Your U.S. Trademark May Be at Risk in Foreign Markets

Brand owners are now on notice that federal trademark law is basically limited to the United States.  If a company wants to sell outside the U.S. and to enforce its trademark rights, it must have strong agreements with licensees, partners or agents outside the U.S. and it must obtain trademark protection in the nations where the U.S. brand owner hopes to make sales.

That's the effect of a U.S. Supreme Court decision in Abitron Austria GmbH v. Hetronic International, Inc.  Abitron Austria had distributed Hetronic's U.S. made products in Europe, but it then began making and distributing its own products using the Hetronic name. Hetronic sued, and after a trial in an Oklahoma federal court, a jury awarded Hetronic more than $90 million.  Only 3% of Abitron's sales were in the U.S.

There's a longstanding principle of American law that congressional legislation applies only in the U.S.unless "the presumption against extraterritoriality had been rebutted."  The Supreme Court held the presumption had not been rebutted, and remanded the case to the trial court to determine how many sales actually took place in the U.S.

In an opinion by Justice Samuel Alito, the court held the Lanham Act only applies to claims of trademark infringement that occurred in the U.S. In short, if mosst of the sales occurred outside the U.S., and none of the defendants is based in the U.S., plaintiffs must bring any action to enforce their rights in foreign courts.