Tenth Circuit Reworks Opinion on Extraterritorial Reach of Lanham Act as Per SCOTUS

The U.S. Court of Appeals for the Tenth Circuit issued a revised opinion on Tuesday in the case of Abitron v. Hetronic, which was on remand from the Supreme Court’s June 2023 decision vacating a $96 million damages award for Hetronic.

The Court ruled last year that Sections 1114(1)(a) and 1125(a)(1) of the Lanham Act are not extraterritorial in nature and that “‘use in commerce’ provides the dividing line between foreign and domestic applications of these provisions.”

The underlying case involved Hetronic’s radio remote controls, which are used to operate heavy-duty construction equipment, such as cranes. Abitron et. al. began manufacturing and selling the products primarily in Europe under the Hetronic brand and continued to do so following the termination of their distribution agreements with Hetronic. The infringement occurred almost entirely outside of the United States.

The Tenth Circuit in August 2021 affirmed in part, reversed in part and remanded a decision of the U.S. District Court for the Western District of Oklahoma, holding that the Lanham Act applied to Abitron’s extraterritorial conduct. Abitron appealed to the Supreme Court and the petition was granted in November 2022.

During oral argument, counsel for Hetronic had argued that the Lanham Act is unique and that “since 1952, this Court has held and repeatedly reaffirmed that the Lanham Act’s uniquely broad language reaches infringement of U.S. marks that is carried out overseas.” But the Court said that the fact that the Lanham Act’s definition of commerce is unique is insufficient to rebut the presumption against extraterritoriality.

Under the two-step test for applying the presumption against extraterritoriality, courts first “determine whether a provision is extraterritorial,” which involves evaluating whether “‘Congress has affirmatively and unmistakably instructed that’ the provision at issue should ‘apply to foreign conduct’” and then if it is not extraterritorial, “we move to step two, which resolves whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision.”

Using the High Court’s framework for assessing extraterritoriality, the Tenth Circuit on Tuesday said that since the Supreme Court determined Sections 1114(1)(a) and 1125(a)(1) are not extraterritorial, it could proceed to step two. At step two the Tenth Circuit found that “[b]ecause the [Supreme] Court now requires infringing conduct in domestic commerce to anchor any Lanham Act claim, none of Abitron’s purely foreign conduct—that is, foreign sales to foreign customers—can premise liability for Hetronic’s Lanham Act claims.”

It also held that any permanent injunction issued against Abitron “cannot extend beyond Abitron’s qualifying domestic conduct” and remanded to the district court to modify the permanent injunction.

The district court will have to decide the amount of damages to award on remand based on the Tenth Circuit’s note that “any monetary relief that Hetronic receives must share a causal nexus with Abitron’s domestic conduct that used Hetronic trademarks in commerce.”