Anti-counterfeiting strategies in Mexico - Uhthoff

Anti-counterfeiting strategies in Mexico

By José Luis Ramos-Zurita

Uhthoff, Gomez Vega & Uhthoff, S.C.

What are the fundamental building blocks on which an anti-counterfeiting strategy should be built?

After a comprehensive and integral assessment of the extent and specific situation of the problem has been performed, IP owners should be better prepared to determine what aspects of the enforcement of their rights is more convenient from a cost/benefit point of view: either by attacking one of the many aspects of the problem (be it import, distribution, storage, transport or final sale to the general public) at a time or by designing a comprehensive and tailor-made anti-counterfeiting program that may last for several months, years, or as a permanent full-time effort.

In this sense, we believe that a comprehensive and well-designed anti-counterfeit program should include:

a) Deploying a plan to effectively interrupt the mechanisms in which counterfeits are being distributed, from the origin/producer to the final consumer;

b) Collecting and analyzing the evidence needed to identify other sources, distribution schemes and places of final sale to consumer of illegal goods with the aim of producing future and more precise actions, and;

c) Producing public statements that should be aimed to strengthen the general awareness about the persistent enforcement of IP rights that should be based by the two previously-mentioned aspects.

In which jurisdiction(s) is registration of a mark with Customs the most powerful weapon available to multinational brand owners?

It is a widely known fact that the vast majority of counterfeit items (almost every conceivable product ranging from luxury items to pharmaceuticals, industrial parts to electronics and household appliances, wristwatches to footwear and clothing) are produced in Southeast Asia countries, and the leading manufacturers of such illegal goods are located in China (P.R.C.), which means that for most western countries the biggest counterfeit threat comes from foreign sources; in consequence, by registering a mark at Customs, IP owners facilitate the effort of detecting and detaining the fake goods coming from abroad.

Furthermore, by preventing the entrance of counterfeits into the country, authorities also avoid the distribution of such illegal items to the markets where counterfeits are sold to the general public, and thus the sole action of registering an IP right at Customs may very well represent avoiding the trouble that may represent to invest in the investigations  and  legal  procedures  that  are  part  of  a  serious  anti-counterfeiting strategy once the fake items enter the country and are publicly available.

How do brand owners go about registering intellectual property with Customs in your jurisdiction?

Unfortunately, in Mexico there is no legal provision to register a trademark before Customs (or any other IP right for that matter), and the General Customs Administration (AGA), which is an agency of the Public Finance Ministry, is not formally responsible of enforcing IP at the port of entry of merchandises into our country; this means that there is no legal manner in which a trademark owner can officially request the government department responsible for customs control, to regularly monitor and intercept any counterfeit goods bearing a fake or forged trademark; i.e., AGA has no legal obligation to enforce intellectual and/or industrial property rights by its own means.

Although there is a plan of launching a Customs Trademark Registry, as a larger collaboration effort between AGA and IMPI to combat counterfeiting, for the time being there is no legal provision in Mexican Legislation that enables Customs Authorities to keep a record of the registered trademarks and their authorized licensees and/or distributors and/or importers.

Even more so, the Customs Authorities cannot order the seizure of counterfeit or infringing products by itself, and may only take action if it receives an order from a competent authority on IP matters, i.e. Mexican Institute of Industrial Property (IMPI), General Prosecutor’s Office (PGR) or a Court of Law.

Notwithstanding the above, there is a recent pilot Collaboration Program that Customs is currently developing with Mexican IP associations, industry representatives and a select few highly-recognized law Firms; the first part of such program consists in sharing information between authorities and IP owners in order to establish effective methods for risk analysis, profiling and targeting that have already improved the effectiveness of search and detection procedures performed by Mexican customs officers;  furthermore  and  as  part  of  this  program,  authorities  constantly  provide feedback to the IP owners, including data from the import and export activities/operations of alleged counterfeiters and infringers with the aim of allowing IP owners and/or their attorneys to produce legal actions before the competent authorities to enforce and protect IP rights at customs offices throughout the country.

How can brand owners best develop an effective relationship with Customs?

In addition to what is described above, the second part of the Collaboration Program consists in providing training for Customs Officers that are tasked with operative tasks at each of the 49 different Customs Offices present in Mexican territory, a situation that is in itself a unique opportunity to personally meet the people who is directly involved in the actions that represent the first line of defense against counterfeiting and piracy; moreover, it is also strongly suggested to maintain constant communication and sharing  relevant information with Customs Officials   regarding new licensees, authorized distributors, importers, products, brands, etc.

What key advice would you give in terms of maximizing the relationship with Customs and enforcement agencies?

Our advice can be summed up in three words: be direct, honest and consistent, and these concepts apply to what perhaps is the most debated issue in the relation between Mexican law  enforcement agencies (including customs) and IP  owners (and/or their representatives/attorneys): the power that Mexican law grants to IP owners to grant full pardon to counterfeiters and/or infringers at any stage of the procedure before a final ruling is issued**.

Most law-enforcement officers are in the opinion that a pardon should not be granted in most cases, and that a company that continuously grants pardons as part of settlement agreements is merely using the law (and their work) as a “collection service”

which thwarts the spirit of the work they are performing and allows IP owners to “legally” extort offenders, so it is always best to plan ahead and take this situation into account when considering a settlement.

** It is important to point out that due to the recent amendments several Mexican IP laws suffered, the option of granting a pardon has been restricted in many aspects – specially regarding criminal copyright infringement (piracy) cases- , but it is still valid in both trademark and copyright administrative infringement matters and in most cases of criminal counterfeiting of trademarks.**

What are the best (most predictable and transparent) jurisdictions in each region for bringing anti-counterfeiting actions? What is the situation in your particular jurisdiction?

In Mexico, anti-counterfeiting actions are Federal matters and thus only Federal authorities can undertake legal procedures in these cases; taking this into account, the only  competent  authority  for  bringing  a  criminal  anti-counterfeiting  matters  is  the General Prosecutor’s Office (PGR), who in turn can issue orders to other authorities (i.e., Customs) and request a Warrant (search & seizure, arrest, etc.) from a federal judge in order to further prosecute the case.

In this regard, criminal actions are usually the fastest and most aggressive course of legal action available to IP owners for the enforcement and protection of their rights.

Anti-counterfeiting efforts are increasingly targeted at the online space, which in some respects transcends national boundaries. What is the current position in your jurisdiction with regard to online infringement (e.g., auction sites and keyword use)? Should brand owners target site operators or individual advertisers?

Although Mexican courts are yet to issue a definitive criteria regarding the liability of online auction sites, it is generally accepted that the main responsibility for posting a counterfeit item for sale is of the individual who is advertising/selling such item, and thus the site can argue several defense arguments in its favor; however and in view of the significant increase of website auctions involving counterfeit goods, major internet sites in Mexico (such as www.mercadolibre.com.mx or www.deremate.com) have IP protection programs that include taking down the auction/advertisement within 24 hrs. after you notify the site administrator of the infringement, as long as you previously credited to be the legitimate trademark/copyright owner or legitimate representative.

The above is independent of the sanctions that can be exerted or derived from a formal legal action brought against the advertiser/seller if enough evidence is gathered.

What are the best practices (or five “must-have” clauses) in manufacturing, distributor and other supply chain contracts to prevent counterfeiting and gray marketing?

Besides keeping a close eye on inventories and trademark/copyright use by using precise accounting and trade controls, we would recommend that an agreement of such commercial nature should include one or several clauses that must include:

  1. recognition of the ownership of the IP rights involved;
  2. restriction over the use of such rights, only allowing such use for the specific and exclusive activities (distribution/fabrication/manufacturing, etc.) that the agreement/commercial arrangement was drafted for;
  3. obligation of allowing periodic audit/supervision procedures performed by the IP owner regarding the activities/accounting/inventories of the distributor/manufacturer/seller;
  4. addition of a clause with economic sanctions or penalties in case of breach or agreement;
  5. establish a mechanism to both identify and quantify the original items that  are  to  be  produced/distributed/sold  as  such,  in  a  manner  that “surplus” and/or “extra” items could be legally deemed as counterfeits.

However, it is important to point out that regarding trademarks, Mexican law follows the “exhaustion of rights” theory, in which any item that is somehow put in the market (national or foreign) by the legitimate IP owner and/or a licensee and/or and authorized distributor/seller is deemed as a legitimate or original good, notwithstanding the fact that  such  article  may  have  not  been  intended  for  import/distribution/sale  in  that particular jurisdiction; this is very important, as the Law foresees the above as an specific exclusion of liability from trademark infringement and/or counterfeiting actions and the consequence is that, from a trademarks point of view. parallel imports or gray market goods are not seen by law as illegal per se and thus, from an IP point of view, there are no legal remedies to counter them.

Furthermore, the treatment of the parallel imports of patented products is ambiguous under the, for the reasons previously referred, it would be convenient to amend the Law, in order to address more clearly the topic of parallel import of patented products.

Whereas the Law does not contain an express provision regarding the possibility of filing a legal proceeding against the unauthorized   import of a patented product that was placed on the market of the exporting country by the owner of the patent, there is legal basis to sustain that the owner of a Mexican patent who has the right to impede others from importing the patented product without his consent, may institute legal proceedings to prevent such unauthorized  import and resale in Mexico, including the possibility of obtaining the seizure of the infringing products.

Nevertheless,  we  have  to  take  into  account  that,  as  previously  mentioned,  the treatment of the subject matter under the Mexican Industrial Property Law (IPL) is ambiguous, and thus, the defendant could dispute that article 22, II, of the IPL refers to international exhaustion of patent rights, which would allow such imports, and in such scenario, it would depend on the competent authorities to issue a ruling on the subject.

In order to combat parallel imports, the copyright owner is entitled to file criminal actions before the PGR, so that it can initiate an investigation and if applicable request a Criminal Judge to issue an order for obtaining the seizure of the infringing products at the border or a search warrant to conduct a raid.

What arguments can in-house counsel make to secure additional budget, or to demonstrate the need for additional resources, to fight anti-counterfeiting in these difficult economic times?

Several economic and consumer behavior studies have shown, one of the most visible effects of an economic crisis is a reduction in the income of the general population, which in turn provokes a drop in the sales of most products because people have less money to spend and thus they either refrain from acquiring certain products and/or seek cheaper substitutes for the more necessary goods.

This phenomenon has a direct impact on how most companies perceive the need to enforce their IP rights portfolio, since the financial problems also impact on corporate budgets and the matters they deem important when resources are scarce; having noted this, companies need to be aware that a reduction on enforcement tasks may not be the best decision when cutting back budgets because:

  1. if the counterfeits expand rapidly in the market due to the crisis, the consumer base may perceive this expansion as a loss of exclusivity and even loss of brand identity, which in turn could cause a long-term loss on the brand and even corporate image that may result in a very serious issue that can become quite troublesome and extremely costly to correct in the future.
  2. if a market is flooded with counterfeit products, companies have the risk of not only losing their market participation to the fake products themselves, but also face the threat of legal liability derived from the low quality of fake products (this risk is specially worth considering on pharmaceutical, cosmetics, processed foods and some other mass consumer goods).
  3. there are several examples of companies (even countries) that have thrived on the systematic violation of IP rights owned by successful companies -usually foreign-; once such entities have obtained enough capital out of manufacturing, selling and distributing counterfeits and/or IP-infringing goods to become “legitimate” businesses, they have emerged as some of the toughest competitors to the same established companies they once pirated.

The above may resemble some alarmist headlines of sensationalist tabloids, but there are several historic examples of once-successful brands that have lost their presence in the market and had to close operations in some countries (in some cases the entire company almost disappeared) because of the poor management of their IP rights, specially regarding the lack of interest on enforcing and protecting those same rights.

A text-book example of this happened in the mid-to-late 1980’s (coincidentally, at the height of a serious regional economic crisis) in Mexico and in other important Latin- American countries,  when a notorious French  brand  of  sportswear  and  designer clothing almost disappeared due to poorly enforced trademark rights and a general lack of judicious management of their trademark rights; this situation proved very hard to amend and took some years and a lot of financial resources to correct but, fortunately enough, nowadays such brand posses a very good image and enjoys an excellent market position despite the ongoing crisis, due in a large part to the change in their IP- enforcement policy and the aggressive protection of their IP rights portfolio since then.

What are the most effective ways of controlling costs to free up budget?

In general, there are a few key aspects on accomplishing this:

  1. Do your homework: investigation required to demonstrate the true size and specific circumstances of the problem is in most cases not only a wise investment, but the only way to know which is the best available option from a cost-benefit point of view, and translate that into significant savings at the moments legal actions are undertaken;
  2. Plan ahead: if you have done a proper evaluation of the situation and adjust your goals accordingly, there are fewer possibilities to encounter unwanted surprises such as unplanned expenses and hidden costs along the way;
  3. Consult with a credited professional that knows the local jurisdiction: it can be pretty obvious, but when dealing with these subjects it is best to work with specialized professionals that have both the experience and capability to assist IP owners to solve whatever counterfeiting problem they may have and the most effective and cost-efficient manner to do so.

Ver también

Mujeres Abogadas

En el transcurso de la historia, las mujeres han luchado incansablemente por su libertad, derechos e igualdad. Lamentablemente, como sociedad, hemos normalizado tanto el machismo y

BUILDING TRADEMARK VALUE THROUGH USE

The industrial and economic development that globally has occurred since the last century, has generated an important impact not only related to companies’ commercial growth, but