A Note on Apple’s Trademark Troubles in Mexico

Apple’s recent Mexican trademark legal troubles highlight some important issues and strategies businesses and exporters should be aware of when exporting.

On November 2, 2012, a Mexican Appeals Court upheld an injunction against Apple’s use of the term IPHONE in selling its popular iPhone devices based on Apple’s similar goods and service offerings and the term’s phonetic similarity to the registered trademark IFONE, held by Mexican telecommunication service provider iFone. iFone registered its mark in 2003 for telecommunication services (International Class (IC) 38), four years prior to Apple’s first iPhone launch in 2007. That year, Apple registered IPHONE as a mark in Mexico for electronic devices (IC Classes 9 and 28).

To obtain legal protection for IPHONE in IC Class 38, Apple filed a trademark cancellation proceeding against iFone’s mark in 2009, claiming that iFone’s mark was confusingly similar to IPHONE among consumers. iFone countersued, asserting that Apple’s use of IPHONE infringed its mark, and sought damages and an injunction. To Apple’s dismay, iFone successfully proved in the Mexican Lower Court that Apple’s mark was confusingly similar to its prior registered mark and that Apple’s use of IPHONE did infringe on its mark, entitling iFone to an injunction and damages.

Although Apple and iFone’s case is not concluded, Apple may be legally prohibited from using the term IPHONE in selling or promoting its iPhone devices in Mexico. Equally as damaging, iFone may be entitled as a prior mark registrant to potentially recover up to 40% of Apple’s Mexican profits from its sales of the iPhone using the IPHONE mark, both current and retroactively.  Statistics on Apple’s Mexican iPhone sales are unavailable, yet it is reported that Apple’s iPhone sales in the Americas are in the billions. To resolve its legal issues with iFone and preserve the Mexican market for iPhones, commentators have mentioned that Apple may be required to enter into a costly settlement with iFone. So what’s the takeaway from this story?

Do Your Homework Before Entering a Foreign Market: A company the size of Apple may not need to examine whether their goods and services offerings conflict with existing foreign trademarks, but doing so is an essential step for any business wishing to protect its IP and prevent legal complications abroad. A simple Mexican trademark search and examination of iFone’s promotional activities would have revealed that they had a prior registered Mexican mark that was confusingly similar to IPHONE and that they were using it in commerce. Apple may have conducted this research and disregarded it, yet doing so is a relatively inexpensive and strategic measure to identify foreign market challenges and safeguard against future legal problems.

Develop a Country-Specific IP Protection Strategy: Apple may have been able to expand legal protections for IPHONE while avoiding a legal proceeding if they had pursued an IP protection strategy with greater consideration of Mexican trademark law. Commentators have espoused that Apple likely adopted a trademark protection strategy in Mexico similar to aggressive strategies seen in the U.S. by registering IPHONE in available IC classes and initiating trademark cancellation proceedings against prior registrants in unavailable IC classes, like iFone’s IC Class 38 mark, to expand their brand’s legal protection.

If Apple had pursued a famous mark declaration, pursuant to Mexican trademark law, they could have obtained legal protection for IPHONE in IC Class 38 while averting a prolonged trial. Mexico’s Industrial Property Law permits famous marks (marks who have achieved a high degree of consumer recognition) to obtain enhanced legal protections through obtaining a declaration from the Mexican Institute of Industrial Property (IMPI). If declared, the petitioner is granted registration in the famous mark that can protect it against any subsequently registered confusingly similar marks in any IC class simply by requesting an acknowledgment from IMPI of the mark’s status and providing accompanying evidence.  Obtaining a declaration would have given Apple legal protections in IPHONE in all IC Classes without having to initiate a legal proceeding. Although IMPI has only declared a handful of marks to be famous, the iPhone’s global recognition may have likely qualified IPHONE for Mexican famous mark protection. While its possible that Apple was aware of Mexico’s famous mark doctrine and chose against it, developing IP protection strategies based on local laws can provide businesses greater choices in obtaining protection for their marks abroad.

Engage Foreign Opposing Parties Before Initiating Legal Action: If Apple had reached out to iFone, it may have been able to enter into an agreement allowing Apple to obtain legal rights in IPHONE for IC class 38 without resulting to legal proceedings. The circumstances of this case show this to be especially true. iFone’s mark is classified for the entire IC 38 class, a classification trait often seen in foreign trademark registrations. Such a broad classification makes a coexisting use agreement between Apple and iFone likely possible due to the disparity of both parties goods and services within the IC 38 class as iFone is a telecommunication service provider, while Apple is a seller of telecommunication devices, the iPhone. A coexisting use agreement would have given Apple sufficient ability to obtain Mexican legal protections in IC Class 38 for IPHONE, while saving three years worth of costly legal fees, and having to pay potential damages.

Few businesses will ever reach Apple’s size or recognition, yet all businesses can adopt these mentioned measures to prevent legal complications when entering and operating in foreign markets.

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