Mexico: supporting and educating Customs can be key for brand owners

Legal framework

Following the agreement between the United States, Canada and Mexico (USMCA), Mexico reformed or entirely amended several provisions concerning IP rights and the legal means available to enforce them. Mexico amended several provisions concerning the Law on the Protection of Industrial Property (LFPPI), which entered into force on 5 November 2020, and Congress made and passed several significant amendments to the Copyright Law (LFDA) and the Criminal Code. These recent changes augment the various legal mechanisms available for IP rights owners who choose to fight back and protect their intangible assets.

In Mexican law, counterfeiting and piracy can be considered either administrative infringements (ie, trademark or copyright) or criminal counterfeiting cases, both with procedural regulations and effects. These legal actions have pros and cons that mainly relate to excessive formalities and requirements 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 created 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

The General Customs Administration (AGA) is the government department responsible for customs control. It plays an essential role in enforcing IP rights when a competent authority (ie, IMPI, the FGR or a judge) issues an order or warrant to enforce those rights.

There are improvements to be made in this regard because Mexican law lacks a means by which a trademark owner can officially request the AGA to directly protect or enforce IP rights owing to the lack of legal powers to perform that task (customs authorities neither have ex officio powers nor possess a legal mandate to take actions to enforce IP rights on their own).

Since 2011 Mexican customs authorities have been in charge of operating a database of trademark owners. The database serves as a watchlist and a source of information to which customs officials can refer when identifying 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 the ports of Manzanillo and Lázaro Cárdenas, which together handle more than 85% of 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 (ie, 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 those involved in this illegal trafficking.

It is safe to conclude that anti-counterfeiting efforts regarding customs and border measures depend on the collaboration between the government agencies and the trademark owners and their representatives. These efforts also hinge on the ability to monitor and detect the import and export of counterfeit and infringing goods, which is further fuelled by the commitment of 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 exclusively depend 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 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.

Customs authorities comprise 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 should improve.

In this regard, response times from rights holders is critical in maintaining a good relationship with law enforcement authorities. This is because 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.

Those actions are lodged before the FGR, which is the competent authority 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. The prosecutor determines whether there is criminal trademark counterfeiting and unlawful copyright exploitation and requests 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 securing the physical grounds (eg, seizing real estate) where the criminally infringing conduct takes place and arresting the people responsible for the criminal conduct.

In those 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 welcomed changes that was included in the LFPPI is the substitution of the FGR’s in-house expert witness report for an official technical opinion issued by IMPI within 30 working days. Through this opinion, the nature of the original products and the counterfeits is legally credited and a clear legal definition of ‘criminal counterfeiting’ (ie, the definition of what conduct constitutes criminal counterfeiting of registered trademarks) is included.

If sufficient evidence is gathered, the deputy attorney submits the case before a competent judge. If a person or a group of people is identified as responsible for the illegal conduct, an indictment is issued, and evidence is submitted and examined by the court (this is when a suitable criminal trial begins). 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 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. The recovery implies a different civil procedure, although it is based on a sentence issued in the criminal procedure.

Several factors at each stage of these procedures extend beyond the control of the parties involved because the prosecutors bear 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. IP rights holders should collaborate and help the FGR in those tasks at each stage; nevertheless, it is almost impossible to estimate a precise timeframe for criminal trials or 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) that is legally competent for attending to and solving these matters and is, simultaneously, responsible for keeping the registry of IP rights, such as trademarks and patents, before a formal court (which is part of the judicial branch of the government) can intervene.

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, therefore, lacks the full legal powers of the judiciary. The latter 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 the issuance of an administrative declaration of infringement. This generally includes fines plus a 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 cessation of the infringing conduct either directly to the alleged infringer or to any third parties that participate or facilitate the conduct.

The authority can order the forceable closure of the infringer’s premises. Owing to the provisions in the LFPPI, IMPI has the power to both impose more significant fines (up to US$1.1 million in the most severe cases) and to collect those penalties on its own. This should significantly shorten the time between when the penalty was imposed and when it was actually executed.

Administrative infringement claims are usually applied when the actual infringement conduct involves copying or using a trademark in a manner that is not identical but confusingly similar to a trademark that has been previously registered to trigger an association in the consumer’s mind that will, thus, result in illegally derived benefits.

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

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

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 the authority in the form of a bond, deposit bill or a similar instrument before exerting the provisional measures.

Another significant change to the LFPPI implies that an IP rights owner is no longer forced to wait until an administrative infringement resolution is deemed final and definitive (IMPI’s administrative resolutions can be challenged by nullity claims filed before the Court of Administrative Justice and then by an amparo constitutional appeal before a circuit tribunal) to seek indemnification for the damage or losses caused by the infringer. This is because IMPI is empowered to study and determine the amount corresponding to the reparation of damages or, if the plaintiff chooses to, take the damages claim to a civil judge, which can be started even if the infringement resolution is not yet deemed final and definitive.

In general, it is essential to take into account 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 owing to the lack of an administrative complaint having already been filed by the affected rights owners.

Anti-counterfeiting online

Another change introduced to the LFPPI and the amendments to the LFDA and related Mexican laws is the addition of specific legal provisions that regulate and punish conduct resulting from 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. This includes the mandatory notice and takedown mechanism that has been proven to be very effective in other jurisdictions.

Notwithstanding these advances, the question remains: 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, why 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. This unfavourable situation could be summarised as a lack of resources of the authorities to investigate thoroughly infringements and criminal offences and the difficulty of exerting adequate means to combat the problem effectively (ie, how to remove the veil of anonymity surrounding most illegal activities in cyberspace).

In this regard, the most valuable aspect of any strategy to combat counterfeiting in the digital domain involves performing comprehensive investigations and performing 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 on the various e-commerce sites (eg, Mercado Libre, 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 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) a 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 when obtaining information is that counterfeiters’ mechanisms and logistics are becoming increasingly sophisticated; thus, the means used to obtain valuable data regarding warehouse location, 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 do not want to squander resources on those measures because of difficult financial times. Victims of robbery rarely recover their property.

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 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 regarding the rights holders’ strict enforcement of IP rights (backed up by their actions).