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Editorial

ANTI-COUNTERFEITING IN MEXICO

By Jose Luis Ramos-Zurita

uhthoff gomez vega & uhthoff

With a population of over 107 million, Mexico is considered to have the fourteenth-largest economy in the world, a hard-earned spot achieved by high rates of economic growth since last decade, mainly due to several key factors that include notable changes in public policies and several reforms to an ever-modernizing legal system that resulted in attracting foreign investments and encourage companies to establish successful businesses within the country. In contrast with such good economic performance, Mexico is also is considered to be the fourth-largest producer and consumer of counterfeited and pirated products, a fact that poses a significant challenge for companies and professionals that have to deal the issue

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      • According to the Institute for the Protection of Intellectual Property and Legal Commerce, a Mexican trade group, counterfeiting and piracy are a $12.5 billion USD a year business in Mexico.
       
      • Mexican buyers account for 9% of all pirated U.S. goods sold worldwide, according to the Washington-based International Intellectual Property Alliance.
       
      • Total estimated losses due to copyright piracy in Mexico, as reported by International Intellectual Property Alliance members, amounted to $1.25 billion USD in 2005.
       
      • In Mexico, 58 percent of all clothing sold is contraband or pirated, as is 60 percent of sound recordings, 55 percent of software, 90 percent of cigars and 66 percent of sports shoes.
       As one can readily note, counterfeiting causes huge economic losses not only for IP Intellectual Property (IP) owners but to all related legitimate businesses: affects tax revenues of Governments, discourages foreign investments, deceives consumers, dissuades the creation of employment, poses an incredible threat to health and safety of the general population, and deters innovation and growth in much-needed areas that would help not only the economy but several key areas of country development.  Furthermore, as the increasingly available information shows[1], there is a significantly growing participation of large-scale criminal activities, such as drug-trafficking and terrorism, that are involved in counterfeiting as a short-term, low-risk financing means for their illicit activities. Notwithstanding the sheer size of the problem itself and the appalling figures that may discourage any business to invest on the protection of IP rights, there is hope in the form of significant measures and actions that can be taken to properly address those issues, same that have already produced tangible results for some IP owners that have decided to protect their rights from this unfortunately highly-spread illegal phenomenon.  

      GIVING A FOCUSED SCOPE TO THE PROBLEM

       In order to effectively deal with this matter, IP owners must first realistically determine the risks and actual threats that piracy and counterfeiting present to their businesses, since each product and/or service has unique characteristics that should be addressed specifically, and thus this assessment should be done on a case by case basis. Once the potential or actual damages caused by counterfeiting activities are identified, it is mandatory to assess, from a cost/benefit point of view, the results that are to be achieved, either by attacking one of the many aspects of the problem at a time, or by designing a comprehensive, tailor-made anti-counterfeiting program that may last for several months or years, or even be an all-out permanent effort. In this sense, we believe that a comprehensive and well-designed anti-counterfeit program should consider three basic aspects, namely i) designing an strategy to effectively disrupt the supply-chain of pirated goods from the producer to the final consumer; ii) gathering information so as to discover the source of the counterfeits and pirated goods, be it domestic or foreign, in order to undertake more focused actions, and; iii) sending strong public statements that should reinforce the general perception about the relentless enforcement of IP rights (backed up by the two former aspects).  

      LEGAL MEANS AVAILABLE TO EXECUTE ENFORCEMENET ACTIONS

       Legal actions are one of the most important parts of an anti-counterfeiting program, and such are established in the Mexican legislation, which stipulates several legal procedures for the enforcement of IP rights against counterfeiters: administrative infringement actions, criminal actions and other legal actions established in specific laws, as well as the different authorities directly involved in the anti-counterfeiting efforts, such as the Mexican Institute of Industrial Property (IMPI) and the General Prosecutor’s office (PGR), and other relevant authorities that may collaborate with said efforts, such as the Mexican General Customs Administration (AGA), the Federal Commission for the Protection from Sanitary Risks (COFEPRIS), and different police corporations like the Federal Investigation Agency (AFI), the Tax & Customs Inspection Unit (UAIFA) and the Federal Police (PF).  In such respect, it is well worth mentioning that Mexican Law and Regulations do not provide means by which a trademark owner can officially request the government department responsible for customs control, to regularly monitor and intercept any counterfeit goods bearing a fake or forged trademark; i.e., AGA has no legal obligation to enforce intellectual and/or industrial property rights by its own means. Although there is a plan of launching a Customs Trademark Registry, as a larger collaboration effort between AGA and IMPI to combat counterfeiting, for the time being there is no legal provision in Mexican Legislation that enables Customs Authorities to keep a record of the registered trademarks and their authorized licensees and/or distributors and/or importers.  Even more so, the Customs Authorities cannot order the seizure of counterfeit or infringing products by itself, and may only take action if it receives an order from a competent Authority, i.e. the IMPI, PGR or a Judge. As noted earlier, the nature and seriousness of counterfeiting problems varies depending on the specifics of each industry, thus it is indispensable to understand the characteristics and particulars of each case, so as to be in a position to effectively employ the correct means to reach all the previously established objectives. In this sense, we can safely consider that administrative and/or criminal actions that result in well-planned raids probably are one of most useful weapons in the legal arsenal to strike counterfeiters in the short or medium-term; still, we should have in mind that these tools may become less effective in the long run, as it is highly probable that counterfeiters will develop more sophisticated methods for evading these actions.  Notwithstanding the above, raids are the most powerful instruments included in anti-counterfeiting campaigns, since as previously mentioned, they usually help to reduce the presence of counterfeits in the Mexican market and have proven successful in shutting down clandestine manufacturing facilities and warehouses, while discouraging retailers and distributors from distributing fake products, which at the end results in a significant reduction in counterfeit availability in the market. Likewise, raids and border measures implemented at some customs offices have been regarded as being very effective because they have a significant outcome with a lower cost, mainly because they effectively interrupt the counterfeits supply chain and they deal with a “sitting target” (the offending merchandises that are waiting for customs clearance), that usually involves very large volumes of counterfeit goods.   It is very important to be ready to enforce IP rights, starting at Mexican Customs by monitoring and obtaining the seizure of counterfeit goods before they enter Mexico through several strategic ports of entry, and if deemed viable, coordinating efforts with the relevant authorities in order to seize offending products in order to put end to this illegal activities, even with the filing of criminal action and arrest of the people involved. It is safe to conclude that the key for a successful anti-counterfeiting program is the well-structured network that enables not only to monitor and detect the import/export operations involving trademark counterfeited goods, but also to take the appropriate legal measures depending on the nature of each specific case.  

      THE GOALS FOR AN ANTI-COUNTERFEITING PROGRAM

       As noted before, the overall objective -as well as the appropriate legal measures- would depend on the nature of each specific case but whatever the case may be, a successful anti-counterfeiting program must involve undertaking several measures according to different goals. It is well-documented that indifference or tolerance towards street vendors selling counterfeit products will eventually encourage others to join such activity, as there is no apparent risk but only increased profits. Still, IP owners that decide to aggressively enforce their rights can significantly reduce the presence of counterfeits affecting them.  Mexico has a huge informal economy conformed by thousands of street vendors located throughout the country, which not only do not pay taxes but also usually sell counterfeit products of all types. Therefore, it is important to direct efforts intended to reduce the availability of counterfeits by diminishing their presence on the marketplace.  Afterwards, all efforts should be directed to locate the source, supply chain and channels of distribution of counterfeits, so as to aggressively attack them whether they are imported or locally produced. It is very important not only to combat domestic production and distribution of counterfeits, but also to steadily combat the introduction (either legally imported or contraband) of foreign-made counterfeits, since once such products enter the country they atomize and are scattered throughout the Mexican territory, a situation that significantly increases the difficulty to deal with the issue. Eventually, the above-mentioned efforts should provide positive results that would allow the IP owner to reinstate control of the market place with their genuine products. Still, it is important to mention that, even when reaching this goal, IP owners should continue to monitor the presence of counterfeits and enforcing their IP rights, thus adopting a zero-tolerance campaign towards counterfeiters. 

      LEGAL REFORMS: FORESEEABLE FUTURE

       Much has happened lately regarding this subject-matter, mainly the ongoing and increasing rumors about legal reforms that allegedly include giving further legal powers to customs authorities to inspect and detain IP-infringing merchandises that are to be imported into Mexico, along with ex-officio faculties so that General Prosecutor’s Office agents could start investigations and perform raids without the need for IP owners to file a criminal complaint beforehand, enabling Mexican authorities to act on their own and expediting the whole investigation-to-enforcement action procedures; also, there are other proposed less important reforms that deal with this problem (including escalating the penalties for criminal counterfeiting offenders), but until this date none of such reforms have been enacted yet, despite growing pressure from legitimate business owners, industry coalitions and even some foreign governments. Finally, while there is growing expectation regarding these pending legal reforms, current Mexican legislation (as it is) present many options for IP owners that wish to effectively protect and enforce their rights against counterfeiting and piracy; notwithstanding the alarming numbers in which these illegal activities are growing, there are also several examples on how to conduct a successful anti-counterfeiting campaign that may encourage other IP owners to follow and restore their confidence (as well as provide tangible business results) in this arena. If you wish to know more about these matters and maybe take actions to protect your IP rights, we can only recommend to seek professional counsel and, as said before, establish a commitment with one of your company’s most valuable assets: your image and IP rights portfolio.


      [1] BASCAP, Counterfeiting and Organized Crime - A Persuasive Argument”http://www.icc-ccs.co.uk/bascap/article.php?articleid=270

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