As Supreme Court Case on Extraterritorial Trademark Disputes Heats Up, ABA Asks Justices to Consider Three-Part Test

The American Bar Association (ABA) filed an amicus brief on February 3 with the U.S. Supreme Court asking the Court to clarify issues related to the application of the Lanham Act to trademark disputes that cross international borders. The ABA filed the brief in the Abitron Austria GmbH v. Hetronic International, Inc. trademark case, in which the U.S. Court of Appeals for the Tenth Circuit affirmed a $90 million damages award for trademark infringement based on infringement that occurred almost entirely outside of the United States.

In its brief, the ABA argued that the rapidly increasing development of technology and the internet has broken down boundaries and allowed for brand and business development that transcends borders.

“This breakdown of functional boundaries between distant territories has heightened the potential impact of foreign infringement on United States commerce and, relatedly, valuable trademark rights cultivated within this country,” the ABA said in its brief.

According to the bar association, this necessitates clarification from the court on the Lanham Act.

“It therefore is imperative to trademark professionals — including members of the ABA — and their clients to understand clearly the circumstances in which the Act applies extraterritorially,” continued the ABA.

Three-Part Test

The ABA is calling for the Supreme Court to affirm the Tenth Circuit ruling in the case and adopt a three-part test that the Second Circuit, Eleventh Circuit, and Federal Circuit have all applied.

The three-part test would consider three factors when determining if the federal Lanham Act applies to an extraterritorial trademark dispute. The three factors are the impact of the defendant’s conduct on U.S. commerce, the defendant’s citizenship, and any conflict with the foreign jurisdiction’s laws. Importantly, the ABA’s test would not require the infringement to cause confusion with U.S. consumers, a much-debated topic between Abitron, Hetronic and parties that have filed an amicus brief.

While the Tenth Circuit did not apply this three-part test in the Abitron v. Hetronic case, the ABA argues that the result would have been the same. Hetronic International won the $90 million judgment after the Tenth Circuit found that Abitron, a German manufacturer, reverse-engineered Hetronic’s product and sold the infringing product abroad and in the United States.

The Tenth Circuit came to this ruling by citing precedent and applying the standard that Abitron’s infringement damaged U.S. commerce despite the fact that 97% percent of the sales occurred outside of the United States between foreign sellers and buyers.

In total, the ABA argued that this three-part test would protect U.S. interests and innovators.

“A more restrictive standard for extraterritorial application of the act would risk subjecting U.S. trademark owners, including those with globally recognized brands, to abuses of their rights outside the United States without adequate and efficient legal recourse in the foreign jurisdiction,” wrote the bar association.

Case Developments

In addition to the ABA’s brief, the case has seen other developments in recent weeks.

On January 31, the Solicitor General filed a motion of leave to participate in the oral argument as amicus curiae. The motion also asked the Supreme Court to enlarge the time allotted for oral argument to 70 minutes, with 25 minutes to the petitioners Abitron, 15 minutes to the United States, and 30 minutes to the respondent Hetronic.

While the Solicitor General said the government’s previous amicus brief was in support of neither party, “it [the U.S. government] appears to be more closely aligned, both legally and practically, with that of petitioners.”

Additionally, Hetronic filed a response brief on January 27. The Oklahoma-based company argued that lower courts have applied the Lanham Act to cases involving similar extraterritorial infringement for the past 70 years.

“With the Lanham Act properly construed, this is a straightforward case,” wrote the company in its brief.

Counterargument

Abitron has argued that the Lanham Act does not apply in this case and has asked the Supreme Court, “whether the court of appeals erred in applying the Lanham Act extraterritorially to petitioners’ foreign sales, including purely foreign sales that never reached the United States or confused U.S. consumers.”

In addition to the ABA’s brief, various other parties have filed briefs in the case, including 12 associations, individuals, and organizations, since the U.S. Solicitor General filed a brief on September 23, 2022. The Solicitor General asked the Supreme Court to overturn the Tenth Circuit’s ruling on the basis that the ruling was not consistent with Foley Bros. v. Filardo (1949). Using this precedent, the Solicitor General made the case that the Lanham Act requires the court to consider whether foreign sales were likely to create consumer confusion in the United States.

Several groups have also more recently filed briefs asking the Supreme Court to reverse the Tenth Circuit’s ruling.

On December 27, 2022, the European Commission, the executive body of the European Union, filed an amicus brief asking the Supreme Court to hold that the Lanham Act does not apply extraterritorially. The European Commission invoked the obligations of the United States to uphold the Paris Convention for the Protection of Industrial Property and the TRIPS agreement.

“The decision of the Tenth Circuit in this case threatens to upset the carefully balanced international trademark system,” wrote the European Commission in its brief.

On the same day as the European Commission, three Intellectual Property Law professors from the United States filed an amicus brief asking the Supreme Court to reverse the Tenth Circuit decision.

“The pendulum has now swung back to a strong presumption against extraterritorial application of U.S. laws,” wrote the professors.

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Author: VadimVasenin