Mexico: New Law Changes IP Management Landscape For Governmentfunded Projects

Last Updated: 12 April 2016
Article by Héctor Chagoya
Most Read Contributor in Mexico, November 2018

For many years, IP management of governmentfunded projects in Mexico was nonexistent. Mexican law was silent regarding both the ownership of such projects and the agreements governing how grant money was spent. Nevertheless, recent changes in innovation policy have mandated changes in the management of such projects in order to prepare for future innovation opportunities.

Absence of regulation in governmentfunded projects

The US BayhDole Act – which resolved the problem that IP policy for governmentfunded projects was so restrictive that it inhibited technology transfers from universities and research and development (R&D) centres to companies – is well known. The BayhDole Act and similar laws around the world have addressed the same restrictive landscape by allowing for the exploitation of governmentfunded inventions by private parties.

In the 1970s and 1980s Mexico had a restrictive technology transfer policy controlled by the government, which had to approve the terms and conditions of the corresponding agreements. This led to much debate, as governmentowned companies used the technology transfer framework intensively and widely. However, private companies became complacent and unskilled in negotiating terms and conditions for technology, and technology providers had no incentive to provide technology to such companies under the restrictive policies – which led to stagnation in the development of technology. With the liberalisation of the Mexican economy, in 1991 the laws were abolished and since then technology transfer has been left to the parties, with no government intervention except for antitrust legislation.

In spite of the criticisms levelled at the law, the restrictive regulation did not cover governmentfunded inventions and historically, Mexico has not regulated government-funded projects. Therefore, unlike many countries, Mexico did not need a law allowing private parties to exploit governmentfunded inventions – similar to the BayhDole Act – because no restrictions applied.

Case-by-case approach

In 2006 a new innovation policy was implemented, emphasising the importance of intellectual property for innovation, in particular for projects funded through the National Council of Science and Technology (CONACyT).

Under this policy, the rules related to the grant of funds included patent expenses as eligible expenses and increasingly tried to promote patenting by the entities benefiting from the fund, with no restrictions on the use of intellectual property.

Nevertheless, along with the establishment of the Hydrocarbon Sector Fund – which comprises 0.4% of the gross sales of Mexican stateowned oil company Pemex – the need to ensure that innovations supported by the fund would return to Pemex was clear. Therefore, in 2009 it became the first fund to include a specific IP policy, which considered different variables for each project and resulted in the signature of IP agreements on a casebycase basis.

The government has promoted the establishment of technology transfer offices in universities, thus increasing the importance of managing the intellectual property of governmentfunded projects. However, in terms of the general policy of transparency for government expenses, the need to know how, when and why government funds are spent – including R&D expenditure – has been part of the national debate. This debate has led to the enactment of a new law on the results of R&D carried out by governmentfunded projects.

New law

On May 20 2014 changes to the Law on Science and Technology were published in the Official Daily of the Federation. There was little debate over the changes as they were perceived to address only a strategy for access to scientific information. The changes added new Chapter X – About the Open Access, Access to Scientific, Technologic and Innovation Information and the National Repository. The title and discussions suggested more of a statistical and transparency exercise in the context of the availability of information through the Internet as a government communication strategy. The law is relevant to IP management only because it expressly addresses intellectual property in Articles 64 and 65:

"Article 64. CONACyT shall design and promote a national strategy in order to democratise Scientific, Technological and Innovation information, in order to strengthen the country's capabilities such that the universal knowledge is available to students, teachers, academics, researchers, scientists, technologists and people in general. The strategy shall seek to broaden, consolidate and facilitate access to national and international scientific, technologic and innovation information, in full text, in digital format.

Higher education institutions and research centres shall constitute Repositories by scientific or technological disciplines, or by other topics to be determined, in order to disseminate scientific and technological information derived from their educational and academic products, and in general to disseminate all kinds of research performed, regardless of its presentation, according to quality criteria and technical standards issued by CONACyT. Such Repositories may be established at the level of the institutions or research centres or through the creation of networks or associations with other institutions by disciplines, regions or other criteria. CONACyT shall issue rules to which such Repositories referred to by this law shall be subject.

Article 65. By Open Access it shall be understood access through a digital platform and without requirement for subscription, register or payment, to research and educational, academic, scientific, technological or innovation materials, that were financed through public funding or that have used public infrastructure in its development, without prejudice of the provisions related to patents, protection of industrial or intellectual property, national security, copyrights, amongst others, as well as of such information that, by reason of its nature or by decision of the author, is confidential or reserved."

Thus, the law goes far beyond what was expected and contains further provisions relating to materials developed by students who obtain scholarships to study abroad, which might lead to copyright conflicts with the institutions that the students attend for master's or doctorate degrees. Fortunately, the law contains a provision that appears expressly to privilege intellectual property and confidentiality. However, CONACyT has 18 months to issue rules implementing these provisions, so their impact remains to be seen.

Transitional recommendations

The new law is historic in the sense that hitherto, no law has contained express provisions related to use of the knowledge developed through governmentfunded projects.

Accordingly, although only one article refers to intellectual property, the law has dramatically changed IP management in government¬funded projects in Mexico by requiring project organisers to develop and document an IP strategy before commencing work whenever government funds or infrastructure are involved. Until CONACyT issues its rules, the applicability of the law to ongoing projects without an IP strategy in place and which are carried out in government facilities (even without government funding) remains unclear. Further, there may be unintended consequences for activities that were previously straightforward – for example, R&D projects that are privately funded, but are performed in government facilities or R&D projects carried out abroad by students who receive support from the Mexican government through scholarships. According to the latest CONACyT statistics on R&D in Mexico, in 2012 more than 4,000 students were supported by the Mexican government through scholarships, mainly in the United States and the European Union. As such, there might be a conflict between this new law and the policies applicable to such students.

In the meantime, companies or institutions that have relationships with Mexican entities or researchers can take the following measures:

  • A company or institution employing Mexican researchers should:

    • identify whether the Mexican government supported them in order to work there, including whether their institutions used public funding to support the researchers;
    • ensure that there is proper paperwork stating that the Mexican researchers will respect the institution's IP policy in accordance with Mexican law and will disclose to the government any duty that is inconsistent with such policy; and
    • ensure that the Mexican researchers have confidentiality obligations in place.
  • A company or institution collaborating with a Mexican institution should:

    • identify, where the project is carried out in Mexico, whether the project is taking place at a government facility;
    • ask the Mexican institution whether it used or has used government funding for any aspect of the project (if so, the company or institution should check the grant agreement);
    • ask the Mexican institution to protect the project from publication under the Law on Science and Technology by documenting the exception for intellectual property and confidential information;
    • ensure, if independent intellectual property is being used for the project, that it is correctly identified upfront and separated from any non-independent intellectual property; and
    • ensure that patents are filed in Mexico in order to ensure the project's IP position in relation to the  

Finally, the management of knowhow and confidential information in collaboration agreements must specifically address the obligation to keep the results of the collaboration confidential.

Comment

Mexico has good safe harbour provisions for research in every technology area. These provisions include clear rules for the assignment of employees' inventions, an experimental use exemption for patents and a grace period for nonpatent publications from inventors.

Mexican researchers are renowned internationally for the quality of their work; at the same time, the market conditions and the country's level of development make it an interesting jurisdiction in which to undertake R&D activities.

As the total number of patent filings has never surpassed 20,000 – with only around 1,000 patents filed by Mexicans – it is evident that the risk of infringing patents in Mexico is much lower than in other countries with more patenting activity. Nonetheless, Mexican publications are generally well ranked in scientific indexes and Mexican researchers are prolific in the publication indicators.

However, all of these opportunities must be considered by Mexican policymakers as they develop the rules for the Law on Science and Technology. The 18 months following this historic new law will be key in order to establish clear rules for investment in innovation projects in Mexico, and to foster the collaboration and open innovation activities of Mexican institutions in the international arena.

The existing rules respect IP rights and seem to be consistent with the Mexican legal framework. However, it is important to keep track of developments, as further formalities or conditions for applying the IP provisions may force those involved in these projects to focus on IP management more intensively.

The Mexican IP system is evolving and, along with other changes in economic policy (eg, the opening of the energy sector to private investment at the constitutional level, as well as the development of a corresponding law), the government has clearly signalled its intent to provide the right tools to increase investment and innovation.

However, the results of the policy changes remain to be seen, as the implementation of policies advances and specific rules are developed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Héctor Chagoya
 
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