Mexico: Reform for pharmaceutical patents: fair balance or fresh disputes?

Reform for pharmaceutical patents: fair balance or fresh disputes?

Contributed by Becerril, Coca & Becerril SC

Introduction

A decree published on June 18 2010 introduced perhaps the most significant changes to Mexico's patent system since the enactment of the Industrial Property Law 1994. The changes took effect 90 days after publication.
The amendments cover:

• amendments to the definition of 'industrial applicability';
• the partial priority rules;
• a new system for oppositions to patent applications during prosecution;
• monitoring of counterfeiting and performance of inspections by the Mexican Institute of Industrial Property (MIIP); and
• new infringement claims in order to protect trade dress more effectively and prevent abuses of patent rights.

All of the changes support the interests of the pharmaceutical industry.
Industrial applicability
The definition of 'industrial applicability' in the Industrial Property Law simply provided for "the possibility of use in any industrial or commercial activity".
Following an animated debate in Congress, this definition was changed to make it consistent with the concept of 'utility' under US law; however, the change resulted in confusion. The new definition in Article 12(IV) of the law refers to "the possibility of an invention having a practical utility, or of being used or utilised in any branch of economic activity, for the purposes described in the application".
The first part of the sentence appears to broaden the meaning of the term, but the rest of the sentence greatly limits the definition, as every potential application of the invention must now be disclosed in order to comply with this requirement. This change is consistent with a change in Article 41(I), which amended the enablement requirements for detailed descriptions to state that such descriptions must be accompanied by information which exemplifies the invention's industrial application.
Unfortunately, the impact of the change on claims interpretation is uncertain, as the provision may be understood merely as a patentability requirement, but could also be interpreted as a standard for determining the extent of a claim.
Partial priority rules
Although the law already allowed for claims of partial priority, the new rules incorporated into Article 41 imply an option to claim new priority, rather than requiring examination according to the filing date in Mexico. However, this interpretation is unclear. It remains to be seen whether the provision will be interpreted as a right to claim new priority after filing in Mexico or merely as a principle that multiple priorities are possible where there is subject matter beyond an original priority. Given that multiple priority claims were possible previously and remain so under international treaties, the most likely interpretation is that a new priority claim is possible where the subject matter is found to be beyond the scope of the claimed priority. The proceedings for such a claim are not set out in regulations; clarification of this issue is expected.
Opposition proceedings
Some of the most controversial changes relate to opposition proceedings.
The new Article 52(2) provides that an interested party may provide the Patent Office with information that is relevant to the substantive requirements of patentability (ie, the requirements under Articles 16 and 19 in relation to novelty, inventive step, industrial applicability and patentable subject matter) of the claims of an application, but must do so within six months of the application being published. The Patent Office will use such information only in support of the examination. The interested party will not be part of the subsequent proceedings; nor will it be able to intervene in the normal prosecution of the invention. Furthermore, the filing of such information does not pre-empt the right to file a nullity action against the granting of the patent at a later date.
This form of patent opposition is intended to be a simple proceeding with few requirements or formalities. However, such a loosely described proceeding leaves scope for misinterpretation by all parties.
The amendment states that a third party can file an opposition within six months of publication of the patent application in the Official Gazette. It is unclear what kind of brief or written petition should be filed, since the amendment states merely that information relating to lack of novelty, inventive step or industrial application must be filed, as well as information demonstrating that the scope of the patent application falls within the exemptions for the term 'invention' within the meaning of the law.
This change in the patent prosecution process is intended to allow a third party to file evidence that a patent application should be rejected. As the modification fails to set out the formal requirements for such an opposition, it gives third parties the freedom to support their opposition in any way. Previously, the law did not set out proceedings or opportunities for third parties to argue against a patent application; the only recourse was to commence litigation proceedings after grant of the patent.
The amendment empowers the Patent Office to study such information during the substantive examination of the patent application and to issue a formal response to the opposition if it so wishes. It appears that on this point, the legislature has given the Patent Office responsibility for deciding whether an opposition filed by a third party merits examination. This prerogative results in a lack of transparency, since the criteria that the Patent Office will apply are unclear. As the Patent Office need not expressly state whether an opposition is well founded, the third party will not know whether its opposition has been considered. Where a third party's opposition is considered and rejected, the third party will not be informed of the reason. As a result, it will be difficult for the third party to appeal. This could also affect the patent applicant, since when an opposition is properly dismissed or rejected, the lack of clarity in the process may allow a third party to appeal a patent application proceeding on the grounds that the Patent Office violated a constitutional right, even where the opposition was properly founded.
Another potential source of confusion lies in the fact that the patent applicant is entitled to argue against the opposition proceeding, but the amendment does not state when the applicant must be informed of such opposition proceedings or the term within which it must file such arguments. It appears that this term will be decided by the Patent Office on a case-by-case basis, which denies the parties procedural certainty.
Moreover, the amendment states that opposition proceedings do not suspend the patent application procedure. This provision appears to be intended to prevent unfair practices by third parties, which otherwise might file an opposition purely in order to delay prosecution of a patent application. The legislature apparently wanted to provide certainty for applicants that opposition proceedings will not delay patent application proceedings and that commercial processes will be unaffected (since, if the process is not suspended, the patent can be granted within the average timeframe and can be enforced against third parties).
The new opposition system grants no legal standing in patent proceedings to a third party that files such opposition, meaning that it is not formally part of the application process - this probably explains why the amendment is vague on formal aspects, timing and the rights of the parties.
If the opposition fails, the amendment theoretically allows third parties that initiate opposition proceedings to commence litigation and seek cancellation once the patent has been granted. However, it is unclear whether such action will be effective - if the same opposition arguments are advanced in litigation, it could be argued that the Patent Office has already rejected them, since the patent has been granted despite the opposition previously filed on such grounds.
Counterfeiting and MIIP inspections
The new provisions of Article 188 allow third parties to notify the MIIP of possible IP rights infringements so that it may initiate proceedings ex officio. The MIIP had standing to initiate proceedings before the changes to the law, but seldom did so because it lacked the necessary infrastructure. This argument no longer applies, but the effects of infringement actions arising from notification by third parties remain to be seen.
On the issue of bonds and counterbonds for seizure injunctions arising from MIIP inspections, Article 199(2)(1) includes a provision requiring 40% of the value to be paid as a counterbond to the original bond from the IP owner that requested injunction measures. Unfortunately, this threshold may be too high in some cases and too low in others, and its impact on counterfeiting remains doubtful.
New infringement claims The primary change in respect of grounds of infringement seeks to provide some degree of enforceability for trade dress protection. The new Article 213(26) provides for the possibility of infringement through the use of "distinctive signs and operative or image elements" in identifying products or services if these are "confusingly similar" to others protected by an IP right, or if such use gives rise to confusion as to whether the products or services originate from the IP rights owner or an unauthorised user. According to the amendment, such use constitutes unlawful competition and is therefore a powerful tool for franchise enforcement and the protection of products and services that depend on trade dress.
However, Article 213(27) states that once the MIIP has declared that no patent infringement exists, the patent holder is liable for infringement if it attempts to assert the same patent against the same person or third parties. This is one of the most controversial provisions of the amendment. Congressional lobbying failed to limit this article to comply with the principles of res judicata (a matter already judged) under Mexican law, which sets out clear positions on this point. The fast-track proceeding before Congress made it impossible to limit the application of the article, and the explanatory notes to the changes state only that the rationale is to incorporate the rules relating to res judicata. However, there are concerns regarding the potential interpretation of this new cause of infringement. It aims to dissuade patent holders from filing groundless infringement actions against third parties by abusing their patent rights and basing actions on grounds that have already been considered in earlier, unsuccessful litigation. Nevertheless, the authorities must be cautious when an alleged infringement is submitted for consideration on this basis, since the fact that an infringement action has previously been filed by the same patent holder - on the basis of the same patent and against the same defendant - does not necessarily mean that the infringement has already been considered. Rather, the claim may relate to a new infringement, since the infringing product or process, the relevant evidence and the time of the alleged infringement could result in a new case that allows the patent holder to initiate a new infringement action.
Comment

The amendments have made significant changes that will modify Mexican practice regarding patent prosecution and patent infringement. Although some attempts to amend the framework are controversial, only the first cases and decisions will show whether they are effective.

It appears that the amendments are intended to keep both sides of the pharmaceutical industry satisfied. Patent holders must now deal with an opposition system that - at least in theory - will not allow unfair practices and will eliminate delays in the patent prosecution process. Third parties that do not enjoy patent protection can now oppose a patent application before it is granted and can initiate infringement actions if a patent holder abuses its rights.
It is hoped that the legislative changes will achieve their goal. However, if they have merely created a system that is unfair to both sides, they may have drawn the battle lines for disputes that will be detrimental to the Mexican patent system and Mexican business at an international level.

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

An earlier version of this update first appeared in IP Value 2011 - An international guide for the boardroom, published by IAM magazine, part of the IP Media Group. For further information please visit www.iam-magazine.com