We have talked about the Lanham Act previously in regards to how it helps define the U.S. trademark registration system. A recent case involving a U.S. company and its European distributor brings up a specific question about the Lanham Act: does it apply to international infringement?
Our focal case involves Oklahoma-based company Hetronic, a maker of radio remote controls, and their European distributor, Abitron. If what Hetronic alleges is true, one could describe Abitron’s actions as “sneaky” – they created their own version of Hetronic’s products using confidential company information and sold those products to Hetronic’s customers.
This would comprise a pretty clear and intentional violation according to the Lanham Act.
However, the infringement occurred abroad. Does the Lanham Act apply?
First: Lanham Act Basics
The Lanham Act of 1946 establishes foundational protections for trademark owners in the United States. It outlines eligible requirements for registering a trademark, as well as the conditions of infringement. This includes likelihood of consumer confusion, a major issue in the land of business marks.
After all, if consumers buy something believing the product is your brand, but that is not correct – that would be actual consumer confusion or deception which could constitute significant material loss for your business. It also means another business is profiting from all the work you put into creating a reliable, quality product or service.
As you can see, Abitron’s actions fit the bill of profiting from consumer confusion. But the outcome is not so straightforward for Hetronic due to where the infringement occurred.
Next: the Extraterritoriality Test
An Oklahoma City jury already awarded Hetronic damages for Abitron’s infringement. But a problem remains: Abitron is a European company, and the majority of its infringing sales took place outside of the United States. So, even though Hetronic has received juror validation for $90 million in damages, the company has only received compensation for U.S. sales, which amounts to a fraction of that, $240,000.
Abitron challenged the decision and with it, the validity of U.S. trademark law for international infringement. This is where the extraterritoriality test comes in, a framework which emerged from precedential case RJR Nabisco, Inc. v. European Community.
The framework asks two questions:
- Does this statute give a “clear, affirmative indication that it applies extraterritorially”?
- If not, do actions within the case have clear domestic U.S. repercussions?
Hetronic would argue that Abitron’s international infringement did affect American consumer confusion. Abitron is sticking with its aforementioned argument against U.S. trademark law’s reach.
This Could Be Precedential
Currently, the case is still pending. It would behoove trademark owners to keep an eye on it. If U.S. trademark law reaches farther than previously agreed, damages for infringement could increase exponentially, which could be a boon to trademark owners – and a stiff price for trademark infringers. A bit of advice: trademark owners who are conducting business in foreign countries should register their trademarks in those foreign countries so they can protect their trademarks in those markets — and file trademark infringement lawsuits in those countries as an additional layer of protection.