RECENT DEVELOPMENTS IN PHILIPPINE TRADEMARK PRACTICE

By: Pablo M. Gancayco LAWS, RULES AND REGULATIONS There was no significant legislation or law directly affecting trademark or its practice which was promulgated during the recent period, whether coming from Congress, the Office of the President, the Supreme Court, or other related agencies. In connection however with the Intellectual Property Code (R.A. 8293) requirement that an applicant or registrant shall file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the filing date of the application, the Bureau of Trademarks issued Memorandum Circular No. 3 on 30 April 2009, entitled “Guidelines on the Submission of the Declaration of Actual Use”, and its pertinent portion is as follows:

“2.0 When to File the DAU 2.1. The first DAU must be filed, without need of notice, within

three years from filing of the trademark application. 2.2. A single six-month request for extension of time to file the

DAU may be made within the three-year period. The actual use of the mark may commence within the six-month extension period.

2.3. Declarations submitted after the three-year period shall not be accepted, unless a request for a six-month extension was timely filed. A declaration of non-use will not be accepted.

2.4. The second DAU must be filed within one year from the fifth anniversary of the date of the registration of the mark. A declaration of non-use may be accepted as provided for in Rule 802.

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4.0 What may be accepted as evidence of use

4.1. Labels of the mark as actually used. 4.2. Download pages from the website of the applicant or

registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines. If the goods or services are available only by online purchase, the web address must be indicated on the form in lieu of name/address of the establishment or outlet.

4.3. Photographs (including digital photographs printed on ordinary paper) of labels or goods bearing the marks as these are actually used.

4.4. Photocopies of brochures or advertising materials evidencing use of the mark in the Philippines, subject to the submission

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of the original materials if required by the Bureau of Trademarks, or other similar evidence of use, provided the goods are placed on the market and the services are available in the Philippines.

4.5. One copy of the evidence of use is sufficient and will be accepted.

4.6. Computer printouts of the drawing or reproduction of the marks will not be accepted as evidence of actual use.

5.0. The DAU may be submitted by facsimile or electronic mail, subject

to the submission of the original document within 30 days, without need of notice from the notice, provided, however, that the fee is paid within the period to file the DAU. The DAU will be considered filed on the day the payment is received by the IP Philippines.

JURISPRUDENCE: Most of the recent Supreme Court cases on trademark involve procedure and the interpretation and determination of the presence of unfair competition. The significant ones are as follows:

A. MATTEL, INC., petitioner, vs. EMMA FRANCISCO, Director-General of the Intellectual Property Office, HON. ESTRELLITA B. ABELARDO, Director of the Bureau of Legal Affairs (IPO), and JIMMY UY, respondents. [July 30, 2008.]

Facts: 1. Respondent, Jimmy A. Uy (Uy) filed a trademark application for the registration of the trademark "BARBIE" for use on confectionary products, such as milk, chocolate, candies. 2. Petitioner, Mattel, Inc. (Mattel), a USA corporation, filed an opposition against Uy's "Barbie" trademark as the latter was allegedly confusingly similar to its trademark on dolls, doll clothes and doll accessories, toys and other similar commercial products.

3. The Director of the Bureau of Legal Affairs (DLA), rendered a decision dismissing Mattel's opposition and giving due course to Uy's application for the registration of the trademark "Barbie", on the ground that there was no confusing similarity between the two competing marks because the goods were non-competing or unrelated.

4. The Director General (DG) denied the appeal on the ground that there was no proof that Mattel had ventured into the production of chocolates and confectionary products under the trademark "Barbie" to enable it to prevent Uy from using an identical "Barbie" trademark on said goods; that the records were bereft of the fact that the Director of the Bureau of Trademarks had already declared the subject trademark application abandoned due to the non-filing of the Declaration of Actual Use (DAU) by Uy.

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5. Mattel filed a Motion for a New Trial which was denied, so Mattel filed a Petition with the Court of Appeals (CA). The CA affirmed the decision of the DG. Ruling of the Supreme Court: The case is now moot and academic. 1. Uy's declaration in his Comment and Memorandum before the Supreme Court that he has not filed the DAU as mandated by the IP Code is a judicial admission that he has effectively abandoned or withdrawn any right or interest in his trademark. 2. The IP Code provides that:

The applicant or the registrant shall file a declaration of actual use of the mark with evidence to that effect, as prescribed by the Regulations within three (3) years from the filing date of the application. Otherwise, the application shall be refused or the mark shall be removed from the Register by the Director.

3. In the present case, Mattel is seeking a ruling on whether Uy's "Barbie" trademark is confusingly similar to its (Mattel's) "Barbie" trademark. Given Uy's admission that he has effectively abandoned or withdrawn any rights or interest in his trademark by his non-filing of the required DAU, there is no more actual controversy, or no useful purpose will be served in passing upon the merits of the case. It would be unnecessary to rule on the trademark conflict between the parties. A ruling on the matter would practically partake of a mere advisory opinion, which falls beyond the realm of judicial review. The exercise of the power of judicial review is limited to actual cases and controversies. Courts have no authority to pass upon issues through advisory opinions or to resolve hypothetical or feigned problems. B. COCA-COLA BOTTLERS, PHILS., INC. (CCBPI), Naga Plant, petitioner, vs.

QUINTIN J. GOMEZ, a.k.a. "KIT" GOMEZ and DANILO E. GALICIA, a.k.a. "DANNY GALICIA", respondents. [November 14, 2008.]

Facts: 1. Coca-Cola applied for a search warrant against Pepsi for hoarding Coke empty bottles in Pepsi's yard, an act allegedly penalized as unfair competition. Coca-Cola claimed that the bottles must be confiscated to preclude their illegal use, destruction or concealment by the respondents. 2. Armed with a search warrant issued by the Municipal Trial Court (MTC), the police seized and brought to the MTC's custody the empty Coke bottles and Pepsi shells, and later filed with the Office of the Prosecutor a complaint against two Pepsi officers for unfair competition. 3. Respondents filed two (2) motions: first, for the return of the Pepsi shells, and second, for the quashal of the search warrant. The MTC denied both motions.

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4. Respondents then went up to the Regional Trial Court (RTC) on certiorari. The RTC eventually voided the warrant for lack of probable cause and for non-commission of the crime of unfair competition. Issue: Whether or not the act of hoarding a competitor’s product containers is punishable as unfair competition. Ruling of the Supreme Court: No. 1. The law on unfair competition does not cover every unfair act committed in the course of business; it covers only acts characterized by "deception or any other means contrary to good faith" in the passing off of goods and services as those of another who has established goodwill in relation with these goods or services, or any other act calculated to produce the same result. 2. From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. It formulated the "true test" of unfair competition: whether the acts of defendant are such as are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions which prevail in the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive must be shown before the right to recover can exist. Deception, passing off and fraud upon the public are still the key elements that must be present for unfair competition to exist. 3. The act alleged to violate the petitioner's rights is hoarding, which the Supreme Court gather to be the collection of petitioner's empty bottles so that they can be withdrawn from circulation and thus impede the circulation of petitioner's bottled products. This, according to the petitioner, is an act contrary to good faith — a conclusion that, if true, is indeed an unfair act on the part of the respondents. The critical question, however, is not the intrinsic unfairness of the act of hoarding; what is critical is to determine if the hoarding, as charged, "is of a nature calculated to discredit the goods, business or services" of the petitioner. 4. The Supreme Court held that it is not. Hoarding as defined by the petitioner is not even an act within the contemplation of the IP Code. It does not relate to any patent, trademark, trade name or service mark that the respondents have invaded, intruded into or used without proper authority from the petitioner. Nor are the respondents alleged to be fraudulently "passing off" their products or services as those of the petitioner. The respondents are not also alleged to be undertaking any representation or misrepresentation that would confuse or tend to confuse the goods of the petitioner with those of the respondents, or vice versa. What in fact the petitioner alleges is an act foreign to the Code, to the concepts it embodies and to the acts it regulates; as alleged, “hoarding” inflicts unfairness by seeking to limit the opposition's sales by depriving it of the bottles it can use for these sales. 5. In this light, hoarding for purposes of destruction is closer to what another law — R.A. No. 623 — covers.

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Unfortunately, the Act is not the law in issue in the present case and one that the parties did not consider at all in the search warrant application. The petitioner in fact could not have cited it in its search warrant application since the "one specific offense" that the law allows and which the petitioner used was unfair competition. If it serves any purpose at all in our discussions, it is to show that the underlying factual situation of the present case is in fact covered by another law, not by the IP Code that the petitioner cites. Viewed in this light, the lack of probable cause to support the disputed search warrant at once becomes apparent. 6. The petitioner's search warrant should properly be quashed for the petitioner's failure to show that the acts imputed to the respondents do not violate the cited offense. There could not have been any probable cause to support the issuance of a search warrant because no crime in the first place was effectively charged. C. LEVI STRAUSS (PHILS.), INC., petitioner, vs. TONY LIM, respondent.

[December 4, 2008.] Facts: 1. Petitioner is a wholly-owned subsidiary of Levi Strauss & Co. (LS & Co.), a USA company. Presently, petitioner is the only company that has authority to manufacture, distribute, and sell products bearing the LEVI'S trademarks or to use such trademarks, in the Philippines. 2. Respondent is engaged in the manufacture, sale, and distribution of products similar to those of petitioner and under the brand name "LIVE'S." 3. Armed with search warrants, the police seized the goods of respondent, then filed a complaint for unfair competition against respondent before the Department of Justice (DOJ). The police claimed that a "confusing similarity" could be noted between petitioner's LEVI'S jeans and respondent's LIVE'S denim jeans and pants. 4. In his counter-affidavit, respondent alleged, among others, that (1) his products bearing the LIVE'S brand name are not fake LEVI'S garments; (2) "LIVE'S" is a registered trademark, while the patch pocket design for "LIVE'S" pants has copyright registration, thus conferring legal protection on his own intellectual property rights, which stand on equal footing as "LEVI'S"; (3) confusing similarity, the central issue in the trademark cancellation proceedings lodged by petitioner, is a prejudicial question that complainant, the police, and the court that issued the search warrants cannot determine without denial of due process or encroachment on the jurisdiction of the agencies concerned; and (4) his goods are not clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary care. 5. The DOJ eventually dismissed the complaint against respondent. 6. On appeal, the Court of Appeals (CA) affirmed the dismissal of the unfair competition complaint. The CA ruled that the existence of some similarities between LIVE'S jeans and LEVI'S garments would not ipso facto equate to fraudulent intent on the part of respondent. The CA noted that respondent used affirmative and precautionary distinguishing features in

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his products for differentiation. The appellate court considered the spelling and pronunciation of the marks; the difference in the designs of the back pockets; the dissimilarity between the carton tickets; and the pricing and sale of petitioner's products in upscale exclusive specialty shops. The CA also disregarded the theory of post-sale confusion propounded by petitioner, relying instead on the view that the probability of deception must be determined at the point of sale. Issue: Whether or not probable cause exists to charge respondent with the crime of unfair competition. Ruling of the Supreme Court: No probable cause. 1. In finding that respondent's goods were not clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary care, the investigating prosecutor of the DOJ found that the 2 marks are spelled and pronounced differently; the backpocket designs are different; the packing and selling of jeans with carton tickets cannot be exclusively appropriated by petitioner; and, respondent has a copyright registration over his backpocket design. 2. The Supreme Court was disinclined to find that grave of abuse of discretion was committed when records show that the finding of no probable cause is supported by the evidence, law, and jurisprudence. 3. Generally, unfair competition consists in employing deception or any other means contrary to good faith by which any person shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established goodwill, or committing any acts calculated to produce such result. 4. All the elements of unfair competition must be proven. In finding that probable cause for unfair competition does not exist, the DOJ arrived at the conclusion that there is insufficient evidence to prove all the elements of the crime that would allow them to secure a conviction. 5. The DOJ discounted the element of actual intent to deceive by taking into consideration the differences in spelling, meaning, and phonetics between "LIVE'S" and "LEVI'S", as well as the fact that respondent had registered his own mark. While it is true that there may be unfair competition even if the competing mark is registered in the Intellectual Property Office, it is equally true that the same may show prima facie good faith. Indeed, registration does not negate unfair competition where the goods are packed or offered for sale and passed off as those of complainant. However, the mark's registration, coupled with the stark differences between the competing marks, negate the existence of actual intent to deceive, in this particular case. 6. The DOJ failed to find the possibility of confusion and of intent to deceive the public, relying on Emerald Garment Manufacturing Corporation v. Court of Appeals. In Emerald, the Court explained that since maong pants or jeans are not inexpensive, the casual buyer is more cautious and discerning and would prefer to mull over his purchase, making confusion and deception less likely.

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7. Emerald Garment is instructive in explaining the attitude of the buyer when it comes to products that are not inexpensive, such as jeans. In fact, the Emerald Garment rationale is supported by Del Monte Corporation v. Court of Appeals, where the Court explained that the attitude of the purchaser is determined by the cost of the goods. There is no reason not to apply the rationale in those cases here even if only by analogy. 8. The rule laid down in Emerald Garment and Del Monte is consistent with Asia Brewery, Inc. v. Court of Appeals, where the Court held that in resolving cases of infringement and unfair competition, the courts should take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption, and also the conditions under which it is usually purchased. 9. The Supreme Court found no reason to go beyond the point of sale to determine if there is probable cause for unfair competition. The CA observations along this line are worth restating:

We also find no basis to give weight to petitioner's contention that the "post sale confusion" that might be triggered by the perceived similarities between the two products must be considered in the action for unfair competition against respondent. No inflexible rule can be laid down as to what will constitute unfair competition. Each case is, in the measure, a law unto itself. Unfair competition is always a question of fact. The question to be determined in every case is whether or not, as a matter of fact, the name or mark used by the defendant has previously come to indicate and designate plaintiff's goods, or, to state it in another way, whether defendant, as a matter of fact, is, by his conduct, passing off defendant's goods as plaintiff's goods or his business as plaintiff's business. The universal test question is whether the public is likely to be deceived. In the case before us, we are of the view that the probability of deception must be tested at the point of sale since it is at this point that the ordinary purchaser mulls upon the product and is likely to buy the same under the belief that he is buying another. The test of fraudulent simulation is to be found in the likelihood of deception, or the possibility of deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated.

D. IN-N-OUT BURGER, INC., petitioner, vs. SEHWANI, INCORPORATED

AND/OR BENITA'S FRITES, INC., respondents. [December 24, 2008.] Facts: 1. Petitioner, a USA company which has not engaged in business in the Philippines, filed trademark and service mark applications for "IN-N-OUT" and "IN-N-OUT Burger & Arrow Design". Petitioner later found that respondent Sehwani, Incorporated had already obtained the trademark registration for the mark "IN N OUT (the inside of the letter "O"

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formed like a star)." By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated. 2. Petitioner eventually filed an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) "IN-N-OUT"; (2) "IN-N-OUT Burger & Arrow Design"; and (3) "IN-N-OUT Burger Logo". These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use. Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioner's products. 3. Petitioner has a registration for the mark "Double Double". It alleged that respondents also used this mark, as well as the menu color scheme. Petitioner averred that respondent Benita's receipts also bore the phrase, "representing IN-N-OUT Burger". It should be noted that although respondent Sehwahi, Incorporated registered a mark which appeared as "IN N OUT (the inside of the letter "O" formed like a star)", respondents used the mark "IN-N-OUT". 4. IPO Director of Legal Affairs (DLA) ruled in favor of petitioner. According to the Decision, although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioner's marks are internationally well-known, given the world-wide registration of the mark "IN-N-OUT", and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that "In-N-Out Burger and Arrow Design" was an internationally well-known mark. Given these circumstances, the DLA ruled that petitioner had the right to use its tradename and mark "IN-N-OUT" in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark "IN N OUT" in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioner's goodwill by copying the mark "IN-N-OUT Burger" exactly. The inside of the letter "O" in the mark used by respondents formed a star. 5. On appeal, the IPO Director General (DG) modified the Decision of the DLA. The DG declared respondents guilty of unfair competition. Despite respondents' claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark "IN-N-OUT". Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter "O", a minor difference which still deceived purchasers. Respondents were not even actually using the star in their mark. The DG also considered respondents' use of petitioner's registered mark "Double-Double" as a sign of bad faith and an intent to mislead the public. 6. On certiorari, the Court of Appeals (CA) reversed the DG.

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Issue: Whether or not there is unfair competition in this case. Ruling of the Supreme Court: Yes, there is unfair competition. 1. First, the Supreme Court ruled that the IPO has jurisdiction over administrative actions for unfair competition, concurrent with a regular court. 2. Thus, the other issue the Supreme Court resolved is whether the DG correctly found respondents guilty of unfair competition. 2.1. The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown. 2.2. In his Decision, the DG explained the basis for his finding of the existence of unfair competition in this case, viz.:

The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioner's] registered mark Double-Double for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioner's] IN-N-OUT Burger's name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter's marks in the business. [Respondents'] explanation that they are not using their own registered trademark due to the difficulty in printing the "star" does not justify the unauthorized use of the [petitioner's] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. . . . .

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[Respondents'] use of IN-N-OUT BURGER in business signages reveals fraudulent intent to deceive purchasers. Exhibit "GG", which shows the business establishment of [respondents] illustrates the imitation of [petitioner's] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held:

"We also note that In-N-Out Burger is likewise, [petitioner's] corporate name. It has used the "IN-N-OUT" Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenames "In-N-Out" Burger in the Philippines and the respondents' are unlawfully using and appropriating the same."

xxx xxx xxx In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants'] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate "representing IN-N-OUT". These acts cannot be considered acts in good faith.

2.3. Administrative proceedings are governed by the "substantial evidence rule". A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion. As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition.