The U.S. Supreme Court is set to hear next year an appeal against a recent decision from Texas holding that American trademark law may sometimes be made to apply to foreign sales of trademarks merchandise. Yup, you read this right.
As one will remember, trademark law (as with most laws) may apply within a given country that adopted or applies this law but will not generally apply once you cross the border. Though there are plenty of exceptions to this, one can still rely on the fact that, in the normal course of things, rules that apply IN a country will not apply as to what goes on OUTSIDE of that country. For example, owning a Canadian trademark registration is nice, but it won’t allow you to stop a Brazilian company from selling goods in South America, even if they are stamped with that same specific trademark.
A recent American case (Abitron Austria v. Hetronic International) involves partly doing away with this, as the court at issue concluded that it could impose liability as to trademark infringement (to the sweet tune of $90M, no less) by basing the calculation of damages on worldwide sales by the infringer. According to the court in this case, demonstration by the plaintiff that it had lost sale IN the U.S. justifies granting it substantial damages because, well, you know, the bad guys caused an American company some lost sales, so they SHOULD be liable under American law, right? (This is a Texas case, need I say more?)
This is of course NOT how things work normally, which is why most businesses making sales abroad (including the likes of Amazon) can operate without getting constantly being sued in the U.S. because something they sold somewhere reflected a trademark that was protected in the U.S. Causing confusion in the U.S. that results in actual lost sales in the U.S. is one thing, but being on the hook just because you had the gull of making foreign sales is another altogether.
This may become really uncomfortable for a lot of business operating outside the U.S. if that specific case is allowed to stand and ends-up catching on. Were something like this to represent a shift in the way American trademark law handles U.S. trademark infringement claims when international sales by an “infringer” are involved, a lot of businesses (including Canadian ones) may end-up in trouble. Hmm, should I stop telling my clients that U.S. trademark registrations have an effect only in the U.S.?
The U.S. Supreme Court will hear this case next year and, hopefully for Canadian businesses, reconsider how damages were assessed in this particular case. We’ll see.