MEXICO: An Introduction to Intellectual Property

What to Know About Investing in Mexico 

Mexico’s location is prime, given its proximity to its main trading partner, the US, and because Mexico has access to both the Atlantic and Pacific Oceans, an important asset with respect to the transportation of goods. Thanks to its strategic location and its strong presence in the global trade atmosphere, Mexico has been forced to make substantial changes and developments at the political, economic and social levels. These have encouraged the country to achieve one of the leading economic positions in Latin America, thereby making it an excellent option for potential investors.

Opportunities for foreign investors in Mexico are indeed vast. Mexico has entered into more free trade agreements than any other nation in the world. The North American Free Trade Agreement (NAFTA), signed by the United States, Canada, and Mexico in 1994, has been recently revised. This new deal will be known as the United States-Mexico-Canada Agreement (USMCA). It also promises to play a significant role in the Mexican economy.

The USMCA brings significant changes. For example, regarding labour and environmental rights, it provides that Mexican trucks that cross the border into the United States must meet higher safety standards and that Mexican workers must have greater freedom to organise and form unions. Also, concerning IP rights, the new IP chapter contains more rigorous provisions for patents and trade marks, including for biotech, financial services and even domain names. Among other updates to consider, one of the most important is that the USMCA stipulates that such agreement will be reviewed every 6 years to try to adapt it to the needs at the time.

The new deal will not go into effect right away. In general terms, the new provisions will not be effective until 2020 since they must be signed by each of the negotiating countries and then Congress and the legislatures in both Canada and Mexico have to approve the agreement; this process can take several months.

Another thing to keep in mind is that the new government, headed by the next president, Mr. Andrés Manuel López Obrador, officially gets started on 1st December 2018. The new president has promised to transform the nation in almost all the strategic sectors to create new opportunities for potential new investors.

The free trade agreements, along with strong national laws to help companies protect their investments, make Mexico a key global market. Below is an overview of the applicable legal frameworks that companies should consider:

Intellectual Property 

Mexico has entered into the most important IP treaties, including the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works and most recently, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP11). The protection of any IP right (trade marks, patents, copyright) is guaranteed by means of such treaties, in addition to the Mexican IP laws.

The country’s commitment to IP protection was renewed with the recent amendment to the Industrial Property Law, which implemented substantial changes to our IP system, mainly in terms of trade marks and associated proceedings, and came into force on 10th August 2018.

With regards to trade marks, our law has been brought up to date in terms of, for example, the inclusion of non-traditional trade marks such as smell, sound and trade dress etc. Also, the most important change (in terms of requiring the immediate attention of trade mark holders in Mexico) is that which incorporates the need of filing declarations of use in Mexico as a mandatory action in order to preserve those rights.

Regarding trade mark oppositions, it is now possible to submit any piece of evidence the opponent and applicant might deem convenient to support their case. The Mexican Patent and Trademark Office is now forced to request both parties to prepare and file their final arguments and render a final well-reasoned decision.

Moreover, concerning trade mark litigation proceedings, bad faith registrations have been expressly recognised in the Industrial Property Law. It is now possible to oppose or invalidate a trade mark on these new grounds, provided that a trade mark has been applied for in bad faith when it is evident that the same was applied for contrary to good use, customs and practices in the IP system, in commerce or in industry or that there is an intention to obtain an undue benefit or advantage which is detrimental to its legitimate owner.

Finally, it is worth mentioning that the corresponding amendments to the Regulations of the Industrial Property Law, as well as the official forms and fees which will be applicable to the new and amended figures in our law are currently in their final stage prior to their publication in the Federal Official Gazette.

Regulatory Environment 

In Mexico, products and services must comply with certain regulatory requirements that can be imposed by customs authorities, the Federal Consumer Protection Office, the Federal Commission for the Protection against Sanitary Risks, or the Federal Telecommunications Institute.

Depending on the product or service that will be produced, manufactured, imported, exported or commercialised, various authorisations are required. Most regulations applicable to products or services are provided by “Norma Oficial Mexicana” (NOMS): mandatory and technical regulations that establish guidelines for a product to be manufactured or a service to be performed. In this regard, it is important to identify the regulations applicable to products and services intended for commercialisation in Mexico. Also, marketing authorisations from the Federal Commission for Protection against Sanitary Risk shall be obtained in certain cases.

Both innovators and generic manufacturers should be aware that linkage between the Mexican Patent Office and the Commission exists. This linkage involves the publication of a special patent list of some specific patented pharmaceutical inventions (mainly compounds, compositions, and subsequent uses of active ingredients). The Commission checks this list before granting marketing authorisations for drugs. Only patent owners or licensed third parties are allowed to commercialise a drug protected by patent laws. Moreover, generic manufacturers can initiate tests for applying for marketing authorisation within three years before the expiration date of the relevant patent. No patent extension is currently available in Mexico for any type of inventions.

Corporate Environment 

It is essential to consider the most suitable corporate regime when deciding to invest. Among all the types of corporations available in Mexico, the “Sociedad Anónima de Capital Variable” or “S.A. de C.V.”, is the most common.

The most significant advantage of using this type of corporation is that shareholders (of which there must be at least two) will only be liable for an amount up to the value of their shares for the obligations and debts of the company.

Another type of corporation available in Mexico is the “Sociedad Civil” or “S.C.”, which is mostly use by professional service providers, such as lawyers, accountants, and architects. This form of corporation has no minimum capital requirements. All of its partners are jointly and personally liable for obligations and debts. There is no limit on the number of partners.

Moreover, the “Sociedad Anónima Simplificada” or “S.A.S.”, is focused on promoting the development of the micro and small companies, since the total annual income of this type of corporation can only reach MXN5 million (approximately USD250,000).

Also, the “Sociedad Anónima Bursátil” or “S.A.B.”, is one of the pillars of the Mexican Stock Market. It is a specialised type of corporation derived from “Sociedades Anónimas”. If a company requires capital financing, then becoming a “Sociedad Anónima Búrsatil” will allow it to achieve its objectives through the issuance of shares or debt securities that can be offered in a regulated and supervised exchange market.

Finally, the “Sociedad de Responsabilidad Limitada” or “S. de R.L.”, is a limited liability company, in which, like the “Sociedad Anónima de Capital Variable”, all partners are only liable for the amount up to the value of their shares. It must be formed with at least two partners, but no more than 50, and 50 per cent of the capital must be paid at the time of incorporation.

Energy Reform 

Given global technological innovations, the Mexican government initiated a plan for new energy growth that had been needed for years. The discovery of new deepwater oil deposits, as well as Mexico's vast array of unconventional reserves, including the sixth largest gas shale fields in the world, has generated new opportunities to create suitable legal mechanisms to achieve solid economic growth in the short and long term. The main objective of this reform is to make the energy sector one of the most powerful engines of the Mexican economy.

This new reform comes from the need to open Mexico’s oil, gas, and power sectors to foreign investors for the first time. In other words, investors will have the chance to partner with “PEMEX” (the national oil company), rebuild the relevant industry, and open new distribution centres that may help to encourage foreign investment.

The reform provides Mexico with a modern legal framework that may allow strengthening of its oil, gas, and power industries, decreasing the current costs of electricity, and creating more jobs for nationals, among other important benefits.

Summary

When deciding whether to set up a business in Mexico, foreign investors should consider, among other factors, the location, the language, and cultural barriers. It is always advisable to hire both a lawyer and an accountant to help guide investors through the process and to make the best, most cost-effective decisions for the company. Being duly advised in the political, economic, social and legal aspects of the country is essential for solid entry into the Mexican market and to take advantage of the many benefits that the region can offer to new investors.