MEXICO: An Introduction to Intellectual Property

WHAT TO KNOW ABOUT INVESTING IN MEXICO 

Mexico’s location is prime, not only given its proximity to its main trading partner, the U.S., but also since it 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 global trade, Mexico has had to make substantial changes and developments at a political, economic and social level which have allowed it to achieve one of the leading economic positions in Latin America, making it an excellent option for possible investors.

Opportunities for foreign investors in Mexico are vast. Mexico has entered into more free trade agreements than any other nation in the world. The North American Free Trade Agreement (NAFTA), now USMCA, signed by the United States, Canada, and Mexico in 1994, also plays a significant role for Mexican economy.

USMCA incorporates significant changes. For example, regarding labour and environmental laws, it establishes that Mexican trucks which cross the border into the United States must meet higher safety regulations and that Mexican workers must have more ability to organise and form unions. Also, concerning IP rights, the new IP chapter contains more rigorous provisions for patents and trademarks, including biotech, financial services and domain names. Among other updates to consider, one of the most important is that the USMCA stipulates that it will be reviewed every six years to try to adapt it to the needs at the time. This new deal, which came into full effect in 2020, compelled Mexico to amend several of its laws, including the Federal Labour Law and the Federal Law for the Protection of Industrial Property (FLPIP), which abolished the previous Law of Industrial Property, both of which are now also in force.

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 is part to 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, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP11), the Patent Cooperation Treaty, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Hague Agreement Concerning the International Registration of Industrial Designs, and, most recently, The Beijing Treaty on Audiovisual Performances. The protection of any IP right (trademarks, patents, copyright, Appellations of Origin and Geographical Indications) is guaranteed by these treaties (amongst others), in addition to the Mexican IP laws, including the recently enacted Federal Law for the Protection of the Cultural Heritage of Indigenous and Afro-Mexican Peoples and Communities.

The country’s commitment to IP protection was renewed with the abolishment of the Law of Industrial Property replaced by the FLPIP which came into force on 5 November 2020. This new law has implemented substantial changes to our Industrial Property system, in basically all rights and matters it regulates.

In terms of patents, the changes affect: grace period for indirect previous disclosures; patentable subject matter expressly prohibiting the protection of inventions where commercial exploitation is contrary to the public order or is illegal and others; withdrawal of a priority claim; double patenting provisions expressly prohibiting it; restrictions when filing divisional applications; supplementary certificates, which represent the introduction of patent term adjustments; Bolar exemption; patent linkage; post-grant amendments, allowing those directed to incorporate dependent claims into a granted claim set of patents and utility models, as long as those dependent claims do not include matter going beyond the granted scope; extended protection term for utility models from a ten-year term to a 15-year term.

Regarding trademarks, the changes include: validity is now counted from the date of grant of registration; single examination, which will derive in the issuing of an office action for formal and substantive grounds, but also any oppositions; the term 'bad faith' has been redefined; disclaimers are being clarified; changes in the declaration of notorious and/or famous trademarks; declarations of use; suppression of the requirement to record licence agreements; and consents.

As for contentious matters: partial cancellation of trademarks; possibility of claiming for damages before a competent court or directly with IMPI; cancellation on grounds of a false date of first use declared in the application - the burden of proof is again on the registrant; cancellation of a trademark against which an opposition has been filed by the same petitioning party will be deemed res judicata when filed on the same grounds; the introduction of a conciliatory proceeding during the course of an infringement action; IMPI can now not only impose fines, but also execute them.

Considering these substantial changes, we would certainly recommend approaching your local counsel to obtain full details.

Regulatory Environment 

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

Depending on the product or service to be produced, manufactured, imported, exported or commercialised, various authorisations might be required. Most regulations applicable to products or services are provided by standards known as “Normas Oficiales Mexicanas” (NOMS): mandatory and technical regulations which establish guidelines for a product to be manufactured or a service to be rendered. In this regard, it is important to identify the regulations applicable to products and services intended for commercialisation/rendering in Mexico. Also, market authorisations from the Federal Commission for Protection against Sanitary Risk are required in certain cases. Both innovators and generic pharma manufacturers should be aware that linkage between the Mexican Institute of Industrial Property and the Commission exists. This linkage involves the biannual publication of a special patent list including some specific patented pharmaceuticals (mainly compounds, compositions, and subsequent uses of active ingredients). The Commission reviews this list prior to granting marketing authorisations for pharmaceutical products. Only patent owners or licensed third parties are allowed to commercialise a pharmaceutical product protected by a listed patent. Moreover, generic manufacturers can initiate tests for applying for marketing authorisation in the terms explained in previous paragraphs.

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, “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 will only be liable for an amount up to the value of their shares for the obligations and debts of the company.

Other types of corporations include: “Sociedad Civil” or “S.C.”, which is mostly used by professional partnerships, such as attorneys, accountants or architects; “Sociedad por Acciones Simplificada” or “S.A.S.”, focused towards promoting the development of SMEs; “Sociedad Anónima Bursátil” or “S.A.B.”, which is one of the pillars of the Mexican Stock Market; and “Sociedad de Responsabilidad Limitada” or “S. de R.L.”, a limited liability company.

Summary 

When deciding to set up a business in Mexico, foreign investors should consider, among other factors, the location, language and cultural barriers. It is always advisable to hire both an attorney 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 on 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.