MEXICO: An Introduction to Intellectual Property
Current Economic Conditions Affecting Clients and the Legal Profession
Mexico is among the world’s 15 largest economies and is the second largest economy in Latin America. The US is its largest trading partner and the destination of nearly 80% of its exports. Mexico’s economy grew slightly more than analysts expected at the end of 2022 ahead of a likely slowdown this year as a higher interest rate tests the strength of resilient demand. According to Bloomberg, gross domestic product (GDP) expanded by 0.4% in the fourth quarter from the previous three months, compared with the 0.3% median estimate of analysts surveyed by Bloomberg. From the same period a year ago, the economy grew by 3.5%, according to preliminary data released by Mexico’s national statistics institute on Tuesday. Overall, the economy expanded by 3% in 2022.
The decline in economic growth in the US has been expected to translate into a downturn in Mexico, as consumers’ weakening demand for everything from electronics to cars hits the local manufacturing sector. Banco de Mexico’s prolonged rate-hiking cycle is expected to end soon, as inflation that has come off a peak may provide policymakers with room for manoeuvre.
The agriculture sector grew by 6.6% in the fourth quarter from the year prior, while manufacturing grew by 3% and the services sector by 3.4%. Other factors such as nearshoring, which refers to the movement of companies to Mexico to be closer to the North American market, are expected to continue providing a boost to the economy, despite some of the concerns about the decline in export growth in the short-term.
Mexico’s economy is diversified, including hi-tech industries, oil production, mineral exploitation, and manufacturing. Mexico is the world’s seventh agricultural power and ranks among the world’s largest producers of coffee, sugar, corn, oranges, avocados, and limes. Cattle farming and fishing are also important activities in the food industry. Furthermore, Mexico is the world’s fifth largest producer of beer and its largest exporter.
The service sector constitutes 59.87% of GDP and employs 61.37% of the workforce. The hi-tech, information, and software development sectors are experiencing real momentum, driven by the quality of the workforce, clusters, and low operating costs that favour the creation of call centres. Even though medical services and tourism had been growing steadily for the past few years, due to lower service costs than in other Western countries, 2020 saw a significant decline in the tourism industry.
Mexico’s GDP grew by 3%, surpassing the pre-pandemic level (fourth quarter of 2019). However, 2022’s annual GDP lagged behind 2019’s GDP by 0.69% and 2018 by 0.88%. On a per capita basis, GDP of 2022 still lagged behind 2018’s GDP by 4.7% and GDP is estimated to finish recovering by 2027. Manufacturing exports will support growth benefiting from the strong recovery and policy support in the US. Private consumption will strengthen gradually, aided by remittances and the rollout of vaccines.
The Level of Current Developments
In accordance with the Mexican Institute of Industrial Property, in 2022 the number of inventions and distinctive signs submitted were the following:
Inventions
20,747
Distinctive signs
201,637
On the other hand, by the end of 2020, the New Federal Law for the Protection of IP (FLPIP) entered into force, which substituted the Industrial Property Law. The Mexican Congress enacted this Law to comply with the obligations that Mexico has undertaken with the International Treaties that were recently executed, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) and the United States–Mexico–Canada Agreement (USMCA).
Taking into consideration the new FLPIP, we certainly have a better enforcement of IP rights by having the possibility of claiming damages in a faster way, without having to wait for a final and non-appealable resolution of the MIIP, as explained below. Additionally, considering the increase of use of e-commerce, we expect to have more litigation cases related to this way of commercialising infringing/counterfeit goods.
New Legislation That Will Have an Effect on Clients
As noted, the FLPIP has entered into force and has several benefits for trademark holders; eg, now the holder of an affected right has the possibility of claiming damages through the following two independent actions.
- Before the MIIP, by filing a parallel procedure (incidental), once the plaintiff obtains a favourable decision declaring an infringement conduct.
- Directly before the Civil Courts by filing a civil or mercantile lawsuit. In this scenario, the procedure may be suspended, in case the counterparty files as a counterclaim, a cancellation, or invalidation action against the plaintiff’s registration, which will be solved by the Trademark Office.
On the other hand, the Federal Copyright Law (FCL) was amended in 2020, as part of the obligations that Mexico has undertaken with the International Treaties mentioned above, and now establishes the proceeding known as “Notice and Take Down”. This proceeding obliges online service providers, websites, platforms, and internet search engines to remove and deny access to any infringing material, work, or content upon receiving a notice from the corresponding copyright holder.
The recent amendments are certainly having an important impact in the intellectual property system.
Potential Hurdles and Difficulties Faced by Clients and How These Can Be Overcome
Taking into consideration the increase of e-commerce, the biggest challenge is how to know that there is a product being commercialised in e-commerce that infringes the trademark holders’ rights, if they are not aware that the trademark is being used by a non-authorised party, and any action they may be able to take to protect the trademark.
Therefore, what we have been successfully doing as a first step is to register our clients’ trademarks in the databases of various platforms, and to conduct a periodic surveillance of:
- any counterfeit product;
- any foreign product that may use a confusingly similar trademark; and
- any unauthorised sale of its products.
In our experience, if we detect any violation of one of our clients’ trademark registrations, we implement several actions, such as:
- the sending of a cease-and-desist letter directly to the unauthorised party selling the infringing product; and
- requesting the platform to remove the infringing product, through the process operated by the platform in question.
By taking all the actions mentioned, our clients have overcome the challenges resulting from the increase of e-commerce.
Another important issue to take into account is that on 17 January 2022 a new act was published in the federal official gazette to protect the cultural heritage of indigenous and Afro-Mexican people. Under this new act, ownership of cultural heritage belongs collectively to the communities and, thus, they can choose whether or not to authorise the use to third parties, of elements of their cultural heritage. This may have important legal consequences mainly in the textile market, since elements that apparently were in the public domain or used by the communities, are now protected rights that cannot be used unless authorised by the corresponding community.