Introduction

The Supreme Court recently held that trademark damages are unavailable for infringement occurring outside the United States. The Court held the Lanham Act’s “focus” was the trademark’s “use in commerce,” and therefore the statute only covers such uses that are domestic. This outcome calls into question the International Trade Commission’s application of trademark and other intellectual property rules to extraterritorial conduct. However, if its jurisdiction withstands this challenge, the ITC will be an attractive forum for trademark holders concerned about the Supreme Court’s restrictions on international enforcement.

Background

On June 29, 2023, the Supreme Court decided Abitron Austria GmbH et al. v. Hetronic International, Inc., overturning the vast majority of a trademark infringement damages award against Abitron. The Court held that the Lanham Act is not extraterritorial and extends only to claims where the infringing use in commerce is domestic.

U.S.-based Hetronic International Inc (“Hetronic”) sued its former European distributors, Abitron Austria GmbH and affiliates (“Abitron”), for trademark infringement, after Abitron started manufacturing and selling reverse-engineered replicas of Hetronic’s products while still using Hetronic’s branding.  All of Abitron’s transactions at issue in the Supreme Court appeal occurred in Europe, with some of those sales ultimately imported into the United States.

A jury in the Western District of Oklahoma awarded Hetronic $96 million in damages for Abitron’s use of Hetronic’s marks. The court also issued an injunction prohibiting Abtiron from selling its accused products worldwide. The Tenth Circuit largely affirmed (while narrowing the injunction), and Abitron petitioned the Supreme Court for certiorari.

Supreme Court Decision

Applying a two-step test for extraterritoriality, the Supreme Court ruled that the Lanham Act does not apply to foreign sales. The Court’s test for assessing a potentially extraterritorial statute is: (1) determine whether Congress affirmatively and unmistakably instructed that the statute should apply to foreign conduct; and (2) if not, identify the focus of the statute and determine whether the conduct relevant to that focus occurred within the United States.

At step one, the Supreme Court found no clear indication that Congress intended the Lanham Act to apply to conduct outside of the United States. At step two, the Court determined that the Lanham Act’s focus is on the defendant’s conduct, specifically its unauthorized use of the marks in commerce. Because Abitron’s conduct in question occurred outside of the United States, the Lanham Act did not apply.

The Supreme Court focused on use in commerce in its analysis of the Lanham Act and Abitron’s conduct, but stopped short of clarifying how that concept applies in practice. The majority’s principal commentary on the matter came in rebutting the argument that Steele v. Bulova Watch Co. (a 1952 Supreme Court case) linked the Lanham Act’s territorial scope to confusion of U.S. consumers, irrespective of use in U.S. commerce. In the majority’s view, Steele did not decide that question, because it featured sufficient domestic activity to meet the use-in-commerce test: the defendant carried out some essential steps in the United States and knowingly caused unauthorized “Bulova”-labeled watches from Mexico to make their way over the border into the U.S. Justice Jackson, in a concurrence, construed use in commerce to include third-party domestic resale of infringing products initially sold abroad. But the majority otherwise left it to the lower courts to map out the specifics of use in commerce.

Impact on the ITC

The Supreme Court’s decision in Abitron might have a ripple effect on future administrative proceedings in the ITC. The Commission’s governing statute, Section 337 of the Tariff Act of 1930, encompasses Lanham Act-based causes of action, along with other intellectual property violations such as trade secret misappropriation. For example, the sale for importation into the United States of articles that infringe a registered U.S. trademark would violate Section 337. Although the legal location of a “sale” is not necessarily the location of the physical product, many sales for importation do occur outside the United States. Thus, whether Section 337 is subject to a domestic “use in commerce” limitation is a salient question.

The Federal Circuit has recognized that the ITC may exclude goods from importation as a domestic remedy for violations arising out of extraterritorial activity. In Tianrui Group Co. v. ITC, 661 F.3d 1322 (Fed. Cir. 2011), the Federal Circuit held that the ITC had jurisdiction over trade secret misappropriation that occurred entirely within a foreign country, so long as the items made using the trade secrets were imported. The Federal Circuit reasoned that Section 337 focuses on “an inherently international transaction – importation.” The court held that the act of misappropriation was only “an element of a claim alleging domestic injury” and was not the focus of the statute.

A respondent in TianRui’s situation might now argue that Abitron implicitly overrules TianRui by placing the focus of an intellectual property statute on the location of infringing use. Even more clearly, an accused trademark infringer in the ITC has reason to assert that Abitron requires a showing of domestic use in commerce to maintain a trademark-based Section 337 investigation. On the other hand, a court could build on TianRui and find that Section 337 simply has a different focus – importation – than the intellectual property statutes it incorporates, such as the Lanham Act.

As a result of Abitron, it is now more challenging to seek remedies for foreign uses in commerce under the Lanham Act. Trademark owners may need to consider registering for protection in additional countries, including working with counsel to implement strategies for registration, monitoring and enforcement.

But, if the ITC’s jurisdiction over foreign uses in commerce that result in importation is confirmed, the ITC could emerge as a very attractive forum for many trademark holders. In particular, Section 337 would continue to provide a remedy for foreign sales that are ultimately imported, like the resold products in Justice Jackson’s hypothetical and the indirect U.S.-bound sales that actually constituted part of the damages base in Abitron.