Partner Jess Collen is quoted in a World IP Review (WIPR) article titled "Lanham Act: will SCOTUS review of $114m TM win bring further scrutiny of US law?" dated November 10, 2022.
The Supreme Court has agreed to review the dispute between Hetronic International and its former European distributor, Abitron Germany, involving the extraterritorial application of the Lanham Act. In March 2020, a jury in the U.S. District Court for the Western District of Oklahoma awarded damages to Hetronic, with $96 million of those damages related to violations in U.S. trademark law. In its appeal, Abitron argued that the Lanham Act was unrelated because the majority of its alleged infringing sales took place outside of the U.S.. The Tenth Circuit affirmed the District Court's decision.
What could the Supreme Court's decision in this case mean for the application of the Lanham Act in sales outside of the U.S.?
"Jess ... believes the case 'presents an important issue', although he suggests that its impact on trademark infringement claims may be limited. 'Had the court not believed there to be a meaningful split in the circuits (despite what the respondent says), the court may not have weighed in on the issue of extraterritoriality, under these facts,' he says. [Jess] points out that when patent and copyright cases have dealt with the issue of territorial impact, and particularly copyright, they have focused heavily on statutory language. 'There, the focus arguably has been on competing provisions of the copyright statute, which made it difficult to discern the impact of extraterritorial conduct (such as first sale under the Copyright Act).' In this case, however, [Jess] argues that the 'significant question relates to the harm to US markets and to the US consumer based upon overseas acts, which facilitate consumer confusion—or even where allegedly, as this court found, there were deceptive acts by the defendant.'"
Jess continued, "'To me, it appears that the challenges to extraterritoriality are reasonably strong for three reasons. First is the very broad application of this doctrine by the Circuit Court, as opposed to the more rigid consideration of factors in other jurisdictions, such as the Second Circuit. Secondly, there are the issues of international comity, which causes courts in this country to consider whether a US court should be assessing damages for actions in sales which occur wholly outside of the US, and in turn, whether we would want US parties to be adversely impacted by foreign court judgments based on acts occurring exclusively in the US.'"
Additionally, Jess says, "the plaintiff 'may have a difficult time arguing that it was left without a remedy had the US courts not assessed damages on foreign sales. The action of circulating infringing, or spurious, goods overseas can result in those goods finding their way into the US market and confusing US consumers. A party is entitled to prove its damage, in any way that is relevant to the harm caused by these activities, and the cases hold that other damages, not strictly related to lost sales or defendant’s profits, might be appropriate.' But, he says, activities which have taken place entirely outside the US can 'presumably be addressed by litigation in other jurisdictions, where those infringements are taking place. These factors may make it less attractive and perhaps less economically feasible to bring overseas litigation. But traditionally factors such as convenience alone, as opposed to actual or practical impossibility, do not empower the US court to extend its reach.'"
As for the case's possible impact and outcome, "[Jess] has his reservations. 'It is often, to state the obvious, almost impossible to guess what the Supreme Court will have in mind. To me, the fact that it is agreeing to hear this case suggests that it wishes to address the splits of the circuits, but it does not suggest to me that the court feels strongly, one way or the other, regarding the underlying extraterritorial issue or any particular outcome. The court may have other matters in mind on the question of ‘substantial effect on US commerce’; whether the Lanham Act prohibits foreign sales which have such an effect is the basis for the Cert petition.'"
"He notes that the dispute seems to be driven by varying linguistic nuances applied by the circuit courts. 'There appears to be little disagreement over the operative language in the statute nor the history of that language. The core of the disagreement is about how courts should apply the language itself. Having said that, I think the court, when dealing with the broader issue of territorial scope of the US court to deal with infringement occurring overseas, is unlikely to be impressed with arguments which state that the overseas activities have facilitated infringement in the United States. There might be some measure of damages attributable to that, but it would not seem [that] such damages should include the entire amount of foreign sales.'"
The entire article, available for WIPR subscribers and also with the option for a 2 week free trial for non-subscribers, can be found on the WIPR website.
