The Supreme Court heard oral argument this week in not one, but two trademark cases with huge implications on commercial activity in the U.S. and abroad. The justices had a bit of fun—and even laughed at points when hypotheticals highlighted the absurdity of what consumers might encounter in today’s online marketplace—but at the end of the day, raised very serious questions about the proper reach of the federal Lanham Act.
Both Abitron Austria GmbH et. al. v. Hetronic Int’l, Inc. and Jack Daniel’s Properties Inc. v. VIP Products, Inc. require the Court to consider exactly how far trademark law can go in regulating conduct in the face of competing public policy interests. On Tuesday, the Court heard argument in Abitron to decide whether the Lanham Act can extend beyond U.S. borders to regulate foreign companies operating almost entirely overseas. (This is where the online influencers and knockoff handbags come in.) And on Wednesday, Jack Daniels prompted a debate over the tug-of-war between free speech and the right to control brand image in the marketplace. (These topics were discussed in the context of drunk elephants and dog poop.)
Here is a rundown on what you need to know about the key legal issues at stake, and how the arguments played out:
Extraterratorial Application of the Lanham Act: Abitron Austria GmbH et al. v. Hetronic Int’l, Inc., Docket No. 21-1043
- Petitioners Abitron et al. are appealing a $115 million judgment, almost $90 million of which was tied to sales of infringing products by foreign entities abroad. The Tenth Circuit had affirmed on the basis that infringing products might ultimately flow into the United States and/or divert sales from U.S.-based mark owner Hetronic, and thus had a “substantial effect” on U.S. commerce.
- The Supreme Court ruled that the Lanham Act has “sweeping reach into ‘all commerce which may lawfully be regulated by commerce’” in 1952. Steele v. Bulova Watch Co., 344 U.S. 280, 287 (1952). Various circuits have since adopted balancing tests applying Steele to extraterritorial activity with a “substantial effect” on U.S. commerce. The Court is now faced with determining exactly where to draw the line.
- The Petitioners’ attorney argued Tuesday that the holding in Steele is distinguishable, because it applied to conduct by a U.S. citizen. He received pushback from Justice Sonia Sotomayor, who questioned the logic of only holding U.S. citizens accountable when foreign companies also purposely target marketing to U.S. consumers.
- Hetronic’s lawyer noted that Steele has been applied extensively for 70 years, and Congress has not stepped in to limit extraterritorial reach, despite having expressly amended the Lanham Act 36 times since Steele was decided.
- The U.S. Solicitor General’s Office weighed in as well, positing that the correct inquiry is whether there is actually a likelihood that U.S. consumers will become confused.
- The justices raised various hypothetical scenarios and questions, from college students buying fake handbags in Europe for resale in the U.S. to product placement through online influencers. Chief Justice John Roberts elicited laughter when he referenced “an influencer… whatever that is.”
- The Court is ultimately left to grapple with a question that comes up often in international trademark disputes: how should traditional trademark law, which is based on purely geographic territory, apply in a world with an increasingly global economy?
The Line Between Artistic and Commercial: Jack Daniel’s Properties Inc. v. VIP Products, Inc., Docket No. 22-148
- At issue is whether VIP Products should be allowed to market and sell a dog toy obviously designed to mimic the look and feel of one of Jack Daniels’ whiskey bottles with the mark BAD SPANIELS and “The Old No. 2” where JACK DANIEL’S and “Old No. 7” would appear. Jack Daniels is appealing a Ninth Circuit ruling that VIP’s toys are shielded from infringement and dilution claims because they are expressive works protected under the First Amendment.
- The seminal case addressing use of another’s trademarks in an artistic work is the Second Circuit’s 1989 decision in Rogers v. Grimaldi, a dispute over unauthorized use of actress Ginger Rogers’ name in the title of a movie. The court held that “the expressive element of titles requires more protection than the labeling of ordinary commercial products,” and created a two-part test to balance: (1) artistic relevance of the work at issue; and (2) whether use of the other party’s mark nonetheless “explicitly misleads as to the source or the content of the work.” Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989). This test is applied in cases involving artistic works in lieu of the traditional likelihood of confusion test that governs trademark infringement claims.
- VIP’s lawyer contended that his client has a “constitutional right” under the First Amendment to comment on famous brands, and urged the Court to uphold application of the existing Rogers test.
- Counsel for Jack Daniel’s and the U.S. Solicitor General’s Office have both taken the position that likelihood of confusion should be the governing standard, however. The Lanham Act “has no exceptions for expressive works,” the lawyer for Jack Daniel’s argued.
- Justice Elena Kagan called the VIP toy “a standard commercial product” to which the Rogers test might not be applicable.
- Justice Samuel Alito expressed concern over free speech implications of doing away with the Rogers test altogether.
- Justice Sonya Sotomayor raised an interesting example: a T-shirt sold on Amazon with an obviously intoxicated elephant, meant to symbolize the Republican party, with the slogan “It’s Time to Sober Up, America”—should that be protected?
- Ultimately, just as in Abitron, the justices seemed to struggle over where a line should be drawn. Is it appropriate to “get a pass” the traditional likelihood of confusion factors based on Rogers when there is a chance consumers could actually become confused, wondered Justice Ketanji Brown Jackson?
Decisions in both cases are expected by late June.