Mexico: Coownership In Mexico: Navigating In The Open Innovation Arena

Last Updated: 12 April 2016
Article by Juan Carlos Amaro and Héctor Chagoya

Most Read Contributor in Mexico, November 2018

Introduction

The increase in open innovation and the importance of collaboration in the business and scientific spheres have led to a growing need to deal with coownership. Some legal systems have clear coownership rules that are specific to IP rights. However, in Mexico, intellectual property is dealt with under the general rules applicable to all types of property, meaning that at times the provisions are not as clear as they could be, considering that most of the laws are designed to deal with tangible property rather than intangible assets such as IP rights.

Therefore, the laws must be interpreted in terms of the unique features of IP rights. This update examines such interpretation in the context of IP¬based business transactions.

General rules

The coownership of property is regulated by the Federal Civil Code, particularly Book 2, Title 4, Chapter VI (Articles 938 to 979).

The general rules state that there is no obligation to keep coowned property undivided, and that if the property “cannot be divided easily” and there is disagreement among the coowners, it must be sold.

In the absence of an agreement to the contrary:

  • the costs of maintenance must be divided proportionally among all coowners;
  • all coowners can use the property;
  • the property cannot be altered or modified;
  • the coowners can individually alienate, assign, mortgage or substitute themselves with another party in the exploitation of their proportional parts; and
  • the coowners must have a right of first refusal option to acquire another coowner’s part of the property.

The implications of these rules on IP rights also depend on the laws applicable to each IP right – the Law of Industrial Property or the Copyright Law.

Each IP right is considered below in order to establish the relevant requirements, how such an IP right can be co- owned and, most importantly, how the rights derived therefrom can be enforced.

Trademarks

In accordance with the Law of Industrial Property, a trademark application can be filed in the name of a single party or two or more parties.

In the event that a trademark is filed in the name of two or more persons or entities, the corresponding application papers must be accompanied by rules on the use, cancellation, limitation in relation to the goods or services,

licensing and assignment of the trademark. In other words, the parties must submit to the Trademark Office in writing, and signed by all parties, their agreement on how the trademark can be assigned, licensed or cancelled (eg, if such action requires the written consent of all coowners).

The law mandates no specific provisions; rather, it indicates only the way in which the trademark can be assigned, licensed or cancelled. It also establishes that the rules must also include provisions regarding the limitation of goods and/or services and legal representation.

Therefore, the requirements for performing any of these actions are left entirely to the applicants to decide, provided that they are submitted in writing when the application is filed.

When a trademark application is filed in the name of two or more persons or entities, each is understood to have an equal share of all rights in the mark (unless the rules specifically grant each party a specific percentage).

Similarly, such share can be assigned by each party following the terms set down in the rules of use, unless there is a provision to the contrary (eg, establishing that the mark must be assigned in its entirety).

All of these provisions also apply to slogans.

The Law of Industrial Property provides for another legal right: collective trademarks. A collective trademark is established by an association or society of manufacturers, traders or service providers which is legally constituted under the laws of Mexico. Such association or society can file a collective trademark, which must also be accompanied by rules on the use, cancellation, limitation in relation to goods or services, licensing and assignment of the trademark.

The difference between a coowned trademark and a collective trademark is that the latter cannot be assigned and its use is reserved for members of the association or society. In conclusion, a trademark application can be filed in coownership and the only prerequisite for proceeding in this way is that the corresponding application papers be accompanied by rules of use, which explain how the trademark can be assigned, licensed or cancelled. The law mandates no specific provisions in this regard, leaving it up to the coowners, provided that the main issues are covered.

The rules of the Federal Civil Code apply only in the absence of agreement. As the rules of use are set out alongside the trademark as a requirement for coownership in this case, the agreement as registered along with the trademark will prevail. This means that, for example, the maintenance fees and other expenses must be shared.

Copyright

The Copyright Law also recognises coauthored works and grants each author all rights granted by law, unless a specific provision states otherwise or the authorship of each author is proven. Furthermore, in the absence of an agreement, the work of employees is coowned by the author and the employer.

In order to enforce the rights granted by the Copyright Law, the consent of the majority of the authors, which is binding on all authors, is needed. In such case, the nonconsenting minority will not be obliged to contribute to the expenses accrued, but will be charged such expenses on the profits made.

Other important provisions established by the Copyright Law regarding coauthorship are as follows:

  • When the majority makes use of or exploits the work, it will deduct any expenses incurred from the total
  • profit made and pass the corresponding share of the profits to the minority.
  • When the part made by each author is clearly identifiable, such authors will be entitled to enforce the rights granted by this law.
  • Unless specified otherwise, each author will be entitled to request registration of the complete work.
  • If one of the authors dies and there is no heir, that author’s right will be absorbed by the other coauthors.

There are also common and wellknown types of authorship, such as the authorship entailed in a work of music and lyrics, where, unless specified otherwise, the Copyright Law grants an equal share of the work to both the author of the music and the author of the lyrics. Each can enforce the rights granted by the Copyright Law with respect to his or her corresponding part or with respect to the entire work. However, in the latter case, the other co- author must be notified, his or her name must be mentioned in the publication and he or she must receive a corresponding share of the profit, when the work is used for profitmaking purposes.

In summary, the coauthorship of works is recognised in the Copyright Law, which establishes provisions regarding the use of such works, the profits made and how the rights that they entail can be enforced. Further, in some cases specific provisions are included, such as for works containing music and lyrics.

Nevertheless, it is still advisable to have a coownership agreement in place so that all issues not regulated by the law can be dealt with clearly, particularly in light of the Civil Code rules on the assignment of the rights of a co- author individually to a third party.

Patents

The IP rights related to inventions (ie, patents, utility models and industrial designs) are perhaps the least regulated IP rights in terms of coownership.

Under the Law of Industrial Property, when two or more persons make an invention, that invention belongs to all of the creators equally. This is the only reference to co-ownership in the Law of Industrial Property or elsewhere; therefore, the exploitation and enforcement of patents are governed by the general rules applicable to all property.

For this reason, and because the Civil Code rules apply only in the absence of an agreement between the co- owners, it is recommended that coowners execute an agreement establishing the rules for licensing, enforcing and exploiting the patent in general. Otherwise, the general rules of the Civil Code will apply.

In particular, there is doubt as to whether one coowner may license its rights to a third party without the authorisation of the other coowners. Under the Civil Code, a co-owner may assign the right, replace himself or herself with a third party for exploitation of the right or otherwise alienate his or her part. This is interpreted as allowing a licence to be granted to a third party, provided that the licence is non-exclusive (given the existence of the other co¬owners) and the benefits are retained by each coowner as if the co¬owner had exploited the patent himself or herself.

With regard to assignment, the coowner can assign his or her part of the right to a third party, provided that the other coowners retain the same share independent of the assignment. Another interesting consequence of the applicability of the Civil Code relates to amendments. In particular, under the Civil Code a single coowner cannot decide on amendments, as this would constitute a change in the scope of the right requiring the approval of all coowners. In this sense, it is understood that if a representative is not specifically designated, the first coowner mentioned in the application is the common representative. The rules for regulating the actions of such common representative are thus vital regarding amendments in particular.

Comment

The Mexican IP system is well equipped to handle the coownership of intellectual property. However, the particular provisions for each kind of right must be taken into account, as the applicable law may differ from one right to another. For instance, a trademark application and a work can be coowned. While the Law of Industrial Property establishes the prerequisites for coownership of a trademark, the Copyright Law recognises, without prerequisites, that due to their nature, some works are usually co-owned, and thus simply regulates the rights derived from such works.

Similarly, coowned patent rights are administered independently through the Civil Code, which also applies to trademarks and copyrights when such rights are not expressly regulated. Therefore, all rights holders should be aware of the particular provisions applicable to the type of right that they own in order to administer coowned IP rights properly to the benefit of their business and maximise the value of such IP rights in business.

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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