Pharmaceutical IP and competition law in Mexico: overview

September 3, 2019

by Alejandro Luna Fandiño, Armando Arenas and Karla Paulina Olvera Acevedo

Patents

1. What are the legal conditions to obtain a patent and which legislation applies? Which products, substances and processes can be protected by patents and what types cannot be patent protected?

Conditions and legislation

Patent applications are regulated by the Industrial Property Law (IP Law) and its regulations. Patentable inventions must (Article 16, IP Law):

• Be novel.
• Result from an inventive step.
• Be industrially applicable.

Scope of protection

Products and processes can be the subject of patent protection under the IP Law. The Mexican Patent and Trademark Office (Instituto Mexicano de la Propiedad Industrial) (IMPI) grants patents protecting compounds, formulations, uses and manufacturing processes for medicines.

Article 19 of the IP Law excludes medical procedures from being the subject matter of an invention. However, a patent can be obtained for a therapeutic method by drafting the claims in the Swiss-style format, that is, claiming the medical use of the compound for the treatment of a specified illness.

Further, on 18 May 2018, articles of the IP Law were amended and new provisions dealing with trade marks were introduced. The main highlights are as follows:

• Trade mark protection for non-visible signs, such as smells and sounds, and certain animated marks such as holograms and for “trade-dress” in the broad sense will be provided for the first time in Mexico.
• Acquired distinctiveness (secondary meaning) will be recognised as an exception to the absolute grounds for refusal.
• Consent and coexistence agreements will be allowed to overcome senior rights, except when dealing with identical trade marks for identical goods or services.
• Bad faith, in a broad sense, is incorporated as a ground for opposition, and as a ground for invalidation.
• Protection for certification marks is recognised.
• Class headings will no longer be possible. It will be necessary to be specific in products and services descriptions according to the WIPO Nice Classification.
• Oppositions will become binding for the Trademark Office, which therefore will have to issue decisions duly grounded and justified based on the merits of each opposition filed.
• To clear non-used marks from the Mexican Register, a use declaration under oath will be required, which must be filed within three months from the third anniversary of the date of grant of the trade mark registration. If no use is declared by this date, the registrations will automatically lapse.
• It will no longer be possible to renew a trade mark registration in a certain class based on the use of the same registered trade mark in other class.

9. How long does trade mark protection typically last?

Trade mark registrations are valid for ten years from the filing date and can be renewed for any number of further ten-year periods.

Renewal of trade mark registration can be requested by the holder from six months before its renewal date. However, the IMPI will accept and process renewal petitions filed within a six-month grace period after the renewal date, on payment of an additional government fee.

10. How can a trade mark be revoked?

If a trade mark is not used for three consecutive years in relation to the goods or services for which it is registered or when the declaration of real and effective use is not made in terms of Article 128 of the IP Law, the registration is subject to cancellation for non-use unless either:

• A duly licensed holder or user has used the mark for three consecutive years immediately before the filing date of the cancellation action.
• There are legitimate reasons for the non-use that are beyond the control of the trade mark owner (for example, import restrictions or other government requirements).

(Articles 130 and 152(II), IP Law.)

• Trade marks can also be cancelled if:
• The registration was granted in breach of the law, although the invalidity action cannot be based on a challenge to the applicant’s legal representation. An action on these grounds can be made at any time.
• The trade mark is identical or confusingly similar to another that has been continuously used in Mexico or abroad before the application for registration, and is applied to the same or similar products or services. An action on these grounds must be made within three years of the trade mark’s registration.
• The registration was granted on the basis of false information in the application. An action on these grounds must be initiated within five years of the trade mark’s registration.
• The registration was granted by mistake, inadvertently, or another trade mark is registered that is considered infringed because it is the same or confusingly similar and is applied to the same or similar products or services.
• The agent, representative, user or distributor of the holder of a trade mark, or any other person who has had a relationship with the holder, directly or indirectly, of a foreign trade mark, requests and obtains the registration of this or another confusingly similar, in its name without the express consent of the holder of the foreign trade mark.
• The registration was obtained in bad faith.(Article 151, IP Law.)

11. How is a trade mark infringed? How is a claim for trade mark infringement made and what remedies are available?

Conditions

For administrative infringements, the claimant must prove use of a confusingly similar/identical trade mark by a third party without authorisation, to distinguish identical or similar goods or services to those covered by the registration.

Criminal proceedings can be brought against counterfeit goods with a trade mark identical to the one held by the claimant (counterfeiting).

A claimant can also bring an action for unfair competition. In this case, the claimant must prove that use of the trade mark by the infringer makes some form of false representation, that tends to cause consumers to believe that the defendant’s goods or services come from the claimant.

Claim and remedies

Administrative actions for trade mark infringement can be brought before the IMPI. IMPI can impose a fine and order an immediate halt to the infringing activities. A civil action to claim damages in a civil court is possible once an IMPI resolution declaring infringement is final and cannot be appealed.

A criminal action against counterfeiting can be brought by filing a complaint with the attorney general’s office. On receiving the complaint, the attorney general’s office will conduct an inquiry, to determine whether a crime has been committed. If so, the district attorney submits the matter to a federal district judge. Criminal penalties range from between two and ten years’ imprisonment, to about USD100,000 in fines. Imprisonment and fines can be imposed simultaneously.

12. Outline the regulatory powers and enforcement action against counterfeiting in the pharmaceutical sector.

COFEPRIS has statutory authority to:

• Seize any drug held for sale that is adulterated, misbranded, mislabelled, and/or lapsed.
• Inspect at reasonable times, subject to reasonable limits and in a reasonable manner any place where health products are manufactured, packed and/or held for marketing.

Right holders can enforce border measures and the remedies provided by the IP Law (see Question 11), if applicable.

Measures against counterfeit medicines in Mexico have been introduced, including customs protection. Customs and IMPI are analysing whether the customs database of registered trade marks could be extended to patents.

On 22 December 2018, amendments to the Customs Law came into force. The amendment to Article 15 will directly impact the protocol for counterfeit or infringing products at Mexican customs The amendment affects certain infringement actions available to right holders in the IP Law, including the right to request that border control seizes the products at Mexican customs checkpoints before being imported into Mexico.

The amendment to Article 15 states that a right holder that causes any product to be seized at Mexican customs for alleged infringement of intellectual property and for matters other than Customs Law infringements or foreign trade matters, will have to pay:

• Storage fees.
• Customs handling fees.
• Any other service fee related to storage.

Before the amendment, the customs used to exempt the payment for storage and necessary handling, not only in criminal proceedings before the Attorney General’s Office, but also in infringement proceedings before the IMPI. This new amendment to the Customs Law means that these services will not be exempted, so that right holders who are implementing these actions will have to pay for the storage and handling of the seized products.

Mexico’s Senate recently published in its Official Gazette a proposal to modify the Mexican IP Law, among others, to empower IMPI to seize goods to be imported, exported or that are in transit, in accordance with the Customs Law.

IP and competition law issues

13. Briefly outline the competition law framework in your jurisdiction and how it impacts on the pharmaceutical sector. In particular, the competition authorities and their regulatory powers, key legislation, whether pharmaceutical investigations are common, key recent activity and case law.

The Antitrust Commission (Comisión Federal de Competencia Económica) (COFECE) (https://www.cofece.mx/) enforces the competition legal framework in Mexico. This regulatory authority is an administrative agency with technical and operational autonomy, not governed by but related to the Ministry of Economy. The primary legislation is the:

• Economic Competition Federal Law (Ley Federal de Competencia Económica) (ECL).
• LEC Regulations (Reglamento de la Ley Federal de Competencia Económica) (ECR).
• Administrative Rules (Disposiciones administrativas de carácter general reglamentarias).

The COFECE has statutory authority to review practices by pharmaceutical companies. In 2010, the COFECE published the imposition of a fine on six pharmaceutical companies for anti-competitive practices in public tender proceedings by the Social Security Institute (Instituto Mexicano del Seguro Social) (IMSS). Currently, COFECE is conducting an investigation into alleged irregularities in the market for the production, distribution and marketing of medicines.

14. Briefly outline the competition issues that can arise on the licensing of technology and patents in a pharmaceutical context.

Patent licensing and anti-trust law

In theory, an action could be brought against activities falling outside the scope of a patent, such as:

• Non-competition agreements for products that are not covered by the claims.
• Product-tying within that scope.
• Unfair competition activities, such as advertising that a product is better than an alternative for the sole reason of it having a patent.

Actions could also be brought before the COFECE for other forms of abuse of patent rights, such as clearly unfounded attempts to enforce a patent.

Compulsory licensing

After three years starting from the date of grant of the patent or four years from the filing date, whichever is later, any person can request from the IMPI the grant of a compulsory licence when the patent has not been used, except if there are justified reasons for the non-use (Article 70, IP Law).

A compulsory licence will not be granted when the patent holder or a licensee has been importing the patented product or the product obtained by the patented process (Article 70, IP Law). Further, the working of a patent by a licensee will be deemed to be worked by its holder, provided that the licence has been recorded with the IMPI (Article 69, IP Law).

A party applying for a compulsory licence must have the technical and economical capacity to efficiently work the patented invention (Article 71, IP Law).

Before the grant of the first compulsory licence, the IMPI will provide the patentee with the opportunity to begin working the patent, within one year from the date of personal notification given to him (Article 72, IP Law).
Following a hearing with the parties, the IMPI will decide on the grant of a compulsory licence. If the IMPI decides to grant it, it will set out its duration, conditions, field of application and amount of royalties to be paid to the patent holder. The royalties are established by the IMPI after a hearing with the parties and they should be fair and reasonable.

The authors’ are not aware of any compulsory licences being granted in recent years.

15. Are there competition issues associated with the generic entry of pharmaceuticals in your jurisdiction?

The IP Law grants patent holders capacity to oppose exploitation of patented goods, such as importation (see Question 5). The linkage regulation prevents violation of patents by preventing approval of marketing authorisations for patented products.

The linkage system contain a Bolar-type exemption. This allows generic companies to apply for marketing authorisations and use patented materials to meet the regulatory requirements, three years before the expiry of a patent covering chemicals and eight years before for biologics.

Problems arise because the law and regulation of import permits for raw materials is silent about IP related controls and does not provide a reference to the Linkage Gazette. Basically, there are no guidelines or standards to bind COFEPRIS to review and take into consideration the amount of raw materials (active pharmaceutical ingredients) (APIs) that are authorised to be imported. The main concern is that recently, there have been an increasing number of permits to import patented compounds in bulk, that clearly exceed the justified amounts for clinical trials or experimental use.

As a result, patent holders have had to attempt different strategies to attack these violations of their IP rights, including patent infringement actions, where co-ordination between the patent and customs offices is not always ideal, and challenges against import permits issued by COFEPRIS. Measures by the authorities would be welcome to prevent the entry of infringing pharmaceutical substances into Mexico. Examples are:

• COFEPRIS using and observing the patent Linkage Gazette for the approval or rejection of import permits.
• COFEPRIS establishing the amount of APIs sufficient to comply with regulatory tests for marketing authorisation for follow-on products, denying imports of non-adequate amounts.
• COFEPRIS requiring importers to declare the destination of the imported products.
• IMPI clearly establishing through case law the differences between the sole experimental use and the Roche-Bolar exception.
• IMPI being careful when, on a case by case basis, it reviews what is an adequate amount to be imported for tests regarding a generic marketing authorisation application. In certain cases, a small amount of an API can represent the manufacturing of thousands of infringing products, which may end up in the grey and black market.
• Customs to take advantage of the information in the patent Linkage Gazette, to detect and stop eventual substances entering Mexico in violation of valid patents.

16. Have abuse of dominance issues arisen in the pharmaceutical sector in your jurisdiction?

The COFECE published in 2010 the imposition of a fine on six pharmaceutical companies for anti-competitive practices in public tender proceedings by IMSS. This case is final (see Question 13). Currently, COFECE is conducting an investigation on alleged irregularities in the market for the production, distribution and marketing of medicines.

17. Have parallel imports of pharmaceuticals raised IP and competition law issues in your jurisdiction?

Although the Intellectual Property Law does not specifically address patents in this context, it is likely that the principle of exhaustion of rights also applies to them. The Mexican government has entered into two main treaties on the subject of international trade and intellectual property rights: the North American Free Trade Agreement (NAFTA) and the Trade Related Aspects of Intellectual Property Rights (TRIPS).

TRIPS allows countries to engage in parallel importation by adopting international doctrines of patent exhaustion, that is, once products are placed on the international market, patent holders’ exclusive rights are exhausted.

NAFTA expressly provides for the protection of IP rights as long as such protection does not constitute a bar on the free circulation of goods and services. Similarly, Article 1 of TRIPS can be interpreted as providing for a balanced system of rights between traders and IP owners.

18. Does a patent or trade mark licence and payment of royalties under it to a foreign licensor have to be approved or accepted by a government or regulatory body? How is such a licence made enforceable?

There is no requirement for a patent or trade mark licence and payment of royalties under it to a foreign licensor to be approved by a government or regulatory body.

Recording a patent or a trade mark licence is not mandatory and the agreement is enforceable between the parties regardless of whether or not it is recorded. However, to be effective against any third party, and to ensure the title holder has the use of the trade mark or patent, the licence must be recorded with IMPI (IP Law).

For information on pharmaceutical pricing and state funding, manufacturing, marketing, clinical trials, advertising, labelling, and product recall and liability, see Medicinal product regulation and product liability in Mexico: overview.