Volume 5, Number 11, Page 2

Mexican Trademark Law: Impact on Maquiladora Trade

Mexico has undergone major economic reforms over the past twenty years. The Mexican government has replaced prior economic policies with a new open-border approach to take advantage of the maquiladora trade, international technology transfers and foreign investment.

To achieve its goals, the Mexican government established the maquiladora program, regulated by the Decree for the Promotion and Operation of the Export Maquiladora Industry. The maquiladora program was designed to combat the high unemployment rate that exists along the U.S.-Mexico border. The United States has both a relatively high wage scale and a consumer-oriented society’s demand for inexpensive and varied goods; manufacturing in Mexico was introduced as a lower cost alternative for the labor-intensive production of such goods.

The Mexican government recognized that pursuing free trade principles required higher standards of intellectual property protection and enforcement as well as improved international trade and foreign investment laws. Accordingly, Mexico enacted new intellectual property protections, passing the 1991 Law for the Promotion and Protection of Industrial Property. The new law brought significant changes in the field of patent and trademark protection and enforcement. In October 1994, the Industrial Property Law (hereinafter the "IPL") was enacted. Its principal purpose was to adapt Mexican law to comply with the North American Free Trade Agreement (NAFTA) and the Agreement on Trade-Related Aspects of Intellectual Property Rights, including Trade in Counterfeit Goods (TRIPS).

Trademarks under Mexican Law

The IPL defines a trademark as "any visible sign adopted by a manufacturer, merchant or renderer of services to identify its goods or services and distinguish them from others of the same kind or class in the marketplace." The following are trademarks:

• visible, sufficiently distinctive names and figures capable of distinguishing the goods or services to which they are applied, or intended to be applied, from other products or services of the same kind or class;
• three-dimensional forms;
• trade names and denominations or corporate names, provided they do not fall within the express prohibitions of the IPL; and
• names of natural persons, provided that there is no confusion with a registered trademark or a published trade name.

A trademark must be distinctive if it is to identify the origin of the goods or services and thereby avoid confusion, deception or mistake on the part of the public. If a trademark is to protect purchasers from confusion regarding what they are purchasing, the trademark must be recognizable, identifiable and different from other marks.

A trademark must be registered with the Mexican Institute of Industrial Property ("IMPI") in order for its owner to enjoy the exclusive rights provided for by law. It takes an average of four months to complete the registration, the cost of which is about U.S.$ 800.00. The IPL is national in scope, protecting trademarks throughout Mexico.

Use of Trademarks in the Maquiladora Industry

Maquiladora assembly plants are commonly located near the U.S.-Mexico border. Such plants import equipment, machinery and foreign materials "in bond" for assembly of a finished product that is then re-exported. Generally speaking, the product is finished in the maquiladora plant in Mexico and is then shipped abroad to be distributed and sold. The trademark used to identify the product in the destination market is usually applied before the product leaves the maquiladora plant. The maquiladora’s use of the trademark can, however, constitute infringement of a trademark registered in Mexico, even if the product is not sold or intended to be sold in Mexico. Article 213 of the IPL defines the boundaries regarding infringement:

"Art. 213. The following constitute administrative infringements:

...IV. To use a trademark confusingly similar to another registered trademark, to cover the same or similar products or services as those protected by the registered trademark...."

Article 62 of the IPL Regulations defines when a trademark is in use. The IPL Regulations state the following: "It shall be understood that a trademark is in use when the goods or services covered by such trademark have been placed in the market or are available in the market in the country under such trademark in the amount and form corresponding to the uses and custom of commerce. It shall also be understood that a trademark is in use when it is applied to goods for exportation...." Based on the foregoing, the holder of a Mexican trademark is entitled to file an infringement action against a maquiladora for unauthorized use of a registered trademark in the maquiladora operation, even if the products are intended solely for the export market.

Trademark infringements are not criminal offenses under the IPL; rather, they constitute administrative violations. Trademark infringement cases are prosecuted before the IMPI. The defendant may contest the validity of the registration by formally requesting its nullity in writing. Damages cannot be sought in an infringement action before the IMPI; the issue decided is whether or not an infringement has occurred. Damages may be claimed in a court proceeding only after the IMPI’s resolution of the infringement claim is final. IMPI decisions may be appealed to a federal district court, with further appeal available to a federal circuit court. Administrative penalties for infringement range from fines of up to U.S.$ 66,000, to the temporary or permanent closure of the infringing business, and detention for a maximum of 36 hours. The IMPI usually imposes fines. If a defendant continues infringing, the fine doubles. If infringement continues after the IMPl’s decision becomes final, the conduct is considered criminal, and penal action may be taken against the defendant.

A maquiladora owner may face an infringement action brought by the holder of a registered trademark in Mexico if the goods finished in the maquiladora plant bear the protected trademark. Ideally, maquiladora owners should register the trademarks they intend to use on the goods they assemble or produce. At the very least, they should search the IMPI’s records to determine whether the marks they intend to use are already registered and protected under the IPL.

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