The Mexican legal system with regard to intellectual property, both through legislation and in practice, is still not as effective as in certain jurisdictions abroad, where levels of development have demanded the implementation of advanced schemes to protect and defend intellectual property rights.
The Mexican situation still requires improvements in order to reach an ideal condition for an adequate enforcement of intellectual property rights. Existing legislation has not completely matured so as to be deemed reasonably effective. However, important efforts towards the improvement of the system are being made in several fields at present. For instance, recently, amendments to the IP and health laws were enacted to condition the issuance of regulatory approval for pharmaceutical products to chemical entities in which the applicant has patent rights or a licence from the patent owner.
Unfortunately Mexico was included in the revised 2003 Watch List of the Special 301 Report issued by the US Trade Representative. This is the first time that Mexico has been placed on the list since 1999. Although the US government is aware of signs of progress in the Mexican IP system, it remains concerned in general in view of lax enforcement against copyright piracy and trademark counterfeiting in addition to concerns by the US pharmaceutical companies related to the lack of coordination between Mexican IP and health agencies with regard to granting of marketing approval for pharmaceutical products; although, amendments mentioned above were thought to cure this situation.
In recent years, Mexico has demonstrated to the rest of the world its will for an active participation in the global arena. Eleven free trade agreements have been adopted to strengthen commercial relationships between the country and other nations such as the United States of America, Canada, the European Union, several Latin American nations and Israel, and negotiations with others such as Japan are under way.
The growth of the Mexican economy and the great efforts made by the Mexican government to make the country an interesting option for investors have made Mexico a target for a number of international commercial ventures. However, doing business in today’s competitive environment demands an exhaustive assessment of all those matters that may contribute to the success or downfall of an enterprise. Therefore, investors want to know if Mexico offers adequate protection to intellectual property rights, the effectiveness of the schemes for a prompt enforcement of rights where there are infringing activities, as well as the remedies, duration and costs commonly involved in these types of proceedings.
The figures shown in tables 1, 1A, 2 and 2A reflect the way inventions and trademarks have increased from 1993 to 2002. These charts were obtained from a recent presentation of the head of the Mexican Institute of Industrial Property (IMPI).
The time to take a case to court
Assuming that a company’s intangible assets have been carefully protected by means of patent or trademark registrations, initial actions to defend the same when unauthorised use occurs, are commonly filed before the Mexican Trademark and Patent Office (IMPI). However, practitioners tend to test court actions to enforce IP rights, albeit modestly.
As a consequence of this, Mexican courts have issued the following precedents:
• A McDonald’s case was resolved by the collegiate circuit courts in March 2001 which decided that civil action before the judicial courts to collect damages derived from trademark infringement were not conditional on IMPI previously issuing a decision on the infringing behaviours regulated in the IP law.
• Subsequently, in August 2003 said court decided the case of Ropa Modelo confirming the decision in the McDonald’s case.
• In March 2003, the same court decided the case of Grupo Victoria changing the sense of the two previous precedents saying that civil action before the judicial courts to collect damages had to be supported by a previous infringement declaration from IMPI.
In view of the conflicting precedents, the matter is now in the hands of the Supreme Court for a final decision by virtue of which we will be able to know in the future which of the two criteria will prevail.
The development of an infringement action before the IMPI, which is an administrative government agency, lasts from 12 to 18 months. However, the complexity of our legal system gives place to the eventual enlargement of the proceeding by means of collateral court actions within the IMPI proceeding. Parties may bring these as a consequence of alleged constitutional violations related to proceeding rules.
The IMPI is the typical first stop in disputes, however, the lack of an effective enforcement of IP rights through the administrative action (IMPI) is pushing practitioners to taste court actions as a collateral action to the administrative proceeding. As matters stand, this alternative still requires final interpretation by the Supreme Court.
The IMPI’s decisions can be appealed before a federal administrative court (FAC), nevertheless recent jurisprudence opened the door to appeal the IMPI’s decisions before the federal judicial courts in certain cases. When an IMPI decision requires an appeal before the FAC you may add from 12 to 18 months approximately.
The odyssey may still be longer if the decision of the Federal Administrative Court is appealed; and this may happen under two circumstances: either through a ‘revision’ proceeding before the Circuit Courts filed by the IMPI; or through an amparo proceeding filed before the District Court by the plaintiff of the cancellation trial. A further average period of 12 months should be added when any of these actions take place. Finally, the decision of the District Court on the amparo action may be appealed before the Circuit Courts, which will mean another 12 months of waiting.
Clearly, Mexican justice cannot be considered quick, and the word odyssey describes with no exaggerations how difficult the enforcement of a company’s intellectual property rights can be.
The cost of taking a case through the courts
With the number of possibilities that may arise from an attempt to enforce IP rights in Mexico, one may think that the experience will be not only tortuous but expensive too. However, official government fees for the filing of infringement action apply only in the case of the infringement action filed before the IMPI, the rest is free of charges for official fees.
However, there are also attorney’s fees to take into consideration. These vary depending on the experience and prestige of the attorney instructed. Normally, for the preparation and filing of any of these actions you will be charged at a minimum a flat fee upon which is added billing charged at an hourly rate. Your attorney will undoubtedly seek reimbursement for all expenses incurred during the assignment, such as travel costs, opinion of experts, etcetera.
Despite this, professional fees charged by Mexican attorneys may still be reasonable in comparison with fees of attorneys of other countries.
Specialist courts
There are no specialised IP courts in Mexico. As stated above, the IMPI is part of the executive branch of the government and therefore not embodied within the judicial branch.
Neither the FAC nor the district or the circuit courts, have specialised bodies dealing with IP matters. Furthermore, judges and other court personnel are not technically trained in IP issues. The number of cases that reach the courts has not been enough to lead to experienced judges.
Unfortunately, the lack of adequate financial support for the judicial branch of the government does not permit any substantial advances to correct this situation. Nevertheless, the creation of specialist courts has been under discussion among practitioners for many years.
Creating specialist courts will require a lot of work and much discussion with the Mexican authorities, including the congress. Under the existing conditions it would probably be difficult to come up with concrete ideas for the creation of specialist courts without amendments to legislation.
Mexican courts, pro-or anti-IP owners?
The historical condition of the majority of the Mexican population has created significant informal, or underground, economies. These comprise well-organised illegal activities like large-scale unauthorised reproduction of music and movie videos as well as the re-marking of packaging of original products or patent infringement of pharmaceutical products through illegal introduction of infringing merchandise mainly sold in the northern part of the country.
This is the Mexican reality and we have had to live with it for many years. However, aggressive campaigns against piracy are carried out in co-ordination with the Mexican authorities to eradicate the problem. Although this problem may be analysed from different angles, courts must apply the law without further analysis of the economical repercussions of their acts. Indeed they are legally obliged to do so; hence one may not say that the referred situation has influenced Mexican courts to the extent that they have adopted a deliberately anti-IP policy. Mexican democracy has made great strides but is still developing. The courts, however, are committed to full observance of the law and, consequently, an anti-IP policy is not legally possible.
Key points to be aware of when enforcing IP rights
Needless to say, it is highly advisable to protect IP through the registration of rights. This is important because in order to benefit from enforcement possibilities a party must demonstrate that it owns the rights in question.
Success through litigation in Mexico depends on having sufficient evidence to prove allegations. When doing business in Mexico, it is important to remember to include within company policies guidelines for the adequate maintenance of a stock of proofs to defend patents, trade marks and related IP property whenever this becomes necessary.
Where companies are doing business in Mexico through distributors or licensees, recording the relevant contracts is not compulsory, however it facilitates the defence of rights, especially trademarks, that otherwise might be challenged for non-use. In view of the amendments to the health regulations, recording before the IMPI licensees of pharmaceutical products has become necessary to obtain marketing approval.
Although, in general, the level of educational background in the Mexican population is poor, in Mexico you will find that law particularly is one area where you will find a high degree of knowledge. Consequently, there will always be several attorneys willing to handle IP cases. However, it is advisable to keep in mind the fact that IP is a field with a great degree of specialisation and, therefore, only a few specialised firms will be really qualified to help. IP rights should not be entrusted to any lawyer, instead specialist advice should be sought through the usual channels of reference.
Attorneys should be asked to find aggressive schemes when enforcing rights, with all applicable law to the specific case deeply analysed so that a strategy can be devised that includes as many sorts of actions as possible, including criminal and civil prosecution of the relevant infringement whenever possible.
Patience is also a virtue. The effectiveness of the Mexican justice system still needs to be worked on.
Availability of damages
Under Mexican civil law, either actual (direct tangible) damages and/or consequential (non direct) damages can be demanded. However consequential damages may be highly difficult to demonstrate in order to obtain the corresponding compensation. In addition to this, unfortunately our legal system is not as developed as others (eg US courts) with regard to usual practice on the recovery of reasonable compensation for damages.
One of the latest innovations in this field, has been the incorporation of a minimum percentage for compensation of damages derived from violation of IP rights. The law now establishes that the corresponding compensation should be at least equivalent to 40% of the selling price of the infringing products or services. However, the corresponding claim for damages does need to be demonstrated before the Courts.
Availability of interlocutory relief
Interlocutory or interim relief in Mexico comprises temporary remedies such as an injunction (a remedy in the form of a court order addressed to a particular person that either prohibits him from doing or continuing to do a certain act) granted to the plaintiff pending the trial.
Mexican IP law incorporates different forms of injunction such as restraint of infringing activities, seizure of infringing goods and manufacturing material as well as closure of an establishment when it is necessary to stop infringing activities.
Posting a bond to guarantee the eventual compensation for damages caused to the alleged infringer should he be subsequently found not to have infringed is necessary to obtain the injunction. Unfortunately, 1994 amendments to the law permit the infringer to lift the injunction by posting a counter-bond.
An injunction without the intervention of the IMPI is extremely complex if not impossible. Although an applicant may directly petition a civil court, this may request a technical opinion from the IMPI before granting the injunction.
Alternatives to litigation and their effectiveness
Negotiation may in some cases be a viable alternative to litigation to stop infringing activities. However, the good will of both parties will be needed to reach a compromise. Cease and desist letters are usually delivered with the assistance of a public notary to infringers and sometimes this kind of approach opens negotiations.
Arbitration may also be an alternative. In practice, however, submission of the parties (especially the alleged infringer) to an arbitrator’s decision will be difficult to achieve. However, arbitration is feasible under Mexican regulations and it may eventually save time and money.
Commercial and trading schemes can also be evaluated within the context of an aggressive strategy to stop infringing activities, however, it is important to bear in mind issues connected to anti-trust (competition) law.
Recent developments affecting IP litigation
As mentioned in previous paragraphs, the linkage amendments to condition the granting of marketing approval for pharmaceutical products to only patented or duly licensed products deserves recognition. Litigation related to the enforcement of this type of rights is still developing day to day. In the past, for example, obtaining an injunction to seize products containing a patented drug manufactured without the consent of the owner of the relevant patent was nearly impossible. Now, the IMPI is in a better position to cooperate with the holder of the patent right to carry out seizure of infringing products of this kind. However, seizing products when the only patent protection relates to the process is much more difficult, regardless of the fact that in this particular instance, the burden of the proof of infringement is reversed to be on the defendant, under the general rules of the TRIPs agreement.
Finally, although substantial improvements related to enforcement of IP rights have taken place in Mexico during the recent history of the country, the mechanisms for an adequate scheme of enforcement are still an issue of concern for investors.