In a tIPsheet article titled “SCOTUS rules Lanham Act does not have extraterritorial reach” published on July 20, 2023, we discussed Abitron Austria GmbH v. Hetronic Int’l, Inc., 600 U.S. 412 (2023), a U.S. Supreme Court case that originated out of the U.S. District Court for the Western District of Oklahoma. In this case, the U.S. Supreme Court resolved a split among federal courts regarding the extraterritorial scope of the Lanham Act (also known as the Trademark Act of 1946) and concluded that the provisions of the Lanham Act that prohibit trademark infringement do not have an extraterritorial scope and apply only in cases in which the alleged infringing “use in commerce” of a trademark is domestic in nature.
History of Case
The Abitron case stemmed from a trademark dispute between Hetronic International, Inc. (“Hetronic”) and six foreign parties (five affiliated companies and one individual) (collectively “Abitron”) and involved Abitron’s foreign sales of remote controls for construction equipment. Hetronic is an Oklahoma City-based company that designs and manufactures a variety of goods, including the remote controls at issue. Abitron is a former licensed distributor of Hetronic’s products in Europe.
In 2011, Abitron reverse-engineered Hetronic’s products and started independently manufacturing and selling the products under Hetronic’s brand, primarily in Europe but also in the United States. In response, Hetronic initiated a lawsuit in the U.S. District Court for the Western District of Oklahoma, claiming trademark infringement under §1114(1)(a) and §1125(a)(1) of the Lanham Act. Hetronic sought damages for worldwide infringement, despite the fact that the majority of the contested sales took place in Europe. The jury sided with Hetronic, awarding the company over $96 million in damages for the infringement.
On appeal, the U.S. Court of Appeals for the Tenth Circuit narrowed the injunction issued by the district court but upheld the judgment and the damages award, determining that the Lanham Act could be applied to “all of [Abitron’s] foreign infringing conduct” because the effects within the United States were significant enough to warrant U.S. involvement. This ruling aligned the Tenth Circuit with several other U.S. Courts of Appeals, which had similarly concluded that the Lanham Act applies to foreign actions that substantially affect U.S. commerce.
The SCOTUS Decision
In vacating the Tenth Circuit’s decision and remanding the case, the U.S. Supreme Court applied a two-step framework based on its established presumption against the extraterritorial application of federal statutes and concluded that the “use in commerce” is the conduct relevant to the focus of the provisions in question and, because the infringing sales in question were in Europe, not the United States, the Tenth Circuit’s affirmance of the damages award could not stand. In conclusion, the court stated:
“In sum, we hold 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. Under the Act, the ‘term ‘use in commerce’ means the bona fide use of a mark in the ordinary course of trade,’ where the mark serves to ‘identify and distinguish [the mark user’s] goods . . . and to indicate the source of the goods.’ §1127. Because the proceedings below were not in accord with this understanding of extraterritoriality, we vacate the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.”
The Tenth Circuit subsequently remanded the case to the U.S. District Court for the Western District of Oklahoma.
The Decision on Remand
On August 5, 2024, the U.S. District Court for the Western District of Oklahoma issued three documents relating to its decision on remand:
- Hetronic Int’l, Inc. v. Hetronic Germanry, GMBH, et al., No. CIV-14-650-F, (W.D. OK. Aug. 5, 2024)( No. 558)(the “Amended Permanent Injunction Order”)
- Hetronic, No. CIV-14-650-F, (W.D. OK. Aug. 5, 2024)( No. 559) (the “Amended Final Judgment”)
- Hetronic, No. CIV-14-650-F, 2024 WL 3656759 (W.D. OK. Aug. 5, 2024)( No. 560) (the “Memorandum”).
As directed by the U.S. Supreme Court, Judge Stephen P. Friot, the presiding judge, focused on the domestic nature of the infringing use in commerce and reduced the damages award from $96 million to about $34.4 million. Judge Friot also amended the permanent injunction, which initially applied worldwide, to be in effect only in the United States. The defendants are required to return to Hetronic all internal, confidential or proprietary information, including price lists, supplier information, product drawings, and schematics that defendants received from Hetronic.
In his ruling, Judge Friot did not hold back on criticizing the defendant’s conduct, stating “the court is at pains to note that the defendants’ infringing activity was about as brazen and willful as infringing activity can get.” See the Memorandum at *1. Judge Friot stated: “[b]roadly speaking, the defendants have, for several years, intentionally exploited plaintiff’s intellectual property and proprietary information in violation of the law[]…” See the Amended Permanent Injunction Order at 3. Judge Friot further pointed out that “Defendant’s commercial piracy was not timid, half-hearted or accidental.” See the Memorandum at *1.
As to the final judgement, Judge Friot stated:
“The court is satisfied that the final money judgment, as entered, provides fulsome relief, within the bounds established by the Supreme Court (and by the Tenth Circuit on remand), responsive to Hetronic’s just claim for compensation and responsive also to the public’s (as well as Hetronic’s) interest in deterrence.”
See Id.
Takeaways
This case serves as a valuable precedent for how damages are now to be determined in trademark infringement cases under the Lanham Act that involve infringing conduct both in the United States and abroad. Although the damages are now limited to infringing use in commerce that is domestic in nature, questions remain, for example, as to what can potentially constitute “use in commerce” in the United States. It is now as important as ever for companies doing business on an international scale to register their trademarks in all countries in which the marks are used.
