Volume 4, Number 30, Page 3

Mexico: IP Protection: Proposed Structure for an IP Court

by Hope H. Camp, Jr.

part 2 of 2

The following proposals with respect to the creation of a specialized Intellectual/Industrial Property (IP) Court in Mexico are intended to stimulate thinking and reasonable discussion, rather than to promote a specific, unalterable mechanism for the enforcement of industrial property rights or copyrights.

"Touchstones" for a Specialized Industrial Property Court in Mexico

1. A trial court staffed with technically qualified personnel: a) judges with training and experience in industrial property protection; and b) other court personnel with technical training and experience in industrial property protection.

2. Right of the property owner to institute a lawsuit and to independently pursue all claims and present all evidence.

3. Right of the property owner to obtain a temporary restraining order, after posting bond, which can be converted to a temporary or permanent injunction after hearing.

4. Right of the litigants to present expert testimony.

5. A Court that is independent of the executive branch of the government.

Structure of the Court

Based on these touchstones, the structure of the court that I propose for consideration follows.

Jurisdiction

To hear and decide the claim of any person with respect to the validity of any kind of intellectual property rights recognized under Mexican law and asserted within Mexico.

To hear and decide any claim presented by any person that an intellectual property right of any kind recognized under Mexican law is being or has been infringed within Mexico.

Pleadings

The first pleading should be a Statement of the Case. It will set forth all of the material facts available to the plaintiff at the time of filing and will incorporate all available material documentary evidence in support of the claim. Such evidence will include sworn statements of witnesses, including expert witnesses.

The second pleading, an answer responding in all respects to allegations made in the statement of the case including specific factual statements, will incorporate all material documentary evidence available at the time. It should also include sworn statements by all material witnesses.

Post Pleading Motions

After the Statement of the Case and Answer are filed with the Court, either party may move for summary judgment or to strike any portion of the other party’s pleading or evidence for legal insufficiency or violation of any rules relating to the materiality, relevance or competence of evidence.

Discovery

Either party may petition the Court for discovery of documents, models, product examples, answers to written questions or the oral depositions of parties or witnesses.

The party seeking discovery must convince the Court that the discovery sought will produce evidence that is material and relevant or will serve to materially impeach the evidence of the other party.

Hearing

Hearings should be before the Court and may consist of written briefs and, as permitted by the Court, oral arguments on the evidence and answering questions by the Court. The Court may appoint its own expert to resolve conflicts in the expert evidence presented by the parties. The parties will be entitled to orally examine and cross-examine all witnesses at the hearing, including any Court-appointed expert.

At the close of the hearing, the parties may file written briefs. The Court’s decision will be published in writing.

Pre-hearing Relief

The Court will have the power to order a party to cease and desist in the use of any form of intellectual property, as long as the party seeking such relief can show the likelihood of winning the claim and can post a bond or other financial guarantee that would reasonably insure against financial loss by the party subject to such an order. If the party granted extraordinary relief does not prevail on the merits, and the other party can prove damages that were proximately caused by the grant of a preliminary cease and desist order, the proceeds of the posted bond must be paid to the damaged party to the extent of the damages proved. If proven damages exceed the proceeds of the bond, the Court may award the excess to the damaged party.

An initial cease and desist order may be obtained ex-parte, provided that the Court promptly sets a hearing on whether the cease and desist order should remain in effect pending a decision on the merits.

The hearing on whether the cease and desist order will remain in effect until a decision on the merits will be based on the evidence available to the parties at the time of the hearing.

The Court will order pre-hearing discovery only upon the strongest of showing that an injustice will occur unless the discovery sought is permitted.

Relief that the Court Can Grant after

Hearing on the Merits

The Court may make any pre-hearing cease and desist order permanent. It may also modify such orders as it sees fit or dissolve them.

The Court may award compensatory damages to either party based on the evidence. The Court may also award punitive damages upon a showing of deliberate and intentional violation of a party’s property rights, as long as the party against whom such damages are awarded was notified by the other party or pursuant to a Court order to cease and desist in the actions that are found to violate another party’s property rights. Punitive damages may not exceed three times the amount of compensatory damages.

The Court may award costs and attorney’s fees to the prevailing party. The Court is to do so when, in its discretion, the actions of the losing party are deliberate and intentional.

Rules of Evidence

The Court has absolute discretion with respect to the admission and weight of evidence offered by the parties.

Appeals

Pre-hearing relief may not be appealed. Orders of the trial court granting or denying discovery are not appealable.

Appeals of a decision on the merits may be made by either party to the designated Collegial Court. Such appeals are of right and must be based on one or more of the following grounds: 1) The Trial Court has erred on the law to such an extent that a substantive property right of either party has been compromised; 2) the decision of the Trial Court is against the great weight of evidence; and 3) the decision of the Trial Court is tainted by fraud or any form of corruption.

Opportunities and Constraints

This proposed structure for a specialized IP court presents many opportunities. We can give the property owner more control and responsibility for the enforcement of his rights. The executive branch of government is thus relieved of the primary responsibility for resolving disputes arising from alleged infringements of industrial property rights.

This structure clearly implants the temporary restraining order in Mexican law and would assist Mexico in complying with its obligations under Chapter 17 of NAFTA. It would encourage the development of experts but leaves room for the court itself to choose its own expert. It would also limit opportunities for ex-parte audiences to petitions for cease and desist orders.

On the other hand, there are constraints as well. Many Mexicans may say that there is no need for such a court because no patent infringements have occurred. It must be remembered that the availability of substantive product patent protection and clearly defined trade secret protection is about three years old. As time goes by, I have no doubt that inventors and property right owners in Mexico will see their patents being infringed and their trade secrets violated. The current system of administrative remedies is not likely to meet the needs of an increasingly dynamic Mexican economy.

There are no judges qualified to sit on such a court. That question is open to discussion. It would appear to me that if the positions were properly remunerated a goodly number of the members of the Mexican Patent Bar would be interested in serving as judges. Judges can be brought up to speed with training. In any event, lack of a corps of trained judges should not bar us from considering a court system which would offer opportunities for enforcement that do not now exist.

The greatest enemy may be inertia. Many say nothing can be done because the existing structures cannot be changed. Nothing can be done because the Mexican Bar does not want anything done. Nothing can be done because change is too sensitive politically. If there is anything we must have all learned about Mexico in the last 10 years, it is that Mexico can and has changed. First, we have been witness to, and participants in, the opening of Mexico to world commerce and the adoption of NAFTA. More importantly, we are witnessing the evolution of Mexico’s political system from monolithic/top-down, one-party rule to a pluralistic, more representative system.

There is the fear of the unknown. It is said that it will be hard to predict how such a court would operate. That is true, but we do know how the current system operates and it is worrisome to many property owners. Furthermore, we know how courts of this type function in other parts of the world and have seen that the results produced are generally salutary.

Finally, loss of control by the executive branch is offered as a constraint. However, the current leadership in the Mexican industrial property arm of the Mexican government wants to give jurisdiction for enforcement to an independent court.

Hope H. Camp, Jr. is a partner at the law firm of Jenkens & Gilchrist in its San Antonio office. He is also the committee chairperson for the Center's IP project. For more information about the project, contact Alejandro Pérez: alejandro@natlaw.com.

Enforcement

Administrative Proceedings

Requirements of the Application

• Directed to the Industrial Property Office.

• Must be in writing and in Spanish.

• Signed by the interested party or his/her representative.

Sanctions

• Fine of up to 20,000 times the prevailing daily minimum wage in Mexico City.

• Temporary or permanent closure of the infringer’s premises.

• Administrative arrest for up to 36 hours.

Judicial Process

Civil Procedures

Article 221 of the Industrial Property Law permits civil actions to obtain damages from the person that discloses a trade secret. Some remedies based on the Civil Code are available, but they may be more theoretical than practical.

Damages may be sought under contract law if the parties had entered into a contract. Damages must not be less than 40 percent of the market price of the product or the cost of realization of any service.

Criminal Procedures

Elements of the crime of an industrial secret:

• The violator must have known about the confidentiality and disclosed the secret with the purpose of obtaining an economic benefit; or

• The violator must have disclosed the secret with the intention of producing harm to the person that was keeping the secret.

Punishment for trademark or trade secret infringement:

• Up to two years in prison.

• Fine equal to 100 to 10,000 times the daily minimum wage.

• Prosecutor can close the establishment of the infringer.

See http://www.natlaw.com/pubs/moeckel.htm for the full text of "Intellectual Property Protection and Enforcement in Mexico," from which this information was adapted.