Manager, IP Policy and Programs, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce
July 14, 2023
The Supreme Court recently closed out the 2022-2023 term with a series of high-profile decisions that have dominated headlines.
However, one unanimous decision, Abitron Austria GmbH v. Hetronic International, Inc., handed down with less coverage, bears significant implications for the American business community.
Background: The case involves Hetronic International, a U.S.-based company manufacturing heavy-duty construction equipment and radio remote controls. Hetronic contracted with Abitron, a collection of foreign companies, to distribute its products across Europe. When the partnership soured and Hetronic terminated the contract, Abitron claimed ownership of Hetronic's trademarks and IP, manufacturing and selling identical products under the Hetronic brand, profiting massively.
SCOTUS limits reach: Hetronic sued Abitron for trademark violations under the Lanham Act. An Oklahoma district court awarded Hetronic approximately $96 million in damages and enacted a worldwide injunction barring Abitron from selling the infringing products. However, the Supreme Court voted to set aside this judgment. It ruled that the Lanham Act does not apply extraterritorially and is only relevant for domestic infringement claims.
Fewer protections for business: This decision raises critical questions for rightsholders operating within a global economy. Limiting the reach of the Lanham Act to instances where harm is directed only at American consumers drastically narrows the recourse for American companies who fall victim to blatant foreign infringements. It also casts doubt on enforcing court decisions across jurisdictions, which often respect foreign judgments.
More counterfeiting risks: The ruling enables an environment conducive to global counterfeits. Businesses now face heightened challenges in combating counterfeits and preserving brand integrity. They must be more cautious when selecting international partners, relying more on thorough contractual agreements than existing IP protections.
Yes, but: The Supreme Court's decision provides a potential blueprint for Congress to rectify this situation. The Court's majority opinion makes clear that a statute like the Lanham Act will apply extraterritorially only if “Congress has affirmatively and unmistakably instructed” that the law will “apply to foreign conduct.” In the Abitron decision, the Court held that the statute contained no such clear statement. But with amendments, Congress could clarify that the Lanham Act applies to domestic and foreign conduct, making it unmistakably extraterritorial.
Bottom line: While the implications of the Abitron Austria GmbH v. Hetronic International, Inc. decision are far-reaching and complex, it serves as a stark reminder that the onus is now on Congress to adapt and clarify legislation better to protect American businesses in a global economy.