Origins of the FCTAA

The Tribunal Federal de Justicia Fiscal y Administrativa or Federal Court of Tax and Administrative Affairs (FCTAA) is a relatively new court. It was enacted in 2001, and its immediate predecessor was the Federal Tax Court. Most of the judges of the FCTAA are tax specialists. However, amendments to several statutes, particularly the modifications of April and May 2000 to the Federal Law of Administrative Procedures, broadened the scope of the old Federal Tax Court to decide a large number of administrative matters, (i.e. trademark registration, public officials liability, environmental protection, mining permits… etc.) until it became the FCTAA in December 2000. 

From mid 2000 to late 2008, appeals regarding IP matters were decided by on the thirteen non-specialized chambers of the FCTAA in Mexico City. Since January 2009, IP appeals are being decided by a specialized chamber, also located in Mexico City. 

The Federal Law of Contentious Administrative Procedures (FLCAP) rules the appeal procedure with the FCTAA. The immediate predecessor of the FLCAP was the contentious chapter of the Federal Tax Code, that governed the appeals with the now extinct Federal Tax Court. 

As you may see, a tax court and a tax law were the predecessors of the current specialized IP Chamber of the FCTAA and of the statute that govern the procedure for appeals involving IP. 

In a typical procedure concerning taxes, there are two parties with opposing interests: the State and the tax payer. The statute that governs the appeals in IP matters took this model. The problem is that in many IP matters, there may be more than one opposing party (such as the proprietor of a registered trademark that was cited as anticipation in a case involving the rejection of a trademark application, or the adversary in a patent invalidation or infringement action). 

At Law School, my Tax Law teacher told us that the purpose of Tax Law was defending tax payers, and many of the provisions (not all) stated in the Federal Tax Code, and later in the FLCAP reflect this way of thinking. Tax law tends to be very formalistic about the decisions and procedures to determine the existence of taxes and liabilities related to unpaid taxes. The lack of fulfillment of a formal or procedural requirement may result in the invalidation of the decision and the procedure, and all the Chambers of the FCTAA must review ex officio that the challenged decision complies with all formal requirements, regardless the arguments of the appellant. 

While such rigor may be desirable in a tax case, it may not be justifiable in a case where the decision of the Mexican Patent and Trademark Office (MPTO) was the result of a “trial-shaped” procedure or did not impose a fine but rejected a trademark or patent application. 

The FLCAP makes no distinction between decisions arising from a purely administrative procedure (such as the abandonment of a patent or the rejection of a trademark application) and decisions rendered as the result of an administrative procedure where the MPTO acted as a court to decide a dispute between two parties, such as a trademark or patent infringement case. 

Therefore, all the rigor that the FCTAA must use to review the compliance of formalities of a tax related decision, regardless the merits of the appeal, are being also applied to review all the decisions from the MPTO. 

The precedents 

A very important issue in Mexican administrative law, and especially in tax law, refers to the authority of the government agencies and the officials to decide taxes, administrative sanctions and impose fines. 

Historically, the government has exercised it power abusively. As a consequence, the Constitution and legislation have provided a number of requirements and limits to protect individuals and private entities from such abuses (whether such protections actually work or if they work only in the benefit of a privileged few would be subject of another discussion). 

One of the above-stated requirements is that the authority of any government agency to impose some burden or extinguishing some right of a private person must be expressly provided in an act of a federal o state legislature (Ley) or in a body of rules issued by the President or Governor himself (Reglamento). 

Certain bodies of rules, such as the estatutos orgánicos or “organizing regulations and the acuerdos delegatorios or “decisions to delegate authority” may provide a government agency with authority for certain actions, but in no case such authority may be broader than the one provided in the legislation or rules, and may not stipulate authority to impose burdens or limit or extinguish rights, if the legislation or the rules did not explicitly stated such authority. 

The requirement for all government officials to have explicit authority provided in the statute or in the rules to decide a case where the official imposes a burden or extinguishes or limits a right does not stop there. There is a binding precedent from the Supreme Court that demands that the official that decides a case must state all the statutes and rules that provide the authority to render the decision, including the article, section, paragraph, subparagraph, etc.** The FCTAA must review this issue ex-officio***, and if it finds one mistake, it must invalidate the decision due lack of authority of the issuing official, even if such lack of authority was never argued by any of the parties, or if it is irrelevant to decide the merits of the case. 

As I explained above, such rigor may be desirable in a tax case, because it has the clear intention of protecting the tax-payer against the abusive behavior of the executive branch. However, in a trademark infringement or cancellation case, this sort of ruling does not result in the enhanced protection of intellectual property rights. On the contrary, it seriously harms intellectual property owners and their activities; the delay of a final decision causes doubts and uncertainty about the enforceability and validity of IP rights, because the effect of the invalidation due apparent or actual lack of authority of the MPTO’s officials is the issuance a new decision signed by an official with authority to do so, or simply correcting the typing flaw that refers to the applicable provision of the statute that originates the authority of such official. 

Of course, given the some voids in the regulations that govern the activities of the MPTO’s officials, the new decision is not always free of formal flaws that may also cause, again, their invalidation, without ever looking at the merits of the appeal. 

Unfortunately, an IP case does not always stop at the FCTAA. The final instance is the Federal Court of Appeals. There are eleven non-specialized courts of appeals with jurisdiction to review the decisions rendered by the IP Specialized Chamber of the FCTAA. The courts of appeals issue contradictory rulings from time to time. When contradictory rulings arise, the Supreme Court may review the cases and decide what ruling should prevail; the Supreme Court’s decisions are binding for all the courts of appeals and the FCTAA. 

Finally, if the patent, trademark or copyright owner wants some indemnification related to a patent, trademark or copyright, the MPTO’s infringement decision must become final (after all the appeals), and then the right-holder may file an action with a court of common jurisdiction, which means to start all over again, but now to try to claim damages and lost of profits. 

The future 

One thing is clear: The current system does not work. Even a relatively simple case may take many years to be decided just because all the time wasted in irrelevant appeals. 

Some practitioners have suggested that the law should be amended to exclude IP from the scope of the FCTAA. Actually there is a bill that the Chamber of Representatives approved in late 2006 to exclude IP from the scope of the Federal Law of Administrative Procedures, and as a consequence, from the FCTAA. The bill is pending at the Senate. 

Although the lack of efficiency of the FCTAA is obvious, I am not sure that this is a good solution. District Courts may decide faster than the FCTAA, but the MPTO’s decisions tend to have many procedural and forma errors that may result in decisions from the District Judges just to cure formal and procedural flaws, with no actual benefit as for the time it takes to reach a final decision would be concerned. 

Finally, most District Judges have not been in regular contact with IP law since 2002, after the FCTAA took over the appeals for IP matters, so their decisions show in general less analysis of the case that the decisions of the FCTAA. 

From my perspective, Mexican IP law needs a structural change. The MPTO should not have authority any long to decide infringement and invalidation cases; such authority should be on specialized federal district courts, which may decide in the same decision if the trademark registration or patent is valid, if it has been infringed and award damages and/or attorney’s fees to the prevailing party.

 Of course, it is a complex issue and any solution would have to be more complex than what I just stated above. In any case, what all practitioners agree is that we need a change, and we have to start working on it now.

 * Ninth Era, Weekly Judicial Journal of the Federation, Courts of Appeals, XXIX, April, 2009, page: 1925, Thesis: I.7o.A.617 A, Registry 167451

 ** Ninth Era, Weekly Journal of the Federation, Supreme Court, Second Chamber, XXV, June 2007, page 287, Thesis: 2a./J. 99/2007

 *** Ninth Era, Weekly Journal of the Federation, Supreme Court, Second Chamber, XXVI, December 2007, page 154, Thesis: 2a./J. 218/2007