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Can U.S. Trademarks Be Infringed by Foreign Conduct? The Supreme Court Is Divided Can U.S. Trademarks Be Infringed by Foreign Conduct? The Supreme Court Is Divided

Can U.S. Trademarks Be Infringed by Foreign Conduct? The Supreme Court Is Divided

At the end of the Supreme Court’s October 2022 term, the Court took up the unusual question as to whether foreign conduct can infringe U.S. trademark rights. In Abitron Austria GmbH v. Hetronic International, Inc., [1] the Supreme Court unanimously vacated a Tenth Circuit decision (previously blogged here) that found U.S. trademarks infringed by the extraterritorial activity of a foreign defendant. However, a split in the Court left some uncertainty regarding the question of foreign conduct.
In Abitron, a U.S. manufacturer’s trademarks were appropriated by its European distributor, who sold reverse-engineered goods in Europe and the United States. The distributor’s sales caused confusion in the United States, with customers contacting the distributor to purchase the U.S. company’s products and sending the distributor’s products to the U.S. company for repair. The Tenth Circuit found that U.S. trademark law under the Lanham Act applied to the distributor’s foreign conduct, and affirmed liability based on the distributor’s foreign activity.
The Supreme Court vacated the Tenth Circuit’s decision, holding that the appellate court failed to apply the proper test regarding whether the Lanham Act reached the distributor’s foreign conduct. Justice Alito delivered the opinion of the Court, confirming that Congress did not intend the Lanham Act to apply to foreign conduct. Therefore, the question is whether a claim involves a permissible domestic or impermissible foreign application of the statute.
A Lanham Act claim is domestic if the conduct relevant to the “focus of congressional concern” underlying the statute occurred in the United States—specifically, the unauthorized use in commerce of a trademark that is likely to cause confusion. “Confusion” is not a separate requirement, but is a “necessary characteristic of an offending use.”
However, Justice Alito went further to state that “use in commerce” in the United States is a “dividing line between foreign and domestic applications” of the Lanham Act, apart from the question of focus and confusion. This conclusion suggests that “use in commerce” is a threshold question, and the Lanham Act may not reach foreign conduct under any circumstances.
Of course, if all the conduct “regarding [the] violations took place outside the United States,” then courts do “not need to determine … the statute’s ‘focus’” at all. … In that circumstance, there would be no domestic conduct that could be relevant to any focus, so the focus test has no filtering role to play. [2] 

At this point, the Court became divided and had difficulty reconciling Steele v. Bulova Watch Co., [3] where the Court previously found liability for foreign conduct that caused consumer confusion in the United States. In a concurring opinion of four justices, Justice Sotomayor wrote that “Steele focused on the impact of the defendant’s foreign conduct on the consumer market in the United States … not the location of the original sale of the infringing product or the location of the trademark owner’s business.” Therefore, “uses of a mark in commerce are actionable [under the Lanham Act] when they cause a likelihood of consumer confusion in the United States, even when the conduct originates abroad.”
In a separate concurring opinion, Justice Jackson similarly wrote that “a ‘use in commerce’ does not cease at the place the mark is first affixed, or where the item to which it is affixed is first sold. Rather, it can occur wherever the mark serves its source-identifying function.” Therefore, liability for foreign conduct exists once foreign goods or services enter “use in commerce” in the United States—e.g., where an unrelated third party introduces foreign goods into the ordinary course of trade in the United States.  Justice Jackson also suggested that the Lanham Act may apply even if foreign goods are not physically present in the United States—e.g., a trademark on an Internet website available in the United States may “serv[e] its critical source-identifying function in domestic commerce even absent the domestic physical presence of the items whose source it identifies.”
In view of Justice Sotomayor and Justice Jackson’s concurring opinions, a majority of the Court appears to agree that the Lanham Act can apply to foreign conduct where the infringing goods subsequently enter the United States. Justice Jackson’s concurrence did not go so far as Justice Sotomayor’s, to find liability based solely on the likelihood of consumer confusion in the United States, regardless of the origin of conduct. However, Justice Jackson’s concurring opinion indicates that a majority of the Court may apply the Lanham Act in certain circumstances where the infringing goods are not physically present in the United States.

[1] Abitron Austria GmbH v. Hetronic Int’l, Inc., No. 21-1043 (June 29, 2023).
[2] Quoting RJR Nabisco, Inc. v. European Community, 579 U.S. 325, 337 (2016) (citation omitted).
[3] Steele v. Bulova Watch Co., 344 U.S. 280 (1952).

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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