Appeals court throws out $1.3 million trademark judgment against California winery

A federal appeals court has thrown out a $1.3 million trademark judgment against a California winery in a dispute brought by an Italian wine producer, ruling that a recent U.S. Supreme Court decision did not support the lower court’s finding of infringement.

The U.S. Court of Appeals for the Second Circuit said the district court had relied on the wrong legal framework when it ruled for the Italian plaintiff after the Supreme Court’s 2023 decision in Abitron Austria GmbH v. Hetronic International Inc. That high court ruling narrowed when the federal Lanham Act, the main U.S. trademark law, can apply to conduct outside the United States.

In its new decision, the Second Circuit said the Supreme Court’s opinion did not justify holding the California winery liable based on foreign conduct tied to wine sales abroad. The appeals court reversed the judgment and sent the case back for further proceedings.

The dispute centers on competing claims over wine branding used by an Italian vintner and a California winery. The Italian producer had won more than $1 million in damages in federal court in New York after arguing that the California company’s use of the mark harmed its rights and caused confusion in the market. But the appeals court said that after Abitron, courts must focus more closely on whether the allegedly infringing “use in commerce” happened in the United States, not simply whether foreign activity had domestic effects.

That distinction matters for wine producers because many trademark fights in the industry cross borders. European wineries often sell into the United States through importers, distributors and online channels, while American wineries market abroad under labels that may resemble names already used in other countries. The Second Circuit’s ruling signals that foreign sales and overseas marketing may be harder to reach under U.S. trademark law unless the challenged use itself is domestic.

The panel said the district court had treated Abitron too broadly in a way that favored the Italian winery. Instead, the appeals court indicated that the Supreme Court limited the Lanham Act’s reach and did not create a path for recovering damages based mainly on conduct outside the country. The Second Circuit therefore concluded that the earlier award could not stand.

The case is being watched by wine businesses, importers and intellectual property lawyers because it affects how producers assess legal risk when exporting bottles into the United States or defending brand names already established in Europe. For wineries, trademark disputes can shape label design, distribution agreements and expansion plans in key markets.

The ruling also highlights a recurring tension between U.S. trademark law and European systems that place strong weight on geographic identity, long-standing regional use and protected names tied to origin. In cross-border wine disputes, companies often try to use U.S. courts to stop rival branding that they say trades on reputation built overseas. The Second Circuit’s decision suggests those claims may face a higher bar when much of the alleged misconduct took place abroad.

The appellate court did not end the litigation outright. By remanding the case, it left open what claims or damages theories may still survive under a narrower reading of domestic trademark use. That means the parties could continue fighting over whether any conduct in the United States is enough to support liability under federal law.

For producers in California, Italy and other major wine regions, the decision is likely to be read as a warning against assuming that success abroad or harm abroad will translate into a U.S. trademark recovery. It may also influence how companies structure sales channels, advertising campaigns and trademark registrations before entering foreign markets.

The case comes at a time when wineries are under pressure from slower demand, shifting export patterns and tighter margins, making brand protection more important and more expensive. A reversal of a $1.3 million award is significant not only for the parties involved but also for an industry where legal costs can quickly rise when disputes span several countries and multiple trademark systems.

The Second Circuit’s opinion adds to early appellate guidance on how lower courts should apply Abitron. Lawyers following trademark cases have been looking for signs of how strictly federal courts would limit claims involving international commerce. In this instance, the appeals court made clear that the Supreme Court’s ruling could not be used to preserve a broad damages award against a U.S. winery based largely on foreign activity.

That outcome may reshape litigation strategy for beverage companies with international portfolios. Plaintiffs may put more emphasis on proving domestic sales activity, domestic labeling decisions or domestic consumer confusion tied directly to use of a mark in U.S. commerce. Defendants, meanwhile, are likely to argue more aggressively that overseas conduct falls outside the Lanham Act even when it affects a foreign brand owner with business interests in the American market.