Procedures and strategies for anti-counterfeiting: Mexico

Legal framework

Following Mexico’s entry into the United States-Mexico-Canada Agreement (USMCA), the country recently reformed or completely amended several dispositions that deal directly with intellectual property, notably including the new Federal Law for the Protection of Industrial Property (which entered into force on 5 November 2020) and several essential amendments made recently to the Federal Copyright Law and the Federal Criminal Code (which entered into force in July 2020).

These recent changes augment the number and diversity of legal mechanisms available for IP rights holders who choose to fight back and protect their intangible assets.

In Mexican law, IP rights violations can be considered either administrative infringements (ie, trademark or copyright) or criminal counterfeiting cases, depending on the facts of the actual matter, each with its own procedural regulations and effects. Both kinds of legal action have pros and cons, which mainly have to do with the excessive formalities and requirements placed on IP rights holders and how serious the penalties are for each.

Legal remedies seeking to stop trademark infringement are strongly linked to and are thus limited by the main legal causes that create 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:

• 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

There still are improvements to be made because Mexican law still lacks a mechanism by which a trademark owner can officially request the government department responsible for customs control (ie, the General Customs Administration (AGA)) to directly protect or enforce IP rights due to the lack of legal powers to perform such a task (customs authorities have neither ex officio powers nor do they possess a legal mandate to take actions to enforce IP rights on their own). The AGA plays an important 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 trademark owner database that serves as a watchlist and a source of information that customs officials resort to 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 to detain or seize 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, usually involving huge 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 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 (within a maximum of 72 hours in most cases) before shipments clear customs procedures.

Collaborative efforts with customs authorities should not depend exclusively on the inclusion of a trademark in the customs database. They 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 comprises 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 are critical in maintaining a good relationship with law enforcement authorities, as the authorities’ actions often depend on how quickly rights holders respond and undertake the appropriate legal measures once a shipment of illegal goods has been detected.

Criminal prosecution

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) such as seizure of infringing items before competent courts.

After filing the claim and providing the available evidence, an FGR deputy prosecutor is responsible for the investigation, which 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 sequester 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. One of the most welcome changes included in the new Federal Law for the Protection of Industrial Property is the substitution of FGR’s in-house expert witness report for an official technical opinion issued by IMPI within a deadline of 30 working days. Through this official technical opinion the nature of the original products and the counterfeits is legally credited, in addition to the inclusion of a clear legal definition of what ‘criminal counterfeiting’ is or, in other words, the very definition of what conduct constitutes the criminal counterfeiting of registered trademarks.

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 different civil procedure, although it is based on a sentence issued in the criminal proceeding.

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. In consequence, rights holders should 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, notwithstanding the fact these actions are usually highly effective for sending a clear message to counterfeiters.

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) that is legally competent for attending and solving these matters and, simultaneously, is responsible for keeping the registry of IP rights such as trademarks and patents, before a formal court (which is part of the judicial branch) intervenes.

This 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 of law and lacks the full legal powers of the judiciary. This is a particularly vital fact to consider 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 issuing an administrative declaration of infringement, which 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; and
• the alleged infringer or any third parties participating in or facilitating the activity to cease the infringing conduct.

Finally, such authority has the legal power to order the forceable closure of the infringer’s premises, and due to the provisions included in the new Federal Law for the Protection of Industrial Property, today IMPI has been endowed with the power to both impose more significant fines (up to $1.1 million) and also to collect said penalties on its own, which should significantly shorten the time between when the penalty is imposed and when it is effectively executed.

Administrative infringement claims are usually applicable when the actual infringing 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 therefore illegally seize benefits from such conduct.

Administrative infringement claims can also involve specific legal remedies ordered by IMPI to prevent further infringement and avoid 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.

Also, before IMPI orders the application of any provisional measure, the law requires the plaintiff to produce collateral 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 exerting the provisional measures.

Another significant change to the newly enacted Federal Law for the Protection of Industrial Property implies that an IP rights holder is no longer forced to wait until an administrative infringement resolution is deemed final and definitive (IMPI’s administrative decisions 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) to seek indemnification for the damages or losses caused by the infringer, as IMPI is now empowered to study and determine the amount corresponding to said reparation of 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.

In general, 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 affected rights holders.

Anti-counterfeiting online

Another welcome change introduced to the newly enacted Federal Law for the Protection of Industrial Property and the amendments to the Federal Copyright Law and related Mexican laws consists in the addition of specific disposition that regulates and punishes conduct performed by unlawful use of the Internet, specifically concerning the use of e-commerce to distribute merchandise or digital content that infringes registered trademarks, patents or copyrights, including the now mandatory ‘notice and takedown’ mechanism that has proven to be very useful in other jurisdictions.

Notwithstanding these advances, the question remains: why – despite the existence of a growing number of provisions that specifically address these matters and enable authorities to act, as well as the creation of highly specialised law-enforcement units tasked to combat online crimes, and the increasing public awareness of the importance of this problem – is the Internet still considered to be a safe haven for pirates and infringers? Internet piracy is problematic, 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 on the part of the authorities to thoroughly investigate infringement or criminal offences, as well as the difficulty to exert adequate means to combat the problem effectively (ie, how to remove the veil of anonymity surrounding most illegal activities happening in cyberspace).

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 cannot 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 on the different e-commerce sites (eg, MercadoLibre, segundamano.com, eBay, and even Amazon), as well as social networks such as Facebook or Instagram 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.

Preventive measures/strategies

While it is impossible to implement actions to combat every aspect of counterfeiting and piracy, it is widely known that several countries in Southeast 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) against whoever is responsible for the step before the very end of the supply chain, where counterfeit goods are stored and distributed just before the final selling point, but also to gather the necessary information and evidence to discover the source of the products. This, in turn, should direct further legal action towards the places of origin (manufacture), distribution and wholesale of illegal goods.

Another critical aspect to bear in mind when aiming to obtain information is that counterfeiters’ mechanisms and logistics are becoming increasingly sophisticated. Thus, the means used to obtain valuable data regarding warehouse locations, means of transport 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 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 will be willing to devote their resources only if they perceive that their investment will be profitable and carry little risk. If a rights holder has shown relentless commitment to enforcing and protecting its IP rights, most counterfeiters will be reluctant to start carrying that particular brand’s merchandise, 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 regarding the strict enforcement of IP rights by their rights holders (backed up by their actions).