Preliminary Note

Most answers to this questionnaire are presented from the perspective of the importing country where the issue of whether or not parallel imports are permitted, has an impact. That is to say, generally, the issues presented in the seven questions of the questionnaire are not addressed from the perspective of the country of exportation where the patented or trademarked goods have been originally introduced in commerce by the IP owner or with the consent of the IP owner, but as noted from the perspective of the importing country where the parallel imports may or may not take place.

1.

Is there international exhaustion of (i) patents; (ii) trade marks; and (iii) other industrial property rights? That is, can an industrial property right owner use industrial property rights against parallel imports from another country, when the imported products have been put on the market in that country by the industrial property right owner or with his consent?

Patents

No. Mexican patent law does not endorse the notion of international exhaustion of patent rights. While there is no express provision in the Mexican statute expressly addressing the possibility to institute legal proceedings against the importation of patented goods manufactured and introduced in the commerce of a foreign country with the consent of the patent owner in Mexico, there is legal basis in order for the owner of a Mexican patent to oppose to the unauthorized importation of a patented product from a foreign country including situations where the patented product was placed in the market place of the foreign country with the consent of the patent owner. See Articles 25, 22, II and 223, XXV, Industrial Property Law of 1991 as Amended (IPL).

Trademarks

Yes. Mexican trademark law endorses the notion of international exhaustion of trademark rights. The owner of a Mexican trademark registration cannot rely on the rights flown from the Mexican trademark registration to oppose to the importation of trademarked products placed in the marketplace of a foreign country by the trademark owner or with the consent of the trademark owner. Express provision exists in the Mexican statute in the sense that a Mexican trademark registration shall not produce legal effects in these specific circumstances (see Article 92, II, IPL).

2(a)

Can contractual restrictions imposed by an industrial property right owner be used to limit the effect of international exhaustion?

Patents

As above noted, there are no parallel imports of patented products under Mexican law, thus the owner of a Mexican patent may rely on patent rights to institute legal proceedings to prevent the importation of patented products in Mexico. This may be reinforced by contractual understandings with the foreign distributor, but only in case the foreign distributor was directly responsible of the sale of the patented products in Mexico as opposed to a buyer of the foreign distributor, in which case the contractual understandings with the foreign distributor would be of little or no use at all.

Trademarks

Since this report is basically drafted from the perspective of the importing country -and not the country of exportation, where the contractual restriction is adopted-little can be said by the Mexican Group of what would be the law of the foreign country which would most likely apply to the contractual restriction imposed to a foreign distributor to avoid that trademarked goods distributed by such foreign distributor reach the Mexican marketplace. In any case, it is submitted that a trademark owner who imposes contractual restrictions to limit the effect of international exhaustion of trademark rights could attempt to enforce the contractual rights -as distinguished from trademark rights-against the specific party with whom the contractual understanding was reached, but not against third parties. If the foreign distributor of the trademark owner sells the trademarked products to a customer with the warning that such trademarked products cannot be sold abroad, the distributor would be honoring the contract and the trademark owner would have no action for breach of contract against the distributor if it later appears that the customer of the distributor imports or sells -directly or indirectly- the trademarked products in a way that the trademarked products reach the Mexican marketplace. If that pattern took place in Mexico, under Mexican law, the trademark owner would have no action against the customers of the distributor but only against the distributor who can hardly be held responsible for the final destination of the trademarked goods sold to a third party. It is extremely unlikely that a foreign distributor bound by export restrictions v.gr. to Mexico directly exported the trademarked goods to Mexico risking his business relationship with the supplier. If the goods reach the Mexican market where parallel imports of trademarked goods are permitted is through a channel other than the foreign distributor, against whom the agreement could not be enforced as far as Mexican law is concerned.

Again, if the situation took place in Mexico, under Mexican law, the trademark owner in Mexico could attempt to enforce the agreement against the distributor only for the acts for which the distributor may be held responsible and not for what the customers of the distributor did. In a situation where Mexico is the importing country, it is most likely that any action for breach of the contract by the foreign distributor would have to be brought in a court of the foreign country and not in a Mexican court, thus the topic of the breach of contract being beyond the areas of law where the Mexican Group is qualified to make statements of law.

2(b)

What is the effect of breach of contractual restriction by a purchaser - does exhaustion occur?

Patents

See 2 (a) above

Trademarks

See 2 (b) above. Yes, it is submitted that exhaustion occurs, as far as Mexican law is concerned.

3(a)

If contractual restrictions can be used to limit importation, does it matter whether they are express or implied?

If an IPR owner attempted to rely on contractual restrictions to limit importation, it is difficult to think of a situation where this attempt was made on mere presumptions, assumptions and conjectures derived from questions of law and fact. Presumably the contractual understandings would have to be both express and in writing in order to explore the viability of enforcing them in situations involving parallel imports of goods associated to IPR.

3(b)

If contractual limitations are express, are there any particular marking requirements?

Patents

The law does not address these issues. Presumably appropriate markings could be designed indicating that unauthorized sale of the (patented) product in Mexico could be subject to prosecution by the Mexican patent laws. Whatever threat is expressly mentioned in the label of the products, invoices or other literature associated to the patented product would have to be carefully drafted in order to reduce the possibilities that such language be used against the interest of the patent owner, particularly if for any reason the parallel importer is found not to infringe the Mexican patent, i.a., for the reason that in the end the Mexican patent was found to be invalid.

Trademarks

In situations involving trademarked products and contractual restrictions with foreign distributors regarding the sale of the trademarked products to Mexico, presumably the marking restriction is addressed to the customers of the distributor and not to the distributor. In such a situation, it is submitted that no marking restriction in the trademarked product could supersede the basic legal notions that parallel imports of trademarked products are permitted by Mexican trademark law, thus trademark owner may attempt to use marking restrictions to see if a direct or indirect customer of the foreign distributor is unaware of Mexican trademark law and decides to follow the game of the markings. This is so for the reason that such markings would produce no legal effects as far as the Mexican situation is concerned whether in a situation involving express contractual limitations or otherwise.

3(c)

If protected products are marked to indicate some marketing restriction, what are the consequences of removal or loss of any marking?

The issue is not addressed in Mexican law as regards these specific circumstances.

Does international exhaustion of industrial property rights apply where a product has been put on the market under a compulsory licence (if applicable)?

The issues is not expressly addressed in Mexican law. It is submitted, that the law should be interpreted as meaning that express consent as distinguished by a forced consent, is what is required in order to consider a genuine trademarked product subject to parallel imports.

5.

Is "consent" which gives rise to exhaustion limited to specific arrangements, (for example a relationship with a subsidiary or affiliated company, or an agreement with a licensee), or a question of fact in each case?

Patents

Not applicable

Trademarks

The expression "consent" does not show up in the statute nor in the regulations. Yet, the notion of "consent" in the context of parallel imports of trademarked goods is addressed in Regulation 54 which considers as genuine products subject to parallel imports those directly placed in the marketplace of the foreign country by the trademark owner or by a licensee or sub-licensee of the trademark owner as well as those placed in the marketplace by an affiliated company of the trademark owner under control of the trademark owner (Regulations 54 and 55).

Also, as a general proposition the trademark owner must be the same in the country of exportation and in the importing country, in this case Mexico. Nevertheless, if the trademark is owned in the two countries by affiliated companies or companies pertaining to the same group of companies, trademarked goods originating from any of the affiliated companies with the same group of companies are regarded as goods originating from the same source for purposes of establishing the right of third parties to carry out parallel imports in Mexico. That is to say, the basic alternative to have the trademark registered in Mexico in the name of a company other than that in whose name the trademark is registered in the country of exportation but pertaining to the same group of companies, would not march for purposes of preventing parallel imports in Mexico (See Regulations 54 and 55).

6.

Can an IPR owner object to parallel importation where (a) goods or (b) their packaging have been modified?

Patents

The question does not apply to patents where parallel imports are not available.

Trademarks

The issue is not addressed in Mexican law.

7.

As well as stating the laws in their respective countries, the groups are also invited to (a) make any proposals for changes; and (b) offer any observations of interest on the topics raised above.

Without eliminating the system of international exhaustion of trademark rights currently existing in countries like Mexico, the advisability to restrict parallel imports of trademarked products in exceptional circumstances should be explored, specifically whether it would be appropriate to consider the circumstances under which a trademark owner could restrict the possibility to carry out parallel imports of trademarked products and further resale of the trademarked products in the importing country, including those situations where the trademarked products have reached the country of importation in circumstances where the product would not have been sold by the trademark owner or with his consent, e.g., damage to the product, to the label, products sold after last sale date, lack of compliance with local packaging or labeling requirements both trademark and non-trademark requirements, et cetera.

Express provisions preventing the implementation of any parallel import pattern in situations involving products manufactured or trademarked under a compulsory license should be adopted, making it clear that the effects of a compulsory license should be restricted in all cases to the territory of the state where the compulsory license was granted. What is more, compulsory licenses should be expressly repudiated. The reasons that, under exceptional circumstances, have existed to justify compulsory licenses in patents, do not apply to trademarks.

Summary

Parallel imports of patented products are not permitted under Mexican law. Unlike the law applicable to patents, trademark law does allow parallel imports of trademarked products. Thus, Mexican patent law does not endorse the notion of international exhaustion of patent rights, whereas international exhaustion of trademarks rights is clearly endorsed by Mexican trademark law. Trademarked goods subject to parallel imports include not only those goods trademarked and placed in the marketplace of the foreign country by the trademark owner, but also by a licensee or sub-licensee or by an affiliated company controlled by the Trademark owner. Without eliminating the system of international exhaustion of trademark rights, it is worth exploring the advisability to restrict parallel imports, and specifically resale of trademarked products in the importing country, in circumstances where it appears that the trademark owner would not have sold the trademarked goods as they are imported and finally sold to the consumer. Also, products manufactured or trademarked under a compulsory license under no circumstances should be allowed to benefit from the system of parallel imports of IP rights, i.a., for the reason that the consent required in order for international exhaustion to arise never existed in reality.

Résumé

La possibilité d'invoquer le brevet contre l'importation parallèle de produits brevetés est une consequence logique du principe fondamental de territorialité des droit de brevets accepté par la loi mexicaine. L'épuisement international des droits de brevets n'existe pas dans le droit mexicain. En ce qui concerne les marques, la possibilité d'invoquer les droits de marques contre l'importation de marques n'existe pas dans le droit mexicain. Le titulaire d'un droit de marque ne peut pas s'opposer à l'importation de sa marque. Le droit mexicain accept la thèse de l'epuisement international des droits de marques. Le Groupe Mexicain propose l'examen de la possible réglamentation des situations exceptionelle dans lesquelle le titulaire d'un droit de marque peut s'opposer à l'importation et à la circulation de sa marque dans le marché du pays de l'importation parallèle.