Mexico has the dubious honour of being among the top five countries in the world when it comes to IP violations and IP theft. According to recent studies, eight out of 10 Mexicans consume some type of IP-infringing goods.
Counterfeiting occurs in most countries to varying degrees. A recent study sponsored by the American Chamber of Commerce of Mexico reported that an estimated 88% of the Mexican population have taken possession of a counterfeit product at least once – a phenomenon that is reflected in consumer habits, as the following figures on the estimated market share of counterfeit goods demonstrate:
Music CDs 52%
Films (DVDs) 49%
Sports shoes 15%
Video games 33%
Mobile phones/accessories 22%
The Mexican legal system for trademark infringement claims is a ‘hybrid’ system. This is due to the fact that the Mexican Institute of Industrial Property (IMPI) is an administrative authority (ie, an agency that is part of the executive branch of the government). It is legally competent to review and evolve IP procedures and, at the same time, is responsible for maintaining the IP rights register (constituting both trademarks and patents), before a formal court can intervene.
This has a direct impact on how legal proceedings are conducted and the results that can be expected from taking legal action, since IMPI is not a court of law and thus lacks the full legal powers of the judiciary. This is particularly important when the objective is to put an immediate stop to infringing conduct, which requires an aggressive approach.
Nevertheless, the Mexican legal system provides several options to enforce and protect trademarks and patents effectively. Such options must be tailored to the specific circumstances of the case at hand – that is, how the infringement was and/or is being carried out and the rights holder’s end goals. In addition, the measures taken should include the means to put an immediate stop to infringing conduct and establish a basis for the recovery of damages.
Under the Mexican legal system, IMPI can enforce IP rights by means of an administrative declaration of infringement, which can be issued in conjunction with penalties that include a fine and temporary shutdown of the infringer’s establishment. Administrative infringement claims are usually recommended when:
- the infringing conduct cannot be classified as counterfeiting because it consists of copying and/or using a trademark that is similar, but not identical, to a registered trademark to produce an association in consumers’ minds and thus illegally benefit from such behaviour; or
- the infringed right is a patent, as there is no criminal recourse available for patent infringement.
Where no criminal recourse is available, a rights holder has limited – but effective – legal options to defend its IP rights and lay the foundation to claim losses and damages. Administrative infringement claims can involve certain remedies mandated by IMPI in order to curtail infringement and prevent the suffering of further damages. Such remedies, classified in Mexican law as provisional measures, include:
- an order to cease immediately all conduct that is considered to infringe the plaintiff’s rights (similar to an injunction);
- withdrawal from the market of the infringing goods;
- the seizure of such goods by the ordering authority; and
- closure of the establishment where the infringement is taking place.
Provisional measures and preliminary injunctions are codified in Article 199 of the IP Law, which states that:
In administrative declaration procedures relating to the infringement of any of the rights protected by this Law, the Institute may adopt the following measures:
- I. Order the withdrawal from circulation or ban the distribution of merchandise that infringes such rights as are protected by this Law;
- Order the withdrawal from circulation of:
(a) Objects manufactured or used illegally,
(b) Objects, wrappers, containers, packaging, paperwork, advertising material and similar articles that infringe any of the rights protected by this Law,
(c) Signs, labels, tags, paperwork and similar articles that infringe any of the rights protected by this Law, and
(d) Implements or instruments intended or used for the manufacture, preparation or production of any of the articles specified in items (a), (b) and (c), above;
III. Prohibit, with immediate effect, the marketing or use of the goods by which one of the rights protected by this Law is infringed;
- Order the seizure of goods, which shall take place in accordance with the provisions of Articles 211 to 212 bis.2;
- Order the alleged infringer or third parties to suspend or discontinue the acts constituting a violation of the provisions of this Law; and
- Order the suspension of the rendering of the service or the closure of the establishment where the measures provided for in the previous subparagraphs are not sufficient to prevent or avoid the infringement of the rights protected by this Law.
If the product or service is on the market, the traders or service providers shall be under the obligation to abstain from disposing of the product or rendering the service as from the date on which the ruling is notified to them.
Producers, manufacturers and importers shall be under the same obligation, as shall their distributors, who shall be responsible for immediately recovering any goods that are already on the market.
In order to enforce any of the above- mentioned provisional measures, the plaintiff is legally required to produce a guarantee that is sufficient to cover any possible damages that could be caused to the defendant as a consequence of such measures. The amount of such guarantee is determined by the ordering authority (ie, IMPI), depending on the measure that is requested and the specific circumstances of the case. Normal practice is to post a bond, deposit bill or similar instrument in the amount determined by the authority before imposition of the provisional measures.
The defendant has the right to request its release from any provisional measures exercised against it by posting a guarantee (usually a counter-bond) to cover possible damages and losses, consisting of at least 40% of the amount originally requested by the authority that ordered the measures.
Once the measures have been imposed, the defendant is granted 10 working days within which to answer the complaint. If the defendant fails to respond during the prescribed time, it loses the right to participate in the proceedings, which are subsequently conducted as an uncontested procedure.
Once the administrative resolution is deemed final and definitive (IMPI’s administrative resolutions can be challenged by nullity claims filed before the Federal Court of Administrative and Taxation Affairs, and then by an amparo appeal (an appeal on the grounds of unconstitutionality tried before a federal circuit court), the party that obtained a favourable resolution can use such resolution as the basis of an ordinary civil claim brought before a civil judge in order to seek the recovery of estimated damages, which are awarded in a procedure separate to the original infringement claim.
The main advantages of requesting the application of provisional measures are as follows:
- They stop the infringing conduct as soon as possible, thus minimising the damages; and
- They force the infringer to divert resources if it wishes to continue with the infringing conduct, thus increasing the cost of doing so and forcing it to consider a settlement as quickly as possible.
The Supreme Court has established that in order to have a legal basis to file a civil action intended to collect statutory damages or lost profits, it is mandatory to obtain a final decision issued by IMPI declaring the existence of infringement of trademarks, patents or other IP rights, caused by the unauthorised use of such rights, thus reinforcing the importance of administrative procedures and specifically, the possibility to request provisional measures.
IMPI is an administrative office, not a criminal prosecution agency or court of law; despite the fact that its legal powers are limited, it has experienced moderate success in enforcing IP rights, especially against individuals and organisations that have benefited in the past from IP rights infringement.
Despite the peculiarities of the Mexican legal system and the limitations of provisional measures, when correctly planned and executed, such measures can prove an adequate tool for rights holders to enforce their rights and lay the legal foundation to seek the recovery of damages and losses before a civil court. However, case-specific advice should always be sought from a trusted IP law professional. WTR
Xavier Hadad Rojas
Xavier Hadad Rojas is senior associate at Uhthoff, Gómez Vega & Uhthoff, with more than 10 years’ experience of litigation. He has a law degree from Universidad La Salle, with a specialty in intellectual property from the Instituto Autónomo de Mexico. He has also received certification from the World Intellectual Property Organisation. He is a member of the Mexican Bar Association and the Mexican Association for the Protection of Industrial Property.