Mexico: Refreshed regime takes aim at administrative infringements and criminal counterfeiting

Legal framework

After entering into the agreement between the United States, Mexico and Canada (USMCA), Mexico reformed and even completely revised many of its domestic laws governing intellectual property rights and their enforcement. This included the enactment of the Federal Law for the Protection of Industrial Property (LFPPI), which entered into force on 5 November 2020, and significantly amending the Federal Copyright Law (LFDA), the Federal Criminal Code and other related procedural laws. These recent changes are aimed at providing better and more diverse legal mechanisms so that IP owners can better enforce and protect their intangible assets.

Under Mexican law, what most people name generically as ‘counterfeiting’ and ‘piracy’ are considered either as administrative infringements of the specific intellectual property rights involved (either trademarks, patents or copyrights) or criminal counterfeiting (applicable only to copyrights and trademarks), and the procedure and action brought would depend on the circumstances of each case. Evidently this distinction brings different procedural rules and effects, which in turn significantly increase the burden of legal requirements for IP owners to obtain favourable results.

Legal remedies seeking to stop trademark infringement are strongly linked to and are thus limited by the main legal causes that created them (administrative or criminal).

Considering the above, administrative infringement actions are brought and tried before the Mexican Institute of Industrial Property (IMPI) while criminal actions are brought before the General Prosecutor’s Office (FGR) as an investigative and prosecutorial authority, which in turn – if there is sufficient evidence – can bring the case before a federal criminal judge after a formal indictment.

Border measures and customs enforcement

After a series of amendments and reforms to several federal laws, in December 2021, the General Customs Administration (AGA) was dissolved, and a new independent institution responsible for customs administration and control, the National Customs Agency of Mexico (ANAM), was created. This new government agency assumes all the legal powers and responsibilities of the AGA but with broader legal customs enforcement and border protection powers. It has an essential role in enforcing intellectual property rights, but, like its predecessor, ANAM has no ex officio powers when dealing with IP infringement and may only take action after a competent authority (the IMPI, the FGR or a judge) issues an order or warrant instructing it to take enforcement action.

The lack of legal powers that would permit ANAM to take direct action makes it more difficult for IPR owners to swiftly enforce and defend their rights.

However, since 2011, Mexican customs authorities have been in charge of operating a database of trademark owners that serves as a watchlist and a source of information that Customs officials use to identify shipments suspected of involving infringing merchandise. The aim is to pass information to other authorities and trademark owners or their registered representatives in Mexico so that they can lodge formal legal action to detain or seize the shipment before it clears Customs.

Notwithstanding the lack of ex officio legal powers, measures taken at some customs offices (most notably at Manzanillo and Lazaro Cardenas seaports, which together handle more than 85% of the container shipments from China and Southeast Asia) are highly effective because of their significant impact and reasonable costs.

Such actions interrupt the supply chain of counterfeits in the final stage (while the offending merchandise awaits customs clearance) before distribution to final consumers, which usually involves vast volumes of counterfeit goods. This approach has resulted in the seizure of millions of counterfeit items, and, in some cases, has led to the arrest of traffickers.

Anti-counterfeiting customs and border control efforts depend on the collaboration mechanisms between Mexican government agencies and trademark owners and their representatives. These efforts also hinge on the ability to monitor and detect the import and export operations of counterfeit and infringing goods, which is further fuelled by the commitment of the trademark owners who undertake the appropriate legal measures within the short time frames available (a maximum of 72 hours in most cases) before shipments clear Customs.

Collaborative efforts with customs authorities should not depend exclusively on including a trademark in the customs database but should involve investing time and effort in working with customs officials to give them the required knowledge to identify counterfeit products. Training seminars and regular face-to-face contact with officials mean that rights holders can demonstrate that they are prepared to invest in the relationship and therefore Customs’ interest will be more effectively engaged, and the likelihood of successful action will increase. Nevertheless, this part of the process is sometimes overlooked. Customs authorities consist of thousands of people trying to do their jobs within the relevant legislation’s confines (and shortcomings). Officials have to deal with a limited mandate, scarce resources and the ever-growing risk of being the target of violence.

It may be beneficial for rights holders to consider assigning resources to the education and awareness of customs and other law enforcement personnel. By actively participating in seminars, training and forums where direct contact with officials is possible, detection practices should improve. In this regard, response times from rights holders are critical in maintaining a good relationship with law enforcement, as the success of the authorities’ actions often depends on how quickly rights holders respond and undertake the appropriate legal actions once a shipment of illegal goods is detected.

Criminal prosecution

In more severe cases, where the violation is caused by importing into the country, storing, transporting, distributing and selling objects that bear marks identical to those covered by a trademark registration or when unauthorised exploitation of copyrights is performed with criminal intent, a criminal complaint may be the best option available.

These actions are lodged before the FGR, which is competent to investigate such crimes and is legally empowered to request the necessary remedies (cautionary measures) before competent courts.

After filing the claim and providing the available evidence, an FGR deputy prosecutor is responsible for the investigation, who is supposed to produce the necessary evidence to determine whether there is criminal trademark counterfeiting and unlawful copyright exploitation, and also to request from the competent courts the legal remedies necessary to stop illegal conduct, including the seizure of offending products and evidence required to support the case.

As part of the legal remedies available, search warrants can be requested before a judge to allow police to enter private premises to look for evidence and seize offending materials, which usually includes the ability to secure the physical grounds (eg, the seizure of real estate) where the criminal conduct takes place and the arrest of the people conduct.

In such matters, the police (under the command of the deputy attorney) are responsible for attesting to the existence of the sites where the counterfeits are being produced, distributed and sold.

One of the most welcome changes included in the LFPP is the substitution of FGR’s in-house expert witness report for an official technical opinion issued by IMPI within 30 working days, through which the nature of the original products and the counterfeits is legally proven, in addition to the inclusion of a clear legal definition of what constitutes criminal counterfeiting of registered trademarks.

If sufficient evidence is gathered, the deputy attorney submits the case before a competent judge. If a person or group of people are identified as responsible for the illegal conduct, an indictment is issued, evidence is submitted and examined by the court (this is when a criminal trial begins), and hearings are conducted until all evidence is examined and all formalities are exhausted.

Once the decision declaring the criminal liability of the people involved is definitive and irreversible (once all judicial remedies and recourses have been exhausted), the owner or rights holder of the affected IP rights can file a request before a civil judge to recover damages. Such recovery implies a different civil procedure, although it is based on a criminal judgment.

Moreover, there are several circumstances present at each stage of these procedures that are beyond the control of the parties because the main responsibility of discovering and obtaining evidence, issuing the official legal briefs, and demonstrating the conclusions necessary to start and support a criminal judicial procedure falls on the prosecutors. Consequently, IP rights holders should collaborate and assist the FGR at each stage, but it is nevertheless almost impossible to estimate a precise time frame for criminal trials or to anticipate their results.

Administrative and civil enforcement

The Mexican legal system is sometimes labelled a hybrid system in respect of trademark infringement claims because IMPI is an administrative authority that is legally competent for attending to and resolving claims, and is responsible for keeping the registry of IP rights such as trademarks and patents, before a court can intervene.

This situation directly affects how the legal proceedings are carried out and the results that can be expected from this type of legal action since IMPI is not a court. This is significant when the desired goal is to stop infringing conduct immediately and an aggressive approach is needed.

IMPI can enforce IP rights by ordering provisional measures that usually precede an administrative declaration of infringement, which generally includes fines plus the definitive order to stop the infringing conduct. IMPI may order:

• the withdrawal from circulation or a ban on the distribution of infringing merchandise;
• the seizure of infringing goods;
• cessation of the infringing conduct either directly to the alleged infringer or to any third parties that participate or facilitate the conduct.

Finally, IMPI may order the forceable closure of the infringer’s premises, and under the provisions included in the LFPPI, IMPI may impose more significant fines (up to US$1.1 million in the most severe cases) and also collect them, which should significantly shorten the time between the sanction being imposed and enforced.

Administrative infringement claims are usually brought when the actual infringement conduct consists of copying or using a trademark in a manner that is not identical but confusingly similar to a previously registered trademark to produce an association in the consumer’s mind and illegally gain benefits.

Further, administrative infringement claims can involve specific legal remedies ordered by IMPI to cease the infringement and prevent further damage to the wronged party. Such remedies are foreseen in Mexican law as provisional measures and include:

• the order to immediately stop any or all of the conduct considered to infringe the plaintiff’s trademark rights (similar to an injunction);
• withdrawal from the market of the infringing goods;
• the seizure of such goods performed by the ordering authority; and
• the closure of the establishment where the infringement is taking place.

In addition, before IMPI orders any provisional measure, the law requires the plaintiff to produce collateral adequate to cover possible damage that could be caused to the defendant. The amount of the guarantee is determined by IMPI depending on the extent of the requested measures and the case’s specific circumstances. The usual practice is to post it before such authority in the form of a bond, deposit bill or a similar instrument before the provisional measures are granted.

Another meaningful change to the newly enacted LFPPI implies that an IP rights owner need no longer wait until an administrative infringement resolution is deemed final and definitive (IMPI’s administrative resolutions can be challenged by nullity claims before the Federal Court of Administrative Justice and then by an amparo constitutional appeal before a circuit tribunal) to seek indemnification for the damages caused by the infringer, as IMPI may now study and determine damages or, alternatively if the plaintiff chooses to, take the damages claim to a civil judge, which again can be started even if the infringement resolution is not yet deemed as final and definitive.

Generally, it is essential to take into account that administrative procedures before IMPI are more formalistic and have some disadvantages, such as the obligation to post a bond on rights holders seeking seizures or the adoption of other provisional measures and the impossibility of seizing obvious counterfeits during official inspections due to the lack of an administrative complaint having already been filed by the rights owners.

Anti-counterfeiting online

Another welcome change introduced to the newly enacted LFPPI and the amendments to the LFDA and related Mexican laws consists in the addition of specific legal provisions that regulate and punish conduct performed by the unlawful use of the Internet, specifically concerning the use of e-commerce to distribute merchandise or digital contents that infringe registered trademarks, patents or copyrights, including the now-mandatory notice and takedown mechanism that has proved to be very effective in other jurisdictions.

Notwithstanding these advances, the question remains why – despite a growing number of provisions specifically addressing these matters and enabling authorities to act, plus the creation of highly specialised law enforcement units to combat online crimes, and the increasing public awareness – is the Internet still considered a safe haven for pirates and infringers? Internet piracy is complex, and the authorities face many practical obstacles, including the public’s perceived tolerance and consent towards ‘harmless illegal conduct’. The unfavourable situation could be summarised as a lack of resources of the authorities to investigate infringements and/or criminal offences thoroughly, plus the difficulty to exert adequate means to combat the problem effectively (ie, how to remove the veil of anonymity surrounding most illegal activities happening on cyberspace).

In this context, the most valuable aspect of any strategy to combat counterfeiting in the digital domain involves performing comprehensive investigations and taking the legal actions available to combat online counterfeiters, paired with a digital isolation strategy. If a vendor of counterfeit goods is unable to reach its potential consumers sooner rather than later, that counterfeiter will be driven out of business.

Under these principles, investing in periodic monitoring and evaluation (patrolling and investigating) of what is lurking in the different e-commerce sites (eg MercadoLibre, SegundaMano, eBay and Amazon), as well as specific social networks that have jumped on the bandwagon of offering their users the ability to sell merchandise on these social platforms, proves worthwhile. Once counterfeits are identified, bringing takedown actions before the administrators of these websites and portals, plus other legal actions directed at the providers (hosting companies) where the sites may be harboured, could effectively isolate counterfeiters without the need to seize and destroy the offending items.

Preventive measures/strategies

While it is impossible to implement actions to combat every aspect of counterfeiting and piracy, it is widely known that a number of countries in Southeast and East Asia (especially China) are the primary source of most counterfeit products. It makes sense to begin there and obtain sensible intelligence and data concerning the routes of the cargo manufactured and shipped from the region to several strategic territories throughout the world.

A wise investment should aim to produce legal actions (eg, claims and raids) one step before the very end of the supply chain, where counterfeit goods are sorted just before the final selling point, and gather the necessary information and evidence to discover the source of the products. This should also assist in directing further legal action towards the places of origin (manufacture), distribution and wholesale of illegal goods.

Another critical aspect to bear in mind when obtaining information is that counterfeiters’ mechanisms and logistics are becoming increasingly sophisticated. The means used to obtain valuable data regarding the location of warehouses, and means of transportation and distribution should be equally capable of producing the desired results.

Those who invest in security measures such as alarms, safe boxes and guards to protect their valuable assets when crime rates increase are less prone to suffer losses than those who did not want to spend resources on such measures because of tough financial times. Victims of robbery rarely recover their property.

It is essential to acknowledge that the people involved in counterfeiting usually see their activities as a business and will only be willing to devote their resources if they perceive that their investment will be profitable and carry little risk. If a rights holder has shown a relentless commitment to enforcing and protecting its IP rights, most counterfeiters will be reluctant to start carrying the merchandise of that particular brand, compared with other brands that are known not to enforce their IP rights.

Consequently, legal actions should be well publicised to reinforce the general perception of their rights holders’ strict enforcement of IP rights (backed up by the actions themselves).