On November 5, 2020, the Federal Law for the Protection of Industrial Property ("LFPPI") replaced the Industrial Property Law, in force since June 25, 1991. The new legislation introduced numerous changes, but this article focuses on what I consider its three most important developments.
Declaration of use in Mexico
The new law resolves, in its transitory articles, the interpretation problem regarding trademarks that must declare use in Mexico. The previous law, as amended on August 10, 2018, established the obligation to declare use within three years after the registration of the trademark. However, its wording allowed interpretations that suggested that this obligation applied to all trademarks with more than three years of registration.
The legislative intent was that this obligation would apply only to trademarks granted after August 10, 2018. The new law makes it clear: the obligation to declare use applies only to trademarks granted after that date.
This provision has been criticized for granting only a three-month term to file the declaration of use, as of the expiration of the three years of the registration, without allowing to file it earlier. This contrasts with the usual practice in Mexico and other legislations, where it is allowed to file the declaration six months before the expiration date and up to six months after as a grace period.
In Mexico, it is not necessary to present proof of use when making this declaration; an affidavit under oath is sufficient. However, a false declaration before a non-judicial authority may be considered a criminal offense punishable by imprisonment.
In addition, according to the LFPPI, it is mandatory to declare use when renewing the registration of a trademark in Mexico, which must be done after 10 years from the date of application for registration (for applications prior to August 10, 2018) or 10 years after the grant of registration (for subsequent applications).
In practice, a frequent problem arises when filing the declaration of use of trademarks with an application in Mexico through the international registration of the Madrid system. The designated applicant in Mexico is often unaware that there is no "multi-class application" in Mexico. Upon arrival, the international registration is divided into files by class. Often, these applications become registrations on different dates, requiring separate declarations of use for each.
In addition, the renewal of the local registration, even in different classes, must coincide with the renewal of the international registration, according to WIPO rules. However, the declaration of use for local registrations must be filed within three months after WIPO informs that the local registration has been renewed.
This is often overlooked, causing local registrations to expire automatically without the need for notification by the authority.
Parallel imports and gray market
Another relevant change is the regulation of parallel imports or "gray market". The new law maintains the acceptance of these for trademarks, but for the first time in decades, it denies it for patents.
In the past, accepting parallel imports for both cases helped avoid high prices in Mexico. If a product was more expensive locally, a merchant could buy it abroad and resell it in Mexico.
However, the obligation to prove the legitimate origin of the product is maintained. The seller abroad must prove that it acquired the products from the trademark owner, its licensee, authorized distributor or a member of the same economic group.
The change is subtle, but its impact has gone unnoticed even by areas of the Mexican government itself.
Article 175, section II:
The registration of a trademark shall not be effective against:
[...]
II. Whoever markets, distributes, acquires or uses the product to which the registered trademark is applied, after it has been legally introduced into commerce by the owner or by whom he has authorized.
For patents, article 57, section III, establishes:
The right conferred by a patent shall not be effective against:
[...]
III. Whoever markets, acquires or uses the patented invention after it has been legally introduced into commerce in Mexico.
Mexican jurisprudence dictates that the law must be interpreted according to its wording. Here, it is required that the patented product has been legally introduced in Mexico, while for trademarks there is no such limitation, allowing products legally introduced in commerce, regardless of the country.
In addition, Section II of Article 175 establishes that the product must be introduced by the trademark holder or its licensee. By extension, it also applies to the economic group of the owner, licensees or sublicensees, inside and outside Mexico.
This is based on article 54, section II, of the former Industrial Property Law, which remains in force until a new regulation is issued, according to the fourth transitory article of the LFPPI:
FOURTH: Until such time as the Federal Executive issues the Regulations of this Law, the Regulations of the Industrial Property Law published on November 23, 1994 will continue in force, insofar as they do not oppose the new Law.
In my opinion, this provision is unconstitutional, but it applies as long as an amparo lawsuit is not filed within 15 business days after the first act of application.
I believe it is unconstitutional because regulations must be limited to facilitating the application of the law. They cannot contradict it or go beyond it. In this case, the regulation exceeds the limits of the law.
3. Claims for damages
Another important change in the LFPPI refers to claims for unauthorized use of the rights granted by law. The previous law allowed such claims, and since 1994 a fixed amount equivalent to 40% of the gross sales of the infringing products was established, without the need for proof. If a higher amount was demanded, proof of damages was required.
This 40% was considered excessive and was challenged for its allegedly confiscatory nature, but the amparo courts validated it.
It was questioned why 40% and not another percentage. When I participated in the advisory group of the then General Directorate of IMPI, I noticed that there was no technical study to justify that number; it was adopted from the percentage that already appeared in the Federal Copyright Law.
Previously, claims had to be filed in federal or local civil courts, at the option of the claimant. There was confusion as to whether the procedure before the IMPI had to be exhausted first or whether it could be sued directly.
This led to many unsubstantiated lawsuits being filed in courts, especially local courts, with little technical knowledge and possible corruption.
Violators, or "pirates", are usually well advised and do not fear these lawsuits, as they can disappear without leaving assets that can be seized. Serious companies, on the other hand, have assets and employees, and face real risks if they are sued for minor oversights.
Although the Supreme Court resolved the criterion in mandatory jurisprudence: first there must be a firm resolution of the IMPI in order to sue for damages.
However, the LFPPI now allows to sue directly before civil courts, without the need of a prior resolution from IMPI. In addition, it empowers IMPI to determine the payment of damages directly after the conclusion of a proceeding.
This raises another problem: IMPI is an administrative authority, and according to the Constitution, it cannot issue civil judgments, such as compensation for damages.
As of the date of this writing, I know of no cases where compensation has been claimed directly before the IMPI.
References:
Mexico. (2020). Ley Federal De Protección A La Propiedad Industrial. Retrieved from https://www.
diputados.gob.mx/LeyesBiblio/pdf/LFPPI.pdf