Counterfeiting in Mexico: its impact and efforts to stop it

It is no secret that counterfeiting is increasing around the world and this unfortunately is also the case in Mexico. Counterfeiting has turned into a severe problem in the country and its impact has attracted the attention of the federal government, which has implemented measures to try to tackle it.

Recent studies and surveys have revealed a continuing rise in counterfeiting in Mexico, where it has had a negative impact on both the economy and society. This is a concern for the federal government as it highlights the need to implement further measures and sanctions, as well as improve regulation to provide a more effective system for battling the counterfeiters.

Indeed, it is crucial to have solid and assertive legislation and measures to combat counterfeiting effectively, not only for the domestic benefits but also in light of the international problems counterfeiting represents for Mexico.

In recent years, the federal government has been working on this and its efforts to fight counterfeiting have included not only legislative amendments but also the implementation of strong and targeted measures.

Although it would be good to think that these efforts to fight counterfeiting have included all the measures needed to prevent and resolve the issues that arise from counterfeiting in Mexico, this is not the case.

As an example, one of the most important legislative changes in the area has been the amendments to the Mexican Criminal Code and Mexican Industrial Property Law that took effect in 2010.

The amendments to the law allow for IP crimes  to be prosecuted ex officio. However, this provision is applicable only when items bearing counterfeit marks are sold to an end user or in public places wilfully and for commercial reasons. As for the criminal code, the amendment established that most punishable crimes related to IP will be prosecuted ex officio.

Although this legal provision is an important step in the battle against counterfeiting, it refers mainly to commercial goods and one of its shortcomings is that it fails to tackle issues relating to illegal downloading from the internet.

The amendment has yet to be used optimally. It was expected that after its implementation, raids and/or criminal prosecutions would increase due to the proactive involvement of the authorities in the use of their new powers to prosecute ex officio crimes, but this has not yet happened.

"Once the Trans-Pacific Partnership has been concluded, it is expected that the powers of the Mexican customs authorities will be increased so that they can seize suspicious counterfeit merchandise."

While action has been taken, the outcome has not matched expectations with regard to the quantity and time frame of prosecutions because the participation of IP right holders is required to continue with these criminal actions.

It is true that increasing the number of raids and/or prosecutions of low-profile criminals is not the only purpose of the anti-counterfeiting drive; it is also designed to stop the manufacture, distribution and financing of the organised crime gangs behind large-scale counterfeiting.

With that in mind, Mexico’s customs authorities have also been brought in to the fight against counterfeiting and this is why, in 2011, the General Rules of External Trade were amended to create an official database for Mexican trademark registrations, operated by Mexican customs.

With the creation of this official database, all trademark holders in Mexico are entitled to ask the customs authorities to record their registered trademarks in order to identify imports of counterfeit goods that violate registered trademarks.

The holders of trademark registrations, through their legal representatives, have also been involved in the fight against counterfeiting. As primary stakeholders, they participate in training courses for officers in charge of the detection of counterfeit goods at Mexico’s borders. These sessions explain how to detect counterfeit merchandise in a practical and illustrative way.

Sometimes, both the Mexican Institute of Industrial Property and some private associations are involved in these training courses, which are designed to improve the protection of IP in Mexico and develop a culture of respect for it.

The official database and the training courses have complemented each other, enabling IP rights holders to take all the action needed to defend their rights. This is because while the training courses help the customs authorities identify IP holders’ marks when reviewing merchandise to  detect counterfeit products, the official database provides more information about identification, importation, licensing and so on.

Another element in the fight against counterfeiting relates to the powers of the Mexican customs authorities within the country.

Even though counterfeit products must enter Mexico by one of the 49 existing customs posts, the Mexican authorities have been struggling to  implement the measures needed because, even though the official database is improving day by day, it and its accompanying regulations only compel the customs authorities to serve notice to the registered holders “suspicious” counterfeit merchandise. The authorities are not obliged or empowered to seize this merchandise even when they have acknowledged the possible crime and all the goods concerned are at their premises.

IP right holders must act within 72 hours or the suspicious merchandise will be legally allowed entry in to Mexico.

The essential problem seems to be the legislation: either the law and its creators are indifferent or unaware of the situation at customs, or the text of the law is not strong enough to deal with it.

What has become consensus among those involved is the urgent need for solid and assertive legislation that allows and indeed forces the customs authorities to seize merchandise that could be counterfeit.

The solution to this may be the Trans-Pacific Partnership (TPP) negotiations, in which Mexico has participated. Once this regional free-trade agreement has been concluded, it is expected that the powers of the Mexican customs authorities will be increased so that they can seize suspicious counterfeit merchandise, thereby streamlining the process.

Meanwhile, the need for solid legislation is evident as counterfeiters are always looking for ways to evade the law. An example has been the recent action by counterfeiters to try to import goods into Mexico by land or by post in small quantities to dissuade trademark holders from filing criminal actions.

This can work because IP right holders generally prefer to file criminal actions against large importers, as such actions are more cost-effective than proceedings against smaller ones.

Another example of how complex the battle against counterfeiting in Mexico is, is the issue of containers in transit. Currently, the authorities will not seize containers in transit if their final destination is not Mexico.

This rule was adopted in compliance with an analysis conducted by the higher administrative authority responsible for monitoring the proper application of the legal rules of the special IP rights crime unit of the attorney general’s office (GAO). This authority considers that containers in transit cannot be deemed criminal because the merchandise transported in the containers will not be imported to or commercialised within Mexican territory.

This has been contested by IP right holders because while it is true that the final destination of the merchandise is not Mexico, it is also true that in theory the conditions required by the criminal code for the commission of the crime have been met. The transport to and introduction of the merchandise into Mexican territory are part of the elements required by the criminal code, alongside commercial use.

This means that if Mexico is used to bringing the goods to their final destination, the merchandise has crossed into Mexican territory and can be considered as introduced to the country; in order to determine “introduction”, completion of the import process is not necessary.

In line with the above, commercial use is also accomplished because the importation of counterfeit merchandise does not just concern one isolated product but also the importation of complete containers with different counterfeit products that evidently are for commercial purposes. Moreover, as the merchandise in the containers often has a final destination of Central America, products usually return to Mexican territory through different means for their commercialisation.

Despite these efforts, it is clear that to date there are still legal shortcomings that interfere with the actions that can be implemented to improve the battle against counterfeiting in Mexico.

There is a need for solid and assertive legislation to avoid the undeniable rise of  counterfeiting. For this reason, new legislative proposals must be launched in Mexico to combat IP crime.

The new legislative proposals need to take all these issues into account and it would also be helpful if the TPP negotiations conclude in the expected way, as this will optimise the outcome of the customs authorities’ commitment to battle counterfeiting.

Overall, the main efforts should probably include the development and implementation of more severe penalties to ensure that offenders no longer see the crime of counterfeiting as very low-risk due to the legal shortcomings and the apparently soft sanctions that fail to prevent them from committing this crime.

Edith López is an attorney at law at Becerril, Coca & Becerril. She can be contacted at: elopez@bcb.com