mardi, juin 29, 2010

Mexico: How to claim damages for IP violations

How to claim damages for IP violations

Contributed by Becerril, Coca & Becerril SC


Introduction

The Mexican Institute of Industrial Property is the body responsible for determining whether an IP infringement has taken place. It issues such a determination after the conclusion of an administrative proceeding, which is prosecuted in the same way as a full trial. These administrative proceedings are governed by the Industrial Property Law, which also establishes penalties for parties found guilty of infringement. These penalties range from a fine or an administrative arrest to the permanent closure of the infringer's business.

A common infringement action is initiated when the IP rights holder files an initial brief with the institute, alleging an infringement and enclosing evidence thereof. Once the institute accepts the claim, it notifies the alleged infringer. If the brief so requests, the institute may also inspect the alleged infringer's premises. The alleged infringer is then granted a short period in which to file a response. Following its admission of the response, the institute requires both parties to file final pleadings. The institute then renders its final decision. If it finds that an infringement of an IP right has been proven, it imposes an administrative penalty on the infringer.

In addition, the law establishes that a rights holder is entitled to claim appropriate compensatory damages under civil legislation by filing an independent action before a civil court. Compensation for material damages will be at least 40% of the sale price of each infringing product or service offered and sold by the infringer. However, the law fails to state when a rights holder should file the civil action to obtain compensatory damages.

When to claim

The lack of regulation on the appropriate point at which to file a civil action for damages has resulted in confusion among rights holders. In the past, some have initiated civil actions to claim for damages before obtaining a decision from the institute as to whether infringement has taken place.

In 2004 the Supreme Court set out a criterion: rights holders must wait until the administrative instance of litigation is definitively decided (ie, until the institute has issued a declaration of infringement) before initiating a civil action to claim damages from the infringer.(1) This decision was supported by the Supreme Court of Justice, which argued that civil courts are not specialist IP tribunals and thus cannot determine whether a violation of an industrial property right has taken place; rather, such courts are competent only to apply civil legislation. The law clearly identifies the institute as the expert administrative authority that is entitled to examine and determine infringements of industrial property rights.

However, it remained unclear whether this criterion applied only to industrial property or extended to claims for compensation for copyright violations. The case in which the criterion was established involved trademarks, which are classified as industrial property under Mexican law. However, cases of copyright infringement are treated differently, especially with regard to civil law.

Copyright and civil law

Under the Copyright Law, copyright infringements must be prosecuted and decided in an administrative proceeding by the institute - exactly like infringements of industrial property rights. However, although administrative proceedings to determine copyright infringement are supposed to be decided under the same rules as the industrial property rights matters, it was unclear whether the Supreme Court's criterion applied to copyright violations.

This uncertainty was based on the fact that:

  • both the law and the Civil Code regulate copyright, but the latter regulates it as a form of as personal property;
  • the law expressly contemplates that litigation proceedings for copyright violations may be prosecuted in the federal courts; and
  • monetary damages for copyright violations must be sought in the federal courts under both the law and the code.

In contrast, industrial property rights cases are regulated solely by the Industrial Property Law, which states that (i) litigation proceedings must be considered and decided by the institute, and (ii) any compensation must be sought from, and determined by, a civil court.

Civil courts began to admit and consider civil actions that were filed for copyright violations without the prior issuance of an administrative infringement decision from the institute. Civil court judges argued that they had competence to resolve such disputes, as civil legislation considers a copyright to be a form of personal property, and several judges maintained that they were competent to resolve disputes related to compensatory damages for personal property.

Supreme Court clarification

A decision issued by the Supreme Court of Justice in 2008 has provided a measure of clarity on this issue by stating that in order to request compensatory damages for copyright infringement, rights holders must have a prior declaration from the institute that a copyright violation has taken place. In this case, the court applied the same considerations and rules governing obligatory precedents related to violations of industrial property rights.

This precedent has subsequently been upheld by the Supreme Court of Justice. As in the case of industrial property rights violations, it argued that the civil courts do not specialize in IP matters and that the institute is the expert authority on issues of industrial and intellectual property. The main purpose of the Supreme Court's criterion was to ensure that civil actions for compensatory damages are not heard until the existence of an infringement has been established; such civil actions are not designed to establish whether an infringement has been committed. Referring to the purpose of the criterion, in 2008 the court stated that the same conditions apply to actions to obtain compensatory damages for both industrial property rights and copyright, even though the latter falls within the scope of civil rights. The main purpose of such cases is to narrow the scope of the civil action, so that it merely determines the amount of compensatory damages.

Closing the loophole

However, the 2008 standard is not yet obligatory. As a result, civil judges may still consider civil actions for compensatory damages in relation to copyright violations, even without a prior declaration from the institute. In such cases, therefore, civil judges must decide whether the defendant infringed an IP right before determining whether damages occurred as a consequence.

There is an urgent need for the federal courts to establish a binding precedent to determine when an affected party may request a civil court to determine compensatory damages for copyright infringement. This is essential in order to create a precise and efficient system through which an injured party can request compensatory damages for IP violations from the civil courts. This should allow IP rights holders to respond rapidly and defend their interests where their rights are infringed.

It is vital to establish clear criteria to determine when rights holders can file an action in order to claim compensation for infringement. In addition to encouraging rights holders to sue for damages, this would also deter offenders. The latter rationale is particularly significant for an IP regime in which rights holders must await the conclusion of lengthy administrative proceedings - which, including two levels of appeal, can last for over five years - in order to obtain a final determination that an infringement has taken place. At this point, a civil trial - potentially lasting another five years - still stands between them and any hope of compensation for the infringement. As a result, rights holders often decide not to seek compensation and sometimes choose not even to initiate an infringement action. This attitude encourages infringers to increase their unlawful activities.

Proposals are being contemplated that would improve the procedure for claiming damages. Among other things, they suggest bundling the two actions, so that the institute would determine not only whether an infringement had taken place, but also what compensatory damages to award. It is hoped that combining the two actions will make it easier and faster for rights holders to seek damages for infringement.

For further information on this topic please contact Juan Carlos Amaro Alvarado or Carlos Hernandez at Becerril, Coca & Becerril SC by telephone (+52 55 5263 8730), fax (+52 55 5263 8731) or email (camaro@bcb.com.mx or ).

Endnotes

(1) Case 31/2003.