Karla Olvera
Expert Contributor

Claims Under the New IP Law in Mexico

By Karla Olvera | Tue, 12/01/2020 - 13:30

The globalization that we are experiencing has clearly revealed how intellectual property is among the intangible assets that deserve the most attention and care from companies regardless of size, not only because their ability to continue developing new products, technologies or to continue providing the services that allow them to position themselves in the local or global market largely depends on it, but because timely and effective protection, or where appropriate, the lack of it, can have multiple economic implications for them.

In Mexico, the protection of intellectual property has been gradually evolving and adapting to international standards. We have specialized institutions and an improved consolidated system; however, there are those who still question the true effectiveness of the protection mechanisms provided for in the applicable laws and regulations, particularly with regard to industrial property rights such as patents and trademarks.

These questions are mainly due to the fact that, although the holder of a patent or trademark has the possibility of submitting a request for an administrative declaration of infringement with the Mexican Institute of Industrial Property (IMPI), and, when applicable, of requesting the implementation of preliminary injunctions that allow the infringing product to be withdrawn from the market, IMPI’s current criterion has allowed it to be very common to come across cases where the infringers request and obtain without major complications the lifting of those injunctions. This allows them to continue with their infringing activity during the entire duration of the administrative procedure with IMPI, in which case, despite obtaining a resolution favorable to their interests, the holders of the exclusivity rights will not be able to obtain due compensation for the damages suffered during the time in which the infringing product continued in the market, regardless of the applicable administrative sanctions.

The foregoing is due to the fact that in accordance with the now abrogated IP law (in force until November 4, 2020) , in order for the holders of an exclusivity right to be able to obtain compensation for damages suffered as a result of an infringing conduct, first they had to obtain a final resolution from IMPI declaring the infringement, and subsequently, they could go to the civil courts to file a special claim for damages.

However, it is well known that, in practice, the processing of a request for an administrative declaration of infringement with IMPI can take several years. To this, we must add the time invested in subsequent challenges eventually filed by any of the parties before the courts, which means that obtaining a final decision of infringement by IMPI may take eight, 10 or even more years, and this is just the first step to be able to later file a claim for damages with a jurisdictional authority.

The result is that despite having obtained a favorable decision on the infringement action with IMPI, the right holders not only lose the motivation to initiate an independent claim for damages, which is also prone to multiple challenges, and therefore, will lead to an additional judicial process of several years, but also, they reach this stage with a considerable financial burden that in many cases does not allow them or makes it impractical to engage in a new judicial procedure.

This situation attends to what was resolved in jurisprudence 13/2014, where the Supreme Court determined that in order to claim damages with the civil courts, a prior declaration of infringement by IMPI is an essential requirement, this on the grounds that said authority is the only one empowered to resolve disputes related to industrial property rights, and the Civil Courts expertise is limited to evaluating the damages caused by the infringement, adding in a different criteria that not only must the existence of a prior resolution by IMPI be demonstrated, but also, that it is essential to properly evidence the causal nexus between the infringement and the damages, namely, to demonstrate that the actual damages were originated as a direct consequence of the infringing conduct previously sanctioned by IMPI.

Due to the above, to date in our country, there are very few cases where decisions have been issued ordering the payment of damages derived from a declaration of a patent or trademark infringement prosecuted with IMPI.

Fortunately, as a result of the obligations imposed on the Mexican government due to the entry into force of the United States-Mexico-Canada Agreement (USMCA), which replaces the well-known North American Free Trade Agreement (NAFTA), on July 1, 2020, the new Federal Law for Protection of the Industrial Property was approved, which entered into force on November 5, 2020, and in which, among other positive amendments, transcendental changes were introduced in connection to damages claims, with which it is sought to provide the holders of exclusive rights with different mechanisms that facilitate their processing and allow obtaining a timely resolution.

On the one hand, the new law allows the holder of an industrial property right to file in parallel with the infringement action a separate civil lawsuit with the ordinary courts directly claiming the payment of damages from the infringer, meaning that it is no longer necessary to wait for the issuance of a final decision of infringement by IMPI. And on the other, it introduces an ancillary damages claim, according to which the holder of the rights may claim the damages generated as a consequence of the declaration of infringement directly with IMPI, which will now be empowered to quantify said damages and order the infringer to pay them, once IMPI has declared an administrative declaration of infringement and this decision is enforceable.

It is important to specify that although these changes are intended to considerably reduce the resolution times applicable to the current regime for claiming damages for the benefit of holders of industrial property rights, there are certain peculiarities of these procedures that still cast doubt on their full effectiveness, since if they opt for the civil claim, the courts will have to suspend the trial process when the infringer challenges the validity of a patent or trademark through a request of administrative declaration of invalidity or cancellation with IMPI. The process also cannot be resumed until the correlative resolution is issued, which would again leave us in a scenario similar to the current one. This is in addition to the fact that the experience of civil courts in matters related to industrial property rights is limited and work should be done jointly with IMPI for the correct implementation of the new mechanisms provided by law.

It is also important to point out that the new law now expressly provides that to determine the amount of compensation, the date on which the infringement was evidenced must be taken into account, and that the compensation in no case may be less than the 40 percent of the legitimate value indicator presented by the affected holder, such as the value of the infringed products or services calculated by the market price, or the profits that the holder would have ceased to receive as a result of the infringement, to name a few.

Undoubtedly, the correct implementation of this new system for claiming damages will bring many challenges, both for individuals and for the authorities. It is precisely for this reason that, according to the provisions of the transitory articles of the law in question, these amendments will not come into force until the corresponding modifications have been made to the organic structure of IMPI and it has the required financial, human and material resources, which in any case must be done no later than one year from the entry into force of the law.

Photo by:   Karla Olvera