Apple's iPhone was dealt a major setback in Mexico when the country's Supreme Court ruled to uphold a previous decision that granted trademark rights for the name "iFone" to a local tech outfit.

Apple filed a complaint with the Mexican Industrial Property Institute in 2009 asking that it bar the Mexican company from using the name  - arguing "iFone" was too phonetically similar to "iPhone."

The courts did not disagree on that point, but found that the local firm first applied for its trademark in 2003  - beating Apple to the punch by about four years. The moniker was found to legally belong to the Mexican company. 

Apple appealed on the grounds that the company wasn't actively using the name, but last week, the Mexican Supreme Court knocked down that argument and affirmed the original ruling.

The court's decision is the latest blow to Apple's Latin American business. Just last month, Cupertino lost the rights to the iPhone brand name in Brazil to a company there named Gradiente. An agreement to resolve the trademark dispute in that case, however, is reportedly on the horizon.

In Mexico, the situation has an interesting twist in that "iFone" is not a physical product. It's a telecom service.

"Our main interest is to defend our brand," said Eduardo Gallastegui, iFone's lawyer. "Apple started the controversy, their first step was to file a lawsuit, they didn't previously approach the company."

The ruling clears the way for iFone to file lawsuits against Apple and three Mexican cell phone carriers for infringing on its trademark. Exactly how much Apple might be on the hook for isn't clear, but Gallastegui told the Wall Street Journal that the law provides for iFone to sue for at least 40 percent of all iPhone sales in Mexico.