legalarsenal
ANDREY_POPOV / SHUTTERSTOCK.COM
1 May 2015TrademarksSaúl Santoyo Orozco and José Luis Ramos-Zurita

Counterfeit goods: A boost for the legal arsenal

It is widely known that a very high percentage (more than 80%) of the generally available counterfeit goods in Mexico come from abroad and that most of these items come from Asian countries. China is probably the largest manufacturer of such fake items, particularly clothing, footwear, luxury items, electronics, toys, and automotive and industrial parts.

Notwithstanding the above, it is important to bear in mind that to this day and unlike in other jurisdictions, Mexican customs officials cannot intercept, detain or seize intellectual property-infringing items on their own, as they lack the proper legal powers to do so and require an order issued by a competent authority on IP matters. Administrative infringement actions are handled by the Mexican Institute of Industrial Property (IMPI), while criminal counterfeiting cases are handled by the General Prosecutor’s Office (PGR); in some rare cases an order can be requested and issued directly by a judge.

It is worth pointing out that despite the above limitations, Mexican customs have achieved great results in the past, receiving in 2010 the Yolanda Benitez Trophy (a prize awarded by the World Customs Organization to a member for its special efforts in tackling counterfeiting and piracy).

Unfortunately, it seems counterfeiters and traffickers have learned from past experiences—criminals seem to learn and adapt to new laws and policies a lot faster than authorities can come up with new mechanisms and legislation designed to stop such illegal activities. Five years after receiving the prize more effective measures are required due to the magnitude of the task of enforcing trademarks and other IP rights at the point of entrance of counterfeit merchandise into the country.

This situation brings us to the core of the issue at hand: what has been done, and could be done by taking advantage of the available mechanisms and tools offered by the Mexican legal system to combat the counterfeit and IP-infringing phenomenon, especially in light of the most recent efforts made by the Mexican government in this area?

Customs database of trademark registrations

The first relevant amendments to the General Foreign Trade Regulations (GFTR) were published in the Mexican Official Gazette in July 2011. These amendments allowed the creation of a database of trademark registrations, administered by the General Customs Administration, which formally started operations in January 2012. The mechanism was created with the aim of speeding up inspection and clearance procedures of registered importers, licensees, etc, and, at the same time, enhancing inspection procedures. These can result in the detection of counterfeit and IP-infringing merchandise and later help to produce the relevant enforcement legal actions.

"History shows that Mexico obtained great results when enforcing IP through customs before this political criterion was adopted."

The creation of a database was and still is a very important first step towards establishing a full trademark registry for customs purposes.Customs authorities at the time did not have an official system to consult or review information concerning trademark owners, licensees, authenticity of goods, etc, and they used to work with an informal database containing information collected from past actions and details that some trademark owners informally provided about their portfolios.

As a consequence, the creation of this database has allowed Mexican customs officials to start gathering the information provided by the trademark owners, which is very helpful for identifying the importation of operations involving potential counterfeit and/or IP-infringing goods.

Further, in December 2013, the Gazette published a series of further amendments to the GFTR (which were already included, although in a vague wording, in article 36 of the Mexican Customs Law) for the importer to declare the trademark and/or any other means of individual identification of the goods subjected to clearance procedures.

Obligations for the importer of branded or trademarked goods

Additionally, further amendments published in the Gazette in July and December 2014 included the specific cases in which the importer is obliged to declare in the corresponding import manifest the information pertaining to the trademark of the imported goods.

These last amendments caused a lot of confusion because they included the obligation to declare in the corresponding import manifest a new trademark indicator code that corresponded to one of five possible situations:

1)  If the importer is the trademark owner (obligation to indicate the trademark registration number);

2)  If the importer has the authorisation to use and distribute trademarked goods;

3)  If there is no trademark or brand affixed to the imported goods;

4)  If the trademark affixed to the products is registered before the IMPI but the imported goods do not have an authorisation or licence (and genuine goods are being imported, so no infringement is being committed); and

5)  If the trademark is pending before the IMPI or is involved in a litigation procedure that may question its validity (obligation to indicate pending application number).

As a result, it is important to stress that these amendments definitively do not establish the obligation to register importers of genuine goods as licensees before the IMPI, as the newly amended regulations cannot impose an obligation that would be completely unconstitutional because the decision to register an entity as a formal licensee before the IMPI has different consequences, including fiscal ones that would have to be addressed before proceedings, let alone impose commercial conditions to importers and trademark owners.

The issue with trans-shipments

Notwithstanding the aforementioned modifications, a very important issue that has changed in the modus operandi of counterfeiters is the manner in which they continue to use regular means of transport, mainly maritime, to continue introducing illegal goods to Mexico by taking advantage of the criterion issued by the General Comptroller of the Attorney General’s Office in June 2011.

That stated that public prosecutors should not participate in an inquiry regarding the trans-shipments of counterfeit products. So the PGR currently allows the ‘safe passage’ of shipments involving counterfeit and/or IP infringing items whose apparent (recorded) destination is a different country, even if such shipments are physically unloaded at a Mexican port and loaded back to another vessel that transports such items to their final destination.

This situation would be like discovering a shipment of cocaine that is being trans-shipped to the US, but because the final destination of the illegal merchandise is not Mexico, federal agents and police would just close the container and let the shipment continue its journey to its final destination.

This is despite there being a great number of such shipments destined for ‘ghost’ importers (paper entities that only serve the purpose of disguising the true nature of the people behind them) in Honduras, El Salvador and Guatemala that forward the items to the southern Mexican border with Guatemala and Belize, where counterfeits are then smuggled back to Mexico.

It is important to consider that the southern Mexican border is quite difficult to control due to its particular characteristics: more than 1,100km of border on very difficult terrain with two countries—Guatemala and Belize—in which there are only two customs offices (Subteniente López, between Mexico and Belize, and Ciudad Hidalgo, between Mexico and Guatemala, plus five other small garrisons scattered along the border of almost 900km between Mexico and Guatemala). Here, other criminal phenomena (drugs, guns and people trafficking) are highly present and represent a huge danger for law enforcement officers and, obviously, to anyone trying to enforce rights in the area.

The above illustrates the need for an urgent revision to the Mexican government position concerning trans-shipments, as the present situation is one of the reasons the number of seizures has dramatically dropped since 2010, when they were at an all-time high.

The current situation

In conclusion, and even if the abovementioned amendments were added to the legal arsenal that is available to combat pirates and counterfeiters, the truth is that from both a strictly legal and a more practical point of view, the reforms are insufficient. We need more legal reforms that may provide authorities with enough legal powers to effectively prosecute and, perhaps more important, have a deterrent effect on the people that control the manufacture, distribution and sale of counterfeits.

Therefore, it is imperative to modify the domestic law to grant powers to customs authorities to enforce IP by their own means against possible infringers/counterfeiters, as today they are legally allowed to take action only after receiving an order from a competent authority, ie, the IMPI, PGR or a judge.

Finally, the elimination of the criterion adopted by the General Comptroller of the Attorney General’s Office in June 2011 concerning trans-shipments is desperately needed, as history shows that Mexico obtained great results when enforcing IP through customs before this political criterion was adopted.

Saúl Santoyo Orozco is the partner in charge of the litigation department at  Uhthoff, Gomez Vega & Uhthoff. His main practice focuses on IP litigation and enforcement, anti-piracy and anti-counterfeiting issues, domain name disputes and counseling. He also designs and implements anti-counterfeiting programmes. He can be contacted at: saulso@uhthoff.com.mx

José Luis Ramos-Zurita is a senior associate at Uhthoff, Gomez Vega & Uhthoff. He has more than 19 years’ experience in administrative litigation issues and customs and international trade issues. He is also directly involved in IP enforcement and anti-counterfeiting strategies. He can be contacted at: jlramos@uhthoff.com.mx

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