Procedures and strategies for anti-counterfeiting: Mexico
According to the International Monetary Fund, Mexico’s economy ranks between the 11th and 15th largest in the world. Unfortunately, however, it also shares the unpleasant distinction of continuously being included in the top five countries that produce and consume counterfeit and pirated goods – a situation that represents an important challenge for companies and professionals that have to with deal with the issue.
For rights holders that have decided to protect their rights from illegal activities there are several legal instruments available which carry significant benefits to those who choose to fight back and protect their intangible assets.
In Mexican law, counterfeiting and piracy are considered to be administrative infringements (ie, trademark or copyright) or criminal counterfeiting cases; each with its own procedural regulations and effects. Both kinds of legal action have their own pros and cons, mainly related to excessive formalities and requirements placed on IP rights holders.
Legal remedies seeking to stop trademark infringement are strongly linked to and are thus limited by the main legal causes that create to them (administrative or criminal), subsequently they cannot be treated as independent legal institutions that may be requested and enacted autonomously in the Mexican legal system.
There are two main legal avenues for the enforcement of IP rights against counterfeiters and pirates alike:
- administrative infringement actions before the Mexican Institute of Industrial Property (IMPI); and
- criminal actions before the General Prosecutor’s Office (FGR).
Border measures and customs enforcement
One of the main concerns about the counterfeiting phenomenon refers to the illegal products being imported from abroad, mostly from Southeast Asia and China. It is therefore of paramount importance to address the volume of counterfeits imported from this region and the means available to exert effective counter-measures.
Mexican law provides no means by which a trademark owner can officially request the government department responsible for customs control (ie, the General Customs Administration) to directly protect or enforce IP rights, because government agencies have no legal powers to do so. However, customs authorities do have a role in the enforcement of IP rights when a competent authority (ie, IMPI, the FGR or a judge) issues an order or warrant to enforce said rights.
Since 2011, Mexican customs authorities have been in charge of operating a database of trademark owners that serves both as a watchlist and a source of information that customs officials resort to in order to better identify shipments carrying suspicious 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 with the intention of detaining or seizing the shipment before it clears customs procedures.
Notwithstanding the lack of ex officio legal powers, measures exerted at some customs offices (most notably at Manzanillo and Lazaro Cardenas seaports, which combined handle more than 85% of the container shipments from China and Southeast Asia) have been regarded as highly effective because of their significant impact and reasonable costs. Such actions interrupt the supply chain of counterfeits in the final stage (ie, while the offending merchandise awaits customs clearance) before distribution to final consumers, which usually involves very large 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 those involved in this illegal traffic.
It is safe to conclude that for the now anti-counterfeiting efforts regarding customs and border measures depend on the collaboration mechanisms between Mexican government agencies and trademark owners and their representatives. This in turn depends 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 timeframes available (ie, 24 hours to 72 hours in most cases) before the shipments clear customs procedures.
Collaborative efforts with customs authorities should not depend exclusively on the inclusion of 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 and regular face-to-face contact with officials mean that rights holders can demonstrate that they are prepared to invest in the relationship: Customs’ interest will be more effectively engaged and the likelihood of successful action will increase. Nevertheless, this part of the process is sometimes overlooked. It should be kept in mind that Customs is made up of thousands of people trying to do their jobs within the confines (and shortcomings) of the relevant legislation. Customs 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 can be improved. In this regard, response times from rights holders is critical in maintaining a good relationship with law enforcement authorities, as the success of the authorities’ actions often depends on how quickly rights holders respond and undertake the applicable legal actions once a shipment of illegal goods has been detected.
In more serious 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 the competent authority to investigate such crimes and is also legally empowered to request the necessary remedies (cautionary measures) before competent courts.
After filing the claim and providing the available evidence, an FGR deputy attorney is responsible for investigation, which is supposed 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 criminally infringing conduct takes place, and the arrest of the people responsible for the criminal 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. They must also request an expert witness report through which the nature of the original products and the counterfeits is legally credited (ie, the official expert opinion is the means by which original and counterfeit characters are legally determined).
If sufficient evidence is gathered, the deputy attorney submits the case before a competent judge. If there is a person or group of people identified as responsible for the illegal conduct, an indictment is issued and evidence is submitted and examined by the court (this is when a proper criminal trial begins) and hearings are conducted until all evidence is examined and all formalities are exhausted.
Once the sentence declaring the criminal responsibility of the people involved is deemed to be 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 and losses. Such recovery implies a totally different civil procedure, although it is based on a sentence issued in the criminal procedure.
Moreover, there are several circumstances present at each stage of these procedures that are beyond the control of the parties involved because the main responsibility of discovering and obtaining evidence, issuing the official legal briefs and demonstrating the conclusions necessary to start and support a judicial criminal procedure falls on the prosecutors. The rights holder can collaborate and help the FGR in such tasks at each stage, but it is nevertheless almost impossible to estimate a precise timeframe 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 (ie, an agency that is part of the executive branch of the government) which is legally competent for attending and solving these matters and, simultaneously, is responsible for keeping the registry of IP rights (ie, trademarks and patents), before a formal court (part of the judicial branch) can intervene.
This has a direct effect on 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 of law and therefore lacks the full legal powers of the judiciary. This is especially important when the desired goal is to put an immediate stop to infringing conduct and an aggressive approach is needed.
IMPI can enforce IP rights by ordering provisional measures that usually precede the issuing of an administrative declaration of infringement, which in turn generally includes fines plus the definitive order to stop performing the infringing conduct. IMPI may order:
- the withdrawal from circulation or a ban on the distribution of infringing merchandise;
- the seizure of infringing goods;
- the alleged infringer or any third parties to cease the infringing conduct.
Finally, such authority has the legal power to order the forceable closure of the infringer’s premises.
Administrative infringement claims are usually applicable when the actual infringement conduct consists of copying or using a trademark in a manner that is not identical but confusingly similar to a trademark previously registered, to produce an association in the consumer’s mind and thus illegally seize benefits from such conduct.
Further, administrative infringement claims can involve certain legal remedies ordered by IMPI in order to avoid the infringement from continuing and also to prevent further damage to the offended 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 the application of any provisional measure, the law requires the plaintiff to produce a guarantee that should be enough to cover possible damage that could be caused to the defendant as a consequence. The amount of the guarantee is determined by IMPI depending on the extent of the requested measures and the specific circumstances of the case. The usual practice is to post it before such authority in the form of a bond, deposit bill or a similar instrument before the exertion of the provisional measures.
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 Justice and then by an amparo constitutional appeal before a circuit tribunal), the injured party that obtained a favourable resolution can take such a resolution as the basis of a claim lodged before a civil judge in order to seek the recovery of damages or loss of profits, which will be estimated and, if viable, awarded in a different procedure.
The Supreme Court has established that it is mandatory to obtain a previous final decision in an infringement administrative proceeding from IMPI, declaring the existence of an infringement of a trademark or other IP right, in order to have the legal basis to file a civil action intended to collect statutory damages or loss of profits, caused by the non-authorised use of trademarks and other IP rights. Administrative procedures before IMPI are more formalistic and have 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 affected rights owners.
Although not specifically enacted to address internet issues, Mexican laws in general provide a set of norms that regulate and punish conduct that can be performed by unlawful use of the Internet, specifically concerning the use of e-commerce to distribute merchandise that infringes registered trademarks or copyrights.
However, the question remains: why – despite the existence of several laws addressing these matters and the creation of highly specialised law-enforcement units tasked to combat online crimes, plus the growing awareness of the general public concerning the importance of this problem – is the Internet still considered to be 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 trouble could be summarised as a lack of proper and specific regulation, plus the inexistence of adequate means to effectively combat the problem.
In this context, the most valuable aspect of any strategy to combat counterfeiting in the digital domain involves performing comprehensive investigations and the exertion of 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 (ie, people do not purchase what they do not know is available) 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.com.mx, segundamano.com or eBay), as well as certain 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 prove effective to isolate counterfeiters without the need to actually seize and destroy the offending items.
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 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) at the end of the supply chain (eg, the places where counterfeit goods are sold), but also to gather the necessary information and evidence to discover the source of the products. This in turn should serve to direct further legal action towards the places of origin (manufacture), distribution and wholesale of illegal goods.
Another key aspect to bear in mind when aiming to obtain information is that the mechanisms and logistics used by counterfeiters are becoming increasingly sophisticated. Thus, the means used to obtain valuable data regarding the location of warehouses, means of transportation and distribution should be equally capable of producing the desired results.
Those that invest in security measures (eg, alarms, safe boxes and guards) to protect their valuable assets when crime rates increase are less prone to suffer losses compared with those who did not want to squander resources on such measures because of tough financial times. Victims of robbery rarely recover their property.
It is important to acknowledge that the people involved in counterfeiting usually see their activities as a business, and thus will only be willing to devote their resources if they perceive that their investment is going to 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.
In consequence, legal actions should be well publicised to reinforce the general perception regarding the relentless enforcement of IP rights by their rights holders (backed up by the actions themselves).