August 07, 2023 | Legal News

SCOTUS Update: Recent Decision Imposes New Limits on Lanham Act

The United States Supreme Court in a 5-4 decision recently limited the territorial scope of the Lanham Act in Abitron Austria GmbH v. Hetronic Int’l, Inc., No. 21-1043 (U.S. June 29, 2023), resolving a split among the lower courts and holding that the statute’s protection of trademark infringement does not apply to foreign conduct, even if it harms a U.S. trademark holder or causes customer confusion within the United States. Following Abitron, to sue under the Lanham Act trademark holders must show that the infringer “used” the trademark in the United States. But the Court did not define the circumstances under which trademarks could be “used” domestically, leaving open whether a person who sells an infringing product in a foreign country might still violate the Lanham Act if the product is later re-sold in the United States. In fact, Justice Ketanji Brown Jackson, the deciding fifth vote for the Court’s decision, suggested in her separate concurrence that the term should be construed broadly and trademark holders should be able to sue under the Lanham Act when infringing products sold in foreign countries are re-sold within the United States. She also suggested that the Lanham Act might apply where infringing marks are used as part of an internet site available for use within the United States. Although these questions will likely continue to be litigated in the coming years, it is clear that franchisors that have either already expanded, or are looking to expand, outside of the United States should prioritize the registration of their principal marks in such countries.  Moreover, this presents an opportunity for franchisors to review their franchise agreements to ensure they can sufficiently prohibit franchisees from unauthorized use of the marks following termination or expiration.

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