Recognizing this problem, the Second Chamber of Mexico’s Supreme Court sought a legal solution based on a new interpretation of the law. The Court moved away from the unconstitutionality issue of Article 23 of Industrial Property Law (“IPL”) and found a way to overturn the unfair patent validity system by interpreting other sources of law, like NAFTA and an internal agreement of the Mexican Patent Office. In doing so, the Court established a historic and transcendental new theory that removed extensions for the effective term of a patent, establishing the principle that compensatory time is not to extend the validity of the patent, but rather to give to the patentee a period of effective protection.
Furthermore, Article 126 of Federal Law for the Protection of Industrial Property (“FLPIP”) introduced a so called “supplementary certificate” (“certificado complementario”) pursuant to the November 30, 2018 United States, Mexico and Canada Agreement (“USMCA”). The supplementary certificate provides compensatory time to offset delays of more than five years between the filing date in Mexico and the granting of the patent has been granted. However, the following ambiguities arise: what qualifies as a “notification” under the FLPIP? Is it a notice attaching the patent certificate or a notice to pay the required fee for the issuance of the certificate? Moreover, the new statute contains an unfair formula that compensates the patentee with only one extra day for every two days of delay.
The Bayer Case
On January 12, 2000, Bayer Corporation (later Bayer Healthcare LLC) applied for an oncological substance invention patent via the international Patent Cooperation Treaty application (“PCT application”). The patent, “Ω-Carboxyaryl Substitutes Diphenyl Ureas as Raf Kinase Inhibitors,” granted on July 26, 2006.
The Mexican Institute of Industrial Property (“IMPI” for Spanish acronym) took six years and six months to grant the patent, and an additional eight months to provide the invention certificate under patent number 238942. It should be noted that both in Mexico and internationally, the average time to grant a patent is three years; however, in this case, IMPI took twice as long. Thus, the validity of the patent was cut short three years and six months.
Article 1709 (12) of the North American Free Trade Agreement (“NAFTA”), to which Mexico was a party, recognized this type of delay was possible and allowed for the patentee to obtain compensatory time to reclaim time taken in the patent approval process, effectively protecting the patentee. Both of our trading partners, the United States and Canada, have a much more suitable patent protection system than Mexico. In Canada, patents are protected for 17 years from the date that the patent is granted, providing legal certainty to patent holder. In the United States, like Mexico, the protective period last 20 years from the filing of the patent application, but differs from the Mexican system by adding compensatory time for the red tape delays to cover time lost due to the administrative process. Unfortunately, in Mexico we are faced with an unfavorable system prone to legal uncertainty because the patentee neither knows how long it will take for the patent to be granted by IMPI nor whether the time the protection sought will be effective. This situation places Mexico at a disadvantage in patent rights when compared to its trading partners.
As mentioned above, Article 126 of FLPIP now regulates the issuance of a limited and unfair supplementary certificate, arbitrarily providing for compensatory time to offset time lost in the patent process. But what is the logic behind the rule that a patentee may receive one day of compensatory time for every two days of delay? Would it not have been better to provide one day of compensatory time for every day of delay? When a statutory rule does not have a rational logic, it is likely to be considered unfair.
Bayer should have been entitled to three years and six months of additional exclusive exploitation of its patent based on the benefits contemplated under NAFTA and applicable federal laws (including Article 1 of Mexico’s federal Constitution and IPL). Patent protection is a civil right that should be given the broadest interpretation for the benefit of private parties. However, in Bayer’s case, the government improperly interpreted the rule to the detriment of the patentee and refused to grant compensatory time for the validity of the patent, without analyzing the benefits provided by NAFTA, which is an international treaty that hierarchically outranks IP law.
Under NAFTA, member countries are required to establish a protection period of at least seventeen years from the granting of the patent or, alternatively, twenty years from the filing application date. When the NAFTA parties negotiated and agreed on this wording, they intended to establish a protection period of not less than seventeen years. The NAFTA parties were aware that the study and administrative process of an application normally takes three years before the patent is finally granted, thus providing roughly seventeen years of protection to patents filed in jurisdictions that start the clock on the filing application date. Furthermore, the NAFTA parties recognized that there may be situations that require additional time to grant a patent and, in those cases, compensatory time could be used to offset the excess time.
It is unfair and unreasonable that some patentees are granted an exclusive right to exploit the patent for seventeen years, whereas others are granted only fourteen years or less, based solely on administrative and red tape issues. The effective term of a patent is of paramount importance to the patentee because inventions require expensive research and development. The exclusive protection bestowed by a patent is a right recognized under both international treaties and by Article 28 of the federal Constitution. It follows that the ideal protection should be seventeen years, after subtracting the customary three-year processing time by the respective Patent Office.
Analysis of the Court’s Opinion
On October 14, 2020, the Second Chamber of Mexico’s Supreme Court, on the amparo action under review 257/2020 and based on the draft opinion authored by Justice Yeasmín Esquivel-Mossa, adopted a systematic interpretation of Article 23 of IPL and Article 1709 (12) of NAFTA, and reaffirmed that in all cases the effective term of a patent may not be less than seventeen years from the granting date of the patent. On page 76 of the opinion, the following wording appears:
We find that, regardless of the [maximum] terms set under the Administrative Rulings [issued by IMPI], and as mentioned above, the interpretation of Article 23 of the Industrial Property Law read in conjunction with the applicable provisions of Article 1709 (12) of the North American Free Trade Agreement, allows us to conclude that the effective term of patents cannot be less than either twenty years from the filing date or seventeen [years] if the granting date is considered (emphasis added); consequently, if it is proven that there was a delay in the administrative approval process, the protection must be extended in order to offset such delay, thereby preserving the effective term of the patent which, we insist, cannot be less than seventeen years. […]”
The Second Chamber of Mexico’s Supreme Court opted for a new, systematic interpretation of the legal provisions under review, instead of either (i) directly holding that Article 23 of IPL was unconstitutional for failing to provide a uniform effective term for all patents or (ii) applying the notion of compensatory time contemplated by Article 1709 (12) of NAFTA. As a result of the legislature’s failure to enact a statutory rule on a minimum term for the validity of all patents or a maximum term for a delay in the granting of a patent, the Supreme Court has now corrected the problem by interpreting the law to require seventeen years from the granting date for all patents.
This recent Supreme Court opinion is more favorable for patent holders than the provisions of the new FLPIP because it mandates a minimum effective term of seventeen years from the granting date, and does away with the preposterous rule of granting one day of compensatory time for every two days of delay. But the question remains: Why not provide one-day of compensatory time per one day of delay?
Court Opinion
On January 8, 2021, the Supreme Court published the following summary of Bayer:
Digital registration: 2022603
Court: Second Chamber
Tenth period
Subject(s): Administrative
Precedent: 2nd. LV/202 (10a.)
Source: Federal Weekly Judicial Gazette. Book 82, January
2021, Volume I, page 662
Type: Single Opinion
PATENTS. WHEN DELAYS IN THE APPROVAL PROCESS ARE ATTRIBUTABLE TO THE
ADMINISTRATIVE AGENCY, THE EFFECTIVE TERM OF A PATENT MAY NOT BE LESS THAN SEVENTEEN YEARS FROM THE GRANTING DATE (SYSTEMATIC INTERPRETATION OF ARTICLE 23 OF THE NOW REPLACED INDUSTRIAL PROPERTY LAW). (…)
The ratio decidendi of this court opinion is that there are two systems: one of the twenty years from the filing application date, and the other of seventeen years from the patent granting date, with the proviso that in the event of any administrative delays, patents must have a minimum effective term of seventeen years from the granting date, and not twenty years from the filing patent application date.
The above interpretation directly impacts those patents that took more than three years to be granted. This Supreme Court opinion corrects the flawed patent system that for many years had prevailed in Mexico under Article 23 of IPL and prior statutes and that, unfortunately, have caused severe damage to those who sought an effective protection for their inventions, but were completely unaware of the unfair shortening of the effective term of patents due to unreasonable delays by the government. In our opinion, the interpretation embraced by the Supreme Court fully upholds the constant and perpetual desire to put into practice the principle of justice, without declaring that Article 23 of IPL was unconstitutional.
It is important to note that the recent opinion of the Supreme Court is only applicable to patent applications filed prior to July 1, 2020, while NAFTA was in effect. However, any patent applications filed between July 1 and November 4, 2020, before the new FLPIP came into effect, may fall into an interpretation limbo. On one hand, those patents are subject to UMSCA, but, on the other hand, the former IPL continued in full force and effect, which was the legal grounds taken by the Supreme Court to issue its opinion. It would be interesting to see how federal courts would react when deciding this time factor in a conflict of laws situation.
