812.543 Palmolive/56

The Secretary of State to the Chargé in Mexico ( Johnson )

No. 1101

Sir: Reference is made to your despatch No. 2132 of January 11, 1930, and to previous correspondence in regard to the decision of the Supreme Court of Mexico handed down on October 26, 1929, which denied the right of The Palmolive Company, an American corporation, to bring suit for infringement of its trade-mark “Palmolive” which is registered in Mexico, on the ground that the corporation was not registered in Mexico in accordance with the provisions of Article 24 of the Mexican Commercial Code.

Numerous protests against the decision have been received not only from companies and associations interested in trade-mark protection but from others who, while not particularly interested in trade-mark rights, nor engaged in business in Mexico, have important business transactions with citizens and residents of Mexico. The companies interested in trade-mark protection are unanimously of the opinion that the decision contravenes the provisions of Article 2 of the Convention for the Protection of Industrial Property of 1883 as amended on June 2, 1911, to which the United States and Mexico are parties, and they concur in the views expressed by numerous other companies interested in trade with Mexico, that the decision, if adhered to, will deny the assistance of Mexican courts for the enforcement of obligations of citizens or residents of Mexico to American companies not engaged in business in Mexico unless the companies concerned comply with the onerous conditions of registration under the Commercial Code.

In view of the importance of the possible effect of the decision of the Supreme Court of Mexico on the business interests of the United States and Mexico if the views set forth above are correct, the Department has carefully considered the decision and is of the opinion that the decision contravenes Article 2 of the Convention for the Protection of Industrial Property signed at Washington on June 2, 1911, and is contrary to the Mexican Trade-mark Law of 1903 under the provisions of which the Palmolive trade-mark was registered in Mexico and is also contrary to the provisions of the Commercial Code. It would also seem to be clear that the decision, if adhered to, will injuriously affect the interests of citizens and residents of Mexico who have business dealings with American companies not engaged in business in Mexico.

The Department hopes that the Mexican Government will share this Government’s views that the interests of the two Governments will be furthered by any action which the Mexican authorities may take effectively to limit the application of the Supreme Court decision [Page 571] to companies which are actually engaged in business in Mexico on the basis of a domicile or an establishment in that country.

You are, accordingly, requested to discuss the matter informally with the Foreign Office and to urge its cooperation with a view to effecting a mutually satisfactory adjustment of the matter which will insure adequate redress and protection to The Palmolive Company and the definite exemption from the obligation of registration under the Commercial Code of companies which do not maintain a domicile or establishment in Mexico.

The Department desires, if possible, to avoid any discussion of the legal questions involved in the Court’s decision and hopes that you may be able to obtain a satisfactory adjustment of the matter without formal legal argument, but there is transmitted herewith for your information and possible use in your discussion with the Foreign Office a memorandum prepared by the Solicitor for this Department, which discusses statutory and treaty provisions involved in the decision under reference.

I am [etc.]

For the Secretary of State:
J. P. Cotton
[Enclosure]

Memorandum by the Office of the Solicitor

Discussion of the Effect on Industrial Property and Other Rights of American Citizens of the Decision of the Supreme Court of Mexico Handed Down on October 26, 1929, Which Denied the Right of the Palmolive Company, an American Corporation, To Bring Suit for Infringement of Its Trade-mark “Palmolive” Which Is Registered in Mexico, on the Ground That the Corporation was not Registered in Mexico in Accordance With the Provisions of Article 24 of the Mexican Commercial Code.

Following the receipt of numerous protests against the decision to which reference is made in the caption, which have been received from American corporations and attorneys, this office has made a careful study of the decision and statutory and treaty provisions which it involves and has concluded that the decision contravenes the provisions of Article 2 of the Convention for the Protection of Industrial Property signed at Washington on June 2, 1911, to which the United States and Mexico are parties, as well as certain provisions of the Mexican Trade-Mark Law of 1903 and the Mexican Commercial Code. This conclusion is based on the following considerations:

Article 2 of the Convention for the Protection of Industrial Property of 1883, as amended on June 2, 1911, reads as follows:

“The subjects or citizens of each of the contracting countries shall enjoy, in all the other countries of the Union, with regard to patents of invention, models of utility, industrial designs or models, trade-marks, [Page 572] trade names, the statements of place of origin, suppression of unfair competition, the advantages which the respective laws now grant or may hereafter grant to the citizens of that country. Consequently, they shall have the same protection as the latter and the same legal remedies against any infringements of their rights, provided they comply with the formalities and requirements imposed by the National laws of each State upon its own citizens. Any obligation of domicile or of establishment in the country where the protection is claimed shall not be imposed on the members of the Union.”

Attention is particularly invited to the fact that the protection provided by the Article above quoted is subject to only one condition, namely, that the applicant “comply with the formalities and requirements imposed by the National laws of each State upon its own citizens”. Immediately following the statement of this condition is the definite unequivocal prohibition against the imposition of “any obligation of domicile or of establishment in the country where the protection is claimed”.

It would seem that, so far as they relate to Mexico, the “formalities and requirements” referred to in Article 2 of the Treaty of 1911 have relation only to the requirements for the registration of trade-marks prescribed by the laws of Mexico which provide for such registration and that when those requirements have been observed the registrant immediately becomes entitled to the exclusive ownership and use of the mark in Mexico and to all the remedies provided by the laws of Mexico for the enforcement of those rights. This view appears clearly to be established by the provisions of Article 2 of the Mexican Trade-mark Law of 1903, which was the law in force in Mexico when The Palmolive Company registered its trade-mark in that country. That Article reads as follows:

“To obtain the exclusive right to the use of a mark it is necessary to effect its registration in the Patent and Trade-mark Office by fulfilling the formalities that the present law and its regulations establish.”

The trade-mark law of 1903 was enacted long after the Commercial Code came into force and if registration under the provisions of the Code had been regarded by the Mexican Legislature as one of the conditions necessary to the enjoyment of the rights conferred by the law of 1903, specific provision to that effect would presumably have been made in the law. However, the law of 1903 not only does not require as a condition for the enjoyment of its benefits that registration be effected under the provisions of the Code, but on the contrary it clearly indicates that the “exclusive right to the use of a mark” shall be granted to the registrant of the mark who fulfills “the formalities of the present law”, thus apparently precluding the setting up of any obligation of registration under the Commercial Code. Moreover, the law of 1903 contains additional evidence that trade-mark [Page 573] registration and use are not in any sense dependent upon registration under the Code. This additional evidence is found in Article 91 of the law of 1903 which provides that trade-marks registered under the provisions of Article 21, paragraph XIII, of the Commercial Code should be presented for registration under the provisions of the trade-mark law of 1903. Article 91 of that law reads as follows:

“Art. 91. From the date on which this law commences to become effective, there shall no longer be applicable as to registration of marks in the Register of Commerce the proviso in paragraph 1 of Art. 26 of the Code of Commerce; and there is fixed a term of nine months which cannot be extended, counting from the same date, so that marks that are registered in accordance with what is provided in No. XIII of Art. 21 of the same Code may be presented for their registration in the Patent Office, with the understanding that, if such shall not be so carried out, the registrations made in said Office will be considered as preferential as respects those effected in the Register of Commerce, even though these latter may be anterior, as respects date, to the former mentioned.”

The decision of the Supreme Court of Mexico under reference appears to be the first decision of that Court which interprets Article 2 of the Industrial Property Convention of 1911. However, since The Palmolive case appears to be the first instance brought to the Department’s attention in which the administrative or judicial authorities of any country in which the Convention is in force have construed the Article in the sense of the opinion of the Mexican Supreme Court under reference, it may fairly be inferred that the Article has been generally interpreted in the countries of the Industrial Property Union in the sense that the “formalities” referred to in the Article relate to the formalities incident to trade-mark registration. The Article in question was construed in this sense by the Belgian Court of Cassation in a decision given in 1912 and reported in “Jurisprudence Belgique Cour de Cassation 1912, page 354” In the case mentioned the lower Belgian court held that an action for infringement of a trademark instituted by a French company which carried on its business in France and did not maintain a manufacturing or commercial establishment in Belgium was not admissible. The Court of Cassation reversed this judgment and held the action admissible by virtue of Article 2 of the Industrial Property Convention of 1911. The Court stated that the purpose of the Paris Convention as amended in Washington in 1911 was (1) to provide for complete and mutual protection of the industry and commerce of the nationals of the contracting countries, and (2) to extend instead of to limit the internal protection of industrial property. Referring specifically to the term “formalities and requirements” found in Article 2 the Court interpreted that term as referring “only to the procedure applicable to trade-marks prescribed by the [Page 574] laws of each country and concerns exclusively requirements of registration of trade-marks.”

Upon complying with the provisions of the law of 1903, The Palmolive Company was granted registration of its trade-mark in the Patent and Trade-mark Office of Mexico. This grant of registration constitutes a declaration by the Mexican Government that The Palmolive Company was the exclusive owner of the trade-mark “Palmolive” and exclusively entitled to its use in Mexico and to all the remedies provided by the laws of Mexico for infringement of that right. The correctness of this position is established by the provisions of Article 11 of the law of 1903, which reads:

“The certificate of registration of a mark shall be issued by the Patent and Trade-mark Office. This certificate, duly legalized and with the documents thereto annexed, shall constitute a title deed that accredits the right to the exclusive use of the mark”.

It is obvious that the “title deed” thus given to The Palmolive Company would be worthless unless the owner of the title were permitted to take adequate measures to protect it. These measures were provided by other provisions of the law of 1903 imposing penalties for infringement of any registered mark. Articles 18, 19 and 27 stipulate the penalties for infringement and Articles 28, 29, 30, 31, 47, 48, 49, 50, 51, 56, 57 and 65 provide in detail for the institution of legal proceedings by the owner of the mark.

It is apparent from the foregoing that The Palmolive Company obtained registration of its mark in conformity with the provisions of the law of 1903; that as a result of that registration it obtained official recognition of its exclusive right of ownership and use of the mark in Mexico and became vested with the right to proceed in the courts of Mexico to suppress any infringement of the registered mark and to obtain indemnity for any damage or injuries suffered by such infringement, and that these rights cannot be destroyed or impaired so long as the registrant complies with the applicable laws of Mexico.

The decision of the Supreme Court under reference does not question the fact that The Palmolive Company is the legal owner of the trademark in question, or that the mark was infringed by the company against which the proceedings were instituted. Those facts are so completely established by the record as to be indisputable. The court’s decision, therefore, must be construed as a judicial prohibition against the exercise of legal rights expressly granted to this American company by the Trade-mark Law of 1903 and in harmony with the provisions of Article 2 of the Industrial Property Convention of 1911. The result of this judicial prohibition is that The Palmolive Company has a “title deed” from the Government of Mexico certifying that the company is entitled to the exclusive ownership and use of the trademark “Palmolive” which “title deed” is rendered worthless by the [Page 575] act of the Supreme Court in denying to the company the opportunity to avail itself of the only means of protecting its title and punishing infringement thereof.

It is believed that the right of The Palmolive Company to bring suit in the Mexican courts to suppress infringement of its trade-mark and to obtain indemnity for damages caused by infringement is sufficiently established by the provisions of Article 2 of the original Convention of 1883 and the Trade-mark Law of Mexico of 1903 and that by virtue of the treaty and statutory provisions mentioned no requirement of registration under the Commercial Code of Mexico could legally be imposed as a condition for the enjoyment of the rights granted to The Palmolive Company pursuant to the Treaty of 1883 and the Trade-mark Law mentioned. It is not necessary, however, to rely on the text of Article 2 as it read in the original Convention of 1883 before the amendment of that Convention in 1911. By that amendment an additional clause was added as the conclusion of Article 2, reading as follows:

“Any obligation of domicile or of establishment in the country where the protection is claimed shall not be imposed on the members of the Union.”

In order that the clause quoted should not be regarded as a new conception of the obligation of the signatory Powers under Article 2 of the Convention, an additional Article was incorporated in the amendment of 1911 which reads as follows:

“… (b) it is understood that the provision in Article 2 which dispenses the members of the Union from the obligation of domicile and of establishment has an interpretable character and must, consequently, be applied to all the rights granted by the Convention of March 20, 1883, before the entrance into force of the present Act.”

The necessary effect of the additional Article quoted is that the original Article 2 of the Convention of 1883 shall be interpreted as though it included the final sentence of the Article as amended in 1911. Accordingly, since Mexico was a party to the Convention of 1883, when The Palmolive Company effected the registration of its trade-mark in Mexico, the Government of Mexico was precluded from setting up any “obligation of domicile or of establishment” in Mexico as one of the conditions for the protection of this trade-mark in Mexico. Moreover, Mexico adhered in 1925 to the amended Convention of 1911 and was, therefore, a party to that amended Convention when the proceedings arose which resulted in the Supreme Court decision under reference, so that Mexico was expressly obligated to avoid imposing any condition of domicile or establishment as a condition for the enjoyment of the rights which it was obligated to confer on American citizens.

[Page 576]

The Government of Mexico appears to have given full recognition to this obligation and has refrained from imposing any legislative requirement of domicile or of establishment in Mexico as a condition for the protection of industrial property. It is submitted, however, that the decision of the Supreme Court under discussion is equivalent to an act of judicial legislation imposing a condition repugnant alike to the laws of Mexico and the provisions of Article 2 of the Convention for the Protection of Industrial Property.

The Supreme Court, however, took the position in its decision that the registration required by the provisions of the Commercial Code does not contravene Article 2 of the Convention of 1911 on the ground that the registration requirements of Article 24 of the Commercial Code “is distinct from a domicile which depends on other circumstances.”

This office is unable to concur in this opinion of the Supreme Court but before discussing this opinion, it desires to point out that the provisions of the Convention under consideration prohibit not only “any obligation of domicile” but “of establishment” and it appears affirmatively from the language of the court’s decision that registration under the Commercial Code necessarily involves the “establishment” in Mexico of the registrant. In the second “Wherefore” paragraph of the court’s decision it is stated that “in the case of foreign companies the same cannot be established in accordance with Article 24 except by compliance with each one of the requirements fixed by said article.” Later on in the same paragraph the court said:

“The only way in which third parties may know if a foreign company is constituted and existing in accordance with the laws of its country, and to know its jurisdiction and economical capacity is through registration in accordance with Article 24 of the Commercial Code and for this purpose the law has provided that in order to become established in Mexico it must comply with the requirements of the said provision.

With respect to the court’s opinion that registration under the Code “is distinct from domicile” it is submitted that registration under the Commercial Code is legally impossible unless the registrant has a domicile in Mexico and in support of this view it refers to Article 18 of the Code, which reads:

“A Mercantile Register shall be kept in the principal town of the division or judicial district of the domicile of the merchant, by the officers charged with the public registry of property; failing these, through the records of mortgage; and in the absence of both by the judges of the first instance of the ordinary jurisdiction.”

It would appear to be clear from the Article just quoted that unless domicile in Mexico was a prerequisite condition to registration under [Page 577] the Code the provisions of Article 18 just quoted would be entirely meaningless.

The foregoing appears to establish definitely that a corporation could not register under the Commercial Code without having a domicile or establishment or both in Mexico and such a requirement is expressly prohibited by Article 2 of the Convention of 1911.

A careful examination of the Commercial Code discloses no provision which seems to require foreign companies to register under its provisions unless they are “established” or “domiciled” in Mexico and it would seem that such establishment or domicile is not necessary to register a trade-mark or to enjoy the rights incident to such registration under the trade-mark laws of Mexico or to do any other act which is not specifically or by reasonable implication an act of commerce within the definition of Article 75 of the Commercial Code which defines acts of commerce.

Preliminary to the discussion of this question it should be noted that Article 4 of the Trade-mark Law of 1903 provides that “any Mexican or Foreigner” may obtain the benefits of the law and provides that legal persons may comply with the formalities prescribed by the law through duly authorized attorneys. Reference to this provision is made as additional evidence of the fact that the law of 1903 grants to foreign companies who have complied with its provisions all the benefits of the law without the necessity of registration under the Commercial Code.

The language of Article 24 of the Commercial Code when read in conjunction with other Articles of the Code appears to establish that the requirement of registration applies to foreign companies only when they are engaged in business in Mexico and cannot by any reasonable interpretation be extended to companies which do not maintain an establishment or domicile in the country. It is submitted that there is a marked and clearty understood distinction between doing business in Mexico and doing business with persons in Mexico. The foreign companies which conduct their business outside of Mexico but whose products are shipped to Mexico either directly or through an exporting company not established in Mexico or having branches or agencies in that country certainly cannot be regarded as engaging in business in Mexico and unless they have an establishment in Mexico devoted to the conduct of their business the provisions of the Commercial Code do not require them to register. An examination of the language of the pertinent provisions of the Code establishes the correctness of this contention. Article 24 reads:

“Foreign companies which desire to establish themselves or create branches in the Republic shall present and enter in the register, etc.”

[Page 578]

Article 15 provides in part that:

“Companies legally constituted in foreign countries which establish themselves in the Republic, or have in it any agency or branch, may engage in commerce subject to the provisions of this Code, etc.”

Article 265 reads:

“Companies legally constituted in a foreign country that may be established in the Republic, or have within the same an agency or branch must, in order to enjoy the right granted to them under Article 15, subject themselves to the following prescriptions.”

Article 267 provides that:

Foreign companies at present existing within the Republic may become subject to the provisions of this chapter in so far as the validity of their future acts is concerned.”

Article 19 of the Code, to which the court refers in support of its position that the registration of The Palmolive Company was “obligatory” necessarily refers to companies engaged in business in Mexico and cannot be applied to companies like The Palmolive Company without doing violence to the language of the other articles of the Code above quoted.

Furthermore, the Commercial Code was designed to have application only to “commercial acts” and cannot have application to the registration of a trade-mark or the institution of proceedings necessary to enforce rights expressly granted by law. Such acts are not included either specifically or by necessary implication among the acts enumerated in Article 75 of the Commercial Code which defines commercial acts. Jacinto Pellares in his work “Derecho Mercantil Mejicano”, which the Supreme Court cited in its opinion under discussion, refers to the provisions of Article 21, paragraph XIII, of the Code of Commerce which, prior to the enactment of the Industrial Property Laws of June 7, 1890, and November 28, 1889, required the registration of trade-marks and patents in the Commercial Register. Referring to the effect of these laws on Article 21 of the Commercial Code, he said:

“As these laws are of a date subsequent to the Code and as the execution of a patent or trade-mark is not a mercantile act but simply an administrative act that does not involve a civil act … he who obtains from the Secretary of Fomento one of the said patents in accordance with the laws aforementioned shall not be obliged to register the same in the Mercantile Register in order to exercise his property rights against third parties.”

The quoted statement would have equal application to trade-marks registered under the provisions of the Trade-mark Law of 1903, which is not specifically mentioned by Señor Pellares. Furthermore, Article 91 of the Trade-mark Law of 1903 removed the penalty which was imposed by Article 26 of the Commercial Code for failure to [Page 579] register a trade-mark under the provisions of Article 21, paragraph XIII, of the Code and provided that marks which had already been registered in the Mercantile Register pursuant to the provisions of Article 21 of the Code might be presented for registration in the Patent Office and that registration in the Patent Office “will be considered as preferential as respects those effected in the Register of Commerce, even though these latter may be anterior, as respects date, to the former”.

This office is of the opinion that the decision of the lower Mexican courts upholding the right of The Palmolive Company to take adequate legal steps to protect the rights expressly granted it under the laws of Mexico, correctly interprets those laws and is in harmony with the provisions of Article 2 of the Convention of 1911. In this connection it should be observed that the right of a national of a foreign country, which is a party to the Industrial Property Convention of 1883, to bring suit in the courts of the United States for the protection of the rights granted by the Convention was expressly recognized by the Supreme Court of the United States in the case of the French Republic v. Saratoga Vichy Spring Company (191 U. S. 427).

It is submitted that the decision of the Supreme Court of Mexico under reference not only invalidates rights to which citizens of the United States are entitled by law and treaty and in harmony with the accepted principles of international law, but that the decision, if adhered to, cannot fail injuriously to affect the legitimate interests of citizens and residents of Mexico who have business dealings with companies not engaged in business in Mexico and who therefore are not registered under the provisions of the Commercial Code.