31 January 2022Trademarks

SCOTUS urged to consider Lanham Act’s scope

Distribution company Hetronic Germany has petitioned the US Supreme Court to overturn a $113 million ruling which found that the Lanham Act could extend to sales activity outside of the US.

Hetronic Germany said its affiliates, including Abitron Austria, filed the petition on January 21. Docketed on Thursday, January 26, the petition claimed that the US Court of Appeals for the Tenth Circuit had erred in finding that the Lanham Act applies extraterritorially to all of the foreign sales made by the distributors.

In August last year, the Tenth Circuit upheld a $113 million award to Hetronic International, with Circuit Judge Gregory Phillips writing that the Lanham Act applied to Hetronic Germany and its affiliates as its actions had a “substantial effect on US commerce”.

US-based Hetronic International had sued its European distributors after one of the distributor’s employees claimed that an old research and development agreement meant that they, not Hetronic, owned the rights to Hetronic’s trademarks and other IP. The distributor then began manufacturing its own identical products and selling them under the Hetronic brand.

According to the distributors, of approximately $90 million in sales, 97% were purely foreign. They claimed that the Lanham Act can “sometimes apply extraterritorially” but insisted that the act’s reach did not extend to making foreign sales to foreign customers.

However, the Tenth Circuit concluded that an Oklahoma court had properly applied the Lanham Act as the foreign activity had a substantial effect on US commerce. While the court refused to restrict an injunction to US sales or products likely to reach the US, it did limit the injunction to the countries in which Hetronic currently markets or sells its products.

Now, the distributors have asked the Supreme Court to review the decision, claiming that the Tenth Circuit “adopted an expansive view that other courts, including the Fourth Circuit, have concededly rejected”.

The petition said that the appeals courts have “badly splintered” on the Lanham Act’s scope. It added: “They have adopted at least six different tests for determining when the Lanham Act applies extraterritorially—including the novel approach the Tenth Circuit devised here. This case presents that conflict starkly.”

The distributors continued: “Nothing supports giving the Lanham Act such blatantly protectionist effect, which defies basic territoriality principles, contradicts US treaty commitments, threatens international friction, and invites other countries to respond in kind.”

According to the petition, the case is an “ideal vehicle for clarifying the Lanham Act’s extraterritorial reach—or lack thereof”.

A response from Hetronic International is due on February 25, 2022.

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More on this story

26 August 2021   The US Court of Appeals for the Tenth Circuit has upheld a $113 million award to Hetronic, ruling that the Lanham Act can extend to foreign sales activity.
5 July 2021   The Trademark Act of 1946 has changed over the decades but remains a bedrock of US trademark law, says Cindy Walden of Fish & Richardson.