Why Mexico matters

Mexico has a developing market for legal services inrelation to trademarks, which has doubled over the past 10 years. Filings from foreign mark owners have been the mainstay of business for many of the big players, but the likely ratification of the Madrid Protocol and other changes may see a change of emphasis.

The ratification of the North American Free Trade Agreement (NAFTA) and the fact that the world’s largest economy is on its doorstep means that the Mexican trademark market is to some extent shaped by the United States. However, local client work is also significant and will become increasingly important as the Mexican economy develops.

While practitioners report that they have seen the amount of work, in terms of trademark registrations, double over the past 10 years, they also note that the Mexican market perhaps differs from more developed markets because there remains a lack of awareness among businesspeople and industrialists as to the protection of trademark rights. A considerable number of small and mediumsized Mexican companies still do not take advantage of the benefitsof the registration system, for example. In addition, certain foreign companies do not, for various reasons (eg, lack of budget or interest in the Mexican market), protect their trademarks in Mexico. “The market is expanding, but I feel that we need to push hard to increase the awareness of trademarks, particularly at the local level,” notes Martin Michaus of Basham Ringe y Correa SC.

Although there is more work than ever before, competition between firms is strong. “There are around 200 firms which are capable of providing trademark services,” explains Oscar Becerril of Coca & Becerril SC. “Of these, there are around 10 to 15 which are the big players. However, I would say that these big firms control only between 25% and 30% of the market. Contrary to the provision of patent services, which is almost entirely dominated by around five firms, trademark services are well distributed among many firms in Mexico,” he adds.

While it is clear that the capabilities and expertise of the big players in the Mexican market are at a similar level to other major firms on the international stage, Arturo Reyes of Goodrich Riquelme argues that there is still a lot of work to do in general terms to improve the levels of responsiveness. “One of the criticisms levelled at Mexican firms by their clients is that they do not receive timely responses to enquiries,” he explains. “Looking at the market as a whole, Mexican firms need to address this issue as the market and economy continue to grow.”

Thus, the challenge for Mexican firms is to provide quality services. This is where the key battles in the market will be fought. “Fees are not such an important factor in the Mexican market, it really is all about service,” says Reyes. “There are cheap law firms certainly, but they do not take that big a slice of the work. Only law firms which are actually able to provide a good level of service are growing and I see this as being a continuing trend.”

New firms seem to appear fairly infrequently, with the main movement in the market coming from general service firms creating new IP departments or strengthening existing departments. One novel way in which this type of expansion has occurred over the past year is through takeovers of smaller firms. Mijares Angoitia Cortes y Fuentes, for example, created an entirely new IP department by absorbing another firm. “This type of action was previously highly unusual in the field of intellectual property in Mexico,” says Sergio L Olivares Jr of Olivares & Cia. “As the market develops, I think that this could perhaps become something that we need to get used to.”

While takeovers may become a common occurrence in the IP legal services market, new firms have struggled to make an impact. The last new one to make real waves was Arochi, Marroquín & Lindner, which was established in 1994. It has grown rapidly over the past few years.

One factor of the Mexican market that may come as a surprise is that the large US firms which have practices in Mexico, such as Baker & McKenzie and White & Case, have been unable to make significant inroads into the market for legal services in relation to trademarks. “Perhaps after NAFTA came into effect some US law firms thought that they could start to do business in Mexico, and a couple of them opened branches in Mexico City,” says Olivares. He explains that, at first, Mexican law firms perceived this development as something of a threat, likely to produce increased competition. The reality, however, is that these branches have not been tremendously successful. Those that still remain have not grown to a significant level and had no real competitive effect in the market. “The reasons for this are twofold,” says Olivares. “First, Mexican companies prefer to deal with local firms and, second, US companies favour Mexican law firms because they have greater experience and reputation in trademark law than the Mexican branches of US law firms. It takes time to build a reputation for excellence in trademark legal services.”

Although Mexico’s ratification of NAFTA in 1994 may not have had the effect that some US firms were expecting, it has led to a number of changes in the market. One of the key aspects was that it forced the Mexican Congress to make further amendments to the country’s IP laws. Mexico had, in fact, implemented a new Industrial Property Law in 1991 and further changes had been made prior to 1994, but the implementation of NAFTA required a number of new measures. In order to comply with NAFTA, Mexico also had to ensure that it was respecting its treaty requirements under the Agreement on Trade-Related Aspects of Intellectual Property Rights.

The market has grown following the enactment of NAFTA as it has brought in more work from both the United States and Canada. Year on year, the United States is, by far and away, the highest foreign filer of trademarks in Mexico. The figures for 2005 confirm that US companies filed the most foreign-originating registrations, the next highest foreign filer was Germany (see tables on page 44). Most Mexican foreign trade is with US companies and they are the biggest investors in the Mexican market. “For instance, WalMart is, I believe, the largest private employer in Mexico,” notes Reyes. While Mexican companies top the table in terms of number of trademarks filed, a very large percentage of Mexican registrations are held by US companies. “Much of the litigation in Mexico in the trademark field relates to US companies, and, perhaps because of the economic power of the United States and its companies, they are more relevant to the Mexican market than the local players,” adds Reyes.

Some practitioners report that although the market has made huge strides in the years following the ratification of NAFTA, it has not grown at the rate anticipated. NAFTA led to changes to Mexican trademark law, including th creation of preliminary measures, similar to the preliminary injunctions available in the United States, but these injunctions can be ineffectual where the defendant puts forward a counter-action. This means that the alleged infringement can continue until there is a final resolution. Issues with enforcement such as this may dissuade mark owners from doing business in Mexico. “NAFTA has helped to improve the law, but further changes are still necessary if Mexico is to become a country which attracts significant foreign investment in the trademarks market,” notes Olivares.

NAFTA and the United States may also have played a part in Mexico’s development of a hybrid trademark protection system. The country has a first-to-file procedure, which means that the first person to file an application and obtain registration owns the mark. However, the law also acknowledges some limited rights of trademark users who have not registered their rights in Mexico, including, crucially, use which has taken place abroad. This is of key importance to foreign mark owners as they will be able to cancel a trademark registered by a third party in Mexico simply by proving use of the mark in their home country. Importantly, the foreign mark owner does not have to prove that its mark is well known. In other Latin American jurisdictions, a mark owner can do nothing to prevent unauthorized registration and use of its mark without such proof.

“Statute of limitations provisions require that the mark owner apply for cancellation of the infringing registration within a set time and if the mark owner fails to adhere to these requirements its rights are waived,” comments Reyes. “Nonetheless, this hybrid system represents a significant advantage to foreign mark owners and I know of no other jurisdiction which offers this level of protection. Personally, I am not sure that the system is fair but it is clear that a policy decision has been made to protect foreign mark owners.”

Another key topic of debate is whether Mexico should join the Madrid Protocol. While the United States was not a part of the international registration system, there was no obvious reason why Mexico should become a member. However, many practitioners feel that since the US ratified the protocol in 2003, and Spanish is an official language, it is almost inevitable that Mexico will join in the medium term.

By Sergio L. Olivares, Jr., Partner

World Trademark Review, January/February 2007

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