, which Hetronic claimed was likely to cause confusion in the United States. At the District Court, a jury awarded Hetronic approximately $96 million in damages for all of Abitron’s conduct, both foreign and domestic. The Tenth Circuit upheld the judgment, after which Abitron appealed to the Supreme Court. Deciding that the Lanham Act provisions prohibiting the unauthorized use in commerce of a protected trademark (15 U.S.C. § 1114(1)(a) and § 1125(a)(1)) do not apply extraterritorially, the Supreme Court vacated the judgment and remanded for further proceedings.
In its opinion, the Supreme Court applied the presumption against extraterritoriality, a longstanding principle which holds that, unless a contrary intent is made manifest, acts of Congress are meant to apply only within the territorial jurisdiction of the United States. Historically, the Court has used a two-part framework to apply the presumption against extraterritoriality. First, the focus of the relevant statute (domestic or foreign) is determined. If Congress has unmistakably instructed that the statute is to be applied extraterritorially, the presumption is rebutted. However, if Congress has not unmistakably instructed that the provision is extraterritorial, the second step is to determine where the conduct relevant to the focus of the statute occurred. If the conduct relevant to the focus of the statute occurred in the United States, prohibiting that conduct is a permissible domestic application of the statute. On the other hand, if the conduct relevant to the focus of the statute occurred abroad, prohibiting that conduct is an impermissible foreign application of the statute.
In Abitron, the Supreme Court first had to establish what conduct of Abitron’s was relevant to the focus of the Lanham Act. The Court determined that the “conduct” relevant to the focus of the Lanham Act was “infringing use in commerce,” not likely consumer confusion. In rejecting the argument that the focus of the Lanham Act was the likelihood of consumer confusion, the Court quoted a prior case in which it had cautioned that “the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case.” The Court noted that if a claim under the Lanham Act could be brought whenever the effects of foreign activity are likely to be felt in the United States, that “watchdog is nothing more than a muzzled Chihuahua”— pretty ineffective.
The Supreme Court held that “§1114(1)(a) and §1125(a)(1) are not extraterritorial and that the infringing ‘use in commerce’ of a trademark provides the dividing line between foreign and domestic applications of these provisions.” This means that foreign sales of a trademarked product, even if likely to cause confusion in the United States, are not prohibited by the Lanham Act. Thus Abitron, despite selling confusingly branded goods that ended up in United States commerce, could not be held liable for sales that occurred outside United States territory.
Ultimately, the scope of what conduct can be prohibited by the Lanham Act has shrunk due to the Abitron ruling. Trademark owners would be wise to monitor both domestic and foreign uses of confusingly similar marks while recognizing that foreign use in commerce cannot be reached under the Lanham Act. Andrus attorneys are able to assist clients in determining the reach of their trademark rights under the Lanham Act and taking action to stop infringing conduct when appropriate.
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Attorneys Edward R. Williams, Joseph D. Kuborn, Aaron T. Olejniczak, Peter T. Holsen and Thomas R. Knight were selected for inclusion in Managing IP's 2024 edition of the IP Stars list. Managing IP’s World IP Survey covers over 80 jurisdictions, and the rankings are based on extensive research among IP practitioners carried out over six months. A team of researchers seeks responses from thousands of firms and clients. IP Stars highlights attorneys with a strong understanding of products and industry areas, as well as the requisite legal experience.
Andrus was once again included in the IAM Patent 1000, a standalone publication that identifies individual and firm expertise in all major areas of patent law and practice. Through an extensive research process by a team of highly qualified analysts, the publication identifies the top patent practitioners and law firms in the world. In addition to firm-wide recognition, Edward R. Williams, Joseph D. Kuborn, Aaron T. Olejniczak, Peter T. Holsen, Christopher R. Liro, Benjamin R. Imhoff, Ryann H. Beck and Emily M. Chilson were each featured individually, based on positive feedback from clients and associates.
Andrus was selected as a ranked intellectual property law firm in Chambers USA 2024. In addition to the firm-wide ranking, Joseph D. Kuborn, Aaron T. Olejniczak, Peter T. Holsen and Ryann H. Beck were listed individually. Chambers ranks lawyers and law firms based on the research of over 170 full-time editors and researchers at their head office in London. Researchers talk to lawyers and clients, conduct in-depth telephone interviews, and review submission forms provided by law firms.
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