Telling the truth on first use

Under the Mexican Industrial Property Law (IPL), several legal remedies are available for challenging the exclusive rights granted by a trademark registration. Among them, invalidation actions on the ground of false statements relating to the date of first use, covered under section III of article 151 of the IPL, are commonly invoked in IP litigation practice in Mexico.

However, the Mexican Institute of Industrial Property (IMPI) and the higher courts have been unclear about which party should bear the onus of the burden of proof in such cases, causing legal uncertainty. A decision in May from the Plenary of the Circuit Court of Administrative Affairs (PCCAA) clarified its view on the issue, which could have negative consequences for trademark owners.

All trademark invalidation actions require a full administrative proceeding to be conducted before IMPI. Such actions are initiated by an initial pleading, after which the defendant has the right to submit its response. Then, both parties have the chance to file their closing arguments before IMPI analyses the case and renders a final decision.

Invalidation actions on the ground of false statements are initiated when the plaintiff deems that information (such as name, address, date of first use, etc) provided by the defendant in its trademark application form is false.

Unlike in other trademark systems, Mexican trademark applications make no distinction between intent to use and use in commerce applications, or any other filing basis. The trademark application form allows the applicant to state a first use date, if there is one. Otherwise, the applicant can leave it blank and it will be accepted as bona fide by IMPI.

However, if the applicant does state a first use date, this provides a big advantage over applications with no first use date indicated. Namely, if a third party brings an invalidation action on grounds of earlier use, that third party will have to prove use before the first use date stated in the application, rather than simply proving use before the disputed trademark registration’s filing date. Clearly, this can result in a much higher hurdle for a third party to overcome in order to succeed.

"Trademark applicants may take advantage of this and file trademark applications stating first use dates earlier than other legitimate foreign owners."

To avoid having to overcome such a high hurdle, invalidation actions on the ground of falsely stated first use dates are commonly invoked in trademark litigation practice in Mexico.

IMPI and the higher courts have not been consistent in their approach to the standard for determining the burden of proof in invalidation proceedings. Some decisions have indicated that the defendant, as the owner of the disputed trademark registration and the party that stated the use date, must submit the proof of use. Other decisions have indicated that the burden of proof shall be on the plaintiff who is asserting that the first use date is false. Of course, these contradictions have caused legal uncertainty in this area.

A new standard

IMPI brought a case to the PCCAA in order to clarify the standard and receive further analysis on which should prevail and be enforceable for future similar cases.

On May 24, 2016, the PCCAA concluded that the burden of proof should be on the plaintiff—in other words, a plaintiff seeking invalidation on the ground of a false first use date shall be required to produce evidence proving that the subject first use date is actually false.

According to the ruling, the PCCAA focused its analysis on the fact that any registration granted by IMPI is understood to be true and valid by statutory provision; so, if the plaintiff is asserting that information is false, it must submit the evidence to confirm those allegations. From a legal standpoint, this analysis does not comply with the current laws governing procedural and litigation practice in Mexico.

Invalidation actions on the ground of false statements are not “affirmative” actions, but “negative” ones.

A clear example of a “negative” action is a non-use cancellation action. These are initiated because the plaintiff states that a registered mark is not in use and should therefore be cancelled. In such cases, the burden of proof is on the defendant. The reasoning for this is very simple—the party who is certain that its trademark is in use and has all the evidence to prove as much is the trademark owner. Consequently, the defendant shall submit proof of use in order to keep its trademark alive.

Conversely, the main characteristic of an “affirmative” action is that the burden of proof is on the plaintiff. An example may be an invalidation action on grounds of earlier registration. In such cases, the plaintiff shall submit all the evidence to prove that its trademark was registered before the defendant’s, as well as that the disputed marks are confusingly similar to each other and cover the same or similar goods or services.

Invalidation actions on the ground of false statements of first use and non-use cancellation actions are very similar. In the latter, the use of the trademark for three years must be shown, while in the former a first use date must be detailed. The plaintiff’s argument is almost the same: the trademark is/was not in use during a certain timeframe. It follows that if a trademark owner states a first use date in its application, it is the only party that has the proof to show such use.

Adopting this new standard for invalidation actions based on false statements of use date could imply several consequences and risks for Mexico’s trademark system. Trademark applicants may take advantage of this and file trademark applications stating first use dates earlier than other legitimate foreign owners. It would not then be possible for legitimate owners to defend their trademarks by bringing invalidation actions based on false statements of first use, because they would not have any evidence to prove that such statements were false. Legitimate trademark owners would possibly be subject to extortion.

It is therefore crucial that the Mexican Supreme Court reviews and weighs in on this standard in order to reestablish that the burden of proof for these cases should remain on the defendant.

Jonathan Rangel is an intellectual property litigation manager at Dumont Bergman Bider & Co. His practice focuses on the enforcement of IP rights for trademarks, patents and copyright. Further aspects of his practice include advice on IP contracts, licensing, well-known and famous trademarks, and constitutional law. He can be contacted at: jrangel@dumont.com.mx

Juan Carlos Salazar is an attorney at Dumont Bergman Bider & Co. His practice focuses on the enforcement of copyright and trademarks. He provides advice to clients on the protection of their intellectual property rights. Further, he provides general consulting on the prosecution of Madrid System trademarks. He can be contacted at: jsalazar@dumont.com.mx