Are letters of consent and trademark coexistence agreements effective in Mexico?

 

Mexican statutes do not stipulate any provision regarding trademark coexistence agreements and letters of consent. Nevertheless, these instruments have been widely used to prevent or overcome objections from the Mexican Patent and Trademark Office (MPTO) associated to applications for trademarks identical or confusingly similar to earlier registered or applied ones, protecting the same or similar products or services.

The statute provides that the MPTO will reject a trademark application when the trademark is identical or confusingly similar to an earlier registered or applied one, to cover the same or similar goods or services. Owners of existing registrations are allowed to apply for the registration of identical trademark to protect goods/services similar to those covered by the senior registration. 

However, the attitude of the MPTO to trademark coexistence agreements and letters of consent has changed, and in the last fifteen months it has been quite hostile. Now the question would be: if they are not regulated, do letters of consent and coexistence agreements actually work in Mexico? 

In general, letters of consent and coexistence agreements have two basic purposes: (i) to overcome an objection raised by an examiner, associated to a senior trademark registration or application; and (ii) to prevent or settle a trademark dispute between two different persons. 

In general, Mexican practitioners give more importance to the administrative aspect of the letter or agreement (as a mean to overcome an objection from the examiner) and often neglect the second contractual aspect, overlooking the rights and obligations arising from the letter of consent or coexistence agreement. 

Consequences of letters of consent and coexistence agreements in connection with the MPTO 

As I stated above, letters of consent and coexistence agreements are not regulated in Mexican law, thus they are not binding for the officials of the MPTO. 

The Mexican Industrial Property Law states that one of the aims of the statute is “encouraging the improvement of the quality of goods and services in industry and commerce, according to the interest of the consumers”. 

With the above in mind, the MPTO started arguing about fifteen months ago that the protection of the consumers must have priority over the interests and wishes of the trademark owners. As a consequence, the approach of the MPTO to letters of consent and trademark coexistence agreements has been lees friendly than it used to be. 

In an effort to provide some certainty about how effective a letter of consent might be to improve the chances of having a trademark registered in spite of the existence of earlier registered identical or confusingly similar trademarks to cover the same or similar products or services, the MPTO developed a few guidelines. The guidelines are not actual directives, since they do not appear in any document or internal regulation, and have been communicated orally by the official in charge of the trademarks area of the MPTO in conferences with practitioners, so it also means that they may become more liberal or more astringent at any time and without notice. 

Basically, the MPTO will accept a letter of consent or coexistence agreement to dismiss an anticipation, in the following cases: 

(i) Similar trademarks covering the same or similar products or services, provided that the distinctive element of one of the trademarks is not identically reproduced in the other trademark; and 

(ii) Identical trademarks covering similar products or services, provided that the goods or services listed in the pending application are not implicitly included in the list of products or activities of the senior trademark registration/application, or vice versa.

 The MPTO will not accept a letter of consent or coexistence agreement in the following cases: 

(a) Identical trademarks covering the same products or services. A word mark would be regarded identical to a word+design trademark if they share the same words. 

(b) Trademarks that share the same distinctive element to cover, implicitly or explicitly, the same products or services. 

This last guideline is causing problems to corporations that allow different subsidiaries or sister companies to register trademarks using the same house mark or distinctive feature for their specific lines of business, because the MPTO is rejecting such new applications, even when the applicant files a letter of authorization or agreement executed with the proprietor of the senior trademark registration 

In a case I found a few minutes ago while browsing in the on-line database of the MPTO, on February 20, 2009, the MPTO rejected the trademark application No. 919,139 “ILT ON SITE” filed by a Mexican corporation to cover “real estate affairs”, due the existence of the earlier trademark registration No. 982,020 “ILT”, also covering “real estate affairs”. The MPTO rejected the application in spite of the fact that the owner of the anticipation is a shareholder of the applicant and that he executed a letter of consent, stating that he authorized the registration of “ILT ON SITE” by his company. 

Usually the MPTO does not issue an office action, informing the applicant that it will not accept the letter of consent or coexistence agreement, but issues the final rejection of the trademark application. From there, the only remedies available for the applicant are filing a petition for administrative review by a higher rank officer within the MPTO itself (often a waste of time), or an amparo indirecto or constitutional appeal with a District Judge, or an appeal with the Tribunal Federal del Justicia Fiscal y Administrativa or Federal Court of Tax and Administrative Affairs (FCTAA), which is the most usual way of challenging the MPTO’s decisions. 

It is important to state that the non-specialized Chambers of the FCTAA have issued inconsistent decisions concerning the consequences of letters of consent and coexistence agreements; I have no information about any ruling from the specialized Chamber. 

Although I am aware of the existence of rulings in different senses, the only two published precedents I found (non-binding) from two of the non-specialized Chambers of the FCTAA*, expressly state that the MPTO should reject an application for a trademark identical or confusingly similar to an earlier registered one for similar goods or services, even if the owner of the earlier registered trademark expressly authorizes the approval of the application. 

Therefore, letters of consent and coexistence agreements may not guarantee that the MPTO will approve a trademark application; in the best scenario, they would only increase the chances of success, provided that they follow the current guidelines of the MPTO. 

Consequences of letters of consent and coexistence agreements between the parties 

When a letter of consent is executed by the trademark owner only, it is only an unilateral declaration, with no binding effects for the applicant. However, once the letter if filed with the MPTO, the applicant is implicitly accepting the terms of the letter, and then it becomes a contract under Mexican law. 

Most letters of consent I have reviewed are more or less vague about the rights and obligations of the involved parties. In many cases, the letter only states that the trademark owner ‘authorizes’ the registration of the applicant’s trademark for certain goods or services or in a specific International Class. 

A plain authorization granted by the trademark owner must imply at least some obligations for the authorizing party and some rights for the applicant; the problem is that these obligations and rights would be implicit, not explicit. From my perspective, the ‘authorization’ implies the obligation for the trademark owner to not oppose the application, but nothing more. If the letter or agreement only refers to an “authorization”, the earlier trademark owner would be allowed to file a cancellation action against the registration resulting from the so authorized application, claiming that it invades the exclusivity rights arising from the senior trademark registration, because the general Mexican statute that governs contracts, provides that the waiver of any right must be explicit; otherwise it is illegal and unenforceable. 

The above is just an example about the importance that a trademark lawyer should give to the contractual aspect of the letter of consent or a coexistence agreement. Further, if the applicant is unsuccessful in obtaining the approval of the trademark application, in spite of the authorization letter or agreement, such letter or agreement could be the only instrument available for the applicant to defend itself in case it decides using the unregistered trademark and, on the other hand, the earlier trademark owner decides to file an infringement action. What I mean is that even if the letter of consent or coexistence agreement was not effective to obtain the trademark registration from the MPTO, the obligations and rights contained therein would still be valid and enforceable between the parties, thus it becomes extremely important that the letter of consent or coexistence agreement explicitly stipulates the rights of the parties and the waivers.

 *Journal of the Federal Court of Tax and Administrative Affairs. Fifth Era, Year VII, Volume IV, No. 73, January 2007, Page 1927. Thesis: V-TASR-I-2346.

* Journal of the Federal Court of Tax and Administrative Affairs. Fifth Era, Year VII, Volume IV, No. 73, January 2007, Page 1929. Thesis V-TASR-II-2347.

The basic structure of IP litigation in Mexico (Second part)

Origins of the FCTAA

The Tribunal Federal de Justicia Fiscal y Administrativa or Federal Court of Tax and Administrative Affairs (FCTAA) is a relatively new court. It was enacted in 2001, and its immediate predecessor was the Federal Tax Court. Most of the judges of the FCTAA are tax specialists. However, amendments to several statutes, particularly the modifications of April and May 2000 to the Federal Law of Administrative Procedures, broadened the scope of the old Federal Tax Court to decide a large number of administrative matters, (i.e. trademark registration, public officials liability, environmental protection, mining permits… etc.) until it became the FCTAA in December 2000. 

From mid 2000 to late 2008, appeals regarding IP matters were decided by on the thirteen non-specialized chambers of the FCTAA in Mexico City. Since January 2009, IP appeals are being decided by a specialized chamber, also located in Mexico City. 

The Federal Law of Contentious Administrative Procedures (FLCAP) rules the appeal procedure with the FCTAA. The immediate predecessor of the FLCAP was the contentious chapter of the Federal Tax Code, that governed the appeals with the now extinct Federal Tax Court. 

As you may see, a tax court and a tax law were the predecessors of the current specialized IP Chamber of the FCTAA and of the statute that govern the procedure for appeals involving IP. 

In a typical procedure concerning taxes, there are two parties with opposing interests: the State and the tax payer. The statute that governs the appeals in IP matters took this model. The problem is that in many IP matters, there may be more than one opposing party (such as the proprietor of a registered trademark that was cited as anticipation in a case involving the rejection of a trademark application, or the adversary in a patent invalidation or infringement action). 

At Law School, my Tax Law teacher told us that the purpose of Tax Law was defending tax payers, and many of the provisions (not all) stated in the Federal Tax Code, and later in the FLCAP reflect this way of thinking. Tax law tends to be very formalistic about the decisions and procedures to determine the existence of taxes and liabilities related to unpaid taxes. The lack of fulfillment of a formal or procedural requirement may result in the invalidation of the decision and the procedure, and all the Chambers of the FCTAA must review ex officio that the challenged decision complies with all formal requirements, regardless the arguments of the appellant. 

While such rigor may be desirable in a tax case, it may not be justifiable in a case where the decision of the Mexican Patent and Trademark Office (MPTO) was the result of a “trial-shaped” procedure or did not impose a fine but rejected a trademark or patent application. 

The FLCAP makes no distinction between decisions arising from a purely administrative procedure (such as the abandonment of a patent or the rejection of a trademark application) and decisions rendered as the result of an administrative procedure where the MPTO acted as a court to decide a dispute between two parties, such as a trademark or patent infringement case. 

Therefore, all the rigor that the FCTAA must use to review the compliance of formalities of a tax related decision, regardless the merits of the appeal, are being also applied to review all the decisions from the MPTO. 

The precedents 

A very important issue in Mexican administrative law, and especially in tax law, refers to the authority of the government agencies and the officials to decide taxes, administrative sanctions and impose fines. 

Historically, the government has exercised it power abusively. As a consequence, the Constitution and legislation have provided a number of requirements and limits to protect individuals and private entities from such abuses (whether such protections actually work or if they work only in the benefit of a privileged few would be subject of another discussion). 

One of the above-stated requirements is that the authority of any government agency to impose some burden or extinguishing some right of a private person must be expressly provided in an act of a federal o state legislature (Ley) or in a body of rules issued by the President or Governor himself (Reglamento). 

Certain bodies of rules, such as the estatutos orgánicos or “organizing regulations and the acuerdos delegatorios or “decisions to delegate authority” may provide a government agency with authority for certain actions, but in no case such authority may be broader than the one provided in the legislation or rules, and may not stipulate authority to impose burdens or limit or extinguish rights, if the legislation or the rules did not explicitly stated such authority. 

The requirement for all government officials to have explicit authority provided in the statute or in the rules to decide a case where the official imposes a burden or extinguishes or limits a right does not stop there. There is a binding precedent from the Supreme Court that demands that the official that decides a case must state all the statutes and rules that provide the authority to render the decision, including the article, section, paragraph, subparagraph, etc.** The FCTAA must review this issue ex-officio***, and if it finds one mistake, it must invalidate the decision due lack of authority of the issuing official, even if such lack of authority was never argued by any of the parties, or if it is irrelevant to decide the merits of the case. 

As I explained above, such rigor may be desirable in a tax case, because it has the clear intention of protecting the tax-payer against the abusive behavior of the executive branch. However, in a trademark infringement or cancellation case, this sort of ruling does not result in the enhanced protection of intellectual property rights. On the contrary, it seriously harms intellectual property owners and their activities; the delay of a final decision causes doubts and uncertainty about the enforceability and validity of IP rights, because the effect of the invalidation due apparent or actual lack of authority of the MPTO’s officials is the issuance a new decision signed by an official with authority to do so, or simply correcting the typing flaw that refers to the applicable provision of the statute that originates the authority of such official. 

Of course, given the some voids in the regulations that govern the activities of the MPTO’s officials, the new decision is not always free of formal flaws that may also cause, again, their invalidation, without ever looking at the merits of the appeal. 

Unfortunately, an IP case does not always stop at the FCTAA. The final instance is the Federal Court of Appeals. There are eleven non-specialized courts of appeals with jurisdiction to review the decisions rendered by the IP Specialized Chamber of the FCTAA. The courts of appeals issue contradictory rulings from time to time. When contradictory rulings arise, the Supreme Court may review the cases and decide what ruling should prevail; the Supreme Court’s decisions are binding for all the courts of appeals and the FCTAA. 

Finally, if the patent, trademark or copyright owner wants some indemnification related to a patent, trademark or copyright, the MPTO’s infringement decision must become final (after all the appeals), and then the right-holder may file an action with a court of common jurisdiction, which means to start all over again, but now to try to claim damages and lost of profits. 

The future 

One thing is clear: The current system does not work. Even a relatively simple case may take many years to be decided just because all the time wasted in irrelevant appeals. 

Some practitioners have suggested that the law should be amended to exclude IP from the scope of the FCTAA. Actually there is a bill that the Chamber of Representatives approved in late 2006 to exclude IP from the scope of the Federal Law of Administrative Procedures, and as a consequence, from the FCTAA. The bill is pending at the Senate. 

Although the lack of efficiency of the FCTAA is obvious, I am not sure that this is a good solution. District Courts may decide faster than the FCTAA, but the MPTO’s decisions tend to have many procedural and forma errors that may result in decisions from the District Judges just to cure formal and procedural flaws, with no actual benefit as for the time it takes to reach a final decision would be concerned. 

Finally, most District Judges have not been in regular contact with IP law since 2002, after the FCTAA took over the appeals for IP matters, so their decisions show in general less analysis of the case that the decisions of the FCTAA. 

From my perspective, Mexican IP law needs a structural change. The MPTO should not have authority any long to decide infringement and invalidation cases; such authority should be on specialized federal district courts, which may decide in the same decision if the trademark registration or patent is valid, if it has been infringed and award damages and/or attorney’s fees to the prevailing party.

 Of course, it is a complex issue and any solution would have to be more complex than what I just stated above. In any case, what all practitioners agree is that we need a change, and we have to start working on it now.

 * Ninth Era, Weekly Judicial Journal of the Federation, Courts of Appeals, XXIX, April, 2009, page: 1925, Thesis: I.7o.A.617 A, Registry 167451

 ** Ninth Era, Weekly Journal of the Federation, Supreme Court, Second Chamber, XXV, June 2007, page 287, Thesis: 2a./J. 99/2007

 *** Ninth Era, Weekly Journal of the Federation, Supreme Court, Second Chamber, XXVI, December 2007, page 154, Thesis: 2a./J. 218/2007