CASRIP Newsletter - Fall 2005, Volume 12, Issue 2
Thou Shalt Not Steal: A Comparative Analysis of Intellectual Property Injunctions in the United States and Mexico
By Signe H. Naeve[?]
The new millennium has witnessed the convergence of a truly global economy and intellectual property rights. In 2004, bilateral trade between the United States and Mexico reached $167,543 billion with approximately two-thirds of this trade, $111,752 billion, consisting of U.S. exports to Mexico. This trade is increasingly composed of goods protected by intellectual property rights. Although avenues for the protection of intellectual property rights in Mexico have improved following pressure accompanying the adoption of international treaties such as NAFTA, the actual enforcement of these rights can still be difficult to accomplish. One reason for this difficulty is the lack of a reliable infrastructure to support parties seeking preliminary injunctions. This infrastructure contrasts sharply with the current systems in the United States.
The inability to obtain injunctive relief in Mexico has caused a serious impact on a wide range of industries. For example, the inability to obtain injunctive relief has contributed to an almost complete halt in the legal or legitimate sale of music in Mexico. Approximately 60 percent of the compact discs sold in Mexico are pirated. The Intellectual Property Alliance estimated that trade losses from copyright piracy in 2003 in Mexico totaled $807 million. The lack of injunctive relief, in addition to inconsistent enforcement of intellectual property rights, has also significantly impacted the film, software, pharmaceutical and textile industries. Considering the amount of bilateral trade between the United States and Mexico and the losses attributable to pirated goods, the impact on these industries, for both Mexican and American producers, will continue to grow if the status quo remains and the ability to obtain preliminary injunctions does not continue to improve.
This article will explore the current avenues for obtaining preliminary injunctions in the United States for trade secrets, copyrights, trademarks and patents and compare these options to their respective counterparts in Mexico. It will then propose a few reasons for the relative ease in obtaining preliminary injunctions to protect intellectual property rights in the United States.
II. General Procedure for Obtaining Injunctions in the United States and Mexico
A. United States
In the United States the majority of intellectual property enforcement occurs in civil court. Federal and state courts have adopted court rules that establish standards and procedures for obtaining provisional relief in litigation. For example, Fed. R. Civ. P. 65 establishes the basis for obtaining a preliminary injunction in federal courts. Rule 65 provides that a preliminary injunction hearing is an adverse proceeding, notice must be given to the opposing party and the moving party must provide adequate security. Significantly, rule 65(a) provides a judge with substantial flexibility when conducting injunction hearings. Although this paper will focus on preliminary injunctions, it is important to note that temporary restraining orders are equally available to litigants, and can be requested ex parte.
Subsequent case law has interpreted and refined the federal rules, so today there is a fairly consistent approach for obtaining preliminary relief in civil cases in general and for intellectual property rights in particular. In general, to obtain a preliminary injunction, the party seeking relief must demonstrate a likelihood of success on the merits, irreparable harm and public interest. The likelihood of success and irreparable harm factors are usually inversely proportional in the level of proof required: the more likely the success on the merits the less harm required, the higher the irreparable harm, the less likelihood of success required. These standards with respect to each area of intellectual property will be explored in more detail below.
Similar to the United States, Mexico civil courts have adopted rules of civil procedure. Mexican Federal Code of Civil Procedure Article 379 could be used for obtaining a preliminary injunction. In general it provides that a party may demand an inspection of certain things, documents, books or papers and a judge may order their exhibition, following a proof of the right and that the inspection is necessary to protect that right. In reality, however, Article 379 is seldom utilized in intellectual property cases. There are also embargos and interdictos, but these are rarely utilized either.
Instead, enforcement of intellectual property rights is most frequently advanced through administrative proceedings with the Mexican Industrial Property Office or criminal proceedings involving the federal Attorney General. As a civil law country, case law in Mexico does not carry the same importance to clarify these rules as it does in the United States.
III. Intellectual Property Enforcement Procedures in the United States and Mexico
1. United States
Copyright Law in the United States is codified in Title 17 of the United States Code. Sections 502(a) and 503(a) of the Code govern injunctions. Section 502(a) states, ?Any court having jurisdiction of a civil action arising under this title may, subject to the provisions of section 1498 of title 28, grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.? Federal courts have interpreted the ?temporary injunctions? language of 502(a) ?to authorize both temporary restraining orders and preliminary injunctions.? Section 503(a), meanwhile, permits the seizure and impoundment of offending goods. Section 503(a) states, ?At any time while an action under this title is pending, the court may order the impounding, on such terms as it may deem reasonable, of all copies or phonorecords claimed to have been made or used in violation of the copyright owner's exclusive rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced.?
Copyright law explicitly overlaps with the federal rules. Rule 56(f) for ?copyright impoundment,? states that the federal rules for injunctive relief apply to copyright impoundment proceedings. Thus, to obtain a preliminary injunction or to seek impoundment, the party must file a motion before the appropriate federal district court, in accordance with Fed. R. Civ. P. 56.
To succeed on a Preliminary Injunction Motion, the party must prove (1) a likelihood of success on the merits, (2) that the balance of hardships tips in favor of the plaintiff, and (3) that issuing an injunction would be in the public interest. To prove a likelihood of success, the movant must show that the copyright is valid and it has the right to enforce it. In all federal circuits, except the Fifth Circuit, ?a copyright owner who demonstrates a likelihood of success is entitled to a rebuttable presumption of irreparable harm.? Furthermore, in some jurisdictions, including California and New York, courts follow an either-or approach to these first two factors. Thus, if the plaintiff shows a likelihood of success on the merits, then the defendant may not have the opportunity to argue the balance of the hardships. When courts do consider the balance of the hardships, they generally approach the first two factors on a sliding scale basis: the higher the likelihood of success, the lower the showing of hardship required.
Once a plaintiff proves the first two factors, the third factor addressing public interest is generally presumed. If the party demonstrates a likelihood of success, then the federal policy, as stated in the Copyright Act comes into play. The policy of the Copyright Act is to provide the creator of a copyrightable work complete control over that work. Thus, most courts will determine that this general statement of public policy satisfies the public interest prong of the preliminary injunction analysis and will delve no deeper. On a case by case basis, however, courts have considered countervailing public interest requirements for protecting freedom of expression. Ultimately, the presumptions of irreparable harm and public interest in favor of the copyright owner provide much support for the party seeking a preliminary injunction in the United States.
In Mexico, copyright law is governed by the Mexican Copyright Act titled, ?Ley Federal de Derechos Autor.? In 1997, the previous copyright law was discarded and a new Federal Copyright Law went into effect. The law was amended in 2003 to address various enforcement issues, including a reinstatement of federal court jurisdiction to hear copyright disputes between private litigants.  Neither the older nor the newer versions of the law specifically provide for civil remedies such as injunctive relief, however.
Most copyright holders seek enforcement of their rights through administrative procedures or a criminal action. The Federal Copyright Law created a new National Copyright Institute (?CNI?), which is empowered to:
I. Conduct research on presumed administrative violations;
II. Request the competent authorities to make inspection visits;
III. Order and execute the provisional steps to prevent or put an end to breaches of copyrights and related rights;
IV. Impose the administrative penalties that are legally justified; and
V. Invoke any other powers to which it is entitled in accordance with the provisions of the Law, its Regulations, and other applicable legal provisions.
Although the copyright law created the CNI and empowered it to conduct certain protective procedures, the administrative proceedings to enforce commercial rights are actually conducted by the Mexican Industrial Property Office, ?Instituto Mexicano de la Propiedad Industrial,? referred to as the IMPI.
Despite the availability of these administrative proceedings and some injunctive-like relief, many copyright owners seek to protect their rights under criminal law. Criminal proceedings are presented through the Federal Attorney General?s office. To initiate the criminal trial, the aggrieved party must file a criminal complaint, called a ?denuncia.? The party must show evidence of a copyright, which is a certificate issued by either the United States or Mexican Copyright Office. Before submitting evidence, however, every document ?must be fully legalized by the State Department or consularized by the Mexican Embassy.? This process can take up to three weeks.
Once the denuncia is filed, the investigation will begin. When notice to the alleged infringer is likely to lead to the disappearance or destruction of evidence the aggrieved party may attempt to convince the Attorney General?s Office to proceed without notice and to preliminarily seize the allegedly infringing goods. This preemptive move is particularly relevant for easily disposable materials, such as software.
If the party can convince the Attorney General to proceed without notice and to seize the allegedly infringing goods, the prosecutor would apply to a federal motions judge for a search warrant, called an ?orden de cateo.? If the search warrant is issued, ?a team consisting of prosecutors, the moving party?s lawyer, the federal judicial police (federales), technical experts, and photographers will appear at the alleged infringer?s premises without notice and begin to examine the alleged infringing activity or items.? Previous infringing conduct or an administrative declaration of infringement is likely to persuade the Attorney General to proceed without notice.
In 2003 the Attorney General?s Office created a specific IPR enforcement unit, designed to streamline the enforcement process. Although raids and access to prosecutors has improved since the inception of the enforcement unit, their actions have not significantly deterred copyright infringement. The United States Embassy in Mexico City reports that only 24 out of 1087 counterfeiters who were arrested in 2003 and 2004 received prison sentences greater than one year and very few violations resulted in prison terms.
1. United States
The Lanham Act, located in Title 15 of the United States Code, defines trademark law in the United States. The Lanham Act specifically grants courts the power to issue injunctive relief in accordance with section 1116(a):
The several courts vested with jurisdiction of civil actions arising under this chapter shall have the power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registration of a mark registered in the Patent and Trademark Office or to prevent a violation under section 1125(a) of this title.
Similar to copyright cases, to receive a preliminary injunction, the party must prove: (a) a likelihood of success on the merits; (b) that a balance of the hardships tips in the movant?s favor; and (c) that an injunction would be in the public interest. Similar also to copyright, in all circuits, except the Fifth Circuit, the trademark owner enjoys a rebuttable presumption of irreparable harm once the owner demonstrates a likelihood of success on the merits. When a court balances the relative hardships on the parties, most federal courts employ a sliding scale analysis, the greater the likelihood of success on the merits, the less showing necessary for hardship. To prove the likelihood of success, the party must show consumer confusion.
Different from the court?s copyright analysis, however, is the consideration of consumer goodwill associated with a trademark. ?Goodwill? is generally not considered in motions for injunctive relief with other areas of intellectual property. Because goodwill is so integral to the value of a trademark, however, the courts will consider it when balancing the hardships. The potential loss of goodwill weighs heavily in favor of granting an injunction.
Similar to copyright cases, the public interest factor is generally presumed to be consistent with the purpose of the Lanham Act. In general, public interest in trademark cases is equated to ?the right of the public not to be deceived or confused.? This assertion is generally sufficient to establish the public interest requirement. There is a countervailing interest, however, that argues in support of free and vigorous competition. Thus, a court may consider the purpose of the injunction when deciding the motion?s merits: is the movant seeking to stifle competition or to protect the consumer?
Similar to copyright law?s impoundment provision, the Lanham Act includes a provision for the seizure of counterfeit goods. In accordance with the Lanham Act, a trademark owner can seek an ex parte seizure order if it follows certain procedures. The trademark owner must: (1) file a verified complaint demonstrating ownership and stating the facts indicative of counterfeiting; (2) provide reasonable notice to the United States Attorney General; (3) post a bond; and (4) present a seizure order compliant with Section 34(d)(5) of the Lanham Act. The order must also meet several procedural and substantive requirements before a court will grant it. If it meets all of these requirements, then several officials are authorized to conduct a seizure raid. Ultimately, the provisions for injunctive relief in the Lanham Act and the presumptions in favor of the rights holder, lead to courts granting preliminary injunctions and protecting intellectual property rights in the United States.
Trademarks, trade secrets and patents are all protected under the Mexican Industrial Property Law (?IPL?). Trademark law is governed by Article 87 et seq. of the IPL, violations by Article 213 and enforcement by Articles 199 bis and bis 1. The Industrial Property Office, the IMPI, administers the IPL. The IMPI handles patent and trademark registration in addition to administrative disputes regarding the IPL. It can act unilaterally against infringers of industrial property rights or it can act at the request of an aggrieved party. The IPL does not adopt clear procedures for obtaining preliminary injunctions; however, Articles 199 bis and bis 1allude to some forms of injunctive relief. 
The administrative process begins when a trademark owner files a request with the IMPI to issue an administrative declaration of infringement, a ?declaracion de infraccion administrativa.? In administrative declaration proceedings, the IMPI is empowered, by means of Article 199 bis of the IPL, with several remedies to protect the intellectual property rights holder. The IMPI may: (a) conduct visits of inspection; (b) impound infringing articles and machinery; (c) order temporary closures; and (d) employ other provisional measures when necessary. These remedies are in addition to monetary fines and final closures and are available once a declaration of administrative infringement has been declared.
In trademark cases, the most commonly used remedy is the visit of inspection. The IMPI may order this procedure to investigate the manufacture, storage, transportation or sale of products and documents verifying the company?s legal compliance with intellectual property laws. If the IMPI inspector discovers a ?flagrant? violation or irrefutable evidence that an administrative or criminal violation has occurred, then the inspector is authorized to impound the infringing article(s). The inspector may also impound ?equipment, instruments, machinery, devices, drawings, specifications and any other means used in the accomplishment of the acts and events considered to be infringements or offenses.?
Before the IMPI will apply any of the measures designated in Article 199 bis, however, the applicant must: (1) prove ownership of the intellectual property right; (2) purchase a bond sufficient to cover potential damages; and (3) sufficiently identify the goods. In addition to proving ownership of the right, the applicant must prove: (a) the existence of an infringement to his rights; (b) that the infringement will be imminent; (c) the existence of the likelihood of irreparable damages suffered; or (d) the existence of a justified fear that the evidence will be destroyed, concealed or altered.
The IPL also provides for criminal offenses under Article 223. Similar to copyright law, criminal offenses are prosecuted by the federal Attorney General?s Office.
Mexican lawmakers have sought to improve the availability of enforcement procedures. Indeed modifying the available defenses and increasing protection of industrial property rights were fundamental objectives of the most recent reforms to the IPL. Only time will tell if these reforms actually help parties in their quests to obtain preliminary relief.
C. Trade Secrets
1. United States
Among all of the areas of intellectual property, courts in the United States most frequently grant injunctions for trade secrets. This is not surprising considering that, ?the denial of an injunction can destroy not merely the value of the right but also the right itself.? To maintain a trade secret it is essential that it be kept ?secret.? Without the means for obtaining a preliminary injunction, a trade secret could be lost forever.
Trade secret law is governed by state, not federal, law. The majority of states, 42 and the District of Columbia, have adopted some version of the Uniform Trade Secrets Act (?UTSA?). Section 2 of UTSA provides for injunctive relief:
(a) Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction shall be terminated when the trade secret ceases to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.
(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable.
(c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.
To obtain an injunction, the trade secret owner must prove: (a) the likelihood of success on the merits; (b) that the balance of the hardships tips in the movant?s favor; and (c) that granting the injunction would be in the public?s best interest.
To prove a likelihood of success, the party must show (1) the existence of a trade secret and (2) the likelihood of misappropriation or inevitable disclosure. The inevitable disclosure doctrine is still developing, but in general, a court will consider the following factors: (i) the circumstances surrounding the termination of employment; (ii) the importance of the employee?s job or position; (iii) the type of work performed by the employee; and (iv) the kind of information sought to be protected and the value of the information or the need of the competitor for it. The balance of the hardships then usually follows the same ?sliding scale? as discussed in copyright and trademark litigation, although the inevitable disclosure doctrine plays a role in this analysis as well.
The majority of states that have published decisions on cases regarding injunctions for trade secrets have found a presumption of irreparable harm. Although the majority of states have reached such a finding, California, a key state for intellectual property rights, has not recognized the presumption. States that recognize the presumption do so, because the trade secret will be lost once it is made public. However, all states recognize a presumption of irreparable harm that could result from the potential disclosure of customer lists or information or disclosures resulting from the breach of a non-competition agreement.
Similar to other areas of intellectual property litigation, courts will generally presume that the public interest favors granting injunctions. As one state court has aptly stated, ?Trade secret by its very nature is in the public interest. The public interest favors enforcement of contracts and the protection of trade secret information gathered and developed by a company at significant expense.? However, arguments for a countervailing public interest limiting injunctions include the promotion of competition, encouragement of research and development and freedom of employment. Despite these countervailing arguments and similar to copyright, the presumptions recognized by the court greatly favor the granting of preliminary injunctions in the United States.
Trade secret law in Mexico is also governed by the Industrial Property Law and is located at Articles 82 through Article 86 bis 1. Trade secrets are called ?industrial secrets? in the IPL. The owner of an industrial secret can seek enforcement through administrative proceedings with the IMPI or by means of a civil or criminal trial. However, damages can only be obtained through civil trial and sanctions are almost exclusively available through criminal enforcement.
The administrative proceedings with the IMPI are similar to a trademark action and the party would have the same available remedies. Potentially the strongest option to protect against the disclosure of an industrial secret is the IMPI?s ability to impose ?provisional measures.? Article 199 bis of the IPL empowers the IMPI to ?order[ ] the presumed infringer or third parties to suspend or stop the actions constituting violation of the provisions of[the IPL].? Industrial secrets can be trickier to protect than other areas of intellectual property because the party is seeking protection against disclosure of an idea, not necessarily a thing. Flexibility, as may be provided by provisional measures, is thus essential.
The IMPI is also empowered ?[t]o arrange the suspension of services rendered or closure of the establishment when the preventive measures of the previous sections are not sufficient to prevent or avoid the violation of the rights protected by the[IPL].? This and the other provisional remedies are necessary because there is no preliminary injunctive relief available as a remedy in civil court.
If the trade secret owner seeks to protect its trade secret through a criminal trial, the owner could have some injunctive-like remedies available. These remedies would include closure or temporary imprisonment. Historically, these injunctive-like remedies have not proven to be very effective for the protection of trade secrets, however.
1. United States
Unlike its intellectual property brethren, preliminary injunctions for patents are more difficult to obtain in the United States. The procedure is more complex and time consuming than its copyright, trademark and trade secret counterparts and the outcome is less secure. The complexity is attributable, in part, because of the complexity of patent cases in general, Markman hearings and the fact/law distinction.
Patent law is codified in Title 35 of the United States Code. Similar to copyright, trademark and trade secret, United States patent law specifically provides for injunctive remedies. Section 283 of Title 35 states, ?The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.?
The Federal Circuit, which hears all patent cases on appeal, has established a four-factor test for analyzing preliminary injunction motions. The factors include: (1) the likelihood of the moving party?s success on the merits; (2) the likelihood of irreparable harm to the movant if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest. To prove a likelihood of success, the movant must show that it has title to enforce the patent, the validity of the patent and infringement by the defendant. The Federal Circuit has recognized a rebuttable presumption of the patent?s validity. To prove infringement, the patent owner must abide by the same two-step process employed in a trial; the court must first determine the patent?s proper scope and then compare the claims to the allegedly infringing device. The Markman analysis may be less stringent and rigorous than the analysis at trial, however.
If the patent owner makes a ?clear showing? of validity and infringement, then the court will award a rebuttable presumption of irreparable harm.  Similar to other areas of intellectual property, the public interest in protecting the rights of patent holders is generally presumed. Courts will often rely on the policy of protecting innovation and end their public policy analysis there. These presumptions all favor the patent holder seeking a preliminary injunction in the United States.
Like trademark and industrial secrets, patent law is codified in the IPL in Mexico. It is contained in Article 9, et seq. Because patent law is also governed by the IPL the same general options for enforcing one?s patent rights are available to the patent litigant as with trademarks or industrial secrets. The patent holder can initiate an administrative proceeding with the IMPI or file a complaint with the federal prosecutor to initiate a criminal proceeding.
Similar to the trademark owner, the party seeking to protect its patent rights will likely benefit most from a visit of inspection and impoundment of infringing articles and machinery, authorized by Articles 203 and 211 of the IPL. Article 203 provides for inspection visits, while 211 allows preventative impoundment of infringing articles when it is clear that an offense has been committed.
While obtaining a preliminary injunction for patent law may prove to be relatively more difficult than its counterparts in American jurisprudence, the Mexican litigant faces the same hurdles as it does for other areas of intellectual property. As a general rule, these hurdles will still be higher than the patent proceeding in the United States.
IV. Factors that Favor Obtaining a Preliminary Injunction in the United States
Although neither system is without its faults, it is generally easier to obtain injunctive relief in the United States. Indeed, if given an option, most intellectual property owners will seek to protect their rights in the United States rather than Mexico. These facts are not surprising given the relative lack of options for preliminary relief in Mexico, particularly in civil proceedings because they can be prohibitively slow and private rights to injunctive relief are virtually nonexistent. In contrast, in the United States civil proceedings hold the greatest promise for obtaining a preliminary injunction.
Instead, in Mexico most intellectual property rights holders seek to enforce their rights through either administrative or criminal proceedings. These means have their own inherent limitations. For example, enforcing rights through administrative means with the IMPI presents a potential conflict of interest if the IMPI is both a judge and a party for a patent, trademark or another intellectual property right that it granted. Parties may also be deterred from seeking enforcement of their rights with the IMPI because the prevailing party cannot win damages, profits or attorney?s fees in an administrative proceeding. Thus, the possible venue for obtaining an injunction or injunctive-like remedy, the IMPI, may not be the most desirable for the intellectual property rights holder. If a party seeks enforcement through the Attorney General, meanwhile, the party may discover that ?Mexican IPR laws are weakly applied and poorly understood? and that ?Mexican judges continue to reject cases involving IPR crimes, discouraging prosecutors from building cases.?
In contrast, there are several attributes of the American system that lend to the relative ease of obtaining preliminary injunctions in intellectual property cases. First, the statutes that govern intellectual property rights contain specific provisions allowing for injunctive relief. This is not the case in Mexico. Second, case law in the United States has developed to set standards and to reinforce the availability of injunctive relief. Although these standards can be complex at times, as in the case with patents, the plaintiff essentially knows what s/he must present to be afforded injunctive relief. Third, the federal rules enable the granting of preliminary injunctions in intellectual property cases. And, in some cases, a party may seek a temporary restraining order without providing notice to the alleged infringer, who may destroy the evidence before trial. Accordingly, the United States presents an evolved infrastructure for seeking injunctive relief.
The strongest factor favoring protection of intellectual property rights in the United States and the relative ease of obtaining preliminary injunctions, however, are the presumptions afforded the moving party. In copyright, trademark, patent, and to a certain extent trade secret, cases, rights holders enjoy a presumption of irreparable harm once they demonstrate a likelihood of success on the merits. Furthermore, in all areas of intellectual property, the courts will generally accept an argument that granting a preliminary injunction to protect intellectual property rights is in the public?s interest.
Finally, intellectual property owners benefit from a culture of protection in the United States that is still developing in Mexico. This culture is evident from the aforementioned presumptions. In Mexico, meanwhile, solutions to the problem of intellectual property infringement ?are hampered by limited political will, a lack of capacity and coordination among law enforcement entities, competing crime-fighting priorities, weak application of IPR laws, and insufficient planning and coordination among industry sectors.? Even when the will exists, the limited resources can undermine efforts to enforce intellectual property rights.
As the culture for enforcing intellectual property rights in Mexico continues to evolve and improve, so will the infrastructure that supports those rights. In the meantime, parties seeking to protect their intellectual property rights, first through a preliminary injunction, are more likely to find success in the United States.