INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

QUALITEX CO.   v.   JACOBSON PRODUCTS CO., INC.

Petitioner Qualitex Company has for years colored the dry cleaning press pads it manufactures with a special

shade of green gold. After respondent Jacobson Products (a Qualitex rival) began to use a similar shade on its

own press pads, Qualitex registered its color as a trademark and added a trademark infringement count to the

suit it had previously filed challenging Jacobson's use of the green gold color. Qualitex won in the District

Court, but the Ninth Circuit set aside the judgment on the infringement claim because, in its view, the Lanham

Trademark Act of 1946 does not permit registration of color alone as a trademark.

Held: The Lanham Act permits the registration of a trademark that consists, purely and simply, of a color. Pp.

2-15.

(a) That color alone can meet the basic legal requirements for use as a trademark is demonstrated both by the

language of the Act, which describes the universe of things that can qualify as a trademark in the broadest of

terms,15 U.S.C. § 1127 and by the underlying principles of trademark law, including the requirements that the

mark "identify and distinguish [the seller's] goods . . . from those manufactured or sold by others and to

indicate [their] source," ibid.,and that it not be "functional," see, e.g., Inwood Laboratories, Inc. v. Ives

Laboratories, Inc., 456 U.S. 844, 850, n. 10. The District Court's findings (accepted by the Ninth Circuit and

here undisputed) show Qualitex's green gold color has met these requirements. It acts as a symbol. Because

customers identify the color as Qualitex's, it has developed secondary meaning, see, e.g., id., at 851, n. 11, and

thereby identifies the press pads' source. And, the color serves no other function. (Although it is important to

use some color on press pads to avoid noticeable stains, the court found no competitive need in the industry

for the green gold color, since other colors are equally usable.) Accordingly, unless there is some special

reason that convincingly militates against the use of color alone as a trademark, trademark law protects

Qualitex's use of its green gold color. Pp. 2-7.

(b) Jacobson's various special reasons why the law should forbid the use of color alone as a trademark--that a

contrary holding (1) will produce uncertainty and unresolvable court disputes about what shades of a color a

competitor may lawfully use; (2) is unworkable in light of the limited supply of colors that will soon be depleted

by competitors; (3) is contradicted by many older cases, including decisions of this Court interpreting pre-

Lanham Act trademark law; and (4) is unnecessary because firms already may use color as part of a trademark

and may rely on "trade dress" protection--are unpersuasive. Pp. 7-15.

13 F. 3d 1297, reversed.

Breyer, J., delivered the opinion for a unanimous Court.

Justice Breyer delivered the opinion of the Court.

The case before us grows out of petitioner Qualitex Company's use (since the 1950's) of a special shade of

green gold color on the pads that it makes and sells to dry cleaning firms for use on dry cleaning presses. In

1989 respondent Jacobson Products (a Qualitex rival) began to sell its own press pads to dry cleaning firms;

and it colored those pads a similar green gold. In 1991 Qualitex registered the special green gold color on

press pads with the Patent and Trademark Office as a trademark. Registration No. 1,633,711 (Feb. 5, 1991).

Qualitex subsequently added a trademark infringement count, 15 U.S.C. § 1114(1), to an unfair competition

claim, §1125(a), in a lawsuit it had already filed challenging Jacobson's use of the green gold color.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Qualitex won the lawsuit in the District Court. 21 U. S. P. Q. 2d 1457 (CD Cal. 1991). But, the Court of Appeals

for the Ninth Circuit set aside the judgment in Qualitex's favor on the trademark infringement claim because,

in that Circuit's view, the Lanham Act does not permit Qualitex, or anyone else, to register "color alone" as a

trademark. 13 F. 3d 1297, 1300, 1302 (1994).

The courts of appeals have differed as to whether or not the law recognizes the use of color alone as a

trademark. Compare NutraSweet Co. v. Stadt Corp., 917 F. 2d 1024, 1028 (CA7 1990) (absolute prohibition

against protection of color alone), with In re Owens Corning Fiberglas Corp., 774 F. 2d 1116, 1128 (CA Fed.

1985) (allowing registration of color pink for fiberglass insulation), and Master Distributors, Inc. v. Pako Corp.,

986 F. 2d 219, 224 (CA8 1993) (declining to establish per se prohibition against protecting color alone as a

trademark). Therefore, this Court granted certiorari. 512 U. S. __ (1994). We now hold that there is no rule

absolutely barring the use of color alone, and we reverse the judgment of the Ninth Circuit.

The Lanham Act gives a seller or producer the exclusive right to "register" a trademark, 15 U.S.C. §

1052 (1988 ed. and Supp. V), and to prevent his or her competitors from using that trademark, §1114(1). Both

the language of the Act and the basic underlying principles of trademark law would seem to include color

within the universe of things that can qualify as a trademark. The language of the Lanham Act describes that

universe in the broadest of terms. It says that trademarks "includ[e] any word, name, symbol, or device, or any

combination thereof." §1127. Since human beings might use as a "symbol" or "device" almost anything at all

that is capable of carrying meaning, this language, read literally, is not restrictive. The courts and the Patent

and Trademark Office have authorized for use as a mark a particular shape (of a Coca Cola bottle), a particular

sound (of NBC's three chimes), and even a particular scent (of plumeria blossoms on sewing thread). See, e.g.,

Registration No. 696,147 (Apr. 12, 1960); Registration Nos. 523,616 (Apr. 4, 1950) and 916,522 (July 13,

1971); In re Clarke, 17 U. S. P. Q. 2d 1238, 1240 (TTAB 1990). If a shape, a sound, and a fragrance can act as

symbols why, one might ask, can a color not do the same?

A color is also capable of satisfying the more important part of the statutory definition of a trademark, which

requires that a person "us[e]" or "inten[d] to use" the mark

"to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by

others and to indicate the source of the goods, even if that source is unknown." 15 U.S.C. § 1127.

True, a product's color is unlike "fanciful," "arbitrary," or "suggestive" words or designs, which

almost automatically tell a customer that they refer to a brand.Abercrombie & Fitch Co. v. Hunting World, Inc.,

537 F. 2d 4, 9-10 (CA2 1976) (Friendly, J.); see Two Pesos, Inc. v. Taco Cabana, Inc., 505 U. S. __, __ (1992)

(slip op., at 6-7). The imaginary word "Suntost," or the words "Suntost Marmalade," on a jar of orange jam

immediately would signal a brand or a product "source"; the jam's orange color does not do so. But, over time,

customers may come to treat a particular color on a product or its packaging (say, a color that in context

seems unusual, such as pink on a firm's insulating material or red on the head of a large industrial bolt) as

signifying a brand. And, if so, that color would have come to identify and distinguish the goods--i.e. "to

"indicate" their "source"--much in the way that descriptive words on a product (say, "Trim" on nail clippers or

"Car Freshner" on deodorizer) can come to indicate a product's origin. See, e.g., J. Wiss & Sons Co. v. W. E.

Bassett Co., 59 C. C. P. A. 1269, 1271 (Pat.), 462 F. 2d 567, 569 (1972); Car Freshner Corp. v.Turtle Wax, Inc.,

268 F. Supp. 162, 164 (SDNY 1967). In this circumstance, trademark law says that the word (e.g., "Trim"),

although not inherently distinctive, has developed "secondary meaning." See Inwood Laboratories, Inc.v. Ives

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Laboratories, Inc., 456 U.S. 844, 851, n. 11 (1982) ("secondary meaning" is acquired when "in the minds of the

public, the primary significance of a product feature . . . is to identify the source of the product rather than the

product itself "). Again, one might ask, if trademark law permits a descriptive word with secondary meaning to

act as a mark, why would it not permit a color, under similar circumstances, to do the same?

We cannot find in the basic objectives of trademark law any obvious theoretical objection to the use of color

alone as a trademark, where that color has attained "secondary meaning" and therefore identifies and

distinguishes a particular brand (and thus indicates its "source"). In principle, trademark law, by preventing

others from copying a source identifying mark, "reduce[s] the customer's costs of shopping and making

purchasing decisions," 1 J. McCarthy, McCarthy on Trademarks and Unfair Competition §2.01[2], p. 2-3 (3d ed.

1994) (hereinafter McCarthy), for it quickly and easily assures a potential customer that this item--the item

with this mark--is made by the same producer as other similarly marked items that he or she liked (or disliked)

in the past. At the same time, the law helps assure a producer that it (and not an imitating competitor) will

reap the financial, reputation related rewards associated with a desirable product. The law thereby

"encourage[s] the production of quality products,"ibid., and simultaneously discourages those who hope to sell

inferior products bycapitalizing on a consumer's inability quickly to evaluate the quality of an item offered for

sale. See, e.g., 3 L. Altman, Callmann on Unfair Competition, Trademarks and Monopolies §17.03 (4th ed.

1983); Landes & Posner, The Economics of Trademark Law, 78 T. M. Rep. 267, 271-272 (1988); Park 'N Fly,

Inc.v. Dollar Park and Fly, Inc., 469 U.S. 189, 198 (1985); S. Rep. No. 100-515, p. 4 (1988). It is the source

distinguishing ability of a mark--not its ontological status as color, shape, fragrance, word, or sign--that

permits it to serve these basic purposes. See Landes & Posner, Trademark Law: An Economic Perspective, 30

J. Law & Econ. 265, 290 (1987). And, for that reason, it is difficult to find, in basic trademark objectives, a

reason to disqualify absolutely the use of a color as a mark.

Neither can we find a principled objection to the use of color as a mark in the important "functionality"

doctrine of trademark law. The functionality doctrine prevents trademark law, which seeks to promote

competition by protecting a firm's reputation, from instead inhibiting legitimate competition by allowing a

producer to control a useful product feature. It is the province of patent law, not trademark law, to encourage

invention by granting inventors a monopoly over new product designs or functions for a limited time, 35 U.S.C.

§§ 154 173, after which competitors are free to use the innovation. If a product's functional features could be

used as trademarks, however, a monopoly over such features could be obtained without regard to whether

they qualify as patents and could be extended forever (because trademarks may be renewed in perpetuity).

SeeKellogg Co. v. National Biscuit Co., 305 U.S. 111, 119-120 (1938) (Brandeis, J.);Inwood Laboratories, Inc.,

supra, at 863 (White, J., concurring in result) ("A functional characteristic is `an important ingredient in the

commercial success of the product,' and, after expiration of a patent, it is no more the property of the

originator than the product itself") (citation omitted). Functionality doctrine therefore would require, to take

an imaginary example, that even if customers have come to identify the special illumination enhancing shape

of a new patented light bulb with a particular manufacturer, the manufacturer may not use that shape as a

trademark, for doing so, after the patent had expired, would impede competition--not by protecting the

reputation of the original bulb maker, but by frustrating competitors' legitimate efforts to produce an

equivalent illumination enhancing bulb. See, e.g., Kellogg Co., supra, at 119-120 (trademark law cannot be

used to extend monopoly over "pillow" shape of shredded wheat biscuit after the patent for that shape had

expired). This Court consequently has explained that, "[i]n general terms, a product feature is functional," and

cannot serve as a trademark, "if it is essential to the use or purpose of the article or if it affects the cost or

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

quality of the article," that is, if exclusive use of the feature would put competitors at a significant non

reputation related disadvantage. Inwood Laboratories, Inc., 456 U. S., at 850, n. 10. Although sometimes color

plays an important role (unrelated to source identification) in making a product more desirable, sometimes it

does not. And, this latter fact--the fact that sometimes color is not essential to a product's use or purpose and

does not affect cost or quality--indicates that the doctrine of "functionality" does not create an absolute bar to

the use of color alone as a mark. See Owens Corning, 774 F. 2d, at 1123 (pink color of insulation in wall

"performs no non trademark function").

It would seem, then, that color alone, at least sometimes, can meet the basic legal requirements for use as a

trademark. It can act as a symbol that distinguishes a firm's goods and identifies their source, without serving

any other significant function. See U. S. Dept. of Commerce, Patent and Trademark Office, Trademark Manual

of Examining Procedure §1202.04(e), p. 1202-13 (2d ed. May, 1993) (hereinafter PTO Manual) (approving

trademark registration of color alone where it "has become distinctive of the applicant's goods in commerce,"

provided that "there is [no] competitive need for colors to remain available in the industry" and the color is not

"functional"); see also 1 McCarthy §§3.01[1], 7.26 ("requirements for qualification of a word or symbol as a

trademark" are that it be (1) a "symbol," (2) "use[d] . . . as a mark," (3) "to identify and distinguish the seller's

goods from goods made or sold by others," but that it not be "functional"). Indeed, the District Court, in this

case, entered findings (accepted by the Ninth Circuit) that show Qualitex's green gold press pad color has met

these requirements. The green gold color acts as a symbol. Having developed secondary meaning (for

customers identified the green gold color as Qualitex's), it identifies the press pads' source. And, the green

gold color serves no other function. (Although it is important to use some color on press pads to avoid

noticeable stains, the court found "no competitive need in the press pad industry for the green gold color, since

other colors are equally usable." 21 U. S. P. Q. 2d, at 1460.) Accordingly, unless there is some special reason

that convincingly militates against the use of color alone as a trademark, trademark law would protect

Qualitex's use of the green gold color on its press pads.

Respondent Jacobson Products says that there are four special reasons why the law should forbid the use of

color alone as a trademark. We shall explain, in turn, why we, ultimately, find them unpersuasive.

First, Jacobson says that, if the law permits the use of color as a trademark, it will produce uncertainty and

unresolvable court disputes about what shades of a color a competitor may lawfully use. Because lighting

(morning sun, twilight mist) will affect perceptions of protected color, competitors and courts will suffer from

"shade confusion" as they try to decide whether use of a similar color on a similar product does, or does not,

confuse customers and thereby infringe a trademark. Jacobson adds that the "shade confusion" problem is

"more difficult" and "far different from" the "determination of the similarity of words or symbols." Brief for

Respondent 22.

We do not believe, however, that color, in this respect, is special. Courts traditionally decide quite difficult

questions about whether two words or phrases or symbols are sufficiently similar, in context, to confuse

buyers. They have had to compare, for example, such words as "Bonamine" and "Dramamine" (motion sickness

remedies); "Huggies" and "Dougies" (diapers); "Cheracol" and "Syrocol" (cough syrup); "Cyclone" and

"Tornado" (wire fences); and "Mattres" and "1-800-Mattres" (mattress franchisor telephone numbers).

See, e.g., G. D. Searle & Co. v. Chas. Pfizer & Co., 265 F. 2d 385, 389 (CA7 1959); Kimberly Clark Corp. v. H.

Douglas Enterprises, Ltd., 774 F. 2d 1144, 1146-1147 (CA Fed. 1985);Upjohn Co. v. Schwartz, 246 F. 2d 254,

262 (CA2 1957); Hancock v. American Steel & Wire Co., 40 C. C. P. A. of New Jersey, 931, 935 (Pat.), 203 F. 2d

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

737, 740-741 (1953); Dial A Mattress Franchise Corp. v. Page, 880 F. 2d 675, 678 (CA2 1989). Legal standards

exist to guide courts in making such comparisons. See,e.g., 2 McCarthy §15.08; 1 McCarthy §§11.24-11.25

("[S]trong" marks, with greater secondary meaning, receive broader protection than "weak" marks). We do not

see why courts could not apply those standards to a color, replicating, if necessary, lighting conditions under

which a colored product is normally sold. See Ebert, Trademark Protection in Color: Do It By the Numbers!, 84

T. M. Rep. 379, 405 (1994). Indeed, courts already have done so in cases where a trademark consists of a color

plus a design, i.e., a colored symbol such as a gold stripe (around a sewer pipe), a yellow strand of wire rope,

or a "brilliant yellow" band (on ampules). See, e.g., Youngstown Sheet & Tube Co. v. Tallman Conduit Co.,149

U. S. P. Q. 656, 657 (TTAB 1966); Amstead Industries, Inc. v. West Coast Wire Rope & Rigging Inc., 2 U. S. P.

Q. 2d 1755, 1760 (TTAB 1987); In re Hodes Lange Corp., 167 U. S. P. Q. 255, 256 (TTAB 1970).

Second, Jacobson argues, as have others, that colors are in limited supply. See,e.g., NutraSweet Co., 917 F. 2d,

at 1028; Campbell Soup Co. v. Armour & Co.,175 F. 2d 795, 798 (CA3 1949). Jacobson claims that, if one of

many competitors can appropriate a particular color for use as a trademark, and each competitor then tries to

do the same, the supply of colors will soon be depleted. Put in its strongest form, this argument would concede

that "[h]undreds of color pigments are manufactured and thousands of colors can be obtained by mixing." L.

Cheskin, Colors: What They Can Do For You 47 (1947). But, it would add that, in the context of a particular

product, only some colors are usable. By the time one discards colors that, say, for reasons of customer appeal,

are not usable, and adds the shades that competitors cannot use lest they risk infringing a similar, registered

shade, then one is left with only a handful of possible colors. And, under these circumstances, to permit one, or

a few, producers to use colors as trademarks will "deplete" the supply of usable colors to the point where a

competitor's inability to find a suitable color will put that competitor at a significant disadvantage.

This argument is unpersuasive, however, largely because it relies on an occasional problem to justify a blanket

prohibition. When a color serves as a mark, normally alternative colors will likely be available for similar use

by others. See, e.g., Owens Corning, 774 F. 2d, at 1121 (pink insulation). Moreover, if that is not so--if a "color

depletion" or "color scarcity" problem does arise--the trademark doctrine of "functionality" normally would

seem available to prevent the anticompetitive consequences that Jacobson's argument posits, thereby

minimizing that argument's practical force.

The functionality doctrine, as we have said, forbids the use of a product's feature as a trademark where doing

so will put a competitor at a significant disadvantage because the feature is "essential to the use or purpose of

the article" or "affects [its] cost or quality." Inwood Laboratories, Inc., 456 U. S., at 850, n. 10. The

functionality doctrine thus protects competitors against a disadvantage (unrelated to recognition or

reputation) that trademark protection might otherwise impose, namely their inability reasonably to replicate

important non reputation related product features. For example, this Court has written that competitors might

be free to copy the color of a medical pill where that color serves to identify the kind of medication (e.g., a type

of blood medicine) in addition to its source. See id., at 853, 858, n. 20 ("[S]ome patients commingle

medications in a container and rely on color to differentiate one from another"); see also J. Ginsburg, D.

Goldberg, & A. Greenbaum, Trademark and Unfair Competition Law 194-195 (1991) (noting that drug color

cases "have more to do with public health policy" regarding generic drug substitution "than with trademark

law"). And, the federal courts have demonstrated that they can apply this doctrine in a careful and reasoned

manner, with sensitivity to the effect on competition. Although we need not comment on the merits of specific

cases, we note that lower courts have permitted competitors to copy the green color of farm machinery

(because customers wanted their farm equipment to match) and have barred the use of black as a trademark 5

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

on outboard boat motors (because black has the special functional attributes of decreasing the apparent size of

the motor and ensuring compatibility with many different boat colors). See Deere & Co. v. Farmhand, Inc., 560

F. Supp. 85, 98 (SD Iowa 1982), aff'd, 721 F. 2d 253 (CA8 1983);Brunswick Corp. v. British Seagull Ltd., 35 F.

3d 1527, 1532 (CA Fed. 1994), cert. pending, No. 94-1075; see also Nor Am Chemical v. O. M. Scott & Sons

Co., 4 U. S. P. Q. 2d 1316, 1320 (ED Pa. 1987) (blue color of fertilizer held functional because it indicated the

presence of nitrogen). The Restatement (Third) of Unfair Competition adds that, if a design's "aesthetic value"

lies in its ability to "confe[r] a significant benefit that cannot practically be duplicated by the use of alternative

designs," then the design is "functional." Restatement (Third) of Unfair Competition §17, Comment c, pp. 175-

176 (1995). The "ultimate test of aesthetic functionality," it explains, "is whether the recognition of trademark

rights would significantly hinder competition." Id., at 176.

The upshot is that, where a color serves a significant nontrademark function--whether to distinguish a heart

pill from a digestive medicine or to satisfy the "noble instinct for giving the right touch of beauty to common

and necessary things," G. K. Chesterton, Simplicity and Tolstoy 61 (1912)--courts will examine whether its use

as a mark would permit one competitor (or a group) to interfere with legitimate (nontrademark related)

competition through actual or potential exclusive use of an important product ingredient. That examination

should not discourage firms from creating aesthetically pleasing mark designs, for it is open to their

competitors to do the same. See, e.g., W. T. Rogers Co. v. Keene, 778 F. 2d 334, 343 (CA7 1985) (Posner, J.).

But, ordinarily, it should prevent the anticompetitive consequences of Jacobson's hypothetical "color depletion"

argument, when, and if, the circumstances of a particular case threaten "color depletion."

Third, Jacobson points to many older cases--including Supreme Court cases--in support of its position. In 1878,

this Court described the common law definition of trademark rather broadly to "consist of a name, symbol,

figure, letter, form, or device, if adopted and used by a manufacturer or merchant in order to designate the

goods he manufactures or sells to distinguish the same from those manufactured or sold by

another." McLean v. Fleming, 96 U.S. 245, 254. Yet, in interpreting the Trademark Acts of 1881 and 1905, 21

Stat. 502, 33 Stat. 724, which retained that common law definition, the Court questioned "[w]hether mere

color can constitute a valid trade mark," A. Leschen & Sons Rope Co. v.Broderick & Bascom Rope Co., 201

U.S. 166, 171 (1906), and suggested that the "product including the coloring matter is free to all who make

it." Coca Cola Co.v. Koke Co. of America, 254 U.S. 143, 147 (1920). Even though these statements amounted to

dicta, lower courts interpreted them as forbidding protection for color alone. See, e.g., Campbell Soup Co., 175

F. 2d, at 798, and n. 9; Life Savers Corp. v. Curtiss Candy Co., 182 F. 2d 4, 9 (CA7 1950) (quoting Campbell

Soup).

These Supreme Court cases, however, interpreted trademark law as it existedbefore 1946, when Congress

enacted the Lanham Act. The Lanham Act significantly changed and liberalized the common law to "dispense

with mere technical prohibitions," S. Rep. No. 1333, 79th Cong., 2d Sess., 3 (1946), most notably, by

permitting trademark registration of descriptive words (say, "U Build It" model airplanes) where they had

acquired "secondary meaning." SeeAbercrombie & Fitch Co., 537 F. 2d, at 9 (Friendly, J.). The Lanham Act

extended protection to descriptive marks by making clear that (with certain explicit exceptions not relevant

here),

"nothing . . . shall prevent the registration of a mark used by the applicant which has become distinctive of the

applicant's goods in commerce." 15 U.S.C. § 1052(f ) (1988 ed., Supp. V).

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

This language permits an ordinary word, normally used for a nontrademark purpose (e.g., description), to act

as a trademark where it has gained "secondary meaning." Its logic would appear to apply to color as well.

Indeed, in 1985, the Federal Circuit considered the significance of the Lanham Act's changes as they related to

color and held that trademark protection for color was consistent with the

"jurisprudence under the Lanham Act developed in accordance with the statutory principle that if a mark is

capable of being or becoming distinctive of [the] applicant's goods in commerce, then it is capable of serving

as a trademark." Owens Corning, 774 F. 2d, at 1120.

In 1988 Congress amended the Lanham Act, revising portions of the definitional language, but left unchanged

the language here relevant. §134, 102 Stat. 3946,15 U.S.C. § 1127. It enacted these amendments against the

following background: (1) the Federal Circuit had decided Owens Corning; (2) the Patent and Trademark

Office had adopted a clear policy (which it still maintains) permitting registration of color as a trademark, see

PTO Manual §1202.04(e) (at p. 1200-12 of the January 1986 edition and p. 1202-13 of the May 1993 edition);

and (3) the Trademark Commission had written a report, which recommended that "the terms `symbol, or

device' . . . not be deleted or narrowed to preclude registration of such things as a color, shape, smell, sound,

or configuration which functions as a mark," The United States Trademark Association Trademark Review

Commission Report and Recommendations to USTA President and Board of Directors, 77 T. M. Rep. 375, 421

(1987) (hereinafter Trademark Commission); see also 133 Cong. Rec. 32812 (1987) (statement of Sen.

DeConcini) ("The bill I am introducing today is based on the Commission's report and recommendations"). This

background strongly suggests that the language "any word, name, symbol, or device," 15 U.S.C. § 1127 had

come to include color. And, when it amended the statute, Congress retained these terms. Indeed, the Senate

Report accompanying the Lanham Act revision explicitly referred to this background understanding, in saying

that the "revised definition intentionally retains . . . the words `symbol or device' so as not to preclude the

registration of colors, shapes, sounds or configurations where they function as trademarks." S. Rep. No. 100-

515, at 44. (In addition, the statute retained language providing that "[n]o trademark by which the goods of the

applicant may be distinguished from the goods of others shall be refused registration . . . on account of its

nature" (except for certain specified reasons not relevant here). 15 U.S.C. § 1052 (1988 ed., Supp V)).

This history undercuts the authority of the precedent on which Jacobson relies. Much of the pre-1985 case law

rested on statements in Supreme Court opinions that interpreted pre-Lanham Act trademark law and were not

directly related to the holdings in those cases. Moreover, we believe the Federal Circuit was right in 1985

when it found that the 1946 Lanham Act embodied crucial legal changes that liberalized the law to permit the

use of color alone as a trademark (under appropriate circumstances). At a minimum, the Lanham Act's changes

left the courts free to reevaluate the pre-existing legal precedent which had absolutely forbidden the use of

color alone as a trademark. Finally, when Congress re enacted the terms "word, name, symbol, or device" in

1988, it did so against a legal background in which those terms had come to include color, and its statutory

revision embraced that understanding.

Fourth, Jacobson argues that there is no need to permit color alone to function as a trademark because a firm

already may use color as part of a trademark, say, as a colored circle or colored letter or colored word, and

may rely upon "trade dress" protection, under §43(a) of the Lanham Act, if a competitor copies its color and

thereby causes consumer confusion regarding the overall appearance of the competing products or their

packaging, see 15 U.S.C. § 1125(a) (1988 ed., Supp. V). The first part of this argument begs the question. One

can understand why a firm might find it difficult to place a usable symbol or word on a product (say, a large

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

industrial bolt that customers normally see from a distance); and, in such instances, a firm might want to use

color, pure and simple, instead of color as part of a design. Neither is the second portion of the argument

convincing. Trademark law helps the holder of a mark in many ways that "trade dress" protection does not.

See 15 U.S.C. § 1124 (ability to prevent importation of confusingly similar goods); §1072 (constructive notice of

ownership); §1065 (incontestible status); §1057(b) (prima facie evidence of validity and ownership). Thus, one

can easily find reasons why the law might provide trademark protection in addition to trade dress protection.

Having determined that a color may sometimes meet the basic legal requirements for use as a trademark and

that respondent Jacobson's arguments do not justify a special legal rule preventing color alone from serving as

a trademark (and, in light of the District Court's here undisputed findings that Qualitex's use of the green gold

color on its press pads meets the basic trademark requirements), we conclude that the Ninth Circuit erred in

barring Qualitex's use of color as a trademark. For these reasons, the judgment of the Ninth Circuit is

Reversed.

VENANCIO SAMBAR   vs . LEVI STRAUSS & CO, G.R. No. 132604

This petition for review on certiorari prays for the reversal of the decision dated January 30, 1998, of the Court

of Appeals in CA-G.R. CV No. 51553.  That decision affirmed the decision in Civil Case No. 88-2220 of the

Regional Trial Court, Branch 66, Makati City, making permanent the writ of preliminary injunction, ordering

CVS Garment and Industrial Company (CVSGIC) and petitioner Venancio Sambar to pay private respondents

jointly and solidarily the sum of P50,000 as temperate and nominal damages, P10,000 as exemplary damages,

and P25,000 as attorney’s fees and litigation costs, and ordering the Director of the National Library to cancel

Copyright Registration No. 1-1998 in the name of Venancio Sambar.

The facts are as follows:

On September 28, 1987, private respondents, through a letter from their legal officer, demanded that CVS

Garment Enterprises (CVSGE) desist from using their stitched arcuate design on the Europress jeans which

CVSGE advertised in the Manila Bulletin.

Atty. Benjamin Gruba, counsel of CVSGE, replied that the arcuate design on the back pockets of

Europress jeans was different from the design on the back pockets of Levi’s jeans.  He further asserted that his

client had a copyright on the design it was using.

Thereafter, private respondents filed a complaint against Sambar, doing business under the name and

style of CVSGE.  Private respondents also impleaded the Director of the National Library.  Summons was sent

to Sambar in his business address at 161-B Iriga corner Retiro, La Loma, Quezon City.

Atty. Gruba claimed that he erroneously received the original summons as he mistook it as addressed to

his client, CVSGIC.  He returned the summons and the pleadings and manifested in court that CVSGE, which

was formerly doing business in the premises, already stopped operation and CVSGIC took over CVSGE’s

occupation of the premises.  He also claimed he did not know the whereabouts of Sambar, the alleged owner of

CVSGE.

Thereafter, private respondents amended their complaint to include CVSGIC.  When private respondents

learned the whereabouts of Sambar and CVSGE, the case was revived.

8

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Private respondents alleged in their complaint that Levi Strauss and Co. (LS&Co.), an internationally

known clothing manufacturer, owns the arcuate design trademark which was registered under U.S. Trademark

Registration No. 404, 248 on November 16, 1943, and in the Principal Register of trademarks with the

Philippine Patent Office under Certificate of Registration No. 20240 issued on October 8, 1973; that through a

Trademark Technical Data and Technical Assistance Agreement with Levi Strauss (Phil.) Inc. (LSPI) in 1972,

LS&Co. granted LSPI a non-exclusive license to use the arcuate trademark in its manufacture and sale of

Levi’s pants, jackets and shirts in the Philippines; that in 1983, LS&Co. also appointed LSPI as its agent and

attorney-in-fact to protect its trademark in the Philippines; and that sometime in 1987, CVSGIC and Venancio

Sambar, without the consent and authority of private respondents and in infringement and unfair competition,

sold and advertised, and despite demands to cease and desist, continued to manufacture, sell and advertise

denim pants under the brand name “Europress” with back pockets bearing a design similar to the arcuate

trademark of private respondents, thereby causing confusion on the buying public, prejudicial to private

respondents’ goodwill and property right.

In its answer, CVSGIC admitted it manufactured, sold and advertised and was still manufacturing and

selling denim pants under the brand name of “Europress”, bearing a back pocket design of two double arcs

meeting in the middle.  However, it denied that there was infringement or unfair competition because the

display rooms of department stores where Levi’s and Europress jeans were sold, were distinctively segregated

by billboards and other modes of advertisement.  CVSGIC avers that the public would not be confused on the

ownership of such known trademark as Levi’s, Jag, Europress, etc..  Also, CVSGIC claimed that it had its own

original arcuate design, as evidenced by Copyright Registration No. 1-1998, which was very different and

distinct from Levi’s design.  CVSGIC prayed for actual, moral and exemplary damages by way of counterclaim.

Petitioner Venancio Sambar filed a separate answer.  He denied he was connected with CVSGIC.  He

admitted that Copyright Registration No. 1-1998 was issued to him, but he denied using it.   He also said he did

not authorize anyone to use the copyrighted design.  He counterclaimed for moral and exemplary damages and

payment of attorney’s fees.

After hearing, the trial court issued a writ of preliminary injunction enjoining CVSGIC and petitioner from

manufacturing, advertising and selling pants with the arcuate design on their back pockets.  CVSGIC and

petitioner did not appear during the October 13 and 27, 1993 hearings, when they were to present

evidence.  Consequently, the trial court ruled that they waived their right to present evidence.

On May 3, 1995, the trial court rendered its decision.  The dispositive portion reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a) making the writ of preliminary injunction permanent;

b) ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the plaintiffs

jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of P10,000.00 as

exemplary damages, and the sum of P25,000.00 as attorney’s fees and litigation expenses and to pay the costs.

SO ORDERED.[1]

9

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Private respondents moved for a reconsideration praying for the cancellation of petitioner’s copyright

registration. The trial court granted reconsideration in its July 14, 1995 order, thus:

IN VIEW OF THE FOREGOING, judgment is hereby rendered:

a)  making the writ of preliminary injunction permanent;

b)  ordering the defendants CVS Garment and Industrial Company and Venancio Sambar to pay the plaintiffs

jointly and solidarily the sum of P50,000.00 as temperate and nominal damages, the sum of P10,000.00 as

exemplary damages, and the sum of P25,000.00 as attorney’s fees and litigation expenses and to pay the costs;

c)  ordering the Director of the National Library to cancel the Copyright Registration No. 1-1998 issued in the

name of Venancio Sambar.[2]

Petitioner appealed to the Court of Appeals which on January 30, 1998 decided in favor of private

respondents as follows:

WHEREFORE, the judgment appealed from is AFFIRMED in toto.

SO ORDERED.[3]

In this instant petition, petitioner avers that the Court of Appeals erred in:

I.   ...RULING THAT THERE WAS AN INFRINGEMENT OF RESPONDENT’S ARCUATE MARK.

II. ...RULING THAT PETITIONER IS JOINTLY AND SOLIDARILY LIABLE WITH CVS GARMENTS

INDUSTRIAL CORPORATION FOR INFRINGEMENT OF RESPONDENT’S ARCUATE MARK.

III.            ...IN ORDERING, THERE BEING NO INFRINGEMENT OR UNFAIR COMPETITION, THE

AWARD OF DAMAGES AND CANCELLATION OF COPYRIGHT REGISTRATION NO. 1-1998

ISSUED IN THE NAME OF PETITIONER.[4]

Briefly, we are asked to resolve the following issues:

1.  Did petitioner infringe on private respondents’ arcuate design?

2. Must we hold petitioner solidarily liable with CVS Garments Industrial Corporation?

3. Are private respondents entitled to nominal, temperate and exemplary damages and cancellation of

petitioner’s copyright?

On the first issue, petitioner claims that he did not infringe on private respondents’ arcuate design

because there was no colorable imitation which deceived or confused the public.  He cites Emerald Garment

Manufacturing Corporation vs. Court of Appeals, G.R. No. 100098, 251 SCRA 600 (1995), as authority.  He

disagreed with the Court of Appeals that there were confusing similarities between Levi’s and Europress’

arcuate designs, despite the trial court’s observation of differences in them.  Petitioner maintains that although

the backpocket designs had similarities, the public was not confused because Levi’s jeans had other marks not

found in Europress jeans.  Further, he says Levi’s long history and popularity made its trademark easily

identifiable by the public.10

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

In its comment, private respondents aver that the Court of Appeals did not err in ruling that there was

infringement in this case.  The backpocket design of Europress jeans, a double arc intersecting in the middle

was the same as Levi’s’ mark, also a double arc intersecting at the center.  Although the trial court found

differences in the two designs, these differences were not noticeable.  Further, private respondents said,

infringement of trademark did not require exact similarity.  Colorable imitation enough to cause confusion

among the public, was sufficient for a trademark to be infringed.  Private respondents explained that in a

market research they conducted with 600 respondents, the result showed that the public was confused by

Europress trademark vis the Levi’s trademark.

We find that the first issue raised by petitioner is factual.  The basic rule is that factual questions are

beyond the province of this Court in a petition for review.  Although there are exceptions to this rule, this case

is not one of them.[5] Hence, we find no reason to disturb the findings of the Court of Appeals that Europress’

use of the arcuate design was an infringement of the Levi’s design.

On the second issue, petitioner claims that private respondents did not show that he was connected with

CVSGIC, nor did they prove his specific acts of infringement to make him liable for damages.  Again, this is a

factual matter and factual findings of the trial court, concurred in by the Court of Appeals, are final and

binding on this Court.[6] Both the courts below found that petitioner had a copyright over Europress’ arcuate

design and that he consented to the use of said design by CVSGIC.  We are bound by this finding, especially in

the absence of a showing that it was tainted with arbitrariness or palpable error. [7] It must be stressed that it

was immaterial whether or not petitioner was connected with CVSGIC.  What is relevant is that petitioner had

a copyright over the design and that he allowed the use of the same by CVSGIC.

Petitioner also contends that the Court of Appeals erred when it said that he had the burden to prove that

he was not connected with CVSGIC and that he did not authorize anyone to use his copyrighted

design. According to petitioner, these are important elements of private respondents’ cause of action against

him, hence, private respondents had the ultimate burden of proof.

Pertinent is Section 1, Rule 131 of the Rules of Court [8] which provides that the burden of proof is the duty

of a party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence required by

law.  In civil cases, the burden of proof may be on either the plaintiff or the defendant.  It is on the latter, if in

his answer he alleges an affirmative defense, which is not a denial of an essential ingredient in the plaintiff’s

cause of action, but is one which, if established, will be a good defense – i.e., an “avoidance” of the claim,

which prima facie, the plaintiff already has because of the defendant’s own admissions in the pleadings.[9]

Petitioner’s defense in this case was an affirmative defense.  He did not deny that private respondents

owned the arcuate trademark nor that CVSGIC used on its products a similar arcuate design.  What he averred

was that although he owned the copyright on the Europress arcuate design, he did not allow CVSGIC to use

it.  He also said he was not connected with CVSGIC.  These were not alleged by private respondents in their

pleadings, and petitioner therefore had the burden to prove these.

Lastly, are private respondents entitled to nominal, temperate and exemplary damages and cancellation of

petitioner’s copyright?

Petitioner insists that he had not infringed on the arcuate trademark, hence, there was no basis for

nominal and temperate damages.  Also, an award of nominal damages precludes an award of temperate

damages.  He cites Ventanilla vs. Centeno, G.R. No. L-14333, 1 SCRA 215 (1961) on this.  Thus, he contends,

11

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

assuming arguendo that there was infringement, the Court of Appeals still erred in awarding both nominal and

temperate damages.

Petitioner likewise said that the grant of exemplary damages was inconsistent with the trial court’s finding

that the design of Europress jeans was not similar to Levi’s design and that no pecuniary loss was suffered by

respondents to entitle them to such damages.

Lastly, petitioner maintains that as Europress’ arcuate design is not a copy of that of Levi’s, citing the trial

court’s findings that although there are similarities, there are also differences in the two designs, cancellation

of his copyright was not justified.

On this matter, private respondents assert that the lower courts found that there was infringement and

Levi’s was entitled to damages based on Sections 22 and 23 of RA No. 166 otherwise known as the Trade Mark

Law,[10] as amended, which was the law then governing.  Said sections define infringement and prescribe the

remedies therefor.  Further, private respondents aver it was misleading for petitioner to claim that the trial

court ruled that private respondents did not suffer pecuniary loss, suggesting that the award of damages was

improper.  According to the private respondents, the trial court did not make any such ruling.  It simply stated

that there was no evidence that Levi’s had suffered decline in its sales because of the use of the arcuate design

by Europress jeans.  They offer that while there may be no direct proof that they suffered a decline in sales,

damages may still be measured based on a reasonable percentage of the gross sales of the respondents,

pursuant to Section 23 of the Trademark law.[11]

Finally, regarding the cancellation of petitioner’s copyright, private respondents deny that the trial court

ruled that the arcuate design of Europress jeans was not the same as Levi’s arcuate design jeans.   On the

contrary, the trial court expressly ruled that there was similarity.  The cancellation of petitioner’s copyright

was justified because petitioner’s copyright can not prevail over respondents’ registration in the Principal

Register of Bureau of Patents, Trademarks, and Technology Transfer.  According to private respondents, the

essence of copyright registration is originality and a copied design is inherently non-copyrightable.  They insist

that registration does not confer originality upon a copycat version of a prior design.

From the foregoing discussion, it is clear that the matters raised by petitioner in relation to the last issue

are purely factual, except the matter of nominal and temperate damages.  Petitioner claims that damages are

not due private respondents and his copyright should not be cancelled because he had not infringed on Levi’s

trademark.  Both the trial court and the Court of Appeals found there was infringement.  Thus, the award of

damages and cancellation of petitioner’s copyright are appropriate.[12] Award of damages is clearly provided in

Section 23,[13] while cancellation of petitioner’s copyright finds basis on the fact that the design was a mere

copy of that of private respondents’ trademark.  To be entitled to copyright, the thing being copyrighted must

be original, created by the author through his own skill, labor and judgment, without directly copying or

evasively imitating the work of another.[14]

However, we agree with petitioner that it was error for the Court of Appeals to affirm the award of

nominal damages combined with temperate damages[15] by the Regional Trial Court of Makati.  What

respondents are entitled to is an award for temperate damages, not nominal damages.  For although the exact

amount of damage or loss can not be determined with reasonable certainty, the fact that there was

infringement means they suffered losses for which they are entitled to moderate damages.[16] We find that the

award of P50,000.00 as temperate damages fair and reasonable, considering the circumstances herein as well

12

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

as the global coverage and reputation of private respondents Levi Strauss & Company and Levi Strauss (Phil.),

Inc.

WHEREFORE, the decision dated January 30, 1998, of the Court of Appeals, in CA-G.R. CV No. 51553

AFFIRMING the judgment of the Regional Trial Court of Makati, Branch 66, dated July 14, 1995, is hereby

MODIFIED so that nominal damages are deleted but the amount of P50,000 is hereby awarded only as

TEMPERATE DAMAGES.  In all other respects, said judgment is hereby AFFIRMED, to wit: 

a)  the writ of preliminary injunction is made permanent;

b)  the defendants CVS Garment and Industrial Company and Venancio Sambar are ordered also to

pay the plaintiffs jointly and solidarily the sum of P10,000.00 as exemplary damages, and the sum

of P25,000.00 as attorney’s fees and litigation expenses, and to pay the costs; and

c) the Director of the National Library is ordered to cancel the Copyright Registration No. 1-1998

issued in the name of Venancio Sambar.

SO ORDERED.

Park N' Fly Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189 (1985)

Syllabus

Petitioner operates long-term parking lots near airports in St. Louis Cleveland, Houston, Boston, Memphis, and

San Francisco. In 1969, petitioner applied to the United States Patent and Trademark Office to register a

service mark consisting of the logo of an airplane and the words "Park 'N Fly." The registration issued in 1971,

and nearly six years later petitioner filed an affidavit with the Patent and Trademark Office to establish the

incontestable status of the mark under § 33(b) of the Trademark Act of 1946 (Lanham Act), which provides that

"registration shall be conclusive evidence of the registrant's exclusive right to use the registered mark,"

subject to the provisions of § 15 and § 33(b) itself. Respondent provides long-term airport parking services

called "Dollar Park and Fly," but only operates in Portland, Ore. Petitioner filed an infringement action in

Federal District Court seeking to enjoin respondent from using the words "Park and Fly" in connection with its

business. The District Court granted the injunction, rejecting, inter alia, respondent's defense that petitioner's

mark is unenforceable because it is merely descriptive. The Court of Appeals reversed, holding that

incontestability provides a defense against the cancellation of a mark but may not be used offensively to enjoin

another's use, that, under this analysis, petitioner could obtain an injunction only if its mark would be entitled

to continued registration without regard to its incontestable status, and that therefore respondent could

defend by showing that the mark was merely descriptive. The court then determined that petitioner's mark is

merely descriptive and respondent should not be enjoined from using the words "Park and Fly."

Held: The holder of a registered mark may rely on incontestability to enjoin infringement, and an infringement

action may not be defended on the grounds that the mark is merely descriptive. Pp. 469 U. S. 193-205.

(a) The Lanham Act nowhere distinguishes between a registrant's offensive and defensive use of an

incontestable mark, but, on the contrary, § 33(b)'s declaration that the registrant has an "exclusive right" to

use the mark indicates that incontestable status may be used to enjoin infringement. The Act's language also

13

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

refutes any conclusion that an incontestable mark may be challenged as merely descriptive. Pp. 469 U. S. 193-

197.

Page 469 U. S. 190

(b) Nothing in the Lanham Act's legislative history supports a departure from the plain language of the

provisions concerning incontestability. Indeed, a conclusion that incontestable status may provide the basis for

enforcement of the registrant's exclusive right to use a mark promotes the Act's goals in providing national

protection of trademarks in order to secure to the mark's owner the goodwill of his business and to protect the

ability of consumers to distinguish among competing producers. Pp. 469 U. S. 197-202.

(c) There is no merit to respondent's argument that the Court of Appeals' decision should be upheld because

trademark registrations are issued after an ex parteproceeding and generally without inquiry into the merits of

an application. The facts of this case belie the suggestion that registration is virtually automatic, and

respondent is simply wrong to suggest that third parties do not have an opportunity to challenge applications

for trademark registration. The power of courts under § 34 of the Lanham Act to grant injunctions "according

to principles of equity" does not encompass a substantive challenge to the validity of an incontestable mark on

the grounds that it lacks secondary meaning. Otherwise, the meaning of "equity" would be expanded to the

point of vitiating the Act's more specific provisions. Similarly, the power of courts to cancel registrations and

"otherwise rectify the register" under § 37 of the Act must be subject to the specific provisions concerning

incontestability. Pp. 469 U. S. 202-203.

(d) The Court of Appeals was not justified in relying on its decision in Tillamook County Creamery v. Tillamook

Cheese & Dairy Assn., 345 F.2d 158, cert. denied, 382 U.S. 903, for the proposition that a registrant may not

rely on incontestability to enjoin the use of a mark. Pp. 469 U. S. 203-205.

718 F.2d 327, reversed and remanded.

O'CONNOR, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE,

MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. STEVENS, J., filed a dissenting

opinion, post, p. 469 U. S. 206.

Page 469 U. S. 191

JUSTICE O'CONNOR delivered the opinion of the Court.

In this case we consider whether an action to enjoin the infringement of an incontestable trade or service mark

may be defended on the grounds that the mark is merely descriptive. We conclude that neither the language of

the relevant statutes nor the legislative history supports such a defense.

I

Petitioner operates long-term parking lots near airports. After starting business in St. Louis in 1967, petitioner

subsequently opened facilities in Cleveland, Houston, Boston, Memphis, and San Francisco. Petitioner applied

in 1969 to the United States Patent and Trademark Office (Patent Office) to register a service mark consisting

of the logo of an airplane and the words "Park 'N Fly." [Footnote 1] The registration issued in August 1971.

Nearly six years later, petitioner filed an affidavit with the Patent Office to establish the incontestable status of

the mark. [Footnote 2] As required by § 15 of the Trademark Act of 1946 (Lanham Act), 60 Stat. 433, as

amended, 15 U.S.C. § 1065, the affidavit stated that the mark had been registered and in continuous use for

14

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

five consecutive years, that there had been no final adverse decision to petitioner's claim of ownership or right

to registration, and

Page 469 U. S. 192

that no proceedings involving such rights were pending. Incontestable status provides, subject to the

provisions of § 15 and § 33(b) of the Lanham Act, "conclusive evidence of the registrant's exclusive right to use

the registered mark. . . ." § 33(b), 15 U.S.C. § 1115(b).

Respondent also provides long-term airport parking services, but only has operations in Portland, Oregon.

Respondent calls its business "Dollar Park and Fly." Petitioner filed this infringement action in 1978 in the

United States District Court for the District of Oregon and requested the court permanently to enjoin

respondent from using the words "Park and Fly" in connection with its business. Respondent counterclaimed

and sought cancellation of petitioner's mark on the grounds that it is a generic term. See § 14(c), 15 U.S.C. §

1064(c). Respondent also argued that petitioner's mark is unenforceable because it is merely descriptive. See §

2(e), 15 U.S.C. § 1052(e). As two additional defenses, respondent maintained that it is in privity with a Seattle

corporation that has used the expression "Park and Fly" since a date prior to the registration of petitioner's

mark, see § 33(b)(5), 15 U.S.C. § 1115(b)(5), and that it has not infringed because there is no likelihood of

confusion. See § 32(1), 15 U.S.C. § 1114(1).

After a bench trial, the District Court found that petitioner's mark is not generic and observed that an

incontestable mark cannot be challenged on the grounds that it is merely descriptive. App. 75. The District

Court also concluded that there was no evidence of privity between respondent and the Seattle corporation.

App. 76. Finally, the District Court found sufficient evidence of likelihood of confusion. App. 76. The District

Court permanently enjoined respondent from using the words "Park and Fly" and any other mark confusingly

similar to "Park 'N Fly." App. 77.

The Court of Appeals for the Ninth Circuit reversed. 718 F.2d 327 (1983). The District Court did not err, the

Court of Appeals held, in refusing to invalidate petitioner's mark.Id. at 331. The Court of Appeals noted,

however, that it

Page 469 U. S. 193

previously had held that incontestability provides a defense against the cancellation of a mark, but it may not

be used offensively to enjoin another's use. Ibid. Petitioner, under this analysis, could obtain an injunction only

if its mark would be entitled to continued registration without regard to its incontestable status. Thus,

respondent could defend the infringement action by showing that the mark was merely descriptive. Based on

its own examination of the record, the Court of Appeals then determined that petitioner's mark is in fact

merely descriptive, and therefore respondent should not be enjoined from using the name "Park and Fly." Ibid.

The decision below is in direct conflict with the decision of the Court of Appeals for the Seventh Circuit in

Union Carbide Corp. v. Ever-Ready, Inc., 531 F.2d 366, cert. denied,429 U.S. 830 (1976). We granted

certiorari to resolve this conflict, 465 U.S. 1078 (1984), and we now reverse.

II

Congress enacted the Lanham Act in 1946 in order to provide national protection for trademarks used in

interstate and foreign commerce. S.Rep. No. 1333, 79th Cong., 2d Sess., 5 (1946). Previous federal legislation,

such as the Federal Trademark Act of 1905, 33 Stat. 724, reflected the view that protection of trademarks was 15

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

a matter of state concern and that the right to a mark depended solely on the common law. S.Rep. No. 1333, at

5. Consequently, rights to trademarks were uncertain and subject to variation in different parts of the country.

Because trademarks desirably promote competition and the maintenance of product quality, Congress

determined that "a sound public policy requires that trademarks should receive nationally the greatest

protection that can be given them." Id. at 6. Among the new protections created by the Lanham Act were the

statutory provisions that allow a federally registered mark to become incontestable. §§ 15, 33(b), 15 U.S.C. §§

1065, 1115(b).

The provisions of the Lanham Act concerning registration and incontestability distinguish a mark that is "the

common

Page 469 U. S. 194

descriptive name of an article or substance" from a mark that is "merely descriptive." §§ 2(e), 14(e), 15 U.S.C.

§§ 1052(e), 1064(e). Marks that constitute a common descriptive name are referred to as generic. A generic

term is one that refers to the genus of which the particular product is a species. Abercrombie & Fitch Co. v.

Hunting World, Inc.,537 F.2d 4, 9 (CA2 1976). Generic terms are not registrable, and a registered mark may

be canceled at any time on the grounds that it has become generic. See §§ 2, 14(e), 15 U.S.C. §§ 1052, 1064(e).

A "merely descriptive" mark, in contrast, describes the qualities or characteristics of a good or service, and

this type of mark may be registered only if the registrant shows that it has acquired secondary meaning, i.e., it

"has become distinctive of the applicant's goods in commerce." §§ 2(e), (f), 15 U.S.C. §§ 1052(e), (f).

This ease requires us to consider the effect of the incontestability provisions of the Lanham Act in the context

of an infringement action defended on the grounds that the mark is merely descriptive. Statutory construction

must begin with the language employed by Congress and the assumption that the ordinary meaning of that

language accurately expresses the legislative purpose. See American Tobacco Co. v. Patterson,456 U. S.

63, 456 U. S. 68 (1982). With respect to incontestable trade or service marks, § 33(b) of the Lanham Act states

that "registration shall be conclusive evidence of the registrant's exclusive right to use the registered mark"

subject to the conditions of § 15 and certain enumerated defenses. [Footnote 3]

Page 469 U. S. 195

Section 15 incorporates by reference subsections (c) and (e) of § 14, 15 U.S.C. § 1064. An incontestable mark

that becomes generic may be canceled at any time pursuant to § 14(c). That section also allows cancellation of

an incontestable mark at any time if it has been abandoned, if it is being used to misrepresent the source of the

goods or services in connection with which it is used, or if it was obtained fraudulently or contrary to the

provisions of § 4, 15 U.S.C. § 1054, or §§ 2(a)-(c), 15 U.S.C. §§ 1052(a)-(c). [Footnote 4]

Page 469 U. S. 196

One searches the language of the Lanham Act in vain to find any support for the offensive/defensive distinction

applied by the Court of Appeals. The statute nowhere distinguishes between a registrant's offensive and

defensive use of an incontestable mark. On the contrary, § 33(b)'s declaration that the registrant has an

"exclusive right" to use the mark indicates that incontestable status may be used to enjoin infringement by

others. A conclusion that such infringement cannot be enjoined renders meaningless the "exclusive right"

recognized by the statute. Moreover, the language in three of the defenses enumerated in § 33(b) clearly

contemplates the use of incontestability in infringement actions by plaintiffs. See §§ 33(b)(4)-(6), 15 U.S.C. §§

1115(b)(4)-(6).16

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

The language of the Lanham Act also refutes any conclusion that an incontestable mark may be challenged as

merely descriptive. A mark that is merely descriptive of an applicant's goods or services is not registrable

unless the mark has secondary meaning. Before a mark achieves incontestable status, registration

provides prima facie evidence of the registrant's exclusive right to use the mark in commerce. § 33(a), 15

U.S.C. § 1115(a). The Lanham Act expressly provides that before a mark becomes incontestable an opposing

party may prove any legal or equitable defense which might have been asserted if the mark had not been

registered. Ibid. Thus, § 33(a) would have allowed respondent to challenge petitioner's mark as merely

descriptive if the mark had not become incontestable. With respect to incontestable marks, however, § 33(b)

provides that registration is conclusive evidence of the registrant's exclusive right to use the mark, subject to

the conditions of § 15 and the seven defenses enumerated in § 33(b) itself. Mere descriptiveness is not

recognized by either § 15 or § 33(b) as a basis for challenging an incontestable mark.

The statutory provisions that prohibit registration of a merely descriptive mark but do not allow an

incontestable

Page 469 U. S. 197

mark to be challenged on this ground cannot be attributed to inadvertence by Congress. The Conference

Committee rejected an amendment that would have denied registration to any descriptive mark, and instead

retained the provisions allowing registration of a merely descriptive mark that has acquired secondary

meaning. SeeH.R.Conf.Rep. No. 2322, 79th Cong., 2d Sess., 4 (1946) (explanatory statement of House

managers). The Conference Committee agreed to an amendment providing that no incontestable right can be

acquired in a mark that is a common descriptive, i.e.,generic, term. Id. at 5. Congress could easily have denied

incontestability to merely descriptive marks as well as to generic marks had that been its intention.

The Court of Appeals in discussing the offensive/defensive distinction observed that incontestability protects a

registrant against cancellation of his mark. 718 F.2d at 331. This observation is incorrect with respect to

marks that become generic or which otherwise may be canceled at any time pursuant to §§ 14(c) and (e).

Moreover, as applied to marks that are merely descriptive, the approach of the Court of Appeals makes

incontestable status superfluous. Without regard to its incontestable status, a mark that has been registered

five years is protected from cancellation except on the grounds stated in §§ 14(c) and (e). Pursuant to § 14, a

mark may be canceled on the grounds that it is merely descriptive only if the petition to cancel is filed within

five years of the date of registration. § 14(a), 15 U.S.C. § 1064(a). The approach adopted by the Court of

Appeals implies that incontestability adds nothing to the protections against cancellation already provided in §

14. The decision below not only lacks support in the words of the statute; it effectively emasculates § 33(b)

under the circumstances of this case.

III

Nothing in the legislative history of the Lanham Act supports a departure from the plain language of the

statutory

Page 469 U. S. 198

provisions concerning incontestability. Indeed, a conclusion that incontestable status can provide the basis for

enforcement of the registrant's exclusive right to use a trade or service mark promotes the goals of the statute.

The Lanham Act provides national protection of trademarks in order to secure to the owner of the mark the

goodwill of his business and to protect the ability of consumers to distinguish among competing 17

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

producers. See S.Rep. No. 1333, at 3, 5. National protection of trademarks is desirable, Congress concluded,

because trademarks foster competition and the maintenance of quality by securing to the producer the

benefits of good reputation. Id. at 4. The incontestability provisions, as the proponents of the Lanham Act

emphasized, provide a means for the registrant to quiet title in the ownership of his mark.  See Hearings on

H.R. 82 before the Subcommittee of the Senate Committee on Patents, 78th Cong., 2d Sess., 21 (1944)

(remarks of Rep. Lanham); id. at 21, 113 (testimony of Daptane Robert, ABA Committee on Trade Mark

Legislation); Hearings on H.R. 102 et al. before the Subcommittee on Trade-Marks of the House Committee on

Patents, 77th Cong., 1st Sess., 73 (1941) (remarks of Rep. Lanham). The opportunity to obtain incontestable

status by satisfying the requirements of § 15 thus encourages producers to cultivate the goodwill associated

with a particular mark. This function of the incontestability provisions would be utterly frustrated if the holder

of an incontestable mark could not enjoin infringement by others so long as they established that the mark

would not be registrable but for its incontestable status.

Respondent argues, however, that enforcing petitioner's mark would conflict with the goals of the Lanham Act

because the mark is merely descriptive and should never have been registered in the first place. [Footnote 5]

Representative Lanham,

Page 469 U. S. 199

respondent notes, explained that the defenses enumerated in § 33(b) were

"not intended to enlarge, restrict, amend, or modify the substantive law of trademarks either as set out in

other sections of the act or as heretofore applied by the courts under prior laws."

92 Cong.Rec. 7524 (1946). Respondent reasons that, because the Lanham Act did not alter the substantive law

of trademarks, the incontestability provisions cannot protect petitioner's use of the mark if it were not

originally registrable. Moreover, inasmuch as petitioner's mark is merely descriptive, respondent contends that

enjoining others from using the mark will not encourage competition by assisting consumers in their ability to

distinguish among competing producers.

These arguments are unpersuasive. Representative Lanham's remarks, if read in context, clearly refer to the

effect of the defenses enumerated in § 33(b). [Footnote 6] There is no question that the Lanham Act altered

existing law concerning trademark rights in several respects. For example, § 22,

Page 469 U. S. 200

15 U.S.C. § 1072, provides for constructive notice of registration and modifies the common law rule that

allowed acquisition of concurrent rights by users in distinct geographic areas if the subsequent user adopted

the mark without knowledge of prior use. See Hanover Star Milling Co. v. Metcalf, 240 U. S. 403, 240 U. S.

415-416 (1916) (describing pre-Lanham Act law). Similarly, § 14 cuts off certain grounds for cancellation five

years after registration and thereby modifies the previous rule that the validity of a trademark could be

attacked at any time. See White House Milk Products Co. v. Dwinell-Wright Co., 27 C. C. P. A. (Pat.) 1194, 111

F.2d 490 (1940). Most significantly, Representative Lanham himself observed that incontestability was one of

"the valuable new rights created by the act." 92 Cong.Rec. 7524 (1946).

Respondent's argument that enforcing petitioner's mark will not promote the goals of the Lanham Act is

misdirected. Arguments similar to those now urged by respondent were in fact considered by Congress in

hearings on the Lanham Act. For example, the United States Department of Justice opposed the

18

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

incontestability provisions and expressly noted that a merely descriptive mark might become incontestable.

Hearings on H.R. 82, at 59-60 (statement of the U.S. Dept. of Justice). This result, the Department of Justice

observed, would "go beyond existing law in conferring unprecedented rights on trade-mark owners," and

would undesirably create an exclusive right to use language that is descriptive of a product. Id. at 60; see

alsoHearings on H.R. 102, at 106-107, 109-110 (testimony of Prof. Milton Handler); id. at 107, 175 (testimony

of attorney Louis Robertson). These concerns were answered by proponents of the Lanham Act, who noted that

a merely descriptive mark cannot be registered unless the Commissioner finds that it has secondary

meaning. Id. at 108, 113 (testimony of Karl Pohl, U.S. Trade Mark Assn.). Moreover, a mark can be challenged

for

Page 469 U. S. 201

five years prior to its attaining incontestable status. Id. at 114 (remarks of Rep. Lanham). The supporters of the

incontestability provisions further observed that a generic mark cannot become incontestable and that § 33(b)

(4) allows the non-trademark use of descriptive terms used in an incontestable mark. Id. at 110-111 (testimony

of Wallace Martin, chairman, ABA Committee on Trade Mark Legislation).

The alternative of refusing to provide incontestable status for descriptive marks with secondary meaning was

expressly noted in the hearings on the Lanham Act. Id. at 64, 69 (testimony of Robert Byerley, New York

Patent Law Assn.); Hearings on S. 895 before the Subcommittee of the Senate Committee on Patents, 77th

Cong., 2d Sess., 42 (1942) (testimony of Elliot Moyer, Special Assistant to the Attorney General). Also

mentioned was the possibility of including as a defense to infringement of an incontestable mark the "fact that

a mark is a descriptive, generic, or geographical term or device." Id. at 45, 47. Congress, however, did not

adopt either of these alternatives. Instead, Congress expressly provided in §§ 33(b) and 15 that an

incontestable mark could be challenged on specified grounds, and the grounds identified by Congress do not

include mere descriptiveness.

The dissent echoes arguments made by opponents of the Lanham Act that the incontestable status of a

descriptive mark might take from the public domain language that is merely descriptive. Post at 469 U. S. 214-

216. As we have explained, Congress has already addressed concerns to prevent the "commercial

monopolization," post at469 U. S. 214, of descriptive language. The Lanham Act allows a mark to be

challenged at any time if it becomes generic, and, under certain circumstances, permits the non-trademark use

of descriptive terms contained in an incontestable mark. Finally, if "monopolization" of an incontestable mark

threatens economic competition, § 33(b)(7), 15 U.S.C. § 1115(b)(7), provides a defense on the grounds that the

mark is being used to violate federal

Page 469 U. S. 202

antitrust laws. At bottom, the dissent simply disagrees with the balance struck by Congress in determining the

protection to be given to incontestable marks.

IV

Respondent argues that the decision by the Court of Appeals should be upheld because trademark

registrations are issued by the Patent Office after an ex parte proceeding and generally without inquiry into

the merits of an application. This argument also unravels upon close examination. The facts of this case belie

the suggestion that registration is virtually automatic. The Patent Office initially denied petitioner's application

19

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

because the examiner considered the mark to be merely descriptive. Petitioner sought reconsideration and

successfully persuaded the Patent Office that its mark was registrable.

More generally, respondent is simply wrong to suggest that third parties do not have an opportunity to

challenge applications for trademark registration. If the Patent Office examiner determines that an applicant

appears to be entitled to registration, the mark is published in the Official Gazette. § 12(a), 15 U.S.C. § 1062(a).

Within 30 days of publication, any person who believes that he would be damaged by registration of the mark

may file an opposition. § 13, 15 U.S.C. § 1063. Registration of a mark provides constructive notice throughout

the United States of the registrant's claim to ownership. § 22, 15 U.S.C. § 1072. Within five years of

registration, any person who believes that he is or will be damaged by registration may seek to cancel a mark.

§ 14(a), 15 U.S.C. § 1064(a). A mark may be canceled at any time for certain specified grounds, including that

it was obtained fraudulently or has become generic. § 14(c), 15 U.S.C. § 1064(c).

The Lanham Act, as the dissent notes, post at 469 U. S. 217, authorizes courts to grant injunctions "according

to principles of equity." § 34, 15 U.S.C. § 1116. Neither respondent nor the opinion of the Court of Appeals

relies on this provision

Page 469 U. S. 203

to support the holding below. Whatever the precise boundaries of the courts' equitable power, we do not

believe that it encompasses a substantive challenge to the validity of an incontestable mark on the grounds

that it lacks secondary meaning. To conclude otherwise would expand the meaning of "equity" to the point of

vitiating the more specific provisions of the Lanham Act. [Footnote 7] Similarly, the power of the courts to

cancel registrations and "to otherwise rectify the register," § 37, 15 U.S.C. § 1119, must be subject to the

specific provisions concerning incontestability. In effect, both respondent and the dissent argue that these

provisions offer insufficient protection against improper registration of a merely descriptive mark, and

therefore the validity of petitioner's mark may be challenged notwithstanding its incontestable status. Our

responsibility, however, is not to evaluate the wisdom of the legislative determinations reflected in the statute,

but instead to construe and apply the provisions that Congress enacted.

V

The Court of Appeals did not attempt to justify its decision by reference to the language or legislative history of

the Lanham Act. Instead, the court relied on its previous decision in Tillamook County Creamery v. Tillamook

Cheese & Dairy Assn.,345 F.2d 158, 163 (CA9), cert. denied, 382 U.S. 903 (1965), for the proposition that a

registrant may not rely on incontestability to enjoin the use of the mark by others. Examination

of Tillamook, however, reveals that there is no persuasive justification for the judicially created distinction

between offensive and defensive use of an incontestable mark.

Page 469 U. S. 204

Tillamook discussed in dicta the offensive/defensive distinction and observed that incontestability protects a

registrant against cancellation but cannot be used to obtain relief from an infringing use. Tillamook's authority

for this proposition was John Morrell & Co. v. Reliable Packing Co., 295 F.2d 314, 316 (CA7 1961), which did

reverse a finding of infringement on the grounds that incontestable status confers only defensive rights. The

Court of Appeals for the Seventh Circuit based its holding in John Morrell onRand McNally & Co. v. Christmas

Club, 105 U.S.P.Q. 499 (1955), aff'd, 44 C. C. P. A. 861 (Pat.), 242 F.2d 776 (1957), but the latter case did not

in fact involve the use of an incontestable mark in an enforcement action.20

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

The Patent Office in Rand McNally denied a petition to cancel a mark challenged as merely descriptive. The

petitioner feared that, if the mark became incontestable, use of the same mark in connection with a service

different from the one specified in the registration could be enjoined. 105 U.S.P.Q., at 500. The Assistant

Commissioner of Patents answered this concern by observing that an incontestable mark does not provide the

registrant "with an offensive weapon' of any greater magnitude than that which it has had since the

registration issued. . . ." Id. at 501. These comments do not suggest that incontestability may never provide the

basis for injunctive relief, but instead indicate that a mark may not be expanded beyond the good or service for

which it was originally designated.

John Morrell, the judicial authority providing the most direct support for the decision below, was subsequently

overruled in Union Carbide Corp. v. Ever-Ready, Inc., 531 F.2d 366 (CA7), cert. denied, 429 U.S. 830 (1976).

In Union Carbide the Court of Appeals for the Seventh Circuit acknowledged that its earlier decision in John

Morrellwas unsupported by the language or legislative history of the Lanham Act and had been based on a

misreading of Rand McNally. 531 F.2d at 373, 377. A registrant may rely on

Page 469 U. S. 205

the incontestable status of the mark in an infringement action, Union Carbideconcluded, and a "[d]efendant

faced with an incontestable registered mark cannot defend by claiming that the mark is invalid because it is

descriptive.'" Id. at 377 (quoting 1 J. McCarthy, Trademarks and Unfair Competition § 11.16, p. 377 (1st

ed.1973)).

Other courts have subsequently followed Union Carbide and concluded that a plaintiff may rely on the

incontestable status of a trade or service mark in an infringement action. See, e.g., United States Jaycees v.

Philadelphia Jaycees, 639 F.2d 134, 137 (CA3 1981); Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1184-1185

(CA5 1980), cert. denied, 450 U.S. 981 (1981). The Patent Office has also rejected any offensive/defensive

distinction with respect to the use of an incontestable mark. See Ansull Co. v. Malter International Corp., 199

U.S.P.Q. 596, 599-600 (TTAB 1978). Thus, the doctrine relied on by the Court of Appeals in this case is best

described as flawed in its origin and subsequently discredited by its progenitors.

VI

We conclude that the holder of a registered mark may rely on incontestability to enjoin infringement and that

such an action may not be defended on the grounds that the mark is merely descriptive. Respondent urges that

we nevertheless affirm the decision below based on the "prior use" defense recognized by § 33(b)(5) of the

Lanham Act. Alternatively, respondent argues that there is no likelihood of confusion and therefore no

infringement justifying injunctive relief. The District Court rejected each of these arguments, but they were not

addressed by the Court of Appeals. 718 F.2d at 331-332, n. 4. That court may consider them on remand. The

judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with

this opinion.

It is so ordered.

COFFEE PARTNERS, INC. vs. SAN FRANCISCO COFFEE & ROASTERY, INC., G.R. No. 169504

The Case

21

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 This is a petition for review[1] of the 15 June 2005 Decision[2] and the     1 September 2005

Resolution[3] of the Court of Appeals in CA-G.R. SP      No. 80396. In its 15 June 2005 Decision, the Court of

Appeals set aside the 22 October 2003 Decision[4] of the Office of the Director General-Intellectual Property

Office and reinstated the 14 August 2002 Decision[5] of the Bureau of Legal Affairs-Intellectual Property Office.

In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s motion for reconsideration and

respondent’s motion for partial reconsideration.

 

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and

maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in

January 2001. It has a franchise agreement[6] with Coffee Partners Ltd. (CPL), a business entity organized and

existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the

Philippines using trademarks designed by CPL such as “SAN FRANCISCO COFFEE.”

 

         Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with

the SEC in May 1995. It registered the business name “SAN FRANCISCO COFFEE & ROASTERY, INC.” with

the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that

included Figaro Company, Tagaytay Highlands, Fat Willy’s, and other coffee companies.

 

         In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name

Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale

selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other

commercial establishments in Metro Manila.

 

         In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name

“SAN FRANCISCO COFFEE” in Libis, Quezon City. According to respondent, petitioner’s shop caused

confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling

coffee. Respondent sent  a letter to petitioner demanding that the latter stop using the name “SAN

FRANCISCO COFFEE.” Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual

Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages.

 

         In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the

Intellectual Property Office (IPO) applications for registration of the mark “SAN FRANCISCO COFFEE &

DEVICE” for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused

with respondent’s trade name because of the notable distinctions in their appearances. Petitioner argued

respondent stopped operating under the trade name “SAN FRANCISCO COFFEE” when it formed a joint

venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead

one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it

had diverted business away from respondent.

 

         Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City

opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City.

He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with

22

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the

business when one Arthur Gindang invited him to invest in a coffee shop and  introduced him to Mr. Boxwell.

For his part, Mr. Boxwell attested that the coffee shop  “SAN FRANCISCO COFFEE” has branches in Malaysia

and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and

Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided

to invest in a similar venture and adopted the name “SAN FRANCISCO COFFEE” from the famous city in

California where he and his former colleagues once lived and where special coffee roasts came from.

 

The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

 

         In its 14 August 2002 Decision, the BLA-IPO held that petitioner’s trademark infringed on respondent’s

trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by

similarity is determined from priority of adoption. Since respondent registered its business name with the DTI

in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other

countries, then respondent must be protected from infringement of its trade name.

 

         The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence

indicated respondent continuously used its trade name in connection with the purpose for which it was

organized. It found that although respondent was no longer involved in blending, roasting, and distribution of

coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of

coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be

permanent, intentional, and voluntary.

 

         The BLA-IPO held that petitioner’s use of the trademark “SAN FRANCISCO COFFEE” will likely cause

confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the

words “SAN FRANCISCO” which is the dominant portion of respondent’s trade name and petitioner’s

trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the

center in petitioner's trademark because greater weight is given to words – the medium consumers use in

ordering coffee products.

 

         On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner

adopted the trademark “SAN FRANCISCO COFFEE” because of the authority granted to it by its franchisor.

The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner.

 

         The BLA-IPO also dismissed respondent’s claim of actual damages because its claims of profit loss were

based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO

likewise dismissed respondent’s claim of moral damages, but granted its claim of attorney’s fees.

 

         Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while

respondent questioned the denial of actual damages. The BLA-IPO denied the parties’ partial motion for

reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-

IPO).

 

23

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

The Ruling of the Office of the Director General-

Intellectual Property Office

 

         In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It  ruled that petitioner’s use of the

trademark “SAN FRANCISCO COFFEE” did not infringe on respondent's trade name. The ODG-IPO found that

respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in

1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in

Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who

had stopped using such trade name, it would be inequitable to rule in favor of the latter.

 

The Ruling of the Court of Appeals

 

         In its 15 June 2005 Decision, the Court of Appeals set aside the        22 October 2003 decision of the

ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the

BLA-IPO finding infringement. The appellate court denied respondent’s claim for actual damages and retained

the award of attorney’s fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s

motion for reconsideration and respondent’s motion for partial reconsideration.

 

The Issue

               

          The sole issue is whether petitioner’s use of the trademark “SAN FRANCISCO COFFEE” constitutes

infringement of respondent’s trade name “SAN FRANCISCO COFFEE & ROASTERY, INC.,” even if the

trade name is not registered with the Intellectual Property Office (IPO).

 

The Court’s Ruling

 

         The petition has no merit.

 

          Petitioner contends that when a trade name is not registered, a suit for infringement is not available.

Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondent’s

registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner

opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its

business name registration. Petitioner stresses respondent’s failure to continue the use of its trade name to

designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur

between its trademark and respondent’s trade name because of a wide divergence in the channels of trade,

petitioner serving ready-made coffee while respondent is in wholesale blending, roasting, and distribution of

coffee. Lastly, petitioner avers the proper noun “San Francisco” and the generic word “coffee” are not capable

of exclusive appropriation.

 

         Respondent maintains the law protects trade names from infringement even if they are not registered

with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)[7]dispensed with registration of a trade

name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the

trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned

24

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the

use of its trademark and by the filing of the infringement case. Respondent alleges petitioner’s trademark is

confusingly similar to respondent’s trade name. Respondent stresses ordinarily prudent consumers are likely

to be misled about the source, affiliation, or sponsorship of  petitioner’s coffee.

 

         As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent

continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which

negates abandonment. This finding was upheld by the Court of Appeals, which further found that while

respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee

machines, one of the services for which the use of the business name has been registered. The binding effect of

the factual findings of the Court of Appeals on this Court applies with greater force when both the quasi-

judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual

findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions

made by the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court

necessarily upholds such findings of fact.[8]

 

         Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA,[9] this Court laid down what constitutes infringement of an unregistered trade name, thus:

 

(1)   The trademark being infringed is registered in the Intellectual      Property Office;

however, in infringement of trade name, the same need not be registered;

(2)   The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated

by the infringer;

 (3)   The infringing mark or trade name is used in connection with the sale, offering for sale, or

advertising of any goods, business or services; or the infringing mark or trade name is applied

to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used

upon or in connection with such goods, business, or services;

 (4)   The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to

deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods

or services or the identity of such business; and

 (5)   It is without the consent of the trademark or trade name owner or the assignee thereof. [10] (Emphasis

supplied)

 

         Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its

owner against the owner of an infringing trademark. All that is required is that the trade name is previously

used in trade or commerce in the Philippines.[11]

 

         Section 22 of Republic Act No. 166,[12] as amended, required registration of a trade name as a condition

for the institution of an infringement suit, to wit:

 

            Sec. 22.  Infringement, what constitutes. – Any person who shall use, without the

consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of any 25

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

registered mark or trade name in connection with the sale, offering for sale, or advertising of

any goods, business or services on or in connection with which such use is likely to cause

confusion or mistake or to deceive purchasers or others as to the source or origin of such

goods or services, or identity of such business; or reproduce, counterfeit, copy, or colorably

imitate any such mark or trade name and apply such reproduction, counterfeit, copy, or

colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements

intended to be used upon or in connection with such goods, business, or services, shall be

liable to a civil action by the registrant for any or all of the remedies herein provided.

(Emphasis supplied)

 

           

         HOWEVER, RA 8293, WHICH TOOK EFFECT ON 1 JANUARY 1998, HAS DISPENSED WITH THE

REGISTRATION REQUIREMENT. SECTION 165.2 OF RA 8293 CATEGORICALLY STATES THAT TRADE

NAMES SHALL BE PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION WITH THE IPO, AGAINST

ANY UNLAWFUL ACT INCLUDING ANY SUBSEQUENT USE OF THE TRADE NAME BY A THIRD PARTY,

WHETHER AS A TRADE NAME OR A TRADEMARK LIKELY TO MISLEAD THE PUBLIC. THUS:

 

          SEC. 165.2 (A) NOTWITHSTANDING ANY LAWS OR REGULATIONS PROVIDING

FOR ANY OBLIGATION TO REGISTER TRADE NAMES, SUCH NAMES SHALL BE

PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION, AGAINST ANY

UNLAWFUL ACT COMMITTED BY THIRD PARTIES.

           

            (B) IN PARTICULAR, ANY SUBSEQUENT USE OF A TRADE NAME BY A THIRD PARTY, WHETHER AS

A TRADE NAME OR A MARK OR COLLECTIVE MARK, OR ANY SUCH USE OF A SIMILAR TRADE NAME OR

MARK, LIKELY TO MISLEAD THE PUBLIC, SHALL BE DEEMED UNLAWFUL. (EMPHASIS SUPPLIED)

        

 

         IT IS THE LIKELIHOOD OF CONFUSION THAT IS THE GRAVAMEN OF INFRINGEMENT. BUT THERE

IS NO ABSOLUTE STANDARD FOR LIKELIHOOD OF CONFUSION. ONLY THE PARTICULAR, AND

SOMETIMES PECULIAR, CIRCUMSTANCES OF EACH CASE CAN DETERMINE ITS EXISTENCE. THUS, IN

INFRINGEMENT CASES, PRECEDENTS MUST BE EVALUATED IN THE LIGHT OF EACH PARTICULAR

CASE.[13]

 

         IN DETERMINING SIMILARITY AND LIKELIHOOD OF CONFUSION, OUR JURISPRUDENCE HAS

DEVELOPED TWO TESTS: THE DOMINANCY TEST AND THE HOLISTIC TEST. THE DOMINANCY TEST

FOCUSES ON THE SIMILARITY OF THE PREVALENT FEATURES OF THE COMPETING TRADEMARKS THAT

MIGHT CAUSE CONFUSION AND DECEPTION, THUS CONSTITUTING INFRINGEMENT. IF THE

COMPETING TRADEMARK CONTAINS THE MAIN, ESSENTIAL, AND DOMINANT FEATURES OF ANOTHER,

AND CONFUSION OR DECEPTION IS LIKELY TO RESULT, INFRINGEMENT OCCURS. EXACT DUPLICATION

OR IMITATION IS NOT REQUIRED. THE QUESTION IS WHETHER THE USE OF THE MARKS INVOLVED IS

LIKELY TO CAUSE CONFUSION OR MISTAKE IN THE MIND OF THE PUBLIC OR TO DECEIVE

CONSUMERS.[14]

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

         IN CONTRAST, THE HOLISTIC TEST ENTAILS A CONSIDERATION OF THE ENTIRETY OF THE MARKS

AS APPLIED TO THE PRODUCTS, INCLUDING THE LABELS AND PACKAGING, IN DETERMINING

CONFUSING SIMILARITY.[15] THE DISCERNING EYE OF THE OBSERVER MUST FOCUS NOT ONLY ON THE

PREDOMINANT WORDS BUT ALSO ON THE OTHER FEATURES APPEARING ON BOTH  MARKS IN ORDER

THAT THE OBSERVER MAY DRAW HIS CONCLUSION WHETHER ONE IS CONFUSINGLY SIMILAR TO THE

OTHER.[16]

 

         APPLYING EITHER THE DOMINANCY TEST OR THE HOLISTIC TEST, PETITIONER’S “SAN

FRANCISCO COFFEE” TRADEMARK IS A CLEAR INFRINGEMENT OF RESPONDENT’S “SAN FRANCISCO

COFFEE & ROASTERY, INC.” TRADE NAME. THE DESCRIPTIVE WORDS “SAN FRANCISCO COFFEE” ARE

PRECISELY THE DOMINANT FEATURES OF RESPONDENT’S TRADE NAME. PETITIONER AND

RESPONDENT ARE ENGAGED IN THE SAME BUSINESS OF SELLING COFFEE, WHETHER WHOLESALE OR

RETAIL. THE LIKELIHOOD OF CONFUSION IS HIGHER IN CASES WHERE THE BUSINESS OF ONE

CORPORATION IS THE SAME OR SUBSTANTIALLY THE SAME AS THAT OF ANOTHER CORPORATION. IN

THIS CASE, THE CONSUMING PUBLIC WILL LIKELY BE CONFUSED AS TO THE SOURCE OF THE COFFEE

BEING SOLD AT PETITIONER’S COFFEE SHOPS. PETITIONER’S ARGUMENT THAT “SAN FRANCISCO” IS

JUST A PROPER NAME REFERRING TO THE FAMOUS CITY IN CALIFORNIA AND THAT “COFFEE” IS

SIMPLY A GENERIC TERM, IS UNTENABLE. RESPONDENT HAS ACQUIRED AN EXCLUSIVE RIGHT TO THE

USE OF THE TRADE NAME “SAN FRANCISCO COFFEE & ROASTERY, INC.” SINCE THE  REGISTRATION

OF THE BUSINESS NAME WITH THE DTI IN 1995. THUS, RESPONDENT’S USE OF ITS TRADE NAME

FROM THEN ON MUST BE FREE FROM ANY INFRINGEMENT BY SIMILARITY. OF COURSE, THIS DOES

NOT MEAN THAT RESPONDENT HAS EXCLUSIVE USE OF THE GEOGRAPHIC WORD “SAN FRANCISCO”

OR THE GENERIC WORD “COFFEE.” GEOGRAPHIC OR GENERIC WORDS ARE NOT, PER SE, SUBJECT TO

EXCLUSIVE APPROPRIATION. IT IS ONLY THE COMBINATION OF THE WORDS “SAN FRANCISCO

COFFEE,” WHICH IS RESPONDENT’S TRADE NAME IN ITS COFFEE BUSINESS, THAT IS PROTECTED

AGAINST INFRINGEMENT ON MATTERS RELATED TO THE COFFEE BUSINESS TO AVOID CONFUSING OR

DECEIVING THE PUBLIC.

 

         IN PHILIPS EXPORT B.V. V. COURT OF APPEALS,[17] THIS COURT HELD THAT A CORPORATION

HAS  AN EXCLUSIVE RIGHT TO THE USE OF ITS NAME. THE RIGHT PROCEEDS FROM THE THEORY THAT

IT IS A FRAUD ON THE CORPORATION WHICH HAS ACQUIRED A RIGHT TO THAT NAME AND PERHAPS

CARRIED ON ITS BUSINESS THEREUNDER, THAT ANOTHER SHOULD ATTEMPT TO USE THE SAME

NAME, OR THE SAME NAME WITH A SLIGHT VARIATION IN SUCH A WAY AS TO INDUCE PERSONS TO

DEAL WITH IT IN THE BELIEF THAT THEY ARE DEALING WITH THE CORPORATION WHICH HAS GIVEN A

REPUTATION TO THE NAME.[18] 

 

         THIS COURT IS NOT JUST A COURT OF LAW, BUT ALSO OF EQUITY. WE CANNOT  ALLOW

PETITIONER TO PROFIT BY THE NAME AND REPUTATION SO FAR BUILT BY RESPONDENT WITHOUT

RUNNING AFOUL OF THE BASIC DEMANDS OF FAIR PLAY. NOT ONLY THE LAW BUT EQUITY

CONSIDERATIONS HOLD PETITIONER LIABLE FOR INFRINGEMENT OF RESPONDENT’S TRADE NAME.

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

         THE COURT OF APPEALS WAS CORRECT IN SETTING ASIDE THE 22 OCTOBER 2003 DECISION OF

THE OFFICE OF THE DIRECTOR GENERAL-INTELLECTUAL PROPERTY OFFICE AND IN REINSTATING THE

14 AUGUST 2002 DECISION OF THE BUREAU OF LEGAL AFFAIRS-INTELLECTUAL PROPERTY OFFICE.

 

         WHEREFORE, WE DENY THE PETITION FOR REVIEW. WE AFFIRM THE 15 JUNE 2005 DECISION

AND 1 SEPTEMBER 2005 RESOLUTION OF THE COURT OF APPEALS IN CA-G.R. SP NO. 80396.

 

         COSTS AGAINST PETITIONER.

 

         SO ORDERED.

ZATARAINS, INC v. OAK GROVE SMOKEHOUSE, INC. and Visko's Fish Fry, Inc., 698 F.2d 786

This appeal of a trademark dispute presents us with a menu of edible delights sure to tempt connoisseurs of

fish and fowl alike. At issue is the alleged infringement of two trademarks, "Fish-Fri" and "Chick-Fri," held by

appellant Zatarain's, Inc. ("Zatarain's"). The district court held that the alleged infringers had a "fair use"

defense to any asserted infringement of the term "Fish-Fri" and that the registration of the term "Chick-Fri"

should be cancelled. We affirm.

I. FACTS AND PROCEEDINGS BELOW

A. THE TALE OF THE TOWN FRIER

Zatarain's is the manufacturer and distributor of a line of over one hundred food products. Two of these

products, "Fish-Fri" and "Chick-Fri," are coatings or batter mixes used to fry foods. These marks serve as the

entree in the present litigation.

Zatarain's "Fish-Fri" consists of 100% corn flour and is used to fry fish and other seafood. "Fish-Fri" is

packaged in rectangular cardboard boxes containing twelve or twenty-four ounces of coating mix. The legend

"Wonderful FISH-FRI TM " is displayed prominently on the front panel, along with the block Z used to identify

all Zatarain's products. The term "Fish-Fri" has been used by Zatarain's or its predecessor since 1950 and has

been registered as a trademark since 1962.

Zatarain's "Chick-Fri" is a seasoned corn flour batter mix used for frying chicken and other foods. The

"Chick-Fri" package, which is very similar to that used for "Fish-Fri," is a rectangular cardboard container

labelled "Wonderful CHICK-FRI." Zatarain's began to use the term "Chick-Fri" in 1968 and registered the term

as a trademark in 1976.

Zatarain's products are not alone in the marketplace. At least four other companies market coatings for

fried foods that are denominated "fish fry" or "chicken fry." Two of these competing companies are the

appellees here, and therein hangs this fish tale.

Appellee Oak Grove Smokehouse, Inc. ("Oak Grove") began marketing a "fish fry" and a "chicken fry" in

March 1979. Both products are packaged in clear glassine packets that contain a quantity of coating mix

sufficient to fry enough food for one meal. The packets are labelled with Oak Grove's name and emblem, along

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

with the words "FISH FRY" OR "CHICKEN FRY." Oak Grove's "FISH FRY" has a corn flour base seasoned with

various spices; Oak Grove's "CHICKEN FRY" is a seasoned coating with a wheat flour base.

Appellee Visko's Fish Fry, Inc. ("Visko's") entered the batter mix market in March 1980 with its "fish fry."

Visko's product is packed in a cylindrical eighteen-ounce container with a resealable plastic lid. The words

"Visko's FISH FRY" appear on the label along with a photograph of a platter of fried fish. Visko's coating mix

contains corn flour and added spices.

Other food manufacturing concerns also market coating mixes. Boochelle's Spice Co. ("Boochelle's"),

originally a defendant in this lawsuit, at one time manufactured a seasoned "FISH FRY" packaged in twelve-

ounce vinyl plastic packets. Pursuant to a settlement between Boochelle's and Zatarain's, Boochelle's product

is now labelled "FISH AND VEGETABLE FRY." Another batter mix, "YOGI Brand TM OYSTER SHRIMP and

FISH FRY," is also available. Arnaud Coffee Corporation ("Arnaud") has manufactured and marketed "YOGI

Brand" for ten to twenty years, but was never made a party to this litigation.1 A product called "Golden Dipt

Old South Fish Fry" has recently entered the market as well.

B. OUT OF THE FRYING PAN, INTO THE FIRE

Zatarain's first claimed foul play in its original complaint filed against Oak Grove on June 19, 1979, in the

United States District Court for the Eastern District of Louisiana. The complaint alleged trademark

infringement and unfair competition under the Lanham Act Secs. 32(1), 43(a), 15 U.S.C. Secs. 1114(1), 1125(a)

(1976), and La.Rev.Stat.Ann. Sec. 51:1405(A) (West Supp.1982). Zatarain's later amended its complaint to add

Boochelle's and Visko's as defendants. Boochelle's and Zatarain's ultimately resolved their dispute, and

Boochelle's was dismissed from the suit. The remaining defendants, Oak Grove and Visko's, filed counterclaims

against Zatarain's under the Sherman Act Sec. 2, 15 U.S.C. Sec. 2 (1976); the Clayton Act Sec. 4, 15 U.S.C.

Sec. 15 (1976); La.Rev.Stat.Ann. Sec. 51:1401 (West Supp.1982); the Fair Packaging and Labeling Act, 15

U.S.C. Secs. 1451-1461 (1976); and the Food, Drug, and Cosmetic Act Sec. 403, 21 U.S.C. Sec. 343 (1976). The

defendants also counterclaimed for cancellation of the trademarks "Fish-Fri" and "Chick-Fri" under section 37

of the Lanham Act, 15 U.S.C. Sec. 1119 (1976), and for damages under section 38 of the Lanham Act, 15

U.S.C. Sec. 1120 (1976).

The case was tried to the court without a jury. Treating the trademark claims first, the district court

classified the term "Fish-Fri" as a descriptive term identifying a function of the product being sold. The court

found further that the term "Fish-Fri" had acquired a secondary meaning in the New Orleans geographical

area and therefore was entitled to trademark protection, but concluded that the defendants were entitled to

fair use of the term "fish fry" to describe characteristics of their goods. Accordingly, the court held that Oak

Grove and Visko's had not infringed Zatarain's trademark "Fish-Fri."

With respect to the alleged infringement of the term "Chick-Fri," the court found that "Chick-Fri" was a

descriptive term that had not acquired a secondary meaning in the minds of consumers. Consequently, the

court held that Zatarain's claim for infringement of its trademark "Chick-Fri" failed and ordered that the

trademark registration of "Chick-Fri" should be cancelled.

Turning to Zatarain's unfair competition claims, the court observed that the evidence showed no likelihood

of or actual confusion on the part of the buying public. Additionally, the court noted that the dissimilarities in

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

trade dress of Zatarain's, Oak Grove's, and Visko's products diminished any possibility of buyer confusion. For

these reasons, the court found no violations of federal or state unfair competition laws.

Finally, the court addressed the counterclaims asserted by Oak Grove and Visko's. Because no evidence was

introduced to support the defendants' allegations of monopolistic behavior, fraud, and bad faith on the part of

Zatarain's, the court dismissed the federal and state antitrust and unfair trade practices counterclaims. The

court also dismissed the counterclaim based on Zatarain's allegedly improper product identity labelling. Both

sides now appeal to this court.

II. ISSUES ON APPEAL

The district court found that Zatarain's trademark "Fish-Fri" was a descriptive term with an established

secondary meaning, but held that Oak Grove and Visko's had a "fair use" defense to their asserted

infringement of the mark. The court further found that Zatarain's trademark "Chick-Fri" was a descriptive term

that lacked secondary meaning, and accordingly ordered the trademark registration cancelled. Additionally,

the court concluded that Zatarain's had produced no evidence in support of its claims of unfair competition on

the part of Oak Grove and Visko's. Finally, the court dismissed Oak Grove's and Visko's counterclaims for

antitrust violations, unfair trade practices, misbranding of food products, and miscellaneous damages.

Battered, but not fried, Zatarain's appeals from the adverse judgment on several grounds. First, Zatarain's

argues that its trademark "Fish-Fri" is a suggestive term and therefore not subject to the "fair use" defense.

Second, Zatarain's asserts that even if the "fair use" defense is applicable in this case, appellees cannot invoke

the doctrine because their use of Zatarain's trademarks is not a good faith attempt to describe their products.

Third, Zatarain's urges that the district court erred in cancelling the trademark registration for the term

"Chick-Fri" because Zatarain's presented sufficient evidence to establish a secondary meaning for the term.

For these reasons, Zatarain's argues that the district court should be reversed.

Oak Grove and Visko's also present an appeal to this court, contending that the district court erred in

dismissing their counterclaims against Zatarain's. In particular, Oak Grove and Visko's again urge that

Zatarain's conduct has violated the Sherman Act, the Lanham Act, the federal regulations governing product

identity labelling, and Louisiana law prohibiting restraint of trade; Oak Grove and Visko's also pray for an

award of attorneys' fees. We now turn to an appraisal of these issues.

III. THE TRADEMARK CLAIMS

A. BASIC PRINCIPLES2

1. Classifications of Marks

The threshold issue in any action for trademark infringement is whether the word or phrase is initially

registerable or protectable. Vision Center v. Opticks, Inc., 596 F.2d 111, 115 (5th Cir.1980); American

Heritage Life Insurance Co. v. Heritage Life Insurance Co., 494 F.2d 3, 10 (5th Cir.1974). Courts and

commentators have traditionally divided potential trademarks into four categories. A potential trademark may

be classified as (1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or fanciful. These categories, like

the tones in a spectrum, tend to blur at the edges and merge together. The labels are more advisory than

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

definitional, more like guidelines than pigeonholes. Not surprisingly, they are somewhat difficult to articulate

and to apply. Soweco, Inc. v. Shell Oil Co., 617 F.2d 1178, 1183 (5th Cir.1980); Vision Center, 596 F.2d at 115.

A generic term is "the name of a particular genus or class of which an individual article or service is but a

member." Vision Center, 596 F.2d at 115; Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d

Cir.1976). A generic term connotes the "basic nature of articles or services" rather than the more

individualized characteristics of a particular product. American Heritage, 494 F.2d at 11. Generic terms can

never attain trademark protection. William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 528, 44 S.Ct. 615,

616, 68 L.Ed. 1161 (1924); Soweco, 617 F.2d at 1183; Vision Center, 596 F.2d at 115. Furthermore, if at any

time a registered trademark becomes generic as to a particular product or service, the mark's registration is

subject to cancellation. Lanham Act Sec. 14, 15 U.S.C. Sec. 1064(c) (1976). Such terms as aspirin and

cellophane have been held generic and therefore unprotectable as trademarks. See Bayer Co. v. United Drug

Co., 272 F. 505 (S.D.N.Y.1921) (aspirin); DuPont Cellophane Co. v. Waxed Products Co., 85 F.2d 75 (2d

Cir.1936) (cellophane).

A descriptive term "identifies a characteristic or quality of an article or service," Vision Center, 596 F.2d at

115, such as its color, odor, function, dimensions, or ingredients. American Heritage, 494 F.2d at 11.

Descriptive terms ordinarily are not protectable as trademarks, Lanham Act Sec. 2(e)(1), 15 U.S.C. Sec.

1052(e)(1) (1976); they may become valid marks, however, by acquiring a secondary meaning in the minds of

the consuming public. See id. Sec. 2(f), 15 U.S.C. Sec. 1052(f). Examples of descriptive marks would include

"Alo" with reference to products containing gel of the aloe vera plant, Aloe Creme Laboratories, Inc. v. Milsan,

Inc., 423 F.2d 845 (5th Cir.1970), and "Vision Center" in reference to a business offering optical goods and

services, Vision Center, 596 F.2d at 117. As this court has often noted, the distinction between descriptive and

generic terms is one of degree. Soweco, 617 F.2d at 1184; Vision Center, 596 F.2d at 115 n. 11 (citing 3 R.

Callman, The Law of Unfair Competition, Trademarks and Monopolies Sec. 70.4 (3d ed. 1969)); American

Heritage, 494 F.2d at 11. The distinction has important practical consequences, however; while a descriptive

term may be elevated to trademark status with proof of secondary meaning, a generic term may never achieve

trademark protection. Vision Center, 596 F.2d at 115 n.11.

A suggestive term suggests, rather than describes, some particular characteristic of the goods or services to

which it applies and requires the consumer to exercise the imagination in order to draw a conclusion as to the

nature of the goods and services. Soweco, 617 F.2d at 1184; Vision Center, 596 F.2d at 115-16. A suggestive

mark is protected without the necessity for proof of secondary meaning. The term "Coppertone" has been held

suggestive in regard to sun tanning products. See Douglas Laboratories, Inc. v. Copper Tan, Inc., 210 F.2d 453

(2d Cir.1954).

Arbitrary or fanciful terms bear no relationship to the products or services to which they are applied. Like

suggestive terms, arbitrary and fanciful marks are protectable without proof of secondary meaning. The term

"Kodak" is properly classified as a fanciful term for photographic supplies, see Eastman Kodak Co. v. Weil, 137

Misc. 506, 243 N.Y.S. 319 (1930) ("Kodak"); "Ivory" is an arbitrary term as applied to soap. Abercrombie &

Fitch, 537 F.2d at 9 n.6.

2. Secondary Meaning

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

As noted earlier, descriptive terms are ordinarily not protectable as trademarks. They may be protected,

however, if they have acquired a secondary meaning for the consuming public. The concept of secondary

meaning recognizes that words with an ordinary and primary meaning of their own "may by long use with a

particular product, come to be known by the public as specifically designating that product." Volkswagenwerk

Aktiengesellschaft v. Rickard, 492 F.2d 474, 477 (5th Cir.1974). In order to establish a secondary meaning for

a term, a plaintiff "must show that the primary significance of the term in the minds of the consuming public is

not the product but the producer." Kellogg Co. v. National Biscuit Co., 305 U.S. 111, 118, 59 S.Ct. 109, 113, 83

L.Ed. 73 (1938). The burden of proof to establish secondary meaning rests at all times with the plaintiff; this

burden is not an easy one to satisfy, for " '[a] high degree of proof is necessary to establish secondary meaning

for a descriptive term.' " Vision Center, 596 F.2d at 118 (quoting 3 R. Callman, supra, Sec. 77.3, at 359). Proof

of secondary meaning is an issue only with respect to descriptive marks; suggestive and arbitrary or fanciful

marks are automatically protected upon registration, and generic terms are unprotectible even if they have

acquired secondary meaning. See Soweco, 617 F.2d at 1185 n.20.

3. The "Fair Use" Defense

Even when a descriptive term has acquired a secondary meaning sufficient to warrant trademark protection,

others may be entitled to use the mark without incurring liability for trademark infringement. When the

allegedly infringing term is "used fairly and in good faith only to describe to users the goods or services of [a]

party, or their geographic origin," Lanham Act Sec. 33(b)(4), 15 U.S.C. Sec. 1115(b)(4) (1976), a defendant in a

trademark infringement action may assert the "fair use" defense. The defense is available only in actions

involving descriptive terms and only when the term is used in its descriptive sense rather than its trademark

sense. Soweco, 617 F.2d at 1185; see Venetianaire Corp. v. A & P Import Co., 429 F.2d 1079, 1081-82 (2d

Cir.1970). In essence, the fair use defense prevents a trademark registrant from appropriating a descriptive

term for its own use to the exclusion of others, who may be prevented thereby from accurately describing their

own goods. Soweco, 617 F.2d at 1185. The holder of a protectable descriptive mark has no legal claim to an

exclusive right in the primary, descriptive meaning of the term; consequently, anyone is free to use the term in

its primary, descriptive sense so long as such use does not lead to customer confusion as to the source of the

goods or services. See 1 J. McCarthy, Trademarks and Unfair Competition Sec. 11.17, at 379 (1973).

4. Cancellation of Trademarks

Section 37 of the Lanham Act, 15 U.S.C. Sec. 1119 (1976), provides as follows:

In any action involving a registered mark the court may determine the right to registration, order the

cancelation of registrations, in whole or in part, restore canceled registrations, and otherwise rectify the

register with respect to the registrations of any party to the action. Decrees and orders shall be certified by the

court to the Commissioner, who shall make appropriate entry upon the records of the Patent Office, and shall

be controlled thereby.

This circuit has held that when a court determines that a mark is either a generic term or a descriptive term

lacking secondary meaning, the purposes of the Lanham Act are well served by an order cancelling the mark's

registration. American Heritage, 494 F.2d at 14.

We now turn to the facts of the instant case.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

B. "FISH-FRI"3

1. Classification

Throughout this litigation, Zatarain's has maintained that the term "Fish-Fri" is a suggestive mark

automatically protected from infringing uses by virtue of its registration in 1962. Oak Grove and Visko's assert

that "fish fry" is a generic term identifying a class of foodstuffs used to fry fish; alternatively, Oak Grove and

Visko's argue that "fish fry" is merely descriptive of the characteristics of the product. The district court found

that "Fish-Fri" was a descriptive term identifying a function of the product being sold. Having reviewed this

finding under the appropriate "clearly erroneous" standard, we affirm. See Vision Center, 596 F.2d at 113.

We are mindful that "[t]he concept of descriptiveness must be construed rather broadly." 3 R. Callman,

supra, Sec. 70.2. Whenever a word or phrase conveys an immediate idea of the qualities, characteristics,

effect, purpose, or ingredients of a product or service, it is classified as descriptive and cannot be claimed as

an exclusive trademark. Id. Sec. 71.1; see Stix Products, Inc. v. United Merchants & Manufacturers, Inc., 295

F.Supp. 479, 488 (S.D.N.Y.1968). Courts and commentators have formulated a number of tests to be used in

classifying a mark as descriptive.

A suitable starting place is the dictionary, for "[t]he dictionary definition of the word is an appropriate and

relevant indication 'of the ordinary significance and meaning of words' to the public." American Heritage, 494

F.2d at 11 n.5; see also Vision Center, 596 F.2d at 116. Webster's Third New International Dictionary 858

(1966) lists the following definitions for the term "fish fry": "1. a picnic at which fish are caught, fried, and

eaten; .... 2. fried fish." Thus, the basic dictionary definitions of the term refer to the preparation and

consumption of fried fish. This is at least preliminary evidence that the term "Fish-Fri" is descriptive of

Zatarain's product in the sense that the words naturally direct attention to the purpose or function of the

product.

The "imagination test" is a second standard used by the courts to identify descriptive terms. This test seeks

to measure the relationship between the actual words of the mark and the product to which they are applied. If

a term "requires imagination, thought and perception to reach a conclusion as to the nature of goods," Stix

Products, 295 F.Supp. at 488, it is considered a suggestive term. Alternatively, a term is descriptive if standing

alone it conveys information as to the characteristics of the product. In this case, mere observation compels

the conclusion that a product branded "Fish-Fri" is a prepackaged coating or batter mix applied to fish prior to

cooking. The connection between this merchandise and its identifying terminology is so close and direct that

even a consumer unfamiliar with the product would doubtless have an idea of its purpose or function. It simply

does not require an exercise of the imagination to deduce that "Fish-Fri" is used to fry fish. See Vision Center,

596 F.2d at 116-17; Stix Products, 295 F.Supp. at 487-88. Accordingly, the term "Fish-Fri" must be considered

descriptive when examined under the "imagination test."

A third test used by courts and commentators to classify descriptive marks is "whether competitors would

be likely to need the terms used in the trademark in describing their products." Union Carbide Corp. v. Ever-

Ready, Inc., 531 F.2d 366, 379 (7th Cir.1976). A descriptive term generally relates so closely and directly to a

product or service that other merchants marketing similar goods would find the term useful in identifying their

own goods. Vision Center, 596 F.2d at 116-17; Stix Products, 295 F.Supp. at 488. Common sense indicates that

in this case merchants other than Zatarain's might find the term "fish fry" useful in describing their own

33

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

particular batter mixes. While Zatarain's has argued strenuously that Visko's and Oak Grove could have chosen

from dozens of other possible terms in naming their coating mix, we find this position to be without merit. As

this court has held, the fact that a term is not the only or even the most common name for a product is not

determinative, for there is no legal foundation that a product can be described in only one fashion. Vision

Center, 596 F.2d at 117 n.17. There are many edible fish in the sea, and as many ways to prepare them as

there are varieties to be prepared. Even piscatorial gastronomes would agree, however, that frying is a form of

preparation accepted virtually around the world, at restaurants starred and unstarred. The paucity of

synonyms for the words "fish" and "fry" suggests that a merchant whose batter mix is specially spiced for

frying fish is likely to find "fish fry" a useful term for describing his product.

A final barometer of the descriptiveness of a particular term examines the extent to which a term actually

has been used by others marketing a similar service or product. Vision Center, 596 F.2d at 117; Shoe Corp. of

America v. Juvenile Shoe Corp., 266 F.2d 793, 796 (C.C.P.A.1959). This final test is closely related to the

question whether competitors are likely to find a mark useful in describing their products. As noted above, a

number of companies other than Zatarain's have chosen the word combination "fish fry" to identify their batter

mixes. Arnaud's product, "Oyster Shrimp and Fish Fry," has been in competition with Zatarain's "Fish-Fri" for

some ten to twenty years. When companies from A to Z, from Arnaud to Zatarain's, select the same term to

describe their similar products, the term in question is most likely a descriptive one.

The correct categorization of a given term is a factual issue, Soweco, 617 F.2d at 1183 n.12; consequently,

we review the district court's findings under the "clearly erroneous" standard of Fed.R.Civ.P. 52. See Vision

Center, 596 F.2d at 113; Volkswagenwerk, 492 F.2d at 478. The district court in this case found that Zatarain's

trademark "Fish-Fri" was descriptive of the function of the product being sold. Having applied the four

prevailing tests of descriptiveness to the term "Fish-Fri," we are convinced that the district court's judgment in

this matter is not only not clearly erroneous, but clearly correct.4

2. Secondary Meaning

Descriptive terms are not protectable by trademark absent a showing of secondary meaning in the minds of

the consuming public.5 To prevail in its trademark infringement action, therefore, Zatarain's must prove that

its mark "Fish-Fri" has acquired a secondary meaning and thus warrants trademark protection. The district

court found that Zatarain's evidence established a secondary meaning for the term "Fish-Fri" in the New

Orleans area. We affirm.

The existence of secondary meaning presents a question for the trier of fact, and a district court's finding on

the issue will not be disturbed unless clearly erroneous. American Heritage, 494 F.2d at 13; Volkswagenwerk,

492 F.2d at 477. The burden of proof rests with the party seeking to establish legal protection for the mark--

the plaintiff in an infringement suit. Vision Center, 596 F.2d at 118. The evidentiary burden necessary to

establish secondary meaning for a descriptive term is substantial. Id.; American Heritage, 494 F.2d at 12; 3 R.

Callman, supra, Sec. 77.3, at 359.

In assessing a claim of secondary meaning, the major inquiry is the consumer's attitude toward the mark.

The mark must denote to the consumer "a single thing coming from a single source," Coca-Cola Co. v. Koke

Co., 254 U.S. 143, 146, 41 S.Ct. 113, 114, 65 L.Ed. 189 (1920); Aloe Creme Laboratories, 423 F.2d at 849, to

34

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

support a finding of secondary meaning. Both direct and circumstantial evidence may be relevant and

persuasive on the issue.

Factors such as amount and manner of advertising, volume of sales, and length and manner of use may

serve as circumstantial evidence relevant to the issue of secondary meaning. See, e.g., Vision Center, 596 F.2d

at 119; Union Carbide Corp., 531 F.2d at 380; Aloe Creme Laboratories, 423 F.2d at 849-50. While none of

these factors alone will prove secondary meaning, in combination they may establish the necessary link in the

minds of consumers between a product and its source. It must be remembered, however, that "the question is

not the extent of the promotional efforts, but their effectiveness in altering the meaning of [the term] to the

consuming public." Aloe Creme Laboratories, 423 F.2d at 850.

Since 1950, Zatarain's and its predecessor have continuously used the term "Fish-Fri" to identify this

particular batter mix. Through the expenditure of over $400,000 for advertising during the period from 1976

through 1981, Zatarain's has promoted its name and its product to the buying public. Sales of twelve-ounce

boxes of "Fish-Fri" increased from 37,265 cases in 1969 to 59,439 cases in 1979. From 1964 through 1979,

Zatarain's sold a total of 916,385 cases of "Fish-Fri."6 The district court considered this circumstantial

evidence of secondary meaning to weigh heavily in Zatarain's favor. Record on Appeal, Vol. I at 273.

In addition to these circumstantial factors, Zatarain's introduced at trial two surveys conducted by its expert

witness, Allen Rosenzweig.7 In one survey, telephone interviewers questioned 100 women in the New Orleans

area who fry fish or other seafood three or more times per month. Of the women surveyed, twenty-three

percent specified Zatarain's "Fish-Fri" as a product they "would buy at the grocery to use as a coating" or a

"product on the market that is especially made for frying fish." In a similar survey conducted in person at a

New Orleans area mall, twenty-eight of the 100 respondents answered "Zatarain's 'Fish-Fri' " to the same

questions.8

The authorities are in agreement that survey evidence is the most direct and persuasive way of establishing

secondary meaning. Vision Center, 596 F.2d at 119; Aloe Creme Laboratories, 423 F.2d at 849; 1 J. McCarthy,

supra, Sec. 15.12(D). The district court believed that the survey evidence produced by Zatarain's, when

coupled with the circumstantial evidence of advertising and usage, tipped the scales in favor of a finding of

secondary meaning. Were we considering the question of secondary meaning de novo, we might reach a

different conclusion than did the district court, for the issue is close. Mindful, however, that there is evidence

in the record to support the finding below, we cannot say that the district court's conclusion was clearly

erroneous. Accordingly, the finding of secondary meaning in the New Orleans area for Zatarain's descriptive

term "Fish-Fri" must be affirmed.

3. The "Fair Use" Defense

Although Zatarain's term "Fish-Fri" has acquired a secondary meaning in the New Orleans geographical

area, Zatarain's does not now prevail automatically on its trademark infringement claim, for it cannot prevent

the fair use of the term by Oak Grove and Visko's. The "fair use" defense applies only to descriptive terms and

requires that the term be "used fairly and in good faith only to describe to users the goods or services of such

party, or their geographic origin." Lanham Act Sec. 33(b), 15 U.S.C. Sec. 1115(b)(4) (1976). The district court

determined that Oak Grove and Visko's were entitled to fair use of the term "fish fry" to describe a

characteristic of their goods; we affirm that conclusion.

35

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Zatarain's term "Fish-Fri" is a descriptive term that has acquired a secondary meaning in the New Orleans

area. Although the trademark is valid by virtue of having acquired a secondary meaning, only that penumbra

or fringe of secondary meaning is given legal protection. Zatarain's has no legal claim to an exclusive right in

the original, descriptive sense of the term; therefore, Oak Grove and Visko's are still free to use the words "fish

fry" in their ordinary, descriptive sense, so long as such use will not tend to confuse customers as to the source

of the goods. See 1 J. McCarthy, supra, Sec. 11.17.

The record contains ample evidence to support the district court's determination that Oak Grove's and

Visko's use of the words "fish fry" was fair and in good faith. Testimony at trial indicated that the appellees did

not intend to use the term in a trademark sense and had never attempted to register the words as a trademark.

Record on Appeal, Vol. II at 28, 33, 226-30, 243-47. Oak Grove and Visko's apparently believed "fish fry" was a

generic name for the type of coating mix they manufactured. Id. at 28, 226, 244. In addition, Oak Grove and

Visko's consciously packaged and labelled their products in such a way as to minimize any potential confusion

in the minds of consumers. Id. at 244-45, 251-52. The dissimilar trade dress of these products prompted the

district court to observe that confusion at the point of purchase--the grocery shelves--would be virtually

impossible. Our review of the record convinces us that the district court's determinations are correct. We hold,

therefore, that Oak Grove and Visko's are entitled to fair use of the term "fish fry" to describe their products;

accordingly, Zatarain's claim of trademark infringement must fail.9

C. "CHICK-FRI"

1. Classification

Most of what has been said about "Fish-Fri" applies with equal force to Zatarain's other culinary concoction,

"Chick-Fri." "Chick-Fri" is at least as descriptive of the act of frying chicken as "Fish-Fri" is descriptive of

frying fish. It takes no effort of the imagination to associate the term "Chick-Fri" with Southern fried chicken.

Other merchants are likely to want to use the words "chicken fry" to describe similar products, and others have

in fact done so. Sufficient evidence exists to support the district court's finding that "Chick-Fri" is a descriptive

term; accordingly, we affirm.

2. Secondary Meaning

The district court concluded that Zatarain's had failed to establish a secondary meaning for the term "Chick-

Fri." We affirm this finding. The mark "Chick-Fri" has been in use only since 1968; it was registered even more

recently, in 1976. In sharp contrast to its promotions with regard to "Fish-Fri," Zatarain's advertising

expenditures for "Chick-Fri" were mere chickenfeed; in fact, Zatarain's conducted no direct advertising

campaign to publicize the product. Thus the circumstantial evidence presented in support of a secondary

meaning for the term "Chick-Fri" was paltry.

Allen Rosenzweig's survey evidence regarding a secondary meaning for "Chick-Fri" also "lays an egg." The

initial survey question was a "qualifier:" "Approximately how many times in an average month do you, yourself,

fry fish or other seafood?" Only if respondents replied "three or more times a month" were they asked to

continue the survey. This qualifier, which may have been perfectly adequate for purposes of the "Fish-Fri"

questions, seems highly unlikely to provide an adequate sample of potential consumers of "Chick-Fri." This

survey provides us with nothing more than some data regarding fish friers' perceptions about products used

for frying chicken. As such, it is entitled to little evidentiary weight.1036

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

It is well settled that Zatarain's, the original plaintiff in this trademark infringement action, has the burden

of proof to establish secondary meaning for its term. Vision Center, 596 F.2d at 118; American Heritage, 494

F.2d at 12. This it has failed to do. The district court's finding that the term "Chick-Fri" lacks secondary

meaning is affirmed.

3. Cancellation

Having concluded that the district court was correct in its determination that Zatarain's mark "Chick-Fri" is

a descriptive term lacking in secondary meaning, we turn to the issue of cancellation. The district court,

invoking the courts' power over trademark registration as provided by section 37 of the Lanham Act, 15 U.S.C.

Sec. 1119 (1976), ordered that the registration of the term "Chick-Fri" should be cancelled. The district court's

action was perfectly appropriate in light of its findings that "Chick-Fri" is a descriptive term without secondary

meaning. We affirm. See American Heritage, 494 F.2d at 13-14.

IV. THE COUNTERCLAIMS

The last morsels on our plate are the counterclaims filed against Zatarain's by Oak Grove and Visko's. One

group of counterclaims alleges violations of federal antitrust statutes and Louisiana law prohibiting the

restraint of trade. In addition, the counterclaims pray for awards of attorneys' fees under the Lanham Act Sec.

35, 15 U.S.C. Sec. 1117 (1976), due to Zatarain's alleged bad faith in instituting this infringement action. The

district court found these allegations to be clearly without merit, noting that Oak Grove and Visko's had

introduced absolutely no evidence at trial to support the counterclaims. Our review of the record fully supports

the district court's judgment in this regard, and it is hereby affirmed.

Finally, Oak Grove and Visko's assert a counterclaim based on the federal regulations governing the identity

labelling of packaged foods, 21 C.F.R. Sec. 101.3 (1982).11The counterclaim alleges that Zatarain's sale of

100% corn flour under the name "Fish-Fri" is deceptive and misleading to the public. In particular, Oak Grove

and Visko's maintain that the size of the product identification "corn flour" on the "Fish-Fri" box is not

reasonably related to the most predominate words on the box as required by the regulations. After examining

the "Fish-Fri" package, the district court found this counterclaim to be without merit. The court initially noted

that the size of the words "corn flour" complies with the specifications of 21 C.F.R. Sec. 101.2(c) (1982), which

sets a minimum requirement for information appearing on the principal display panel of packaged foods. The

court then found that the identification of Zatarain's "Fish-Fri" as a corn flour product was reasonably related

in size to the words "Fish-Fri." This finding is not clearly erroneous and therefore is affirmed.

We agree with the district court that this smorgasbord of counterclaims by Oak Grove and Visko's is without

merit, and we affirm their dismissal by the district court. Sadly, for Oak Grove and Visko's at least, these are

"the ones that got away."

V. CONCLUSION

And so our tale of fish and fowl draws to a close. We need not tarry long, for our taster's choice yields but

one result, and we have other fish to fry. Accordingly, the judgment of the district court is hereby and in all

things

AFFIRMED.

37

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

DERMALINE, INC., vs. MYRA PHARMACEUTICALS, INC., G.R. No. 190065

This is a petition for review on certiorari[1] seeking to reverse and set aside the Decision dated August 7,

2009[2] and the Resolution dated October 28, 2009[3] of the Court of Appeals (CA) in CA-G.R. SP No. 108627.

 

          The antecedent facts and proceedings—

 

          On October 21, 2006, petitioner Dermaline, Inc. (Dermaline) filed before the Intellectual Property Office

(IPO) an application for registration of the trademark “DERMALINE DERMALINE, INC.” (Application No. 4-

2006011536).  The application was published for Opposition in the IPO E-Gazette on March 9, 2007.

 

          On May 8, 2007, respondent Myra Pharmaceuticals, Inc. (Myra) filed a Verified Opposition [4] alleging

that the trademark sought to be registered by Dermaline so resembles its trademark “DERMALIN” and will

likely cause confusion, mistake and deception to the purchasing public.  Myra said that the registration of

Dermaline’s trademark will violate Section 123[5] of Republic Act (R.A.) No. 8293 (Intellectual Property Code of

the Philippines).  It further alleged that Dermaline’s use and registration of its applied trademark will diminish

the distinctiveness and dilute the goodwill of Myra’s “DERMALIN,” registered with the IPO way back July 8,

1986, renewed for ten (10) years on July 8, 2006.  Myra has been extensively using “DERMALIN” commercially

since October 31, 1977, and said mark is still valid and subsisting.

 

          Myra claimed that, despite Dermaline’s attempt to differentiate its applied mark, the dominant feature is

the term “DERMALINE,” which is practically identical with its own “DERMALIN,” more particularly that the

first eight (8) letters of the marks are identical, and that notwithstanding the additional letter “E” by

Dermaline, the pronunciation for both marks are identical.  Further, both marks have three (3) syllables each,

with each syllable identical in sound and appearance, even if the last syllable of “DERMALINE” consisted of

four (4) letters while “DERMALIN” consisted only of three (3).

 

          Myra also pointed out that Dermaline applied for the same mark “DERMALINE” on June 3, 2003 and was

already refused registration by the IPO.  By filing this new application for registration, Dermaline appears to

have engaged in a fishing expedition for the approval of its mark.  Myra argued that its intellectual property

right over its trademark is protected under Section 147[6] of R.A. No. 8293.

 

          Myra asserted that the mark “DERMALINE DERMALINE, INC.” is aurally similar to its own mark such

that the registration and use of Dermaline’s applied mark will enable it to obtain benefit from Myra’s

reputation, goodwill and advertising and will lead the public into believing that Dermaline is, in any way,

connected to Myra.  Myra added that even if the subject application was under Classification 44 [7] for various

skin treatments, it could still be connected to the “DERMALIN” mark under Classification 5[8] for

pharmaceutical products, since ultimately these goods are very closely related.

 

          In its Verified Answer,[9] Dermaline countered that a simple comparison of the trademark “DERMALINE

DERMALINE, INC.” vis-à-vis Myra’s “DERMALIN” trademark would show that they have entirely different

features and distinctive presentation, thus it cannot result in confusion, mistake or deception on the part of the

purchasing public. Dermaline contended that, in determining if the subject trademarks are confusingly similar,

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

a comparison of the words is not the only determinant, but their entirety must be considered in relation to the

goods to which they are attached, including the other features appearing in both labels.  It claimed that there

were glaring and striking dissimilarities between the two trademarks, such that its trademark “DERMALINE

DERMALINE, INC.” speaks for itself (Res ipsa loquitur).  Dermaline further argued that there could not be any

relation between its trademark for health and beauty services from Myra’s trademark classified under

medicinal goods against skin disorders.

 

          The parties failed to settle amicably.  Consequently, the preliminary conference was terminated and they

were directed to file their respective position papers.[10]

 

          On April 10, 2008, the IPO-Bureau of Legal Affairs rendered Decision No. 2008-70 [11] sustaining Myra’s

opposition pursuant to Section 123.1(d) of R.A. No. 8293.  It disposed—

 

            WHEREFORE, the Verified Opposition is, as it is, hereby SUSTAINED.  Consequently,

Application Serial No. 4-2006-011536 for the mark ‘DERMALINE, DERMALINE, INC. Stylized

Wordmark’ for Dermaline, Inc. under class 44 covering the aforementioned goods filed on 21

October 2006, is as it is hereby, REJECTED.

 

            Let the file wrapper of ‘DERMALINE, DERMALINE, INC. Stylized Wordmark’ subject

matter of this case be forwarded to the Bureau of Trademarks (BOT) for appropriate action in

accordance with this Decision.

 

            SO ORDERED.[12]

 

          Aggrieved, Dermaline filed a motion for reconsideration, but it was denied under Resolution No. 2009-

12(D)[13] dated January 16, 2009.

 

          Expectedly, Dermaline appealed to the Office of the Director General of the IPO.  However, in an

Order[14] dated April 17, 2009, the appeal was dismissed for being filed out of time.

 

          Undaunted, Dermaline appealed to the CA, but it affirmed and upheld the Order dated April 17, 2009

and the rejection of Dermaline’s application for registration of trademark.  The CA likewise denied Dermaline’s

motion for reconsideration; hence, this petition raising the issue of whether the CA erred in upholding the

IPO’s rejection of Dermaline’s application for registration of trademark.

 

          The petition is without merit.

 

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination

thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from

those manufactured, sold, or dealt by others.[15]  Inarguably, it is an intellectual property deserving protection

by law.  In trademark controversies, each case must be scrutinized according to its peculiar circumstances,

such that jurisprudential precedents should only be made to apply if they are specifically in point.[16]

            

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

          As Myra correctly posits, as a registered trademark owner, it has the right under Section 147 of R.A. No.

8293 to prevent third parties from using a trademark, or similar signs or containers for goods or services,

without its consent, identical or similar to its registered trademark, where such use would result in a likelihood

of confusion.

 

          In determining likelihood of confusion, case law has developed two (2) tests, the Dominancy Test and the

Holistic or Totality Test. 

 

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks

that might cause confusion or deception.[17]  It is applied when the trademark sought to be registered contains

the main, essential and dominant features of the earlier registered trademark, and confusion or deception is

likely to result.  Duplication or imitation is not even required; neither is it necessary that the label of the

applied mark for registration should suggest an effort to imitate.  The important issue is whether the use of the

marks involved would likely cause confusion or mistake in the mind of or deceive the ordinary purchaser, or

one who is accustomed to buy, and therefore to some extent familiar with, the goods in question. [18]  Given

greater consideration are the aural and visual impressions created by the marks in the public mind, giving

little weight to factors like prices, quality, sales outlets, and market segments.[19]  The test of dominancy is now

explicitly incorporated into law in Section 155.1 of R.A. No. 8293 which provides—

 

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of

a registered mark or the same container or a dominant feature thereof in connection with the

sale, offering for sale, distribution, advertising of any goods or services including other

preparatory steps necessary to carry out the sale of any goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to deceive; (emphasis

supplied)

 

 

On the other hand, the Holistic Test entails a consideration of the entirety of the marks as applied to

the products, including labels and packaging, in determining confusing similarity.  The scrutinizing eye of the

observer must focus not only on the predominant words but also on the other features appearing in both labels

so that a conclusion may be drawn as to whether one is confusingly similar to the other.[20]

 

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types

of confusion, viz: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be

induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business

(source or origin confusion), where, although the goods of the parties are different, the product, the mark of

which registration is applied for by one party, is such as might reasonably be assumed to originate with the

registrant of an earlier product, and the public would then be deceived either into that belief or into the belief

that there is some connection between the two parties, though inexistent.[21]

 

In rejecting the application of Dermaline for the registration of its mark “DERMALINE DERMALINE,

INC.,” the IPO applied the Dominancy Test.  It declared that both confusion of goods and service and confusion

of business or of origin were apparent in both trademarks.  It also noted that, per Bureau Decision No. 2007-

40

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

179 dated December 4, 2007, it already sustained the opposition of Myra involving the trademark

“DERMALINE” of Dermaline under Classification 5.  The IPO also upheld Myra’s right under Section 138 of

R.A. No. 8293, which provides that a certification of registration of a mark is prima facie evidence of the

validity of the registration, the registrant’s ownership of the mark, and of the registrant’s exclusive right to use

the same in connection with the goods and those that are related thereto specified in the certificate.        

 

We agree with the findings of the IPO.  As correctly applied by the IPO in this case, while there are no

set rules that can be deduced as what constitutes a dominant feature with respect to trademarks applied for

registration; usually, what are taken into account are signs, color, design, peculiar shape or name, or some

special, easily remembered earmarks of the brand that readily attracts and catches the attention of the

ordinary consumer.[22]

 

          Dermaline’s insistence that its applied trademark “DERMALINE DERMALINE, INC.” had differences

“too striking to be mistaken” from Myra’s “DERMALIN” cannot, therefore, be sustained.  While it is true that

the two marks are presented differently – Dermaline’s mark is written with the first “DERMALINE” in script

going diagonally upwards from left to right, with an upper case “D” followed by the rest of the letters in lower

case, and the portion “DERMALINE, INC.” is written in upper case letters, below and smaller than the long-

hand portion; while Myra’s mark “DERMALIN” is written in an upright font, with a capital “D” and followed by

lower case letters – the likelihood of confusion is still apparent.  This is because they are almost spelled in the

same way, except for Dermaline’s mark which ends with the letter “E,” and they are pronounced practically in

the same manner in three (3) syllables, with the ending letter “E” in Dermaline’s mark pronounced

silently.  Thus, when an ordinary purchaser, for example, hears an advertisement of Dermaline’s applied

trademark over the radio, chances are he will associate it with Myra’s registered mark.

 

          Further, Dermaline’s stance that its product belongs to a separate and different classification from

Myra’s products with the registered trademark does not eradicate the possibility of mistake on the part of the

purchasing public to associate the former with the latter, especially considering that both classifications

pertain to treatments for the skin.

 

          Indeed, the registered trademark owner may use its mark on the same or similar products, in different

segments of the market, and at different price levels depending on variations of the products for specific

segments of the market.  The Court is cognizant that the registered trademark owner enjoys protection in

product and market areas that are the normal potential expansion of his business.  Thus, we have held –

 

            Modern law recognizes that the protection to which the owner of a trademark is

entitled is not limited to guarding his goods or business from actual market competition with

identical or similar products of the parties, but extends to all cases in which the use by a junior

appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as

where prospective purchasers would be misled into thinking that the complaining

party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is

in any way connected with the activities of the infringer; or when it forestalls the normal

potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).[23] (Emphasis

supplied)

41

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

 

          Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such that,

considering the current proliferation of health and beauty products in the market, the purchasers would likely

be misled that Myra has already expanded its business through Dermaline from merely carrying

pharmaceutical topical applications for the skin to health and beauty services.

          Verily, when one applies for the registration of a trademark or label which is almost the same or that

very closely resembles one already used and registered by another, the application should be rejected and

dismissed outright, even without any opposition on the part of the owner and user of a previously registered

label or trademark.  This is intended not only to avoid confusion on the part of the public, but also to protect an

already used and registered trademark and an established goodwill.[24]

 

          Besides, the issue on protection of intellectual property, such as trademarks, is factual in nature.  The

findings of the IPO, upheld on appeal by the same office, and further sustained by the CA, bear great weight

and deserves respect from this Court.  Moreover, the decision of the IPO had already attained finality when

Dermaline failed to timely file its appeal with the IPO Office of the Director General.

 

          WHEREFORE, the petition is DENIED.  The Decision dated August 7, 2009 and the Resolution dated

October 28, 2009 of the Court of Appeals in CA-G.R. SP No. 108627 are AFFIRMED.  Costs against petitioner.

 

SO ORDERED.

MANUEL P. SAMSON vs. COURT OF APPEALS and WILFRO LUMINLUN, G.R. No. 139983

The Case

 

         This is a petition for review of the Decision[1] dated 6 September 1999 of the Court of Appeals  in CA-G.R.

CV No. 31904 reversing the Decision[2] dated 15 May 1990and the Order dated 7 December 1990 of the

Regional Trial Court, Branch 160, Pasig City in Civil Case No. 58052. 

The Antecedent Facts

         On 26 February 1982, petitioner Manuel P. Samson (Samson) applied for the registration of the “OTTO”

trademark with the Philippine Patent Office on belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans, and

bra.  On 21 January 1983, respondent Wilfro Luminlun (Luminlun) likewise filed for the registration of the

“OTTO” trademark on jeans, sportswear, skirts, and socks. 

 

         On 29 December 1983, Samson executed the following document[3] granting Luminlun the authority to

use the “OTTO” trademark for jeans only:

 

AUTHORITY TO USE TRADEMARK

 

KNOW ALL MEN BY THESE PRESENTS:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

           I,  MANUEL P. SAMSON, Filipino, of legal age and a resident

of Doña Betang Subdivision, Santolan, Metro Manila, am the registered owner of the

trademark OTTO for bags, shoes, sandals and slippers under Registration Certificate No.

29840 issued on September 29, 1981, and the applicant in Application hearing Serial No.

47626 for the same trademark OTTO filed on February 26, 1982 for belts, bags, t-shirts,

blouses, briefs, pants, jackets, jeans and bras, which application was duly approved for

publication in the Official Gazette last November 18, 1982;

 

           That for valuable consideration, I hereby grant unto WILFRO P. LUMINLUN, Filipino, of

legal age and with business address at No. 959 Soler Street, Binondo, Manila, a non-

transferable, non-assignable, non-exclusive right and license to use said trademark OTTO for

jeans only.  This authority shall remain valid and existing for as long as I remain the owner of

the trademark OTTO unless said WILFRO P. LUMINLUN should do or cause to be done any act

which in any way prejudice or discredit the trademark OTTO not only in connection with its use

for jeans but as well as for other products enumerated in my registration

certificates/application documents.

 

            IN WITNESS WHEREOF, I have hereunto affixed my signature this 29th day of

December, 1983.

 

                                   SGD.  MANUEL P. SAMSON

 

         On 19 March 1984, the Philippine Patent Office issued to Samson a Certificate of Registration for the

mark “OTTO” in the principal register for use on belts, bags, t-shirts, blouses, briefs, pants, jackets, jeans, and

bra. 

 

         In a letter[4] dated 29 March 1989, Samson, through counsel, informed Luminlun that he was revoking the

latter’s authority to use the trademark “OTTO.”   Samson advisedLuminlun to “cease and desist from further

manufacturing and distributing OTTO jeans” otherwise he would confiscate jeans using the unauthorized

“OTTO” trademark.  Samson likewise demanded the payment of royalties, thus:

 

Dear Mr. Luminlun:

 

            On behalf of my client, Mr. Manuel P. Samson, this is to demand that you CEASE and

DESIST from further manufacturing and distributing OTTO jeans effective as of receipt of this

notice considering that my aforesaid client had already revoked the authority granted to you

for the use of the trademark ‘OTTO’ in jeans.  A copy of the Revocation of Authority To Use

Trademark filed in the Patent Office on March 21, 1989 is attached.

 

            Further, you have to account for the sale of OTTO jeans beginning January 1984 up to

March 1989 as we will get a percentage thereof for the royalty due to my client of not less

than P5,000,000.00 for your use of said trademark for more than five (5) years.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

            Kindly give us the name and address of your sales outlet in order that they maybe

properly appraised (sic) of this development.

 

            Should you fail to heed this advice, we will be constrained to file an action for damages

and we will pray for issuance of injunction against you and for the confiscation and removal of

jeans with the use of an unauthorized trademark ‘OTTO’.

 

           I trust for your compliance within five (5) days from receipt hereof to obviate being

embroiled in a costly and cumbersome litigation.

 

                                              Very truly yours,

 

                                               SGD.  NELSON Y. NG

 

 

 

         Samson also filed with the Philippine Patent Office a Revocation of Authority to Use Trademark.[5]

 

         As a result, Luminlun filed a complaint before the Regional Trial Court, Pasig City questioning the validity

of Samson’s revocation of his authority to use the “OTTO” trademark.  Luminlun likewise prayed that he be

compensated for the loss of sales he suffered since the sales outlets refused to accept his deliveries for fear

that the goods  would be confiscated and removed from their stores.

 

         On 10 April 1989, the trial court issued an Order restraining Samson  from “proceeding and carrying out

the confiscation and the removal of jeans with trademark ‘OTTO’ pending hearing on the petition for

preliminary injunction.”    On 19 April 1989, Samson filed an “Opposition to Motion for Issuance of preliminary

injunction and/or Motion to Lift Restraining Order.” 

 

         After presentation of evidence and submission of memoranda by both parties, on 28 April 1989, the trial

court issued an Order granting Luminlun’s prayer for preliminary injunction.

 

         On 9 May 1989, Samson filed his Answer.  Samson raised, among others, the defenses that:

(1) Luminlun failed to pay royalties for the use of the trademark; and (2)Luminlun violated the terms and

conditions of the Authority to Use  Trademark when he used the “OTTO” trademark for other products. 

The Ruling of the Trial Court

         In its Decision dated 15 May 1990, the trial court

dismissed Luminlun’s complaint.  The dispositive portion of the decision reads:

            WHEREFORE, foregoing considered, the complaint is ordered DISMISSED.  With costs

against plaintiff.

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

            The writ of preliminary injunction earlier issued by the Court is set aside and recalled.

 

            On the counterclaim, plaintiff is ordered to pay defendant attorney’s fees of P25,000.00.

 

            SO ORDERED.[6] 

 

         The trial court ruled that Samson was justified in revoking the authority of Luminlun to use the

trademark.   The trial court found that Luminlun’s acts of manufacturing and selling products bearing the

trademark “OTTO LTD.” like skirts, shorts, pants, jeans, as as well as  products with the trademark “OTTO”

like belts, buttons, and bags, clearly violated the authority granted by Samson to use  the “OTTO” trademark

for jeans only.  The trial court, however, ruled that Samson failed to prove that he was entitled to royalties.

 

         Upon motion for reconsideration of both parties, the trial court in an Order dated 7 December

1990[7] affirmed its decision with the modification of an award of moral damages of P20,000 in favor

of  Samson. 

 

The Ruling of the Court of Appeals

 

         On appeal, the Court of Appeals reversed the ruling of the trial court.  The appellate court found that

Samson revoked the authority on the sole ground that Luminlun failed to pay royalties.  According to the

appellate court, Samson could not validly revoke the authority based on this ground since he failed to prove

that royalties were due him.  The appellate court further ruled that Luminlun suffered losses as a result of the

revocation and thus awarded damages.  The dispositive portion of the Court of Appeals’ decision reads:   

 

            WHEREFORE, judgment is hereby rendered setting aside the decision appealed from

and a new one issue making the injunction permanent and ordering appellee to pay appellant

the following sums of money:

 

            a)  actual and compensatory damages in the amount of P2,257,872.20.

 

b)      attorney’s fees in the amount of P50,000.00.

 

            Costs against appellee.

 

            SO ORDERED.[8]

 

 

The Issues

Thus, in this petition, Samson raises the following assignment of errors:[9]

 

(a)  The Court of Appeals erred in concluding that the revocation of the Authority to Use

Trademark made by Samson was unjustified;

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

(b) The Court of Appeals erred in awarding actual or compensatory damages of P2,257,872.20

in spite of the total absence of evidence to show that Luminlunsustained such damages as a

consequence of the revocation of the Authority to Use Trademark;

 

(c)  The Court of Appeals erred in awarding attorney’s fees of P50,000 in spite of the absence

of any legal ground for such award; and

 

 

d)  The Court of Appeals erred in not sustaining the trial court’s award of moral damages and

attorney’s fees in favor of Samson.

 

 

The Court’s Ruling

         The resolution of this case hinges on whether Samson was justified in revoking Luminlun’s authority to

use the “OTTO” trademark.

 

         We rule in the affirmative. 

 

In finding for respondent Luminlun, the appellate court rationalized:

 

x x x In appellee’s Opposition to Motion for Issuance of Preliminary Injunction and/or

Motion to Lift Restraining Order dated April 18, 1989 (p. 37, Records), it is clearly

stated that he revoked the Authority to Use Trademark on the sole ground that

appellant failed to pay royalty tax, thus:

 

            “x x x.  When plaintiff unjustly and illegally failed, refused and

neglected and still fails, refuse, and neglects to pay royalty tax, defendant

revoked the grant of authority and the same was filed with the Patent Office

on March 21, 1989, a copy of which was served on plaintiff and received by him

contained in a letter dated March 29, 1989. (at page 3 of Opposition)

 

                       x x x                x x x                x x x

 

            “It is defendant who is entitled to the issuance of injunction to

restrain plantiff from further manufacturing and distributing OTTO jeans after

plaintiff’s authority had been revoked for failure to comply with his

obligation to pay royalty tax due to defendant.”

 

            As correctly pointed out by appellant, the issue that appellee had been allegedly

affected and his products allegedly discredited by appellant’s use of the trademark OTTO and

OTTO Ltd. was but a belated attempt on the part of the appellee to justify his illegal act of

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

revoking the Authority to Use Trademark issued to the appellant.  It was only after realizing

the weakness of his sole ground for revoking the authority that he raised said issue. 

 

            It is evident that when appellee executed the Revocation of Authority to Use

Trademark on March 28, 1989 he was not concerned with appellant’s use of the

trademark OTTO Ltd. on appellant’s product and the trademark OTTO on belts and

buttons because there was no prejudice on his part.  Otherwise, he could have mentioned

the same in the Revocation and in the demand letter dated March 29, 1989 of his

counsel, Atty Nelson Y. Ng.[10] (Emphasis supplied)

 

 

 

We disagree with the appellate court’s  ruling.

 

 

            The  authority granted to Luminlun to use the “OTTO” trademark was limited for use on jeans

only.   Under the agreement, Samson could revoke the authority if Luminlun“should do or cause to be done any

act which would in any way prejudice or discredit the trademark OTTO not only in connection with its use

for jeans but as well as for other products” enumerated in Samson’s registration certificates.

 

         As correctly found by the trial court, Luminlun manufactured “OTTO” belts, buttons, and bags  as well as

“OTTO LTD.” clothing in violation of the terms and conditions of the authority which affected Samson and

discredited his products, thus: 

 

            On the second issue, the Court finds that defendant has been affected and his

products discredited by plaintiff’s use of trademark “OTTO” and OTTO LTD.” on other

products, aside from jeans.   Plaintiff admitted manufacturing and selling products

bearing the trademark “OTTO LTD.” like skirts, shorts, pants, jeans; also plaintiff

manufactures and sells products with the trademark “OTTO”, like belts, buttons and

bags. (Exh. “3”; also pp. 67, 68, 69, 91, rec.) The authority given to plaintiff was a non-

transferable, non-assignable, non-exclusive right and license to use said trademark

“OTTO” for   jeans  only    x x x”.   (Underlining supplied) Clearly, plaintiff failed to comply with

the terms and conditions enumerated in the agreement.  Plaintiff had the option to use the

trademark “OTTO” but he had done acts constituting bad faith, necessarily discrediting the

interest of defendant on his products which were duly registered with the Philippine Patent

Office, such as:  Exh. “6,” photograph of over all with trademark “OTTO”; Exh. “7”,  issue of

Panorama Magazine;  Exh. “7-A”,  trousers with  “OTTO LTD.”,  Exh.  “8”, t-shirt with brand

“OTTO [LTD.]”; Exh. “14”, pants bearing “OTTO [LTD.]”, Exh. “14-A” & Exh. “14-B”; belt and

pant with “OTTO LTD.” & “OTTO”; Exh. “15” Cash invoice, pants “OTTO”; Exh. “17”- .”, jeans

classic with trademark “OTTO”.

 

            Defendant therefore was justified when he served notice of revocation of the authority

of plaintiff to use the trademark.[11] (Emphasis supplied)

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

 

          Under the circumstances and in accordance with the terms and conditions of the Authority to Use

Trademark, we find that Samson was justified in revoking Luminlun’s authority to use the “OTTO” trademark.

 

         However, the appellate court chose to ignore Luminlun’s glaring violation of the terms and conditions of

the Authority.  The appellate court instead resorted to hair-splitting and ruled that Samson could not justify the

revocation since he did not raise this ground in his “Opposition to Motion for Issuance of Preliminary

Injunction and/or Motion to Lift Restraining Order.” 

 

         We  find such reasoning flawed.

        

         The records reveal that Samson, in his Answer, raised, among others, the affirmative defense that he had

the right to  revoke the Authority to Use  Trademark because Luminlun manufactured other “OTTO” products

aside from jeans:

         

Defendant had every right and prerogative to revoke the authority granted to plaintiff on the

use of the trademark for “OTTO” for jeans only when plaintiff failed to pay a single centavo of

royalty and had likewise violated the grant of authority by illegally manufacturing and

distributing aside from jeans, other products like jackets, skirts, shirts, blouses and

shorts which are not covered by the grant of  authority granted to him.[12] (Emphasis

supplied)

 

 

 

         We find that Samson seasonably raised this defense and we do not see any basis for the apellate court’s

ruling that Samson could not invoke this ground.   

 

         The appellate court further makes issue of the fact that Samson did not mention in both the Revocation of

Authority to Use Trademark and his demand letter dated 29 March 1989 that Luminlun’s manufacture of other

“OTTO” products such as belts and buttons was prejudicial to him and was the cause for the revocation. 

 

         We note that the Revocation of Authority simply mentioned that “it was Luminlun’s failure to comply with

his undertaking when the authority was executed as the reason for the revocation.”  The  fact that Samson did

not indicate the specific reason for the revocation is of no moment and should not be taken against him.   Thus,

we find no basis for the appellate court’s conclusion that when Samson executed the Revocation of Authority

he was not concerned with Luminlun’s use of the “OTTO” trademark on other products because there was no

prejudice on his part.  Samson was affected and his products discredited by Luminlun’s unauthorized

manufacture of other “OTTO” products.  Thus, in its Order resolving the Motions for Reconsideration filed by

the parties, the trial court stated:

 

x x x it is not denied defendant was given the authority by the Patent Office and has been the

registered owner of the trademark “OTTO” under principal register no. 33064 and 29840 and

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

supplemental register 7390 and 4166.  The license was issued to the defendant for the

protection of his rights as a registered owner of the trademark in order to identify the lawful

user.  It was intended to protect the public to be deceived of the use of the products.

 

            On the issue of the violation of the conditions involving the claim of royalty, the Court

said that defendant has been affected and his products discredited by the plaintiff’s use of

trademark “OTTO” and “OTTO LTD,” on other products.  Plaintiff had admitted

manufacturing and selling products with the same trademark on skirts, shorts, pants

and jeans.  Bad faith was evident from the acts of plaintiff.  The authority of plaintiff

to use the trademark “OTTO” for jeans was revoked for violation of the terms of the

agreement.[13] (Emphasis supplied)

 

         Considering that Samson was justified in revoking the authority of Luminlun to use the “OTTO”

trademark, it necessarily follows that the damages awarded by the appellate court in favor of Luminlun have

no basis. 

        

         WHEREFORE, we GRANT the Petition.  We SET ASIDE the assailed Decision and Resolution of the

Court of Appeals and REINSTATE the 15 May 1990 Decision and the 7 December 1990 Order  of the Regional

Trial Court, Branch 160, Pasig City.

         SO ORDERED.

Tabacalera vs. Tabaqueria, G.R. No. 161051, July 23, 2009

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the June 16,

2003 Decision[1] and December 1, 2003 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 42881. The

CA denied petitioners’ Petition for Certiorari (With Urgent Application for Temporary Restraining Order and/or

Writ of Preliminary Injunction) and their motion for reconsideration.

The Facts

 

          Petitioner Compania General de Tabacos de Filipinas, also known as “Tabacalera,” is a foreign

corporation organized and existing under the laws of Spain. It is the owner of 24 trademarks registered with

the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) of the Department of Trade and Industry

(DTI). Tabacalera authorized petitioner La Flor de la Isabela, Inc. to manufacture and sell cigars and cigarettes

using the Tabacalera trademarks.

 

          Respondent Gabriel Ripoll, Jr. was an employee of petitioners for 28 years and was the General Manager

before he retired sometime in 1993.[3] In the same year, Ripoll organized Tabaqueria de Filipinas, Inc.

(Tabaqueria), a domestic corporation also engaged in the manufacture of tobacco products like cigars. [4] Ripoll

is the managing director of Tabaqueria.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

          On October 1, 1993, petitioners filed a Letter-Complaint[5] with the Securities and Exchange Commission

praying for the cancellation of the corporate name of Tabaqueria on the following ground:

         

Tabaqueria, being engaged in the same business as Tabacalera, cannot be allowed to

continue using “tabaqueria” which will confuse and deceive the public into believing that

Tabaqueria is operated and managed by, and part of, Tabacalera and that its business is

approved, sponsored by, and affiliated with, Tabacalera.

 

          Thereafter, petitioners also filed with the Department of Justice (DOJ)-Task Force on Anti-Intellectual

Property Piracy a criminal complaint against Ripoll for Infringement of Trademark and Unfair Competition for

violation of Articles 188 and 189 of the Revised Penal Code. The case was docketed as I.S. No. 94C-07941,

entitled Compania General de Tabacos de Filipinas & La Flor de la Isabela, Inc. (Attys. Ferdinand S. Fider and

Ma. Dolores T. Syquia v. Gabriel Ripoll, Jr. (Tabaqueria de Filipinas, Inc.).

 

          On February 8, 1994, petitioners filed with the DTI a Complaint dated February 4, 1994 [6] for Unfair

Competition, docketed as Administrative Case No. 94-19 and entitledCompania General de Tabacos de

Filipinas and La Flor de la Isabela, Inc. v. Tabaqueria de Filipinas, Inc. and Gabriel Ripoll, Jr.

 

          Petitioners alleged in the Complaint that Tabaqueria deliberately sought to adopt/simulate the

Tabacalera trademarks to confuse the public into believing that the Tabaqueria cigars are the same or are

somehow connected with the Tabacalera products.[7]

 

          In the Complaint petitioners sought, among others, the issuance of a “preliminary order requiring

respondents to refrain from manufacturing, distributing and/or selling the Tabaqueria products.”[8]

 

          In their Answer dated April 9, 1994, Tabaqueria and Ripoll opposed the issuance of injunctive relief

pending investigation on the ground that petitioners’ allegation of unfair competition is unproved and

unsubstantiated. They alleged that petitioners failed to establish the following elements required for the

issuance of an injunctive writ:

 

          The party applying for preliminary injunction must show (a) The invasion of the right

sought to be protected is material and substantial; (b) The right of complainant is clear and

unmistakable; and (c) There is an urgent and paramount necessity for the writ to prevent

serious damage. (Director of Forest Administration vs. Fernandez, 192 SCRA 121 [1990]; Phil.

Virginia Tobacco Administration vs. De los Angeles, 164 SCRA 543 [1988])[9]

 

Meanwhile, on September 1, 1994, the DOJ issued a Resolution[10] in I.S. No. 94C-07941, the dispositive

portion of which reads:

 

Accordingly, it is hereby recommended that the complaint for unfair competition and/or

infringement of trademark be dismissed against respondent Gabriel Ripoll Jr. for insufficiency

of evidence.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

Petitioners moved reconsideration of the above resolution, but their motion was denied in a Letter

dated October 18, 1994.[11] Later, the Secretary of Justice reversed the Resolution dated September 1, 1994.

Upon reconsideration, the Secretary, however, issued a Letter dated February 5, 1997[12] reaffirming the

Resolution dated September 1, 1994.

 

On March 24, 1995, petitioners filed a Motion to Issue Cease and Desist Order [13] with the DTI, praying

for the issuance of an order: (1) directing private respondents to immediately cease and desist from

manufacturing, distributing, and selling cigar products bearing the marks and design of petitioners; (2) for the

immediate seizure of all cigar products of private respondents bearing the marks and design of petitioners;

and (3) for the immediate closure of private respondents’ establishment involved in the production of those

products.

         

In response, private respondents filed an Opposition to Complainants’ Motion to Issue Cease and

Desist Order, with Motion to Dismiss Complaint dated March 30, 1995.[14] Private respondents anchored their

motion to dismiss on the ground of forum shopping due to petitioners’ filing of prior cases of infringement and

unfair competition with the DOJ. As to the Motion to Issue Cease and Desist Order, private respondents

claimed that such motion was premature considering that the alleged evidence for the issuance of the order

was just then marked. Moreover, they alleged that the acts that petitioners sought to be restrained would not

cause irreparable injury to them.

 

          Subsequently, the DTI issued a Temporary Restraining Order dated September 18, 1995[15] with a

validity period of 20 days from receipt by private respondents.

 

          In an Order dated April 30, 1996, the Office of Legal Affairs of the DTI ruled that there was no similarity

in the general appearance of the products of the parties and that consumers would not be misled. In the same

order, the DTI partially granted petitioners’ prayer for the issuance of a writ of preliminary injunction. The

pertinent portions of the DTI Order state:

 

DETERMINATION OF SIMILARITY IN GENERAL APPEARANCE AND LIKELIHOOD OF

CONFUSION; PRODUCT COMPARISON; USUAL PURCHASER

 

            x x x [L]et us now determine if there is similarity in general appearance between

Tabacalera products and Respondents’ products, such that it will likely mislead, confuse or

deceive the usual purchasers of cigars into buying Respondents’ products thinking that what

they are buying are the Tabacalera products they intended to buy.

 

            The competing products should be viewed in their totality.  But certain features, have to

be excluded first.  That is what the Supreme Court did in determining similarity between SAN

MIGUEL PALE PILSEN (of San Miguel Corporation) and BEER PALE PILSEN (of Asia Brewery,

Inc.) in the case of Asia Brewery, Inc. vs. C.A. and San Miguel Corp. (G.R. No. 103543,

prom. July 5, 1993). In said case, the Supreme Court found that the two competing beer

products have certain features in common.  Therefore, the two competing products are similar

51

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

as far as those features are concerned.  But the Supreme Court excluded said

features.  Apparently the Court wanted to distinguish between “similarity as a matter of fact”

and “similarity as a matter of law”, the latter having a limited scope considering the many

exclusions that have to be made.  Hereunder are the said features and the reasons cited by the

Supreme Court for their exclusion:

 

COMMON FEATURES                 REASONS FOR EXCLUSION

 

1.   The container is steinie bottle.         It is a standard type of bottle and

                                                               therefore lacks exclusivity.  It is of

                                                               functional or common use.  It is

                                                               universally used.

 

2.   The color of the bottle is amber.      It is a functional feature.  Its

                                                               function is to prevent the transmis-

                                                               sion of light into the said bottle

                                                               and thus protect the beer inside the

                                                               bottle.

 

3.   The phrase “pale pilsen” is               This phrase is a generic one even if

      carried in their respective                 included in their trademarks.

      trademark.

 

4.   The bottle has a capacity of             It is a metrication and standardiza-

      320 ML and is printed on the          tion requirement of the defunct

      label.                                                 Metric System Board (now a func-

                                                               tion of the Bureau of Product

                                                               Standards, DTI).

 

5.   The color of the words and              It is the most economical to use on

      design on the label is white.             the label and easiest to bake in the

                                                               furnace.  Hence, a functional

                                                               feature.

 

6.   Rectangular shape of the label.        It is the usual configuration of

                                                               labels.

 

7.   The bottle’s shape is round              It is commonly and universally

      with a neck.                                      used.

 

 

            In the same case of Supreme Court stated the following, citing Callman, Unfair

Competition, Trademarks and Monopolies:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

 

“Protection against imitation should be properly confined to non-functional

features.     Even if purely functional elements are slavishly copied, the

resemblance will not support an action for unfair competition, and the first user

cannot claim secondary meaning protection.  Nor can the first user predicate

his claim in reliance of any such unpatented functional feature, even at large

expenditure of money.”

 

            Following the Supreme Court’s way of determining similarity, OLA will exclude the

features which arise from industry practices of cigar manufacturers worldwide, features

commonly used by cigar manufacturers, standard features, functional features, features arising

from labeling rights and obligations, and generic words and phrases.  All of these features have

been listed and/or discussed above.  Now this needs clarification.  When we say that we are

excluding the logo because it is a functional and universal feature, what we mean to say is that,

the fact that both products bear a logo (and therefore they are similar in that respect), will

be excluded; but the design, words, drawings of the respective logo of the contending parties

will be considered.  This clarification is also true for the other excluded features.

            Before we view the products in their totality, we will first compare the products as to

their respective details.  The competing products of the Parties consist of around thirty-two

(32) wooden boxes. We note the following glaring differences/distinctions:

 

1.         As to the logo engraved on the top and/or back of the cover of the box:

 

TABACALERA’S:

 

Tabacalera uses two variants of their logo, one for the ordinary plywood boxes and

another for the narra boxes.  The logo on the ordinary plywood box is as follows:

 

There are word/phrases thereon, namely:

1st line – the brand “TABACALERA” (in big letters);

2nd line – the representation “THE FINEST CIGARS SINCE 1881”;

3rd line – the representation “HAND MADE 100% TOBACCO”;

4th line – the address “MANILA, PHILIPPINES”;

5th line – the code “A-4-2”.

 

Between the 2nd line and 3rd line is inscribed the crest and coat of arms of Tabacalera

which consists of a shield placed vertically, and divided into 4 parts with

inscriptions/drawings in each part. Within the center of the shield is an oval vertically

placed with drawings in it.  The crest consists of the uppermost part of a watchtower

used in ancient times in watching for enemies coming.

 

As regards the logo on the narra boxes, it is oblong or egg-shaped, in two parallel lines

interrupted at its sides with semi-oblong two parallel lines and inscripted within such

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

latter parallel lines on the left side is “100% TABACO” and on the right side “HECHO A

MANO”.  On the lower portion between the oblong lines are the words “COMPANIA

GENERAL DE TABACOS DE FILIPINAS – MANILA, PHILIPPINES, A-4-2”.  Within the

center of the smaller oblong is inscribed the crest and coat (described already

above).  At each side of the crest/coat are tobacco leaves tied together.  On top of the

crest is the corporate name “LA FLOR DE LA ISABELA” and this makes the logo

confusing because it does not explain the respective role of the two firms mentioned in

the logo, such as which one is the manufacturer, the distributor, the licensor, licensee,

and trademarks owner.

 

RESPONDENTS’:

 

A bar curved into a U-shape.  It is flanked at the bottom and on its sides with tobacco

leaves curved into a “U” also and joined together as in a “laurel”.  Engraved at the

center of said bar is the coat consists of a “shield”, on top of which is the crest consists

of a prince’s crown with a cross on top.  The “shield” is divided at its center by a line

drawn horizontally with small circles marked at intervals.  At the upper portion of said

dividing line is a rooster (adopted by Mr. Ripoll from the coat of arms of his clan – Exh.

“48”) and the lower portion contains three tobacco leaves (representing Mr. Ripoll’s 3

sons) joined into one.  Encircling the crest and coat is the corporate name

“TABAQUERIA DE FILIPINAS, INC.” as well as the brand “FLOR DE

MANILA”. Immediately below the leaves shaped as in a “laurel” is the phrase “HECHO

A MANO 100% TOBACO”.

 

2.         As to the brand of the product:

 

TABACALERA’S:

 

The brand “TABACALERA” is printed in big white Roman letters with black shadows on

a red rectangular background, and the latter is set over a gold and red rectangular

background with a design which appears to be an inverted letter “Z” leaning to the

right side, and said “Z” is used repeatedly forming a “chain” that surrounds the said

red background.  Said “Z” also fills the left and right sides of the label.  The same

brand and markings appear on three sides of the box.  The back side bears the

Government Warning that cigar smoking is dangerous to health.

 

The brand “FLOR DE MANILA” is not used on Tabacalera’s products except on a

cardboard pack of cigars, which is just slightly bigger than a pack of 100 mm

cigarettes.  (Exh. “DD”).

 

RESPONDENTS’:

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

The brand “FLOR DE MANILA” is printed in red letters with black shadows on a white

rectangular background, and the latter is set over a gold rectangular background filled

with a red design that looks like the letter “P” with its head touching the

ground.  These brand and markings appear on two sides of the box.  The other two

sides are occupied by the seal of guaranty and by the said Government Warning.

 

Both Complainants and Respondents have no trademark registration yet of the brand

“Flor de Manila”.

 

3.         As to markings on edges of ordinary plywood box:

 

TABACALERA’S:

 

The phrase “FLOR FINA” is printed in red Roman letters over a white rectangular

background, and the latter is set over a red background with 2 parallel gold lines and

the above-mentioned “Z” design in gold used repeatedly forming a straight chain.  A

tiny company logo colored blue and yellow is marked at intervals.

 

RESPONDENTS’:

 

The phrase “TABACO FINO” is printed in red letters with strokes that resemble those

in Chinese letters, on a white rectangular background, and the latter is set over a gold

background with red designs that look like ornate letters “X” and “J”.  A tiny company

logo is marked at intervals.

 

4.         As to “seal of guaranty”:

 

TABACALERA’S:

 

Colored green and white; with the phrase “REPUBLIC OF THE PHILIPPINES” in big

letters and the phrase “sello de garantia de la Flor de la Isabela, Inc.”; pasted

horizontally at the middle of the left portion of the cigar box if viewed from its top.

 

RESPONDENTS’:

 

Colored gold and red; with the phrase in big letters “sello de garantia”; bears in big

print the company logo; pasted vertically at the middle of the left portion of the cigar

box if viewed from its top.

 

5.         As to predominant colors:

 

TABACALERA’S:

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

            Red, gold, and green, in that order.  Has blue and yellow.

 

RESPONDENTS’:

 

            Gold and red, in that order.  No green, blue and yellow.

 

6.         Other differences/distinctions

 

            Tabacalera products have the following features:

 

a.                   The corporate name “LA FLOR DE LA ISABELA” (engraved on the narra

wood boxes; also printed on the seal of guaranty).

b.                  The brand “TABACALERA” surrounded by said “Z” design.

c.                   The representation “THE FINEST CIGARS SINCE 1881”.

d.                  The address “MANILA, PHILIPPINES”.

e.                   The code “A-4-2”.

f.                   The phrase “REPUBLIC OF THE PHILIPPINES” in the seal of

guaranty.  Below said phrase is a mountain which resembles the mountain

printed in the old Philippine money.  This appears to be a misrepresentation

that the Philippine government is a co-guarantor in the seal of guaranty.  This

seal of guaranty was possibly copied from the seal of guaranty of Cuban-made

boxes of cigars.  But in Cuba, the government really guarantees the cigars

made in Cuba because cigars are one of the main exports of that country.  In

the Philippines, the government does not guaranty cigars made in

the Philippines.

g.                  The phrase “FLOR FINA” with the said “Z” design.

 

These seven (7) features are NOT found in Respondents’ products.

 

One of the rules in adjudicating unfair competition cases was laid down by the Supreme

Court in the case of Del Monte Corp. vs. C.A. et al. (181 SCRA 410) as follows:

 

We note that respondent court failed to take into consideration several

factors which should have affected its conclusion, to wit: 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 condition under

which it is usually purchased.  Among those, what essentially determines the

attitude of the purchaser, specifically his inclination to be cautious, is the cost

of the goods.  To be sure, a person who buys a box of candies will not exercise

as much care as one who buys an expensive watch.  As a general rule, an

ordinary buyer does not exercise as much prudence in buying an article for

which he pays a few centavos as he does in purchasing a more valuable

thing.  Expensive and valuable items are normally bought after deliberate,

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comparative and analytical investigation.  But mass products, low priced

articles as in wide use, and the matters of everyday purchase requiring

frequent replacement are bought by the causal consumer without great care.

 

Certainly, not everybody buys cigars.  Very few people buy cigars for they are

expensive, have health implications, and its smoke annoys non-smokers.  It is really not the

“sari-sari” store variety. OLA takes judicial notice that even big department stores and malls do

not ordinarily sell cigars.  The usual purchasers of cigars are older people not necessarily an

elder or professional, besides those cigar aficionados and cigar lovers, who are able and willing

to pay and are capable of discerning the products they buy.  Definitely the “impulse buyers”

(those who make a very quick decision (e.g., 6 seconds) to buy a certain product) are not the

usual purchasers of cigars.

 

“The ordinary purchasers must be thought of as having, and credited with, at least a

modicum of intelligence to be able to see the obvious differences between the two trademarks

in question.”  (Fruit of the Loom, Inc. vs. C.A., 133 SCRA 405).  From this Supreme Court

decision we can say that if the buyer can see the obvious differences between two trademarks,

there is more reason for him to see the obvious differences of the whole of the two products

themselves even if sold at a glance.

 

Viewing briefly the competing products in their totality, the two are readily

distinguished by their respective brand as appearing in the box:  “TABACALERA” is the brand

of the Tabacalera products while “FLOR DE MANILA” is the brand of Respondents’

products.  In fact, per Certification of BIR dated March 15, 1994, “Flor de Manila” is

the brandregistered by the Respondents with said bureau (Annex “B”, Answer).  The

Complainants allege in the Complaint (Par. 1.12) that Respondents are using the word

“TABAQUERIA” as the brand of their products.  This allegation is belied by an inspection of the

boxes of Respondents – none of them shows that the word “TABAQUERIA” was detached from

the firm name “TABAQUERIA DE FILIPINAS, INC.” and used separately as a brand.  Also

readily distinguishing the two products are their respective distinctive logo: Tabacalera’s logo

is quite big and ornate while Respondents’ logo is quite small and simple.  Their respective seal

of guaranty are also conspicuous.  Tabacalera’s seal of guaranty is colored green and white and

pasted horizontally while that of Respondents is colored gold and red and pasted

vertically.  The other glaring differences between the two, which we have listed above, are

revealed at once upon a brief look at the competing products.

 

            Confusion becomes more remote when we consider the usual buyers of cigars.  We have

already discussed that above.  They know their brand and they will not be confused by the

various words, marks, and designs on the products.  This is specially true for purchasers who

have been using Tabacalera products for a long time (Tabacalera products have been available

since 1881 [per logo of Tabacalera] or 1917 [per Complaint]), and therefore know very well

their favorite brand.

 

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            If they switch to Respondents’ products, it is not because they are deceived and

confused but because they find Respondents’ products to their taste.

 

            We should also consider that cigars are expensive.  Hereunder are sample prices of

Respondents’ products (Exhs. “EEE” and “III”):

 

            a.         Chest Coronas Largas 25        -           P/     619.75

            b.         Corona 50                               -                   739.75

            c.         Corona Largas 50                    -                   959.75

            d.         Corona Humidor De Luxe 50 -                1,749.75

 

            Tabacalera products are priced higher.  The point we are driving at is that with these

high prices (which are like prices of writs watches, electric fans, tape recorders, and other

electrical/electronic appliances), the usual purchasers will be cautious in buying and he will

give the product he is buying that examination that corresponds to the amount of money that

he will part with.

 

            Therefore, there is definitely no similarity in the general appearance of the competing

products and hence there is no likelihood that purchasers will be [misled], deceived and

confused into buying Respondents’ products thinking that they are buying the Tabacalera

products that they intended to buy.

 

            Complainants allege in their Complaint that they have been using the trademark

(brand) “FLOR DE MANILA” for their products since 1992.  However, Complainants presented

only a pack of cigars made by La Flor de la Isabela, Inc., with the brand “Flor de Manila”,

colored white and gray, and the size is just slightly bigger than a pack of 100 mm.

cigarettes.  (Exh. “DD”).  Buyers cannot possibly make the mistake of buying

Respondents’ wooden boxes of cigars thinking that what they are buying is this carton pack of

cigars of La Flor de la Isabela, Inc.

 

x x x x

 

            In view of all the foregoing, the injunction prayed for cannot be granted in toto but only

partially, i.e., with respect to the barrel type of container, the existence of which has to be

explained and justified further by Respondents, and certain features in the packaging which

are confusingly similar to the containers/packaging of Complainants’ products x x x.[16] (Emphasis supplied.)

 

         

          The DTI disposed of the complaint this way:

 

 

WHEREFORE:

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1.         Respondents are hereby enjoined and restrained from further manufacturing and using

the wooden barrel type of container as container for their cigars (typified by Exh. “DDD-1”).

However, current stocks thereof, which are in their finished – product state, now in possession

of Respondents’ distributors or retailers may be sold/disposed of in the ordinary course of

business, but those still in the possession of Respondents shall be transferred to the box

containers.

 

2.         In connection with the label used on the sides of the boxes (which contain the dominant

colors gold and red), Respondents are ordered to:

 

            a. change either the gold or the red with another color (not blue); or

 

            b. maintain the said gold and red color combination but add another dominant color

(not blue). This injunction no. 2 covers only products yet to be manufactured and not products

which are already in the possession of Respondents’ distributors/retailers. This injunction is for

the purpose only of making said label of Respondents very distinct.

 

3.         In connection with the narra wood boxes, Respondents are ordered to make distinctive

and conspicuous etchings/engravings on the top and/or sides of the said bozes. The

etchings/engravings thereon (which are stripe/s) shall be transferred to other exterior parts of

the boxes or done away with. This injunction no. 3 covers only products yet to be manufactured

and not products which are already in their finished-product state and already in the

possession of Respondents’ distributors/retailers. This injunction is for the purpose only of

making said narra wood boxes of Respondents very distinct, hence, the present boxes can no

longer be used by Respondents unless the above-stated changes thereon, as herein ordered,

are complied with.

 

            x x x x

 

            SO ORDERED.[17]

 

                   On June 10, 1996, petitioners filed a Motion for Reconsideration dated June 4, 1996 [18] of the above

Order contending that: (1) the DTI erroneously passed upon the entire merits of the case where the only

pending issue for resolution is the issuance of a preliminary injunction; (2) the findings of facts of the Order

are not in accordance with the evidence presented by the parties; and (3) the DTI misapplied the law and

jurisprudence applicable on the issues in the instant case. The Motion was denied by the DTI in an Order

dated December 10, 1996.[19]

 

          Thus, on December 26, 1996, petitioners filed a Petition for Certiorari (With Urgent Application for

Temporary Restraining Order and/or Writ of Preliminary Injunction) dated December 19, 1996 [20] with the CA.

Petitioners raised substantially the same issues as in their Motion for Reconsideration dated June 4, 1996. The

case was docketed as CA-G.R. SP No. 42881 entitled Compania General de Tabacos de Filipinas and La Flor de

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la Isabela, Inc. v. Hon. Virgilio A. Sevandal, as Director and DTI Adjudication Officer, Atty. Ruben S.

Extramadura,as Hearing Officer – Office of the Legal Affairs, Department of Trade and Industry, Tabaqueria

De  Filipinas, Inc. and Gabriel Ripoll, Jr.

 

          The CA, thus, issued the assailed decision dated June 16, 2003 wherein it determined the issues as:

 

1)      Whether or not the Order dated April 30, 1996 disposed of the merits of the case; and

 

2)    Whether or not public respondent committed grave abuse of discretion in refusing to

grant petitioners’ prayer for injunctive relief.[21]

 

The CA ruled that the findings of the DTI were premature having passed upon the main issues of the

case when the pending incident was only a motion for preliminary injunction. The CA added that the evidence

necessary in such a hearing was a mere sampling, not being conclusive of the principal action itself. Thus, the

CA ruled that the DTI had prejudged the case and that its findings were premature, to wit:

 

By holding thus, public respondent OLA-DTI had pre-judged the main case. In

fact, there was practically nothing left for the Hearing Officer to try except for private

respondents’ claim for attorney’s fees.

 x x x x

 

We therefore rule that public respondent OLA-DTI’s finding was premature.[22] (Emphasis supplied)

 

As to the second issue, the CA ruled that the dismissal of the infringement of trademarks and unfair

competition case against respondent Ripoll, Jr., renders petitioners’ right to an injunctive relief doubtful. Thus,

the issuance of an injunction in that case would not be proper. The CA further ruled that petitioners failed to

show that there was an urgent and paramount necessity for the issuance of the writ having failed to

substantiate their claim that the abrupt drop in the sales of their products was the direct result of the acts of

respondents.[23]

 

          Thus, the CA denied the petition.[24]

 

          The petitioners then filed a Motion for Reconsideration dated July 4, 2003[25] to the above decision. This

motion was denied for lack of merit in the assailed resolution.

 

Hence, we have this petition.

The Court’s Ruling

 

          This petition must be denied.

 

The Issues

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I.

The Court of Appeals gravely erred in not declaring the Orders of Public Respondent dated 30

April 1996 and 10 December 1996 as completely null and void for having been rendered with

Grave Abuse of Discretion amounting to Lack [or] Excess of Jurisdiction.

 

II.

The Court of Appeals gravely erred in not ruling that the invasion of/to petitioners’ rights are

substantial and material.

 

III.

The Court of Appeals gravely erred in ruling that the petitioners’ right to the exclusive use of

the Tabacalera Trademarks and Design was not shown to be clear and unmistakable.

 

IV.

The Court of Appeals gravely erred in ruling that there is no urgent and paramount necessity

for the issuance of a writ of injunction.[26]

 

 

The Orders of the DTI were not rendered in grave abuse of discretion amounting to lack of or in

excess of jurisdiction

 

Petitioners argue that because the CA ruled that the DTI had prejudged the main case, the Decision of

the DTI was, therefore, issued in grave abuse of discretion amounting to lack of or in excess of jurisdiction.

Thus, petitioners conclude that the DTI Orders dated April 30, 1996 and December 10, 1996 must be

considered as null and void.[27]

 

There is no merit in such contention.

 

In First Women’s Credit Corporation v. Perez,[28] we defined grave abuse of discretion as:

By grave abuse of discretion is meant such capricious and whimsical exercise of

judgment which is equivalent to an excess or lack of jurisdiction. The abuse of discretion must

be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to

perform a duty enjoined by law or to act at all in contemplation of law, as where the power is

exercised in an arbitrary and despotic manner by reason of passion or hostility.

 

We further clarified such principle later in Buan v. Matugas:[29]

 

There is grave abuse of discretion only when there is a capricious and whimsical

exercise of judgment as is equivalent to lack of jurisdiction, such as where the power is

exercised in an arbitrary and despotic manner by reason of passion and personal hostility, and

it must be so patent or gross as to constitute an evasion of a positive duty or a virtual refusal to

perform the duty or to act at all in contemplation of law. Not every error in the proceedings,

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or every erroneous conclusion of law or fact, is grave abuse of discretion. (Emphasis

supplied)

 

Petitioners must prove that the elements above-mentioned were present in the rendering of the

questioned Orders of the DTI in order to establish grave abuse of discretion. The mere fact that the CA ruled

that the DTI prejudged the main case filed before it does not by itself establish grave abuse of discretion.

 

Moreover, there is no grave abuse of discretion in the instant case because the DTI merely tried to

justify the issuance of the writ of preliminary injunction. Sometimes a discussion in passing of the issues to be

resolved on the merits is necessary in order to deny or grant an application for the writ. This cannot, however,

be considered as a whimsical or capricious exercise of discretion.

 

          The next three issues shall be discussed simultaneously for being interrelated.

 

 Petitioners failed to establish that they are entitled to a writ of preliminary injunction

 

Section 3 of Rule 58 provides for the grounds for the issuance of a preliminary injunction:

 

Sec. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may

be granted when it is established:

 

(a) That the applicant is entitled to the relief demanded, and the whole or part of such

relief consists in restraining the commission or continuance of the act or acts complained of, or

in requiring the performance of an act or acts, either for a limited period or perpetually;

 

(b) That the commission, continuance or non-performance of the act or acts complained

of during the litigation would probably work injustice to the applicant; or

 

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do,

or is procuring or suffering to be done, some act or acts probably in violation of the rights of

the applicant respecting the subject of the action or proceeding, and tending to render the

judgment ineffectual.

 

Thus, the Court has repeatedly held that, in order that an injunctive relief may be issued, the applicant

must show that: “(1) the right of the complainant is clear and unmistakable; (2) the invasion of the right sought

to be protected is material and substantial; and (3) there is an urgent and paramount necessity for the writ to

prevent serious damage.”[30]

 

In establishing the above elements, it bears pointing out that the Court used the term “and” in

enumerating the said elements. In Mapa v. Arroyo,[31] this Court defined the term “and” as follows:

 

In the present case, the employment of the word “and” between “facilities, improvements,

infrastructures” and “other forms of development,” far from supporting petitioner’s theory,

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enervates it instead since it is basic in legal hermeneutics that “and” is not meant to separate

words but is a conjunction used to denote a joinder or union.

 

While in Republic v. David,[32] we applied the above definition with regard an enumeration of conditions

or requisites in this wise:

 

The conditions that were allegedly violated by respondent are contained in paragraph

10 of the Deed of Conditional Sale, as follows:

 

“10. The Contract shall further [provide] the following terms and conditions:

 

x x x x

 

(c) The VENDEE, and his heirs and/or successors, shall actually occupy and be in

possession of the PROPERTY at all times”

 

x x x x

 

The use of the conjunctive and in subparagraph (c) is not by any chance a surplusage.

Neither is it meant to be without any legal signification. Its use is confirmatory of the

restrictive intent that the houses provided by petitioner should be for the exclusive use and

benefit of the SSS employee-beneficiary.

 

It is easily discernible, therefore, that both “actual occupancy” and “possession

at all times” -- not just one or the other -- were imposed as conditions upon

respondent. The word and -- whether it is used to connect words, phrases or full sentences --

must be accepted in its common and usual meaning as “binding together and as relating to one

another.” And implies a conjunction, joinder or union. (Emphasis supplied)

 

In the instant case, the import of the use of the term “and” means that all of the elements mentioned

above must concur in order that an injunctive writ may be issued. The absence of even one of the elements

would be fatal in petitioners’ application for the writ.

 

In finding that the third element was absent, that there is no urgent and paramount necessity for the

writ to prevent serious damage to petitioners, the CA ruled that:

 

Second, petitioners have failed to show that there is an urgent and paramount

necessity for the issuance of writ of injunction to prevent serious damage. In Olalia vs. Hizon

(196 SCRA 665, 672), the Supreme Court held:

 

“While, to reiterate, the evidence to be submitted at the hearing on the motion

for preliminary injunction need not be conclusive and complete, we find that the private

respondent has not shown, at least tentatively, that she has been irrepairably injured

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during the five month period the petitioner was operating under the trade name of

Pampanga’s Pride. On this ground alone, we find that the preliminary injunction should

not have been issued by the trial court. It bears repeating that as a preliminary

injunction is intended to prevent irreparable injury to the plaintiff, that possibility

should be clearly established, if only provisionally, to justify the restraint of the act

complained against. No such injury has been shown by the private respondent.

Consequently, we must conclude that the issuance of the preliminary injunction in this

case, being utterly without basis, was tainted with grave abuse of discretion that we

can correct on certiorari.”

 

In the case at bench, petitioner failed to substantiate their claim that the

abrupt drop in sales was the result of the acts complained of against private

respondent.[33] (Emphasis supplied.)

 

Petitioners claim that as a result of private respondents’ “fraudulent and malicious entry into the

market, Petitioners’ sales dropped by twenty-five [percent] (25%).”[34]

 

Petitioners further aver that the writ of preliminary injunction is necessary as the general appearance

of private respondents’ products is confusingly similar to that of petitioners’ products. Petitioners claim that

this has resulted in a marked drop in their sales. Thus, petitioners argue that unless private respondents use

similar marks, packaging, and labeling as that of petitioners’ products, they will continue to suffer damages.[35]

 

Petitioners’ postulations are bereft of merit.

 

Petitioners failed to present one iota of evidence in support of their allegations. They failed to present

evidence that indeed their sales dropped by an alleged 25% and that such losses resulted from the alleged

infringement by private respondents. Without presenting evidence to prove their allegations, petitioners’

arguments cannot be given any merit. Thus, we ruled in Olalia v. Hizon:[36]

 

A preliminary injunction is an order granted at any stage of an action prior to final

judgment, requiring a person to refrain from a particular act. As the term itself suggest, it is

merely temporary, subject to the final disposition of the principal action. The justification for

the preliminary injunction is urgency. It is based on evidence tending to show that the action

complained of must be stayed lest the movant suffer irreparable injury or the final judgment

granting him relief sought become ineffectual. Necessarily, that evidence need only be a

“sampling,” as it were, and intended merely to give the court an idea of the justification for the

preliminary injunction pending the decision of the case on the merits. The evidence submitted

at the hearing on the motion for the preliminary injunction is not conclusive of the principal

action, which has yet to be decided.

 

Due to the absence of the third requisite for the issuance of a preliminary injunction, petitioners’

application for the injunctive writ must already fail; the absence or presence of the other requisites need no

longer be discussed.

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Such denial is grounded on the oft-repeated principle enunciated in Vera v. Arca,[37] where this Court

held that:

 

As far back as March 23, 1909, more than 60 years ago, this Court, in the leading case

of Devesa v. Arbes, made the categorical pronouncement that the issuance of an injunction is

addressed to the sound discretion of the Court, the exercise of which is controlled not so much

by the then applicable sections of the Code of Civil Procedure, now the Rules of Court, but by

the accepted doctrines, one of which is that it should not be granted while the rights between

the parties are undetermined except in extraordinary cases where material and irreparable

injury will be done. For it is an action in equity appropriate only when there can be no

compensation in damages for the injury thus sustained and where no adequate remedy in law

exists. Such a holding reflected the prevailing American doctrine that there is no power “the

exercise of which is more delicate, which requires greater caution, deliberation and sound

discretion or more dangerous in a doubtful case,” being “the strong arm of equity, that never

ought to be extended,” except where the injury is great and irreparable.

While in Olalia,[38] we reiterated the above ruling, as follows:

 

It has been consistently held that there is no power the exercise of which is more

delicate, which requires greater caution, deliberation and sound discretion, or more dangerous

in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should

never be extended unless to cases of great injury, where courts of law cannot afford an

adequate or commensurate remedy in damages.

 

Every court should remember that an injunction is a limitation upon the freedom of

action of the defendant and should not be granted lightly or precipitately. It should be granted

only when the court is fully satisfied that the law permits it and the emergency demands it.

 

We again ruled in Hernandez v. National Power Corporation:[39]

 

At times referred to as the “Strong Arm of Equity,” we have consistently ruled that

there is no power the exercise of which is more delicate and which calls for greater

circumspection than the issuance of an injunction. It should only be extended in cases of great

injury where courts of law cannot afford an adequate or commensurate remedy in damages; “in

cases of extreme urgency; where the right is very clear; where considerations of relative

inconvenience bear strongly in complainant’s favor; where there is a willful and unlawful

invasion of plaintiff’s right against his protest and remonstrance, the injury being a continuing

one, and where the effect of the mandatory injunction is rather to reestablish and maintain a

preexisting continuing relation between the parties, recently and arbitrarily interrupted by the

defendant, than to establish a new relation.” (Emphasis supplied)

 

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Clearly, it was incumbent upon the petitioners to support with evidence their claim for the issuance of

a preliminary injunction. They failed to do so. Hence, the instant petition must fail.

 

WHEREFORE, the petition is hereby DENIED. The assailed June 16, 2003 Decision and December 1,

2003 Resolution of the CA in CA-G.R. SP No. 42881 areAFFIRMED. Costs against petitioners.

 

          SO ORDERED.

E.Y. Industrial Sales v. Shen Dar Electricity G.R. No.184850, October 20, 2010

The Case

This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21, 2008

Decision1and the October 6, 2008 Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 99356

entitled Shen Dar Electricity and Machinery Co., Ltd. v. E.Y. Industrial Sales, Inc. and Engracio Yap.

The assailed decision reversed the Decision dated May 25, 20073 issued by the Director General of the

Intellectual Property Office (IPO) in Inter Partes Case No. 14-2004-00084. The IPO Director General upheld

Certificate of Registration (COR) No. 4-1999-005393 issued by the IPO for the trademark "VESPA" in favor of

petitioner E.Y. Industrial Sales, Inc. (EYIS), but ordered the cancellation of COR No. 4-1997-121492, also for

the trademark "VESPA," issued in favor of respondent Shen Dar Electricity and Machinery Co., Ltd. (Shen

Dar). The Decision of the IPO Director General, in effect, affirmed the Decision dated May 29, 20064 issued by

the Director of the Bureau of Legal Affairs (BLA) of the IPO.

The Facts

EYIS is a domestic corporation engaged in the production, distribution and sale of air compressors and other

industrial tools and equipment.5 Petitioner Engracio Yap is the Chairman of the Board of Directors of EYIS.6

Respondent Shen Dar is a Taiwan-based foreign corporation engaged in the manufacture of air compressors.7

Both companies claimed to have the right to register the trademark "VESPA" for air compressors.

From 1997 to 2004, EYIS imported air compressors from Shen Dar through sales contracts. In the Sales

Contract dated April 20, 2002,8 for example, Shen Dar would supply EYIS in one (1) year with 24 to 30 units of

40-ft. containers worth of air compressors identified in the Packing/Weight Lists simply as SD-23, SD-29, SD-

31, SD-32, SD-39, SD-67 and SD-68. In the corresponding Bill of Ladings, the items were described merely as

air compressors.9 There is no documentary evidence to show that such air compressors were marked "VESPA."

On June 9, 1997, Shen Dar filed Trademark Application Serial No. 4-1997-121492 with the IPO for the mark

"VESPA, Chinese Characters and Device" for use on air compressors and welding machines.10

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

On July 28, 1999, EYIS filed Trademark Application Serial No. 4-1999-005393, also for the mark "VESPA," for

use on air compressors.11 On January 18, 2004, the IPO issued COR No. 4-1999-005393 in favor of

EYIS.12Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 4-1997-121492.13

In the meantime, on June 21, 2004, Shen Dar filed a Petition for Cancellation of EYIS’ COR with the BLA. 14 In

the Petition, Shen Dar primarily argued that the issuance of the COR in favor of EYIS violated Section 123.1

paragraphs (d), (e) and (f) of Republic Act No. (RA) 8293, otherwise known as the Intellectual Property Code

(IP Code), having first filed an application for the mark. Shen Dar further alleged that EYIS was a mere

distributor of air compressors bearing the mark "VESPA" which it imported from Shen Dar. Shen Dar also

argued that it had prior and exclusive right to the use and registration of the mark "VESPA" in the Philippines

under the provisions of the Paris Convention.15

In its Answer, EYIS and Yap denied the claim of Shen Dar to be the true owners of the mark "VESPA" being the

sole assembler and fabricator of air compressors since the early 1990s. They further alleged that the air

compressors that Shen Dar allegedly supplied them bore the mark "SD" for Shen Dar and not "VESPA."

Moreover, EYIS argued that Shen Dar, not being the owner of the mark, could not seek protection from the

provisions of the Paris Convention or the IP Code.16

Thereafter, the Director of the BLA issued its Decision dated May 29, 2006 in favor of EYIS and against Shen

Dar, the dispositive portion of which reads:

WHEREFORE, premises considered, the Petition for Cancellation is, as it is hereby, DENIED. Consequently,

Certificate of Registration No. 4-1999-[005393] for the mark "VESPA" granted in the name of E.Y. Industrial

Sales, Inc. on 9 January 2007 is hereby upheld.

Let the filewrapper of VESPA subject matter of this case be forwarded to the Administrative, Financial and

Human Resource Development Services Bureau for issuance and appropriate action in accordance with this

DECISION and a copy thereof furnished to the Bureau of Trademarks for information and update of its

records.

SO ORDERED.17

Shen Dar appealed the decision of the BLA Director to the Director General of the IPO. In the appeal, Shen Dar

raised the following issues:

1. Whether the BLA Director erred in ruling that Shen Dar failed to present evidence;

2. Whether the registration of EYIS’ application was proper considering that Shen Dar was the first to

file an application for the mark; and

3. Whether the BLA Director correctly ruled that EYIS is the true owner of the mark.18

Later, the IPO Director General issued a Decision dated May 25, 2007 upholding the COR issued in favor of

EYIS while cancelling the COR of Shen Dar, the dispositive portion of which reads:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

WHEREFORE, premises considered, the appeal is DENIED. Certificate of Registration No. 4-1999-005393 for

the mark VESPA for air compressor issued in favor of Appellee is hereby upheld. Consequently, Certificate of

Registration No. 4-1997-121492 for the mark VESPA, Chinese Characters & Device for goods air compressor

and spot welding machine issued in favor of Appellant is hereby ordered cancelled.

Let a copy of this Decision as well as the records of this case be furnished and returned to the Director of

Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the

Administrative, Financial and Human Resources Development Services Bureau, and the Documentation,

Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance,

and records purposes.19

Shen Dar appealed the above decision of the IPO Director General to the CA where Shen Dar raised the

following issues:

1. Whether Shen Dar is guilty of forum shopping;

2. Whether the first-to-file rule applies to the instant case;

3. Whether Shen Dar presented evidence of actual use;

4. Whether EYIS is the true owner of the mark "VESPA";

5. Whether the IPO Director General erred in cancelling Shen Dar’s COR No. 4-1997-121492 without a

petition for cancellation; and

6. Whether Shen Dar sustained damages.20

In the assailed decision, the CA reversed the IPO Director General and ruled in favor of Shen Dar. The

dispositive portion states:

WHEREFORE, premises considered, the petition is GRANTED. Consequently, the assailed decision of the

Director General of the Intellectual Property Office dated May 25, 2007 is hereby REVERSED and SET ASIDE.

In lieu thereof, a new one is entered: a) ordering the cancellation of Certificate of Registration No. 4-1999-

005393 issued on January 19, 2004 for the trademark VESPA in favor of E.Y. Industrial Sales, Inc.; b) ordering

the restoration of the validity of Certificate of Registration No. 4-1997-121492 for the trademark VESPA in

favor of Shen Dar Electricity and Machinery Co., Ltd. No pronouncement as to costs.

SO ORDERED.21

In ruling for Shen Dar, the CA ruled that, despite the fact that Shen Dar did not formally offer its evidence

before the BLA, such evidence was properly attached to the Petition for Cancellation. As such, Shen Dar’s

evidence may be properly considered. The CA also enunciated that the IPO failed to properly apply the

provisions of Sec. 123.1(d) of RA 8293, which prohibits the registration of a trademark in favor of a party when

there is an earlier filed application for the same mark. The CA further ruled that Shen Dar should be

considered to have prior use of the mark based on the statements made by the parties in their respective

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Declarations of Actual Use. The CA added that EYIS is a mere importer of the air compressors with the mark

"VESPA" as may be gleaned from its receipts which indicated that EYIS is an importer, wholesaler and retailer,

and therefore, cannot be considered an owner of the mark.22

EYIS filed a motion for reconsideration of the assailed decision which the CA denied in the assailed resolution.

Hence, the instant appeal.

Issues

EYIS and Yap raise the following issues in their petition:

A. Whether the Director General of the IPO correctly upheld the rights of Petitioners over the

trademark VESPA.

B. Whether the Director General of the IPO can, under the circumstances, order the cancellation of

Respondent’s certificate of registration for VESPA, which has been fraudulently obtained and

erroneously issued.

C. Whether the Honorable Court of Appeals was justified in reversing the findings of fact of the IPO,

which affirm the rights of Petitioner EYIS over the trademark VESPA and when such findings are

supported by the evidence on record.

D. Whether this Honorable Court may review questions of fact considering that the findings of the

Court of Appeals and the IPO are in conflict and the conclusions of the appellee court are contradicted

by the evidence on record.23

The Ruling of the Court

The appeal is meritorious.

First Issue:

Whether this Court may review the questions of fact presented

Petitioners raise the factual issue of who the true owner of the mark is. As a general rule, this Court is not a

trier of facts. However, such rule is subject to exceptions.

In New City Builders, Inc. v. National Labor Relations Commission,24 the Court ruled that:

We are very much aware that the rule to the effect that this Court is not a trier of facts admits of exceptions.

As we have stated in Insular Life Assurance Company, Ltd. vs. CA:

[i]t is a settled rule that in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts

and does not normally undertake the re-examination of the evidence presented by the contending parties

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the

Court. However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are

grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly

mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on

a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the

Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the

appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are

conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the

petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the

findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record;

and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties,

which, if properly considered, would justify a different conclusion. (Emphasis supplied.)

In the instant case, the records will show that the IPO and the CA made differing conclusions on the issue of

ownership based on the evidence presented by the parties. Hence, this issue may be the subject of this Court’s

review.

Second Issue:

Whether evidence presented before the BLA must be formally offered

Preliminarily, it must be noted that the BLA ruled that Shen Dar failed to adduce evidence in support of its

allegations as required under Office Order No. 79, Series of 2005, Amendments to the Regulations on Inter

Partes Proceedings, having failed to formally offer its evidence during the proceedings before it. The BLA

ruled:

At the outset, we note petitioner’s failure to adduce any evidence in support of its allegations in the Petition for

Cancellation. Petitioner did not file nor submit its marked evidence as required in this Bureau’s Order No.

2006-157 dated 25 January 2006 in compliance with Office Order No. 79, Series of 2005, Amendments to the

Regulations on Inter Partes Proceedings.25 x x x

In reversing such finding, the CA cited Sec. 2.4 of BLA Memorandum Circular No. 03, Series of 2005, which

states:

Section 2.4. In all cases, failure to file the documentary evidences in accordance with Sections 7 and 8 of the

rules on summary proceedings shall be construed as a waiver on the part of the parties. In such a case, the

original petition, opposition, answer and the supporting documents therein shall constitute the entire evidence

for the parties subject to applicable rules.

The CA concluded that Shen Dar needed not formally offer its evidence but merely needed to attach its

evidence to its position paper with the proper markings,26 which it did in this case.

The IP Code provides under its Sec. 10.3 that the Director General of the IPO shall establish the procedure for

the application for the registration of a trademark, as well as the opposition to it:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Section 10. The Bureau of Legal Affairs.¾The Bureau of Legal Affairs shall have the following functions:

x x x x

10.3. The Director General may by Regulations establish the procedure to govern the implementation of this

Section.

Thus, the Director General issued Office Order No. 79, Series of 2005 amending the regulations on Inter

Partes Proceedings, Sec. 12.1 of which provides:

Section 12. Evidence for the Parties¾

12.1. The verified petition or opposition, reply if any, duly marked affidavits of the witnesses, and the

documents submitted, shall constitute the entire evidence for the petitioner or opposer. The verified answer,

rejoinder if any, and the duly marked affidavits and documents submitted shall constitute the evidence for the

respondent. Affidavits, documents and other evidence not submitted and duly marked in accordance with the

preceding sections shall not be admitted as evidence.

The preceding sections referred to in the above provision refer to Secs. 7.1, 8.1 and 9 which, in turn, provide:

Section 7. Filing of Petition or Opposition¾

7.1. The petition or opposition, together with the affidavits of witnesses and originals of the documents and

other requirements, shall be filed with the Bureau, provided, that in case of public documents, certified copies

shall be allowed in lieu of the originals. The Bureau shall check if the petition or opposition is in due form as

provided in the Regulations particularly Rule 3, Section 3; Rule 4, Section 2; Rule 5, Section 3; Rule 6, Section

9; Rule 7, Sections 3 and 5; Rule 8, Sections 3 and 4. For petition for cancellation of layout design (topography)

of integrated circuits, Rule 3, Section 3 applies as to the form and requirements. The affidavits, documents and

other evidence shall be marked consecutively as "Exhibits" beginning with the letter "A".

Section 8. Answer¾

8.1. Within three (3) working days from receipt of the petition or opposition, the Bureau shall issue an order

for the respondent to file an answer together with the affidavits of witnesses and originals of documents, and

at the same time shall notify all parties required to be notified in the IP Code and these Regulations, provided,

that in case of public documents, certified true copies may be submitted in lieu of the originals. The affidavits

and documents shall be marked consecutively as "Exhibits" beginning with the number "1".

Section 9. Petition or Opposition and Answer must be verified¾ Subject to Rules 7 and 8 of these regulations,

the petition or opposition and the answer must be verified. Otherwise, the same shall not be considered as

having been filed.

In other words, as long as the petition is verified and the pieces of evidence consisting of the affidavits of the

witnesses and the original of other documentary evidence are attached to the petition and properly marked in

accordance with Secs. 7.1 and 8.1 abovementioned, these shall be considered as the evidence of the petitioner.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

There is no requirement under the abovementioned rules that the evidence of the parties must be formally

offered to the BLA.

In any case, as a quasi-judicial agency and as stated in Rule 2, Sec. 5 of the Regulations on Inter Partes

Proceedings, the BLA is not bound by technical rules of procedure. The evidence attached to the petition may,

therefore, be properly considered in the resolution of the case.

Third Issue:

Whether the IPO Director General can

validly cancel Shen Dar’s Certificate of Registration

In his Decision, the IPO Director General stated that, despite the fact that the instant case was for the

cancellation of the COR issued in favor of EYIS, the interests of justice dictate, and in view of its findings, that

the COR of Shen Dar must be cancelled. The Director General explained:

Accordingly, while the instant case involves a petition to cancel the registration of the Appellee’s trademark

VESPA, the interest of justice requires that Certificate of Registration No. 4-1997-121492 be cancelled. While

the normal course of proceedings should have been the filing of a petition for cancellation of Certificate of

Registration No. 4-1997-121492, that would involve critical facts and issues that have already been resolved in

this case. To allow the Applicant to still maintain in the Trademark Registry Certificate of Registration No. 4-

1997-121492 would nullify the exclusive rights of Appellee as the true and registered owner of the mark

VESPA and defeat the purpose of the trademark registration system.27

Shen Dar challenges the propriety of such cancellation on the ground that there was no petition for

cancellation as required under Sec. 151 of RA 8293.

Office Order No. 79, Series of 2005, provides under its Sec. 5 that:

Section 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases.¾The rules of

procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases. The Rules of Court

may be applied suppletorily. The Bureau shall not be bound by strict technical rules of procedure and evidence

but may adopt, in the absence of any applicable rule herein, such mode of proceedings which is consistent with

the requirements of fair play and conducive to the just, speedy and inexpensive disposition of cases, and which

will give the Bureau the greatest possibility to focus on the contentious issues before it. (Emphasis supplied.)

The above rule reflects the oft-repeated legal principle that quasi-judicial and administrative bodies are not

bound by technical rules of procedure. Such principle, however, is tempered by fundamental evidentiary rules,

including due process. Thus, we ruled in Aya-ay, Sr. v. Arpaphil Shipping Corp.:28

That administrative quasi-judicial bodies like the NLRC are not bound by technical rules of procedure in the

adjudication of cases does not mean that the basic rules on proving allegations should be entirely dispensed

with. A party alleging a critical fact must still support his allegation with substantial evidence. Any decision

based on unsubstantiated allegation cannot stand as it will offend due process.72

INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

x x x The liberality of procedure in administrative actions is subject to limitations imposed by basic

requirements of due process. As this Court said in Ang Tibay v. CIR, the provision for flexibility in

administrative procedure "does not go so far as to justify orders without a basis in evidence having rational

probative value." More specifically, as held in Uichico v. NLRC:

It is true that administrative and quasi-judicial bodies like the NLRC are not bound by the technical rules of

procedure in the adjudication of cases. However, this procedural rule should not be construed as a license to

disregard certain fundamental evidentiary rules.

This was later reiterated in Lepanto Consolidated Mining Company v. Dumapis:29

While it is true that administrative or quasi-judicial bodies like the NLRC are not bound by the technical rules

of procedure in the adjudication of cases, this procedural rule should not be construed as a license to disregard

certain fundamental evidentiary rules. The evidence presented must at least have a modicum of admissibility

for it to have probative value. Not only must there be some evidence to support a finding or conclusion, but the

evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant

evidence as a reasonable mind might accept as adequate to support a conclusion. Thus, even though technical

rules of evidence are not strictly complied with before the LA and the NLRC, their decision must be based on

evidence that must, at the very least, be substantial.

The fact that no petition for cancellation was filed against the COR issued to Shen Dar does not preclude the

cancellation of Shen Dar’s COR. It must be emphasized that, during the hearing for the cancellation of EYIS’

COR before the BLA, Shen Dar tried to establish that it, not EYIS, was the true owner of the mark "VESPA"

and, thus, entitled to have it registered. Shen Dar had more than sufficient opportunity to present its evidence

and argue its case, and it did. It was given its day in court and its right to due process was respected. The IPO

Director General’s disregard of the procedure for the cancellation of a registered mark was a valid exercise of

his discretion.

Fourth Issue:

Whether the factual findings of the IPO are binding on the CA

Next, petitioners challenge the CA’s reversal of the factual findings of the BLA that Shen Dar and not EYIS is

the prior user and, therefore, true owner of the mark. In arguing its position, petitioners cite numerous rulings

of this Court where it was enunciated that the factual findings of administrative bodies are given great weight

if not conclusive upon the courts when supported by substantial evidence.

We agree with petitioners that the general rule in this jurisdiction is that the factual findings of administrative

bodies deserve utmost respect when supported by evidence. However, such general rule is subject to

exceptions.

In Fuentes v. Court of Appeals,30 the Court established the rule of conclusiveness of factual findings of the CA

as follows:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Jurisprudence teaches us that "(a)s a rule, the jurisdiction of this Court in cases brought to it from the Court of

Appeals x x x is limited to the review and revision of errors of law allegedly committed by the appellate court,

as its findings of fact are deemed conclusive. As such this Court is not duty-bound to analyze and weigh all

over again the evidence already considered in the proceedings below. This rule, however, is not without

exceptions." The findings of fact of the Court of Appeals, which are as a general rule deemed conclusive, may

admit of review by this Court:

(1) when the factual findings of the Court of Appeals and the trial court are contradictory;

(2) when the findings are grounded entirely on speculation, surmises, or conjectures;

(3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken,

absurd, or impossible;

(4) when there is grave abuse of discretion in the appreciation of facts;

(5) when the appellate court, in making its findings, goes beyond the issues of the case, and such

findings are contrary to the admissions of both appellant and appellee;

(6) when the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7) when the Court of Appeals fails to notice certain relevant facts which, if properly considered, will

justify a different conclusion;

(8) when the findings of fact are themselves conflicting;

(9) when the findings of fact are conclusions without citation of the specific evidence on which they are

based; and

(10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but

such findings are contradicted by the evidence on record. (Emphasis supplied.)

Thereafter, in Villaflor v. Court of Appeals,31 this Court applied the above principle to factual findings of quasi-

judicial bodies, to wit:

Proceeding by analogy, the exceptions to the rule on conclusiveness of factual findings of the Court of Appeals,

enumerated in Fuentes vs. Court of Appeals, can also be applied to those of quasi-judicial bodies x x x.

(Emphasis supplied.)

Here, the CA identified certain material facts that were allegedly overlooked by the BLA and the IPO Director

General which it opined, when correctly appreciated, would alter the result of the case. An examination of the

IPO Decisions, however, would show that no such evidence was overlooked.

First, as to the date of first use of the mark by the parties, the CA stated:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

To begin with, when respondents-appellees filed its application for registration of the VESPA trademark on July

28, 1999, they stated under oath, as found in their DECLARATION OF ACTUAL USE, that their first use of the

mark was on December 22, 1998. On the other hand, [Shen Dar] in its application dated June 09, 1997 stated,

likewise under oath in their DECLARATION OF ACTUAL USE, that its first use of the mark was in June 1996.

This cannot be made any clearer. [Shen Dar] was not only the first to file an application for registration but

likewise first to use said registrable mark.32

Evidently, the CA anchors its finding that Shen Dar was the first to use the mark on the statements of the

parties in their respective Declarations of Actual Use. Such conclusion is premature at best. While a

Declaration of Actual Use is a notarized document, hence, a public document, it is not conclusive as to the fact

of first use of a mark. The declaration must be accompanied by proof of actual use as of the date claimed. In a

declaration of actual use, the applicant must, therefore, present evidence of such actual use.

The BLA ruled on the same issue, as follows:

More importantly, the private respondent’s prior adoption and continuous use of the mark ‘VESPA’ on air

compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of

E.Y. Industrial and Bill of Lading (Exhibits ‘4’ to ‘375’). Sales Invoice No. 12075 dated March 27, 1995

antedates petitioner’s date of first use on January 1, 1997 indicated in its trademark application filed on June 9,

1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use submitted on

December 3, 2001 (Exhibit ‘385’). The use by respondent registrant in the concept of owner is shown by

commercial documents, sales invoices unambiguously describing the goods as "VESPA" air compressors.

Private respondents have sold the air compressors bearing the "VESPA" to various locations in the Philippines,

as far as Mindanao and the Visayas since the early 1990’s. We carefully inspected the evidence consisting of

three hundred seventy-one (371) invoices and shipment documents which show that VESPA air compressors

were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City, Zamboanga City,

Cagayan de Oro City, Davao City, to name a few. There is no doubt that it is through private respondents’

efforts that the mark "VESPA" used on air compressors has gained business goodwill and reputation in the

Philippines for which it has validly acquired trademark rights. Respondent E.Y. Industrial’s right has been

preserved until the passage of RA 8293 which entitles it to register the same.33

Comparatively, the BLA’s findings were founded upon the evidence presented by the parties. An example of

such evidence is Invoice No. 12075 dated March 29, 199534 where EYIS sold four units of VESPA air

compressors to Veteran Paint Trade Center. Shen Dar failed to rebut such evidence. The truth, as supported by

the evidence on record, is that EYIS was first to use the mark.

Moreover, the discrepancy in the date provided in the Declaration of Actual Use filed by EYIS and the proof

submitted was appropriately considered by the BLA, ruling as follows:

On the contrary, respondent EY Industrial was able to prove the use of the mark "VESPA" on the concept of an

owner as early as 1991. Although Respondent E.Y. indicated in its trademark application that its first use was

in December 22, 1998, it was able to prove by clear and positive evidence of use prior to such date.

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

In Chuang Te v. Ng Kian-Guiab and Director of Patents, L-23791, 23 November 1966, the High Court clarified:

Where an applicant for registration of a trademark states under oath the date of his earliest use, and later on

he wishes to carry back his first date of use to an earlier date, he then takes on the greater burden of

presenting "clear and convincing evidence" of adoption and use as of that earlier date. (B.R. Baker Co. vs.

Lebrow Bros., 150 F. 2d 580.)35

The CA further found that EYIS is not a manufacturer of air compressors but merely imports and sells them as

a wholesaler and retailer. The CA reasoned:

Conversely, a careful perusal of appellees’ own submitted receipts shows that it is not manufacturer but an

importer, wholesaler and retailer. This fact is corroborated by the testimony of a former employee of appellees.

Admittedly too, appellees are importing air compressors from [Shen Dar] from 1997 to 2004. These matters,

lend credence to [Shen Dar’s] claim that the letters SD followed by a number inscribed in the air compressor is

only to describe its type, manufacturer business name and capacity. The VESPA mark is in the sticker which is

attached to the air compressors. The ruling of the Supreme Court, in the case of UNNO Commercial

Enterprises, Inc. vs. General Milling Corporation et al., is quite enlightening, thus We quote:

"The term owner does not include the importer of the goods bearing the trademark, trade name, service mark,

or other mark of ownership, unless such importer is actually the owner thereof in the country from which the

goods are imported. Thus, this Court, has on several occasions ruled that where the applicant’s alleged

ownership is not shown in any notarial document and the applicant appears to be merely an importer or

distributor of the merchandise covered by said trademark, its application cannot be granted."36

This is a non sequitur. It does not follow. The fact that EYIS described itself in its sales invoice as an importer,

wholesaler and retailer does not preclude its being a manufacturer. Sec. 237 of the National Internal Revenue

Code states:

Section 237. Issuance of Receipts or Sales or Commercial Invoices.¾All persons subject to an internal revenue

tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty-five pesos

(P25.00) or more, issue duly registered receipts or sale or commercial invoices, prepared at least in duplicate,

showing the date of transaction, quantity, unit cost and description of merchandise or nature of service:

Provided, however, That where the receipt is issued to cover payment made as rentals, commissions,

compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any,

and address of the purchaser, customer or client.

The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the

transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the

same in his place of business for a period of three (3) years from the close of the taxable year in which such

invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of

business, for a like period.

The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from

compliance with the provisions of this Section. (Emphasis supplied.)

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Correlatively, in Revenue Memorandum No. 16-2003 dated May 20, 2003, the Bureau of Internal Revenue

defined a Sales Invoice and identified its required information as follows:

Sales Invoices (SI)/Cash Invoice (CI) – is written account of goods sold or services rendered and the prices

charged therefor used in the ordinary course of business evidencing sale and transfer or agreement to sell or

transfer of goods and services. It contains the same information found in the Official Receipt.

Official Receipt (OR) – is a receipt issued for the payment of services rendered or goods sold. It contains the

following information:

a. Business name and address;

b. Taxpayer Identification Number;

c. Name of printer (BIR Permit No.) with inclusive serial number of booklets and date of issuance of

receipts.

There is no requirement that a sales invoice should accurately state the nature of all the businesses of the

seller. There is no legal ground to state that EYIS’ "declaration" in its sales invoices that it is an importer,

wholesaler and retailer is restrictive and would preclude its being a manufacturer.

From the above findings, there was no justifiable reason for the CA to disregard the factual findings of the IPO.

The rulings of the IPO Director General and the BLA Director were supported by clear and convincing

evidence. The facts cited by the CA and Shen Dar do not justify a different conclusion from that of the IPO.

Hence, the findings of the BLA Director and the IPO Director General must be deemed as conclusive on the CA.

Fifth Issue:

Whether EYIS is the true owner of the mark "VESPA"

In any event, given the length of time already invested by the parties in the instant case, this Court must write

finis to the instant controversy by determining, once and for all, the true owner of the mark "VESPA" based on

the evidence presented.

RA 8293 espouses the "first-to-file" rule as stated under Sec. 123.1(d) which states:

Section 123. Registrability. - 123.1. A mark cannot be registered if it:

x x x x

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing or

priority date, in respect of:

(i) The same goods or services, or

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion. (Emphasis

supplied.)

Under this provision, the registration of a mark is prevented with the filing of an earlier application for

registration. This must not, however, be interpreted to mean that ownership should be based upon an earlier

filing date. While RA 8293 removed the previous requirement of proof of actual use prior to the filing of an

application for registration of a mark, proof of prior and continuous use is necessary to establish ownership of

a mark. Such ownership constitutes sufficient evidence to oppose the registration of a mark.

Sec. 134 of the IP Code provides that "any person who believes that he would be damaged by the registration

of a mark x x x" may file an opposition to the application. The term "any person" encompasses the true owner

of the mark¾the prior and continuous user.

Notably, the Court has ruled that the prior and continuous use of a mark may even overcome the presumptive

ownership of the registrant and be held as the owner of the mark. As aptly stated by the Court in Shangri-la

International Hotel Management, Ltd. v. Developers Group of Companies, Inc.:37

Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The

certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark

or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the

presumptive ownership of the registrant and may very well entitle the former to be declared owner in an

appropriate case.

x x x x

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in

trade or commerce. As between actual use of a mark without registration, and registration of the mark without

actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly entrenched,

because it has come down through the years, is that actual use in commerce or business is a pre-requisite to

the acquisition of the right of ownership.

x x x x

By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the

trademark being applied for, he has no right to apply for registration of the same. Registration merely creates

a prima facie presumption of the validity of the registration, of the registrant’s ownership of the trademark and

of the exclusive right to the use thereof. Such presumption, just like the presumptive regularity in the

performance of official functions, is rebuttable and must give way to evidence to the contrary.

Here, the incontrovertible truth, as established by the evidence submitted by the parties, is that EYIS is the

prior user of the mark. The exhaustive discussion on the matter made by the BLA sufficiently addresses the

issue:

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Based on the evidence, Respondent E.Y. Industrial is a legitimate corporation engaged in buying, importing,

selling, industrial machineries and tools, manufacturing, among others since its incorporation in 1988. (Exhibit

"1"). Indeed private respondents have submitted photographs (Exhibit "376", "377", "378", "379") showing an

assembly line of its manufacturing or assembly process.1avvphi1

More importantly, the private respondent’s prior adoption and continuous use of the mark "VESPA" on air

compressors is bolstered by numerous documentary evidence consisting of sales invoices issued in the name of

respondent EY Industrial and Bills of Lading. (Exhibits "4" to "375"). Sales Invoice No. 12075 dated March 27,

1995 antedates petitioner’s date of first use in January 1, 1997 indicated in its trademark application filed in

June 9, 1997 as well as the date of first use in June of 1996 as indicated in the Declaration of Actual Use

submitted on December 3, 2001 (Exhibit "385"). The use by respondent-registrant in the concept of owner is

shown by commercial documents, sales invoices unambiguously describing the goods as "VESPA" air

compressors. Private respondents have sold the air compressors bearing the "VESPA" to various locations in

the Philippines, as far as Mindanao and the Visayas since the early 1990’s. We carefully inspected the evidence

consisting of three hundred seventy one (371) invoices and shipment documents which show that "VESPA" air

compressors were sold not only in Manila, but to locations such as Iloilo City, Cebu City, Dumaguete City,

Zamboanga City, Cagayan de Oro City, Davao City to name a few. There is no doubt that it is through private

respondents’ efforts that the mark "VESPA" used on air compressors has gained business goodwill and

reputation in the Philippines for which it has validly acquired trademark rights. Respondent EY Industrial’s

right has been preserved until the passage of RA 8293 which entitles it to register the same. x x x38

On the other hand, Shen Dar failed to refute the evidence cited by the BLA in its decision. More importantly,

Shen Dar failed to present sufficient evidence to prove its own prior use of the mark "VESPA." We cite with

approval the ruling of the BLA:

[Shen Dar] avers that it is the true and rightful owner of the trademark "VESPA" used on air compressors. The

thrust of [Shen Dar’s] argument is that respondent E.Y. Industrial Sales, Inc. is a mere distributor of the

"VESPA" air compressors. We disagree.

This conclusion is belied by the evidence. We have gone over each and every document attached as Annexes

"A", "A" 1-48 which consist of Bill of Lading and Packing Weight List. Not one of these documents referred to a

"VESPA" air compressor. Instead, it simply describes the goods plainly as air compressors which is type "SD"

and not "VESPA". More importantly, the earliest date reflected on the Bill of Lading was on May 5, 1997.

(Annex – "A"-1). [Shen Dar] also attached as Annex "B" a purported Sales Contract with respondent EY

Industrial Sales dated April 20, 2002. Surprisingly, nowhere in the document does it state that respondent EY

Industrial agreed to sell "VESPA" air compressors. The document only mentions air compressors which if

genuine merely bolsters respondent Engracio Yap’s contention that [Shen Dar] approached them if it could sell

the "Shen Dar" or "SD" air compressor. (Exhibit "386") In its position paper, [Shen Dar] merely mentions of Bill

of Lading constituting respondent as consignee in 1993 but never submitted the same for consideration of this

Bureau. The document is also not signed by [Shen Dar]. The agreement was not even drafted in the letterhead

of either [Shen Dar] nor [sic] respondent – registrant. Our only conclusion is that [Shen Dar] was not able to

prove to be the owner of the VESPA mark by appropriation. Neither was it able to prove actual commercial use

in the Philippines of the mark VESPA prior to its filing of a trademark application in 9 June 1997.39

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

As such, EYIS must be considered as the prior and continuous user of the mark "VESPA" and its true owner.

Hence, EYIS is entitled to the registration of the mark in its name.

WHEREFORE, the petition is hereby GRANTED. The CA’s February 21, 2008 Decision and October 6, 2008

Resolution in CA-G.R. SP No. 99356 are hereby REVERSED and SET ASIDE. The Decision dated May 25, 2007

issued by the IPO Director General in Inter Partes Case No. 14-2004-00084 and the Decision dated May 29,

2006 of the BLA Director of the IPO are hereby REINSTATED.

Fredco Manufacturing v. Fellows of Harvard College, G.R. No. 185917, June 1, 2011

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009

Resolution3 of the Court of Appeals in CA-G.R. SP No. 103394.

The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and

existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the

Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of

Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts,

United States of America. The case was docketed as Inter Partes Case No. 14-2005-00094.

Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the

mark “Harvard Veritas Shield Symbol” for decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying

discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services.

Fredco alleged that the mark “Harvard” for t-shirts, polo shirts, sandos, briefs, jackets and slacks was first

used in the Philippines on 2 January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York

Garments), a domestic corporation and Fredco’s predecessor-in-interest. On 24 January 1985, New York

Garments filed for trademark registration of the mark “Harvard” for goods under Class 25. The application

matured into a registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year

term subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a

member of the family that owned New York Garments.

 Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9

November 1995 and had since then handled the manufacture, promotion and marketing of “Harvard” clothing

articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York

Garments had already registered the mark “Harvard” for goods under Class 25. Fredco alleged that the

registration was cancelled on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of

use/non-use on the fifth anniversary of the registration but the right to the mark “Harvard” remained with its

predecessor New York Garments and now with Fredco.

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 Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark “Harvard” in

numerous countries worldwide, including the Philippines. Among the countries where Harvard University has

registered its name and mark “Harvard” are:

 

1.      Argentina 26. South Korea

2.      Benelux4 27. Malaysia

3.      Brazil 28. Mexico

4.      Canada 29. New Zealand

5.      Chile 30. Norway

6.      China P.R. 31. Peru

7.      Colombia 32. Philippines

8.      Costa Rica 33. Poland

9.      Cyprus 34. Portugal

10.  Czech Republic 35. Russia

11.  Denmark 36. South Africa

12.  Ecuador 37. Switzerland

13.  Egypt 38. Singapore

14.  Finland 39. Slovak Republic

15.  France 40. Spain

16.  Great Britain 41. Sweden

17.  Germany 42. Taiwan

18.  Greece 43. Thailand

19.  Hong Kong 44. Turkey

20.  India 45. United Arab Emirates

21.  Indonesia 46. Uruguay

22.  Ireland 47. United States of America

23.  Israel 48. Venezuela

24.  Italy 49. Zimbabwe

25.  Japan 50. European Community5

 

The name and mark “Harvard” was adopted in 1639 as the name of Harvard College6 of Cambridge,

Massachusetts, U.S.A. The name and mark “Harvard” was allegedly used in commerce as early as 1872.

Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United

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States and throughout the world. Harvard University promotes, uses, and advertises its name “Harvard”

through various publications, services, and products in foreign countries, including the Philippines. Harvard

University further alleged that the name and the mark have been rated as one of the most famous brands in

the world, valued between US $750,000,000 and US $1,000,000,000.

 Harvard University alleged that in March 2002, it discovered, through its international trademark watch

program, Fredco’s website www.harvard-usa.com. The website advertises and promotes the brand name

“Harvard Jeans USA” without Harvard University’s consent. The website’s main page shows an oblong logo

bearing the mark “Harvard Jeans USA®,” “Established 1936,” and “Cambridge, Massachusetts.” On 20 April

2004, Harvard University filed an administrative complaint against Fredco before the IPO for trademark

infringement and/or unfair competition with damages.

 Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines

are:

 

1.      Trademark Registration No. 56561 issued on 25 November 1993 for “Harvard Veritas Shield Design”

for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-

shirts, hats and flying discs) of the Nice International Classification of Goods and Services;

2.      Trademark Registration No. 57526 issued on 24 March 1994 for “Harvard Veritas Shield Symbol” for

services in Class 41; Trademark Registration No. 56539 issued on 25 November 1998 for “Harvard” for

services in Class 41; and

3.      Trademark Registration No. 66677 issued on 8 December 1998 for “Harvard Graphics” for goods in

Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark

“Harvard Veritas Shield Symbol” with the IPO.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for “Harvard

Medical International & Shield Design” for services in Classes 41 and 44. In 1989, Harvard University

established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark

Licensing, to oversee and manage the worldwide licensing of the “Harvard” name and trademarks for various

goods and services. Harvard University stated that it never authorized or licensed any person to use its name

and mark “Harvard” in connection with any goods or services in the Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs,

IPO cancelled Harvard University’s registration of the mark “Harvard” under Class 25, as follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED.

Consequently, Trademark Registration Number 56561 for the trademark “HARVARD VE RI

TAS ‘SHIELD’ SYMBOL” issued on November 25, 1993 to PRESIDENT AND FELLOWS OF

HARVARD COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to

goods falling under Class 25. On the other hand, considering that the goods of Respondent-

Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Petitioner’s goods, the Respondent-Registrant has acquired vested right over the same and

therefore, should not be cancelled.

 Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for

the trademark “HARVARD VE RI TAS ‘SHIELD’ SYMBOL”, subject matter of this case together

with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate

action.

 SO ORDERED.8

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision 9 dated 21

April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO.

The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be

the owner of the mark sought to be registered. The Director General ruled that the right to register a

trademark is based on ownership and when the applicant is not the owner, he has no right to register the

mark. The Director General noted that the mark covered by Harvard University’s Registration No. 56561 is not

only the word “Harvard” but also the logo, emblem or symbol of Harvard University. The Director General

ruled that Fredco failed to explain how its predecessor New York Garments came up with the mark “Harvard.”

In addition, there was no evidence that Fredco or New York Garments was licensed or authorized by Harvard

University to use its name in commerce or for any other use.

The dispositive portion of the decision of the Office of the Director General, IPO reads:

 

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is

hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark

application and records be furnished and returned to the Director of Bureau of Legal Affairs for

appropriate action. Further, let also the Directors of the Bureau of Trademarks and the

Administrative, Financial and Human Resources Development Services Bureau, and the library

of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this

Decision for information, guidance, and records purposes.

 

SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the

IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter

correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard University’s

trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to

substantiate that it appropriated and used the marks “Harvard” and “Harvard Veritas Shield Symbol” in Class

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled that the

records failed to disclose any explanation for Fredco’s use of the name and mark “Harvard” and the words

“USA,” “Established 1936,” and “Cambridge, Massachusetts” within an oblong device, “US Legend” and

“Europe’s No. 1 Brand.” Citing Shangri-La International Hotel Management, Ltd. v. Developers Group of

Companies, Inc.,11 the Court of Appeals ruled:

 

One who has imitated the trademark of another cannot bring an action for infringement,

particularly against the true owner of the mark, because he would be coming to court with

unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to

ensure that a second user may not merely take advantage of the goodwill established by the

true owner.12

The dispositive portion of the decision of the Court of Appeals reads:

 

WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated

April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No.

14-2005-00094 is hereby AFFIRMED.

 

SO ORDERED.13

 

Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit.

Hence, this petition before the Court.

The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of

the Office of the Director General of the IPO.

The Ruling of this Court

The petition has no merit.

There is no dispute that the mark “Harvard” used by Fredco is the same as the mark “Harvard” in the

“Harvard Veritas Shield Symbol” of Harvard University. It is also not disputed that Harvard University was

named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge,

Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark “Harvard” in

commerce since 1872. It is also established that Harvard University has been using the marks “Harvard” and

“Harvard Veritas Shield Symbol” for Class 25 goods in the United States since 1953. Further, there is no

dispute that Harvard University has registered the name and mark “Harvard” in at least 50 countries.

On the other hand, Fredco’s predecessor-in-interest, New York Garments, started using the mark “Harvard” in

the Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

to register the mark “Harvard,” which application was approved in 1988. Fredco insists that the date of actual

use in the Philippines should prevail on the issue of who has the better right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be registered,

it must have been actually used in commerce for not less than two months in the Philippines prior to the filing

of an application for its registration. While Harvard University had actual prior use of its marks abroad for a

long time, it did not have actual prior use in the Philippines of the mark “Harvard Veritas Shield Symbol”

before its application for registration of the mark “Harvard” with the then Philippine Patents Office. However,

Harvard University’s registration of the name “Harvard” is based on home registration which is allowed under

Section 37 of R.A. No. 166.15 As pointed out by Harvard University in its Comment:

 

Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark

that the applicant thereof must prove that the same has been actually in use in commerce or

services for not less than two (2) months in the Philippines before the application for

registration is filed, where the trademark sought to be registered has already been registered

in a foreign country that is a member of the Paris Convention, the requirement of proof of use

in the commerce in the Philippines for the said period is not necessary. An applicant for

registration based on home certificate of registration need not even have used the mark or

trade name in this country.16

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard University’s

registration “is based on ‘home registration’ for the mark ‘Harvard Veritas Shield’ for Class 25.”17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 “[m]arks registered under

Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x

x,” which does not require actual prior use of the mark in the Philippines. Since the mark “Harvard Veritas

Shield Symbol” is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of

actual prior use in the Philippines has been cured by Section 239.2.19 In addition, Fredco’s registration was

already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for the fifth

anniversary of the mark’s registration. Hence, at the time of Fredco’s filing of the Petition for Cancellation

before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the

mark “Harvard.”

There are two compelling reasons why Fredco’s petition must fail.

First, Fredco’s registration of the mark “Harvard” and its identification of origin as “Cambridge,

Massachusetts” falsely suggest that Fredco or its goods are connected with Harvard University, which uses

the same mark “Harvard” and is also located in Cambridge, Massachusetts. This can easily be gleaned from

the following oblong logo of Fredco that it attaches to its clothing line:

Fredco’s registration of the mark “Harvard” should not have been allowed because Section 4(a) of R.A. No.

166 prohibits the registration of a mark “which may disparage or falsely suggest a connection with persons,

living or dead, institutions, beliefs x x x.” Section 4(a) of R.A. No. 166 provides:

 

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Section 4. Registration of trade-marks, trade-names and service- marks on the principal

register. ‒ There is hereby established a register of trade-mark, trade-names and service-marks

which shall be known as the principal register. The owner of a trade-mark, a trade-name or

service-mark used to distinguish his goods, business or services from the goods, business or

services of others shall have the right to register the same on the principal register, unless it:

 

(a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may

disparage or falsely suggest a connection with persons, living or dead, institutions,

beliefs, or national symbols, or bring them into contempt or disrepute;

 

(b) x x x (emphasis supplied)

Fredco’s use of the mark “Harvard,” coupled with its claimed origin in Cambridge, Massachusetts, obviously

suggests a false connection with Harvard University. On this ground alone, Fredco’s registration of the mark

“Harvard” should have been disallowed.

Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with

Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in

the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or

to the IPO why it used the mark “Harvard” on its oblong logo with the words “Cambridge, Massachusetts,”

“Established in 1936,” and “USA.” Fredco now claims before this Court that it used these words “to evoke a

‘lifestyle’ or suggest a ‘desirable aura’ of petitioner’s clothing lines.” Fredco’s belated justification merely

confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and

popularity of Harvard University, and thus appropriating part of Harvard University’s goodwill without the

latter’s consent.

Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the United

States. These provisions are intended to protect the right of publicity of famous individuals and institutions

from commercial exploitation of their goodwill by others.21 What Fredco has done in using the mark “Harvard”

and the words “Cambridge, Massachusetts,” “USA” to evoke a “desirable aura” to its products is precisely to

exploit commercially the goodwill of Harvard University without the latter’s consent. This is a clear violation of

Section 4(a) of R.A. No. 166. Under Section 17(c)22 of R.A. No. 166, such violation is a ground for cancellation

of Fredco’s registration of the mark “Harvard” because the registration was obtained in violation of Section 4

of R.A. No. 166.

Second, the Philippines and the United States of America are both signatories to the Paris Convention for the

Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris

Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state:

ARTICLE 6bis

 

(i) The countries of the Union undertake either administratively if their legislation so permits,

or at the request of an interested party, to refuse or to cancel the registration and to prohibit

the use of a trademark which constitutes a reproduction, imitation or translation, liable to

create confusion or a mark considered by the competent authority of the country as

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

being already the mark of a person entitled to the benefits of the present Convention

and used for identical or similar goods. These provisions shall also apply when the

essential part of the mark constitutes a reproduction of any such well-known mark or

an imitation liable to create confusion therewith.

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of

filing or registration, whether or not it forms part of a trademark. (Emphasis supplied)

 

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris

Convention that they are afforded an effective protection against violation of their intellectual property rights

in the Philippines in the same way that their own countries are obligated to accord similar protection to

Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:

Section 37. Rights of foreign registrants. — Persons who are nationals of, domiciled in, or have

a bona fide or effective business or commercial establishment in any foreign country, which is a

party to any international convention or treaty relating to marks or trade-names, or the

repression of unfair competition to which the Philippines may be a party, shall be entitled to

the benefits and subject to the provisions of this Act to the extent and under the conditions

essential to give effect to any such convention and treaties so long as the Philippines shall

continue to be a party thereto, except as provided in the following paragraphs of this section.

x x x x

Trade-names of persons described in the first paragraph of this section shall be

protected without the obligation of filing or registration whether or not they form

parts of marks.24

x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention,

whether or not the trade name forms part of a trademark, is protected “without the obligation of filing or

registration.”

“Harvard” is the trade name of the world famous Harvard University, and it is also a trademark of Harvard

University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University

is entitled to protection in the Philippines of its trade name “Harvard” even without registration of such trade

name in the Philippines. This means that no educational entity in the Philippines can use the trade name

“Harvard” without the consent of Harvard University. Likewise, no entity in the Philippines can claim,

expressly or impliedly through the use of the name and mark “Harvard,” that its products or services are

authorized, approved, or licensed by, or sourced from, Harvard University without the latter’s consent.

 Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two

directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in

several cases.25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a

Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending

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applications for Philippine registration of signature and other world-famous trademarks by applicants other

than their original owners.26 The Memorandum states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the

Philippines is a signatory, you are hereby directed to reject all pending applications for

Philippine registration of signature and other world-famous trademarks by applicants other

than its original owners or users.

The conflicting claims over internationally known trademarks involve such name brands as

Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la

Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks

should be asked to surrender their certificates of registration, if any, to avoid suits for damages

and other legal action by the trademarks’ foreign or local owners or original users.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the

earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement

measures necessary to comply with the Philippines’ obligations under the Paris Convention, thus:

 

1.      Whether the trademark under consideration is well-known in the Philippines

or is a mark already belonging to a person entitled to the benefits of the

CONVENTION, this should be established, pursuant to Philippine Patent Office

procedures in inter partes and ex parte cases, according to any of the

following criteria or any combination thereof:

 

(a) a declaration by the Minister of Trade and Industry that the trademark being considered is

already well-known in the Philippines such that permission for its use by other than its original

owner will constitute a reproduction, imitation, translation or other infringement;

 

(b) that the trademark is used in commerce internationally, supported by proof that goods

bearing the trademark are sold on an international scale, advertisements, the establishment of

factories, sales offices, distributorships, and the like, in different countries, including volume or

other measure of international trade and commerce;

 

(c) that the trademark is duly registered in the industrial property office(s) of another

country or countries, taking into consideration the dates of such registration;

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

(d) that the trademark has been long established and obtained goodwill and general

international consumer recognition as belonging to one owner or source;

 

(e) that the trademark actually belongs to a party claiming ownership and has the right to

registration under the provisions of the aforestated PARIS CONVENTION.

 

2.      The word trademark, as used in this MEMORANDUM, shall include tradenames,

service marks, logos, signs, emblems, insignia or other similar devices used for

identification and recognition by consumers.

3.      The Philippine Patent Office shall refuse all applications for, or cancel the registration of,

trademarks which constitute a reproduction, translation or imitation of a trademark owned by a

person, natural or corporate, who is a citizen of a country signatory to the PARIS

CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY.

x x x x28 (Emphasis supplied)

 In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is that

the trademark to be protected must be “well-known” in the country where protection is sought.29 The Court

declared that the power to determine whether a trademark is well-known lies in the competent authority of the

country of registration or use.30 The Court then stated that the competent authority would either be the

registering authority if it has the power to decide this, or the courts of the country in question if the issue

comes before the courts.31

 To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need

not be registered or used in the Philippines.32 All that is required is that the mark is well-known internationally

and in the Philippines for identical or similar goods, whether or not the mark is registered or used in the

Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33

 

The fact that respondent’s marks are neither registered nor used in the Philippines is

of no moment. The scope of protection initially afforded by Article 6bis of the Paris

Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on

the Protection of Well-Known Marks, wherein the World Intellectual Property Organization

(WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a

well-known mark should be protected in a country even if the mark is neither

registered nor used in that country. Part I, Article 2(3) thereof provides:

 

(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition

for determining whether a mark is a well-known mark:

 

(i) that the mark has been used in, or that the mark has been registered or that an application

for registration of the mark has been filed in or in respect of, the Member State:

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(ii) that the mark is well known in, or that the mark has been registered or that an application

for registration of the mark has been filed in or in respect of, any jurisdiction other than the

Member State; or

 

(iii) that the mark is well known by the public at large in the Member State.34 (Italics in the

original decision; boldface supplied)

 

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that “a mark which is considered by the

competent authority of the Philippines to be well-known internationally and in the Philippines, whether

or not it is registered here,” cannot be registered by another in the Philippines. Section 123.1(e) does not

require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the

Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names

and Marked or Stamped Containers, which implement R.A. No. 8293, provides:

 

Rule 102. Criteria for determining whether a mark is well-known. In determining whether a

mark is well-known, the following criteria or any combination thereof may be taken into

account:

 

(a) the duration, extent and geographical area of any use of the mark, in particular, the

duration, extent and geographical area of any promotion of the mark, including advertising or

publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the

mark applies;

 

(b) the market share, in the Philippines and in other countries, of the goods and/or services to

which the mark applies;

 

(c) the degree of the inherent or acquired distinction of the mark;

(d) the quality-image or reputation acquired by the mark;

 

(e) the extent to which the mark has been registered in the world;

 

(f) the exclusivity of registration attained by the mark in the world;

 

(g) the extent to which the mark has been used in the world;

 

(h) the exclusivity of use attained by the mark in the world;

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(i) the commercial value attributed to the mark in the world;

 

(j) the record of successful protection of the rights in the mark;

 

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark;

and

 

(l) the presence or absence of identical or similar marks validly registered for or used on

identical or similar goods or services and owned by persons other than the person claiming that

his mark is a well-known mark. (Emphasis supplied)

 

Since “any combination” of the foregoing criteria is sufficient to determine that a mark is well-known, it is

clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality

principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-

known marks are the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found

that:

 

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than

Harvard University, a recognized and respected institution of higher learning located in

Cambridge, Massachusetts, U.S.A. Initially referred to simply as “the new college,” the

institution was named “Harvard College” on 13 March 1639, after its first principal donor, a

young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in

England, John Harvard bequeathed about four hundred books in his will to form the basis of

the college library collection, along with half his personal wealth worth several hundred

pounds. The earliest known official reference to Harvard as a “university” rather than “college”

occurred in the new Massachusetts Constitution of 1780.

 

Records also show that the first use of the name HARVARD was in 1638 for educational

services, policy courses of instructions and training at the university level. It has a Charter. Its

first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953

covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the

Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still

cannot be denied that the Appellant’s use thereof was decades, even centuries, ahead of the

Appellee’s. More importantly, the name HARVARD was the name of a person whose deeds

were considered to be a cornerstone of the university. The Appellant’s logos, emblems or

symbols are owned by Harvard University. The name HARVARD and the logos, emblems or

symbols are endemic and cannot be separated from the institution.35

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Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational

institutions in the United States, it being established in 1636. It is located primarily in

Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to

the college his books and half of his estate.

 

The mark “Harvard College” was first used in commerce in the United States in 1638 for

educational services, specifically, providing courses of instruction and training at the university

level (Class 41). Its application for registration with the United States Patent and Trademark

Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks

“Harvard” and “Harvard Ve ri tas ‘Shield’ Symbol” were first used in commerce in the the

United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats,

leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts, shirts,

socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for

registration with the USPTO were filed on September 9, 1996, the mark “Harvard” was

registered on December 9, 1997 and the mark “Harvard Ve ri tas ‘Shield’ Symbol” was

registered on September 30, 1997.36

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard

University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled that the mark

“Harvard” is a “well-known mark.” This Decision, which cites among others the numerous trademark

registrations of Harvard University in various countries, has become final and executory.

There is no question then, and this Court so declares, that “Harvard” is a well-known name and mark not only

in the United States but also internationally, including the Philippines. The mark “Harvard” is rated as one of

the most famous marks in the world. It has been registered in at least 50 countries. It has been used and

promoted extensively in numerous publications worldwide. It has established a considerable goodwill

worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the

trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as

one of the leading educational institutions in the world. As such, even before Harvard University applied for

registration of the mark “Harvard” in the Philippines, the mark was already protected under Article 6bis and

Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can

invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark “which may disparage or falsely

suggest a connection with persons, living or dead, institutions, beliefs x x x.”

WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009

Resolution of the Court of Appeals in CA-G.R. SP No. 103394.

SO ORDERED.

Shangri-La vs. Developers Group G.R. No. 159938, March 31, 2006

In this petition for review under Rule 45 of the Rules of Court, petitioners Shangri-La International Hotel

Management, Ltd. (SLIHM), et al. assail and seek to set aside the Decision dated May 15, 2003[1] of the Court

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of Appeals (CA) in CA-G.R. CV No. 53351 and its Resolution[2] of September 15, 2003 which effectively affirmed

with modification an earlier decision of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-91-

8476, an action for infringement and damages, thereat commenced by respondent Developers Group of

Companies, Inc. (DGCI) against the herein petitioners.

       

        The facts:

 

        At the core of the controversy are the “Shangri-La” mark and “S” logo. Respondent DGCI claims

ownership of said mark and logo in the Philippines on the strength of its prior use thereof within the country.

As DGCI stresses at every turn, it filed on October 18, 1982 with the Bureau of Patents, Trademarks and

Technology Transfer (BPTTT) pursuant to Sections 2 and 4 of Republic Act (RA) No. 166, [3] as amended, an

application for registration covering the subject mark and logo. On May 31, 1983, the BPTTT issued in favor of

DGCI the corresponding certificate of registration therefor, i.e., Registration No. 31904. Since then, DGCI

started using  the “Shangri-La” mark and “S” logo in its restaurant business.

 

        On the other hand, the Kuok family  owns and operates a chain of hotels with interest in hotels and hotel-

related transactions since 1969. As far back as 1962, it adopted the name “Shangri-La” as part of the

corporate names of all companies organized under the aegis of the Kuok Group of Companies (the Kuok

Group). The Kuok Group has used the name “Shangri-La” in all Shangri-La hotels and hotel-related

establishments around the world which the Kuok Family owned.

         To centralize the operations of all Shangri-la hotels and the ownership of the “Shangri-La” mark

and “S” logo, the Kuok Group had incorporated inHong Kong and Singapore, among other places, several

companies that form part of the Shangri-La International Hotel Management Ltd. Group of Companies.   EDSA

Shangri-La Hotel and Resort, Inc., and  Makati Shangri-La Hotel and Resort, Inc. were incorporated in

the Philippines beginning 1987 to own and operate the two (2) hotels put up by the Kuok Group in

Mandaluyong and Makati, Metro Manila.

 

        All hotels owned, operated and managed by the aforesaid SLIHM Group of Companies adopted and used

the distinctive lettering of the name “Shangri-La” as part of their trade names.

       

        From  the  records,  it  appears  that Shangri-La Hotel Singapore commissioned a Singaporean design

artist, a certain Mr. William Lee,  to conceptualize  and  design  the logo of the Shangri-La hotels.

 

        During the launching of the stylized “S” Logo in February 1975, Mr. Lee gave the following explanation

for the logo, to wit:

 

            The logo which is shaped like a “S” represents the uniquely Asean architectural

structures as well as keep to the legendary Shangri-la theme with the mountains on top being

reflected on waters below and the connecting centre [sic] line serving as the horizon. This logo,

which is a bold, striking definitive design, embodies both modernity and sophistication in

balance and thought.

 

 

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Since 1975 and up to the present, the “Shangri-La” mark and  “S” logo have been used consistently

and continuously by all Shangri-La hotels and companies in their paraphernalia, such as stationeries,

envelopes,  business forms, menus, displays and receipts.

        The Kuok Group and/or petitioner SLIHM caused the registration of, and in fact registered, the “Shangri-

La” mark and “S” logo in the patent offices in different countries around the world.

 

        On June 21, 1988, the petitioners filed with the BPTTT a petition, docketed as Inter Partes Case No. 3145,

praying for the cancellation of the registration of the “Shangri-La” mark and “S” logo issued to  respondent

DGCI on the ground that the same were illegally and fraudulently obtained and appropriated for the latter's

restaurant business.  They also filed in the same office Inter Partes Case No. 3529, praying for the registration

of the same mark and logo in their own names. 

 

        Until 1987 or 1988, the petitioners did not operate any establishment in the Philippines, albeit they

advertised their hotels abroad  since 1972 in numerous business, news, and/or travel magazines widely

circulated around the world, all readily available in Philippine magazines and newsstands. They,

too,  maintained reservations and booking agents in airline companies, hotel organizations, tour operators,

tour promotion organizations, and in other allied fields in the Philippines.

 

        It is principally upon the foregoing factual backdrop that  respondent DGCI  filed a complaint for

Infringement and Damages with the RTC of Quezon City against the herein petitioners SLIHM, Shangri-La

Properties, Inc., Makati Shangri-La Hotel & Resort, Inc., and Kuok Philippine Properties, Inc., docketed as Civil

Case No. Q-91-8476 and eventually raffled to Branch 99 of said court. The complaint with prayer for injunctive

relief and damages alleged that DGCI has, for the last eight (8) years, been the prior exclusive user in

the Philippines of  the mark and logo in question and the registered owner thereof for its restaurant and allied

services. As DGCI alleged in its complaint, SLIHM, et al., in promoting and advertising their hotel and other

allied projects then under construction in the country, had been using a mark and logo confusingly similar, if

not identical, with its mark and “S” logo. Accordingly, DGCI sought to prohibit the petitioners, as defendants a

quo, from using the “Shangri-La” mark and “S”  logo in their hotels in the Philippines.   

 

        In their Answer with Counterclaim, the petitioners accused DGCI of appropriating and illegally using

the “Shangri-La” mark and “S” logo, adding that the legal and beneficial ownership thereof pertained to

SLIHM  and  that  the Kuok Group and its related companies had been using this mark and logo since March

1962 for all their corporate names and affairs. In this regard, they point to the Paris Convention for the

Protection of Industrial Property as affording security and protection to SLIHM’s exclusive right to said mark

and logo. They further claimed having used, since late 1975, the  internationally-known and specially-

designed “Shangri-La” mark and “S”  logo  for all the hotels in their hotel chain.

 

        Pending  trial on the merits of Civil Case No. Q-91-8476, the trial court issued a Writ of Preliminary

Injunction enjoining the petitioners from using the subject mark and logo.  The preliminary injunction issue

ultimately reached  the  Court  in  G.R. No. 104583 entitled Developers Group of Companies, Inc. vs. Court of

Appeals, et al.   In a decision[4] dated March 8, 1993, the Court nullified the writ  of  preliminary  injunction

issued by the trial court and directed it to proceed with the main case and decide it with deliberate dispatch.

 

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        While trial was in progress, the petitioners filed with the court a motion to suspend proceedings on

account of the pendency before the BPTTT of Inter Partes Case No. 3145 for the cancellation of DGCI’s

certificate of registration.  For its part, respondent DGCI filed a similar motion in that case, invoking in this

respect the pendency of its infringement case before the trial court.  The parties’ respective motions to

suspend proceedings also reached the Court via their respective petitions in G.R. No.

114802, entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. and G.R. No. 111580,

entitled Shangri-La International Hotel Management LTD., et al. vs. Court of Appeals, et al.,  which were

accordingly consolidated.

 

        In a consolidated decision[5] dated June 21, 2001, the Court, limiting itself to the core issue of whether,

despite the petitioners’ institution  of Inter Partes Case No. 3145  before the BPTTT, herein respondent DGCI

“can file a subsequent action for  infringement with the regular courts of justice in connection with the same

registered mark,” ruled in the affirmative, but nonetheless ordered the BPTTT to suspend further proceedings

in said inter partes case and to await the final outcome of the main case.

 

        Meanwhile, trial on the merits of the infringement case proceeded. Presented as DGCI’s lone witness was

Ramon Syhunliong, President and Chairman of DGCI’s Board of Directors. Among other things, this witness

testified that:

 

1.         He is a businessman, with interest in lumber, hotel, hospital, trading and restaurant

businesses but only the restaurant business bears the name “Shangri-La” and uses the

same and the “S-logo” as service marks.  The restaurant now known as “Shangri-La

Finest Chinese Cuisine” was formerly known as the “Carvajal Restaurant” until

December 1982, when respondent took over said restaurant business.

 

2.         He had traveled widely around Asia prior to 1982, and  admitted  knowing the Shangri-

La Hotel in Hong Kong as early as August 1982.

 

3.         The “S-logo” was one of two (2) designs given to him in December 1982, scribbled on a

piece of paper by a jeepney signboard artist with an office somewhere in

Balintawak.  The unnamed artist supposedly produced the two designs after about two

or three days from the time he (Syhunliong) gave the idea of the design he had in mind.

 

4.         On  October 15, 1982, or before the unknown signboard artist supposedly created the

“Shangri-La” and “S” designs, DGCI was  incorporated with the primary purpose of

“owning or operating, or both, of hotels and restaurants”.

 

5.         On  October 18,  1982, again prior to the alleged creation date of the mark and logo,

DGCI filed an application for trademark registration of the mark “SHANGRI-LA FINEST

CHINESE CUISINE & S. Logo” with the BPTTT. On said date, respondent DGCI

amended its Articles of Incorporation to reflect the name of its restaurant, known and

operating under the style and name of “SHANGRI-LA FINEST CHINESE CUISINE.”

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Respondent DGCI obtained Certificate of Registration No. 31904 for the “Shangri-La”

mark and “S” logo.

 

         

          Eventually, the trial court, on the postulate that petitioners’, more particularly petitioner SLIHM’s, use

of the mark and logo in dispute constitutes an infringement of DGCI’s right thereto, came out with its

decision[6] on March 8, 1996 rendering judgment for DGCI, as follows:

 

          WHEREFORE, judgment is hereby rendered in favor of [respondent DGCI] and against

[SLIHM, et al.] –

 

                        a) Upholding the validity of the registration of the service mark “Shangri-la” and “S-

Logo” in the name of [respondent];

 

                     b)  Declaring [petitioners’] use of said mark and logo as  infringement of [respondent’s]

right thereto;

 

            c)  Ordering [petitioners], their representatives, agents, licensees, assignees and other

persons acting under their authority and with their permission, to permanently cease and

desist from using and/or continuing to use said mark and logo, or any copy, reproduction or

colorable imitation

thereof, in the promotion, advertisement, rendition of their hotel and allied projects and

services or in any other manner whatsoever;

 

            d) Ordering [petitioners] to remove said mark and logo from any premises, objects,

materials and paraphernalia used by them and/or destroy any and all prints, signs,

advertisements or other materials bearing said mark and logo in their possession and/or under

their control; and

 

            e) Ordering [petitioners], jointly and severally, to indemnify [respondent]  in the

amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as attorney’s fee

and expenses of litigation.

           

            Let a copy of this Decision be certified to the Director, Bureau of Patents, Trademarks

and Technology Transfer for his information and appropriate action in accordance with the

provisions of Section 25, Republic Act No. 166

 

            Costs against [petitioners].

 

            SO ORDERED. [Words in brackets added.]   

 

               

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          Therefrom, the petitioners went on appeal to the CA whereat their recourse was docketed as  CA G.R. SP

No. 53351.

 

        As stated at the threshold hereof, the CA, in its assailed Decision  of May 15, 2003,[7] affirmed that of

the lower court with the modification of deleting the award of attorney’s fees. The appellate court predicated

its affirmatory action on the strength or interplay of the following premises:

 

1.      Albeit the Kuok Group used the mark and logo since 1962, the evidence presented shows

that the bulk use of the tradename was abroad and not in the Philippines (until 1987).

Since the Kuok Group does not have proof of actual use in commerce in the Philippines (in

accordance with Section 2 of R.A. No. 166), it cannot claim ownership of the mark and logo

in accordance with the holding in Kabushi Kaisha Isetan v. IAC[8], as reiterated in Philip

Morris, Inc. v. Court of Appeals.[9]

 

2.      On the other hand,  respondent has a right to the mark and logo by virtue of its prior use

in the Philippines and the issuance of Certificate of Registration No. 31904.

 

3.      The  use of the mark or logo  in commerce through the bookings made by travel agencies

is unavailing since the Kuok Group did not establish any branch or regional office in

the Philippines. As it were, the Kuok Group was not engaged in commerce in

the Philippines inasmuch as the bookings were made through travel agents not owned,

controlled or managed by the Kuok Group.

 

4.       While the Paris Convention protects internationally known marks, R.A. No. 166 still

requires use in commerce in the Philippines. Accordingly, and on the premise that

international agreements, such as Paris Convention, must yield to a municipal law, the

question on the exclusive right over the mark and logo would still depend on actual use in

commerce in the Philippines.

 

 

          Petitioners then moved for a reconsideration, which motion was denied by the CA in its equally

assailed Resolution of  September 15, 2003.[10]

 

        As formulated by the petitioners, the issues upon which this case hinges are:

 

 

1.      Whether the CA erred in finding that respondent had the right to file an

application for registration of the “Shangri-La” mark and “S” logo although

respondent never had any prior actual commercial use thereof;

 

2.      Whether the CA erred in finding that respondent's supposed use of the identical

“Shangri-La” mark and “S” logo of the petitioners was not evident bad faith and

can actually ripen into ownership, much less registration;

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3.      Whether the CA erred in overlooking petitioners' widespread prior use of the

“Shangri-La” mark and “S” logo in their operations;

 

4.      Whether the CA erred in refusing to consider that petitioners are entitled to

protection under both R.A. No. 166, the old trademark law, and the Paris

Convention for the Protection of Industrial Property;

 

5.      Whether the CA erred in holding that SLIHM did not have the right to legally own

the “Shangri-La” mark and “S” logo by virtue of and despite their ownership by the

Kuok Group;

6.      Whether the CA erred in ruling that petitioners' use of the mark and logo

constitutes actionable infringement;

 

7.      Whether the CA erred in awarding damages in favor of respondent despite the

absence of any evidence to support the same, and in failing to award relief in favor

of the petitioners; and

 

8.      Whether petitioners should be prohibited from continuing their use of the mark

and logo in question.

 

        There are two preliminary issues, however, that respondent DGCI calls our attention to, namely:

 

1.      Whether the certification against forum-shopping submitted on behalf of the petitioners is

sufficient;

 

2.      Whether the issues posed by petitioners are purely factual in nature hence  improper for

resolution in the instant petition for review on certiorari.

 

        DGCI claims that the present petition for review should be dismissed outright for certain procedural

defects, to wit: an insufficient certification against forum shopping and raising pure questions of fact. On both

counts, we find the instant petition formally and substantially sound.

 

        In its Comment, respondent alleged that the certification against forum shopping signed by Atty. Lee

Benjamin Z. Lerma on behalf and as counsel of the petitioners was insufficient, and that he was not duly

authorized to execute such document. Respondent further alleged that since petitioner SLIHM is a foreign

entity based in Hong Kong, the Director's Certificate executed by Mr. Madhu Rama Chandra Rao, embodying

the board resolution which authorizes Atty. Lerma to act for SLIHM and execute the certification against

forum shopping, should contain the authentication by a consular officer of the Philippines inHong Kong.

        In National Steel Corporation v. CA,[11] the Court has ruled that the certification on non-forum shopping

may be signed, for and in behalf of a corporation, by a specifically authorized lawyer who has personal

knowledge of the facts required to be disclosed in such document. The reason for this is that a corporation can

only exercise its powers through its board of directors and/or its duly authorized officers and agents. Physical

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acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose.[12]

       

        Moreover, Rule 7, Section 5 of the Rules of Court concerning the certification against forum shopping

does not require any consular certification if the petitioner is a foreign entity. Nonetheless, to banish any

lingering doubt, petitioner SLIHM furnished this Court with a consular certification dated October 29,

2003 authenticating the Director's Certificate authorizing Atty. Lerma to execute the certification against

forum shopping, together with petitioners’ manifestation of  February 9, 2004.

 

        Respondent also attacks the present petition as one that raises pure questions of fact. It points out that in

a petition for review under Rule 45 of the Rules of Court, the questions that may properly be inquired into are

strictly circumscribed by the express limitation that “the petition shall raise only questions of law which must

be distinctly set forth.”[13] We do not, however, find that the issues involved in this petition consist purely of

questions of fact. These issues will be dealt with as we go through the questions raised by the petitioners one

by one.

        Petitioners' first argument is that the respondent had no right to file an application for registration of

the “Shangri-La” mark and “S” logo because it did not have prior actual commercial use thereof. To

respondent, such an argument raises a question of fact that was already resolved by the RTC and concurred in

by the CA.

 

        First off, all that the RTC found was that respondent was the prior user and registrant of the subject mark

and logo in the Philippines.  Taken in proper context, the trial court’s finding on “prior use” can only be

interpreted to mean that respondent used the subject mark and logo in the country before the petitioners did.

It cannot be construed as being a factual finding that there was prior use of the mark and logo before

registration.

 

        Secondly, the question raised is not purely factual in nature. In the context of this case, it involves

resolving whether a certificate of registration of a mark, and the presumption of regularity in the performance

of official functions in the issuance thereof, are sufficient to establish prior actual use by the registrant. It

further entails answering the question of whether prior actual use is required before there may be a valid

registration of a mark.

 

        Under the provisions of the former trademark law, R.A. No. 166, as amended, which was in effect up

to December 31, 1997, hence, the law in force at the time of respondent's application for registration of

trademark, the root of ownership of a trademark is actual use in commerce. Section 2 of said law requires that

before a trademark can be registered, it must have been actually used in commerce and service for not less

than two months in the Philippinesprior to the filing of an application for its registration.

        Registration, without more, does not confer upon the registrant an absolute right to the registered mark.

The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered

mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome

the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an

appropriate case.[14]

 

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            Among the effects of registration of a mark, as catalogued by the Court in Lorenzana v. Macagba,[15] are:

 

1.                  Registration in the Principal Register gives rise to a presumption of the

validity of the registration, the registrant's ownership of the mark, and his right

to the exclusive use thereof. x x x

 

2.                  Registration in the Principal Register is limited to the actual owner of

the trademark and proceedings therein pass on the issue of ownership,

which may be contested through opposition or interference proceedings,

or, after registration, in a petition for cancellation. xxx

                                [Emphasis supplied]

 

 

        Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and

use in trade or commerce. As between actual use of a mark without registration, and registration of the mark

without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly

entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-

requisite to the acquisition of the right of ownership.[16]

        While the present law on trademarks[17] has dispensed with the requirement of prior actual use at the time

of registration, the law in force at the time of registration must be applied, and thereunder it was held that as a

condition precedent to registration of trademark, trade name or service mark, the same must have been in

actual use in the Philippines before the filing of the application for registration.[18] Trademark is a creation of

use and therefore actual use is a pre-requisite to exclusive ownership and its registration with the Philippine

Patent Office is a mere administrative confirmation of the existence of such right.[19]

       

        By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the

trademark being applied for, he has no right to apply for registration of the same. Registration merely creates

a prima facie presumption of the validity of the registration, of the registrant's ownership of the trademark and

of the exclusive right to the use thereof.[20] Such presumption, just like the presumptive regularity in the

performance of official functions, is rebuttable and must give way to evidence to the contrary.

 

        Here, respondent's own witness, Ramon Syhunliong, testified that a jeepney signboard artist allegedly

commissioned to create the mark and logo submitted his designs only in December 1982.[21] This was two-and-

a-half months after the filing of the respondent’s trademark application on October 18, 1982 with the BPTTT. It

was also only in December 1982 when the respondent's restaurant was opened for business. [22]  Respondent

cannot now claim before the Court that the certificate of registration itself is proof that the two-month prior

use requirement was complied with, what with the fact that its very own witness testified otherwise in the trial

court. And because at the time (October 18, 1982) the respondent filed its application for trademark

registration of the “Shangri-La” mark and “S” logo, respondent was not using these in

the Philippines commercially, the registration is void.

 

        Petitioners also argue that the respondent's use of the “Shangri-La” mark and “S”  logo was in evident

bad faith and cannot therefore ripen into ownership, much less registration. While the respondent is correct in

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saying that a finding of bad faith is factual, not legal,[23] hence beyond the scope of a petition for review,  there

are, however, noted exceptions thereto. Among these exceptions are:

 

1.      When the inference made is manifestly mistaken, absurd or impossible;[24]

2.      When there is grave abuse of discretion;[25]

3.      When the judgment is based on a misapprehension of facts;[26]

4.      When the findings of fact are conflicting;[27] and

5.      When the facts set forth in the petition as well as in the petitioner's main and reply briefs

are not disputed by the respondent.[28]

 

 

 

And these are naming but a few of the recognized exceptions to the rule.

        The CA itself, in its Decision of May 15, 2003, found that the respondent’s president and chairman of the

board, Ramon Syhunliong, had been a guest at the petitioners' hotel before he caused the registration of the

mark and logo, and surmised that he must have copied the idea there:

 

        Did Mr. Ramon Syhunliong, [respondent's] President copy the mark and devise from one

of [petitioners’] hotel (Kowloon Shangri-la) abroad? The mere fact that he was a visitor of

[petitioners’] hotel abroad at one time (September 27, 1982) establishes [petitioners’]

allegation that he got the idea there.[29]

 

        Yet, in the very next paragraph, despite the preceding admission that the mark and logo must have been

copied, the CA tries to make it appear that the adoption of the same mark and logo could have been

coincidental:

 

The word or name “Shangri-la” and the S-logo, are not uncommon. The word “Shangri-

la” refers to a (a) remote beautiful imaginary place where life approaches perfection or (b)

imaginary mountain land depicted as a utopia in the novel Lost Horizon by James Hilton. The

Lost Horizon was a well-read and popular novel written in 1976. It is not impossible that the

parties, inspired by the novel, both adopted the mark for their business to conjure [a] place of

beauty and pleasure.

 

            The S-logo is, likewise, not unusual. The devise looks like a modified Old English print.[30]

 

        To jump from a recognition of the fact that the mark and logo must have been copied to a rationalization

for the possibility that both the petitioners and the respondent coincidentally chose the same name and logo is

not only contradictory, but also manifestly mistaken or absurd. Furthermore, the “S” logo appears nothing like

the “Old English” print that the CA makes it out to be, but is obviously a symbol with oriental or Asian

overtones. At any rate, it is ludicrous to believe that the parties would come up with the exact same lettering

for the word “Shangri-La” and the exact same logo to boot. As correctly observed by the petitioners, to which

we are in full accord:

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        x x x When a trademark copycat adopts the word portion of another's trademark

as his own, there may still be some doubt that the adoption is intentional. But if he

copies not only the word but also the word's exact font and lettering style and in

addition, he copies also the logo portion of the trademark, the slightest doubt vanishes.

It is then replaced by the certainty that the adoption was deliberate, malicious and in

bad faith.[31]

 

        It is truly difficult to understand why, of the millions of terms and combination of letters and designs

available, the respondent had to choose exactly the same mark and logo as that of the petitioners, if there was

no intent to take advantage of the goodwill of petitioners' mark and logo.[32]

 

        One who has imitated the trademark of another cannot bring an action for infringement, particularly

against the true owner of the mark, because he would be coming to court with unclean hands. [33] Priority is of

no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely

take advantage of the goodwill established by the true owner.

 

        This point is further bolstered by the fact that under either Section 17 of R.A. No. 166, or Section 151 of

R.A. No. 8293, or Article 6bis(3) of the Paris Convention, no time limit is fixed for the cancellation of marks

registered or used in bad faith.[34] This is precisely why petitioners had filed an inter partescase before the

BPTTT for the cancellation of respondent's registration, the proceedings on which were suspended pending

resolution of the instant case.

 

                Respondent DGCI also rebukes the next issue raised by the petitioners as being purely factual in

nature, namely, whether the CA erred in overlooking petitioners' widespread prior use of the “Shangri-

La” mark and “S”  logo in their operations. The question, however, is not whether there had been widespread

prior use, which would have been factual, but whether that prior use entitles the petitioners to use the mark

and logo in the Philippines. This is clearly a question which is legal in nature.

 

        It has already been established in the two courts below, and admitted by the respondent’s president

himself, that petitioners had prior widespread use of the mark and logo abroad:

 

        There is, to be sure, an impressive mass of proof that petitioner SLIHM and its related

companies abroad used the name and logo for one purpose or another x x x.[35] [Emphasis

supplied]

 

        In respondent's own words, “[T]he Court of Appeals did note petitioners' use of the mark and logo but

held that such use did not confer to them ownership or exclusive right to use them in the

Philippines.”[36] To petitioners' mind, it was error for the CA to rule that  their worldwide use of the mark and

logo in dispute could not have conferred upon them any right thereto. Again, this is a legal question which is

well worth delving into.

 

        R.A. No. 166, as amended, under which this case was heard and decided provides:

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        Section 2. What are registrable. - Trademarks, trade names and service marks owned by

persons, corporations, partnerships or associations domiciled in the Philippines and by

persons, corporations, partnerships or associations domiciled in any foreign country may be

registered in accordance with the provisions of this Act: Provided, That said trademarks trade

names, or service marks areactually in use in commerce and services not less than two

months in the Philippines before the time the applications for registration are filed: And

provided, further, That the country of which the applicant for registration is a citizen grants by

law substantially similar privileges to citizens of the Philippines, and such fact is officially

certified, with a certified true copy of the foreign law translated into the English language, by

the government of the foreign country to the Government of the Republic of the Philippines.

 

            Section 2-A. Ownership of trademarks, trade names and service marks; how acquired. -

Anyone who lawfully produces or deals in merchandise of any kind or who engages in any

lawful business, or who renders any lawful service in commerce, by actual use thereof in

manufacture or trade, in business, and in the service rendered, may appropriate to his

exclusive use a trademark, a trade name, or a servicemark not so appropriated by another,

to distinguish his merchandise, business or service from the merchandise, business or

services of others. The ownership or possession of a trademark, trade name, service mark,

heretofore or hereafter appropriated, as in this section provided, shall be recognized and

protected in the same manner and to the same extent as are other property rights known to

this law. [Emphasis supplied]

 

        Admittedly, the CA was not amiss in saying that the law requires the actual use in commerce of the said

trade name and “S” logo in the Philippines.Hence, consistent with its finding that the bulk of the petitioners'

evidence shows that the alleged use of the Shangri-La trade name was done abroad and not in the Philippines,

it is understandable for that court to rule in respondent’s favor.  Unfortunately, however, what the CA failed to

perceive is that there is a crucial difference between the aforequoted Section 2 and Section 2-A of R.A. No.

166.  For, while Section 2 provides for what is registrable, Section 2-A, on the other hand, sets out

how ownership is acquired. These are two distinct concepts.

        Under Section 2, in order to register a trademark, one must be the owner thereof and must have actually

used the mark in commerce in the Philippines for 2 months prior to the application for registration. Since

“ownership” of the trademark is required for registration, Section 2-A of the same law sets out to define how

one goes about acquiring ownership thereof. Under Section 2-A, it is clear that actual use in commerce is also

the test of ownership but the provision went further by saying that the mark must not have been so

appropriated by another. Additionally, it is significant to note that Section 2-A does not require that the actual

use of a trademark must be within the Philippines. Hence, under R.A. No. 166, as amended, one may be an

owner of a mark due to actual use thereof but not yet have the right to register such ownership here due to

failure to use it within the Philippines for two months.

 

        While the petitioners may not have qualified under Section 2 of R.A. No. 166 as a registrant, neither did

respondent DGCI, since the latter  also failed to fulfill the 2-month actual use requirement. What is worse,

DGCI was not even the owner of the mark. For it to have been the owner,  the mark must not have been

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already appropriated (i.e., used) by someone else. At the time of respondent DGCI's registration of the

mark, the same was already being used by the petitioners, albeit abroad, of which  DGCI’s president was

fully aware.

 

        It is respondent's contention that since the petitioners adopted the “Shangri-La” mark and “S” logo as a

mere corporate name or as the name of their hotels, instead of using them as a trademark or service mark,

then such name and logo are not trademarks. The two concepts of corporate name or business name and

trademark or service mark, are not mutually exclusive. It is common, indeed likely, that the name of a

corporation or business is also a trade name, trademark or service mark. Section 38 of R.A. No. 166 defines

the terms as follows:

               

 

       Sec. 38. Words and terms defined and construed – In the construction of this Act, unless

the contrary is plainly apparent from the context  – The term “trade name” includes individual

names and surnames, firm names, trade names, devices or words used by manufacturers,

industrialists, merchants, agriculturists, and others to identify their business, vocations or

occupations; the names or titles lawfully adopted and used by natural or juridical

persons, unions, and any manufacturing, industrial, commercial, agricultural or other

organizations engaged in trade or commerce.

 

 

            The term “trade mark” includes any word, name, symbol, emblem, sign or device or any

combination thereof adopted and used by a manufacturer or merchant to identify his goods and

distinguish them from those manufactured, sold or dealt in by others.

 

 

            The term “service mark” means a mark used in the sale or advertising of services to

identify the services of one person and distinguish them from the services of others and

includes without limitation the marks, names, symbols, titles, designations, slogans,

character names, and distinctive features of radio or other advertising. [Emphasis

supplied]           

        Clearly, from the broad definitions quoted above, the petitioners can be considered as having used

the “Shangri-La” name and “S” logo as a tradename and service mark.

 

         The new Intellectual Property Code (IPC), Republic Act No. 8293, undoubtedly shows the firm resolve of

the Philippines to observe and follow the Paris Convention by incorporating the relevant portions of the

Convention such that persons who may question a mark (that is, oppose registration, petition for the

cancellation thereof, sue for unfair competition) include persons whose internationally   well-

known   mark,   whether   or  not  registered,  is identical with or confusingly similar to or constitutes a

translation of a mark that is sought to be registered or is actually registered.[37]

 

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        However, while the Philippines was already a signatory to the Paris Convention, the IPC only took effect

on January 1, 1988, and in the absence of a retroactivity clause, R.A. No. 166 still applies.[38] Under the

prevailing law and jurisprudence at the time, the CA had not erred in ruling that:

            

            The Paris Convention mandates that protection should be afforded to internationally

known marks as signatory to the Paris Convention, without regard as to whether the foreign

corporation is registered, licensed or doing business in the Philippines. It goes without

saying that the same runs afoul to Republic Act No. 166, which requires the actual use

in commerce in the Philippines of the subject mark or devise. The apparent conflict

between the two (2) was settled by the Supreme Court in this wise -

 

            “Following universal acquiescence and comity, our municipal law on

trademarks regarding the requirement of actual use in the Philippines

must subordinate an international agreement inasmuch

as   the  apparent  clash is being decided by a

municipal tribunal  (Mortensen  vs. Peters, Great Britain, High Court of

Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World

Organization, 1971 Ed., p. 20).             Withal, the fact that international law

has been made part of the law of the land does not by any means imply the

primacy of international law over national law in the municipal sphere.

Under   the doctrine of incorporation as applied in most countries, rules

of             international law are given a standing equal, not superior, to

national legislative enactments (Salonga and Yap, Public International Law,

Fourth ed., 1974, p. 16).”[39] [Emphasis supplied]

 

        Consequently, the petitioners cannot claim protection under the Paris Convention. Nevertheless, with the

double infirmity of lack of two-month prior use, as well as bad faith in the respondent's registration of the

mark, it is evident that the petitioners cannot be guilty of infringement. It would be a great injustice to

adjudge the petitioners guilty of infringing a mark when they are actually the originator and creator thereof.

 

        Nor  can  the petitioners'  separate  personalities  from  their mother  corporation  be  an obstacle in the

enforcement of their rights as part of the Kuok Group of Companies and as official repository, manager and

operator of the subject mark  and logo. Besides, R.A. No. 166  did  not  require  the  party seeking relief to

be  the  owner  of  the  mark  but  “any  person  who believes that he is or will be damaged by the registration

of a mark or trade name.”[40]

 

        WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of

Appeals dated May 15, 2003 and  September 15, 2003, respectively, and  the  Decision  of  the  Regional Trial

Court of Quezon City dated March 8, 1996 are hereby SET ASIDE. Accordingly, the complaint for

infringement in Civil Case No. Q-91-8476 is ordered DISMISSED.

 

SO ORDERED.

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Prosource International vs. Horphag Research, G.R. No. 180073, November 11, 2009

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside

the Court of Appeals (CA) Decision[1] dated July 27, 2007and Resolution[2] dated October 15, 2007 in CA-G.R.

CV No. 87556.  The assailed decision affirmed the Regional Trial Court (RTC)[3] Decision[4] dated January 16,

2006 and Order[5] dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied petitioner’s

motion for reconsideration.

 

          The facts are as follows:

 

          Respondent Horphag Research Management SA is a corporation duly organized and existing under the

laws of Switzerland and the owner[6] of trademark PYCNOGENOL, a food supplement sold and distributed by

Zuellig Pharma Corporation.  Respondent later discovered that petitioner Prosource International, Inc. was

also distributing a similar food supplement using the mark PCO-GENOLS since 1996.[7]  This prompted

respondent to demand that petitioner cease and desist from using the aforesaid mark.[8]

 

          Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the

products under the name PCO-GENOLS as of June 19, 2000.  It, likewise, changed its mark from PCO-GENOLS

to PCO-PLUS.[9]

 

          On August 22, 2000, respondent filed a Complaint[10]  for Infringement of Trademark with Prayer for

Preliminary Injunction against petitioner, praying that the latter cease and desist from using the brand PCO-

GENOLS for being confusingly similar with respondent’s trademark PYCNOGENOL.  It, likewise, prayed for

actual and nominal damages, as well as attorney’s fees.[11]

 

          In its Answer,[12] petitioner contended that respondent could not file the infringement case considering

that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag Research

Limited.  It, likewise, claimed that the two marks were not confusingly similar.  Finally, it denied liability, since

it discontinued the use of the mark prior to the institution of the infringement case.  Petitioner thus prayed for

the dismissal of the complaint.  By way of counterclaim, petitioner prayed that respondent be directed to pay

exemplary damages and attorney’s fees.[13]         

 

          During the pre-trial, the parties admitted the following:

 

            1. Defendant [petitioner] is a corporation duly organized and existing under the laws of

the Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San

Juan, Metro Manila;

 

            2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual

Property Office but not with the Bureau of Food and Drug (BFAD).

 

            3. The defendant’s product PCO-GENOLS is duly registered with the BFAD but not with

the Intellectual Property Office (IPO).

 

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            4.  The defendant corporation discontinued the use of and had withdrawn from the

market the products under the name of PCO-GENOLS as of June 19, 2000, with its trademark

changed from PCO-GENOLS to PCO-PLUS.

 

            5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000.[14]

 

          On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and PCO-

GENOLS have the same suffix “GENOL” which appears to be merely descriptive and thus open for trademark

registration by combining it with other words. The trial court, likewise, concluded that the marks, when read,

sound similar, and thus confusingly similar especially since they both refer to food supplements. The court

added that petitioner’s liability was not negated by its act of pulling out of the market the products bearing the

questioned mark since the fact remains that from 1996 until June 2000, petitioner had infringed respondent’s

product by using the trademark PCO-GENOLS. As respondent manifested that it was no longer interested in

recovering actual damages, petitioner was made to answer only for attorney’s fees amounting to P50,000.00.[15]  For lack of sufficient factual and legal basis, the court dismissed petitioner’s counterclaim.  Petitioner’s

motion for reconsideration was likewise denied.

 

          On appeal to the CA, petitioner failed to obtain a favorable decision.  The appellate court explained that

under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to PYCNOGENOL.  It also found

just and equitable the award of attorney’s fees especially since respondent was compelled to litigate.[16]

 

          Hence, this petition, assigning the following errors:

 

I.                   THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE

LOWER [COURT] THAT RESPONDENT’S TRADEMARK P[YC]NOGENOLS (SIC) WAS

INFRINGED BY PETITIONER’S PCO-GENOLS.

 

II.                THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF

ATTORNEY’S FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH

MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00.[17]

 

 

The petition is without merit.

 

It must be recalled that respondent filed a complaint for trademark infringement against petitioner for

the latter’s use of the mark PCO-GENOLS which the former claimed to be confusingly similar to its trademark

PYCNOGENOL.  Petitioner’s use of the questioned mark started in 1996 and ended in June 2000.  The instant

case should thus be decided in light of the provisions of Republic Act (R.A.) No. 166 [18] for the acts committed

until December 31, 1997, and R.A. No. 8293[19] for those committed from January 1, 1998 until June 19, 2000.

 

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination

thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from

those manufactured, sold, or dealt by others. Inarguably, a trademark deserves protection.[20]

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Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes

trademark infringement, as follows:

 

Sec. 22.  Infringement, what constitutes. – Any person who shall use, without the

consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any

registered mark or tradename in connection with the sale, offering for sale, or advertising of

any goods, business or services on or in connection with which such use is likely to cause

confusion or mistake or to deceive purchasers or others as to the source or origin of such

goods or services, or identity of such business; or reproduce, counterfeit, copy of colorably

imitate any such mark or tradename and apply such reproduction, counterfeit, copy or

colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements

intended to be used upon or in connection with such goods, business, or services, shall be

liable to a civil action by the registrant for any or all of the remedies herein provided.

 

Sec. 155. Remedies; Infringement. – Any person who shall, without the consent of the

owner of the registered mark:

 

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a

registered mark or the same container or a dominant feature thereof in connection with the

sale, offering for sale, distribution, advertising of any goods or services including other

preparatory steps necessary to carry out the sale of any goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

 

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a

dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation

to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used

in commerce upon or in connection with the sale, offering for sale, distribution, or advertising

of goods or services on or in connection with which such use is likely to cause confusion, or to

cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant

for the remedies hereinafter set forth: Provided, That infringement takes place at the moment

any of the acts stated in Subsection 155.1 or this subsection are committed regardless of

whether there is actual sale of goods or services using the infringing material.

 

 

          In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the

following constitute the elements of trademark infringement:

 

          (a)        A trademark actually used in commerce in the Philippines and registered in the

principal register of the Philippine Patent Office[;]

 

            (b)        [It] is used by another person in connection with the sale, offering for sale, or

advertising of any goods, business or services or in connection with which such use is likely to

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cause confusion or mistake or to deceive purchasers or others as to the source or origin of such

goods or services, or identity of such business; or such trademark is reproduced, counterfeited,

copied or colorably imitated by another person and such reproduction, counterfeit, copy or

colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or

advertisements intended to be used upon or in connection with such goods, business or

services as to likely cause confusion or mistake or to deceive purchasers[;]

 

            (c)        [T]he trademark is used for identical or similar goods[;] and

 

            (d)       [S]uch act is done without the consent of the trademark registrant or assignee.[21]

       

          On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

 

(1)   The trademark being infringed is registered in the Intellectual Property Office; however, in

infringement of trade name, the same need not be registered;

 

(2)   The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the

infringer;

 

(3)   The infringing mark or trade name is used in connection with the sale, offering for sale, or

advertising of any goods, business or services; or the infringing mark or trade name is applied to

labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon

or in connection with such goods, business or services;

 

(4)   The use or application of the infringing mark or trade name is likely to cause confusion or mistake

or to deceive purchasers or others as to the goods or services themselves or as to the source or

origin of such goods or services or the identity of such business; and

 

(5)   It is without the consent of the trademark or trade name owner or the assignee thereof.[22]

 

 

In the foregoing enumeration, it is the element of “likelihood of confusion” that is the gravamen of

trademark infringement.  But “likelihood of confusion” is a relative concept.  The particular, and sometimes

peculiar, circumstances of each case are determinative of its existence.  Thus, in trademark infringement

cases, precedents must be evaluated in the light of each particular case.[23]

 

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the

Dominancy Test and the Holistic or Totality Test.  The Dominancy Test focuses on the similarity of the

prevalent features of the competing trademarks that might cause confusion and deception, thus constituting

infringement.[24] If the competing trademark contains the main, essential and dominant features of another,

and confusion or deception is likely to result, infringement takes place.  Duplication or imitation is not

necessary; nor is it necessary that the infringing label should suggest an effort to imitate.  The question is

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whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to

deceive purchasers.[25]  Courts will consider more the aural and visual impressions created by the marks in the

public mind, giving little weight to factors like prices, quality, sales outlets, and market segments.[26]

 

In contrast, the Holistic Test entails a consideration of the entirety of the marks as applied to the

products, including the labels and packaging, in determining confusing similarity.[27] The discerning eye of the

observer must focus not only on the predominant words but also on the other features appearing on both labels

in order that the observer may draw his conclusion whether one is confusingly similar to the other.[28]

 

The trial and appellate courts applied the Dominancy Test in determining whether there was a

confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court

found, and the CA affirmed, that:

 

Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix “GENOL” which on

evidence, appears to be merely descriptive and furnish no indication of the origin of the article

and hence, open for trademark registration by the plaintiff thru combination with another word

or phrase such as PYCNOGENOL, Exhibits “A” to “A-3.” Furthermore, although the letters “Y”

between P and C, “N” between O and C and “S” after L are missing in the [petitioner’s] mark

PCO-GENOLS, nevertheless, when the two words are pronounced, the sound effects are

confusingly similar not to mention that they are both described by their manufacturers as a

food supplement and thus, identified as such by their public consumers. And although there

were dissimilarities in the trademark due to the type of letters used as well as the size, color

and design employed on their individual packages/bottles, still the close relationship of the

competing products’ name in sounds as they were pronounced, clearly indicates that

purchasers could be misled into believing that they are the same and/or originates from a

common source and manufacturer.[29] 

 

We find no cogent reason to depart from such conclusion. 

 

This is not the first time that the Court takes into account the aural effects of the words and letters

contained in the marks in determining the issue of confusing similarity. InMarvex Commercial Co., Inc.

v. Petra Hawpia & Co., et al.,[30] cited in McDonald’s Corporation v. L.C. Big Mak Burger, Inc.,[31] the Court

held:

 

The following random list of confusingly similar sounds in the matter of trademarks,

culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view

that “SALONPAS” and “LIONPAS” are confusingly similar in sound: “Gold Dust” and “Gold

Drop”; “Jantzen” and “Jass-Sea”; “Silver Flash” and “Supper Flash”; “Cascarete” and

“Celborite”; “Celluloid” and “Cellonite”; “Chartreuse” and “Charseurs”; “Cutex” and

“Cuticlean”; “Hebe” and “Meje”; “Kotex” and “Femetex”; “Zuso” and “Hoo Hoo.” Leon Amdur,

in his book “Trade-Mark Law and Practice,” pp. 419-421, cities, as coming within the purview

of the idem sonans rule, “Yusea” and “U-C-A,” “Steinway Pianos” and “Steinberg Pianos,” and

“Seven-Up” and “Lemon-Up.” In Co Tiong vs. Director of Patents, this Court unequivocally said

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that “Celdura” and “Cordura” are confusingly similar in sound; this Court held in Sapolin Co.

vs. Balmaceda, 67 Phil. 795 that the name “Lusolin” is an infringement of the trademark

“Sapolin,” as the sound of the two names is almost the same.[32]

 

Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and

appellate courts finding the allegations of infringement to be meritorious.  As we have consistently held,

factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. [33] Hence,

petitioner is liable for trademark infringement.

 

We, likewise, sustain the award of attorney’s fees in favor of  respondent.  Article 2208 of the Civil

Code enumerates the instances when attorney’s fees are awarded, viz.:

 

Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other

than judicial costs, cannot be recovered, except:

 

1.      When exemplary damages are awarded;

 

2.      When the defendant’s act or omission has compelled the plaintiff to litigate with

third persons or to incur expenses to protect his interest;

 

3.      In criminal cases of malicious prosecution against the plaintiff;

 

4.      In case of a clearly unfounded civil action or proceeding against the plaintiff;

 

5.      Where the defendant acted in gross and evident bad faith in refusing to satisfy

the plaintiff”s plainly valid, just and demandable claim;

 

6.      In actions for legal support;

 

7.      In actions for the recovery of wages of household helpers, laborers and skilled

workers;

 

8.      In actions for indemnity under workmen’s compensation and employer’s liability

laws;

 

9.      In a separate civil action to recover civil liability arising from a crime;

 

10.  When at least double judicial costs are awarded;

 

11.  In any other case where the court deems it just and equitable that attorney’s fees

and expenses of litigation should be recovered.         

 

In all cases, the attorney’s fees and expenses of litigation must be reasonable.

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As a rule, an award of attorney’s fees should be deleted where the award of moral and exemplary

damages is not granted.[34]  Nonetheless, attorney’s fees may be awarded where the court deems it just and

equitable even if moral and exemplary damages are unavailing.[35]   In the instant case, we find no reversible

error in the grant of attorney’s fees by the CA.

 

WHEREFORE, premises considered, the petition is DENIED for lack of merit.  The Court of Appeals

Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556

are AFFIRMED.

 

Superior Commercial vs. Kunnan Enterprises, G.R. No. 169974, April 20, 2010

We review in this petition for review on certiorari[1] the (1) decision[2] of the Court of Appeals (CA) in CA-G.R.

CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City, Branch 85 (RTC),[3] and

dismissed the petitioner Superior Commercial Enterprises, Inc.’s (SUPERIOR) complaint for trademark

infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan

Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA

resolution[4] that denied SUPERIOR’s subsequent motion for reconsideration.  The RTC decision that the CA

reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to

pay SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorney’s fees, and costs of the suit.

 THE FACTUAL ANTECEDENTS

 On February 23, 1993, SUPERIOR[5] filed a complaint for trademark infringement and unfair competition

with preliminary injunction against KUNNAN[6] and SPORTS CONCEPT[7] with the RTC, docketed as Civil

Case No. Q-93014888.  

 In support of its complaint, SUPERIOR first claimed to be the owner of the trademarks, trading styles,

company names and business names[8] “KENNEX”,[9] “KENNEX & DEVICE”,[10] “PRO KENNEX”[11] and

“PRO-KENNEX” (disputed trademarks).[12]  Second, it also asserted its prior use of these trademarks,

presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its

name.  Third, SUPERIOR also alleged that it extensively sold and advertised sporting goods and products

covered by its trademark registrations.  Finally, SUPERIOR presented as evidence of its ownership of the

disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982

(Distributorship Agreement) it executed with KUNNAN, which states:

 Whereas, KUNNAN intends to acquire the ownership of KENNEX trademark registered by the

[sic] Superior in the Philippines.  Whereas, the [sic] Superior is desirous of having been appointed [sic] as the

sole distributor by KUNNAN in the territory of the Philippines.”  [Emphasis supplied.][13]

 In its defense, KUNNAN disputed SUPERIOR’s claim of ownership and maintained that SUPERIOR – as mere

distributor from October 6, 1982 until December 31, 1991 – fraudulently registered the trademarks in its

name.  KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation for

the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its

products in different countries, including the Philippines since 1972.[14]  It created and first used “PRO

KENNEX,” derived from its original corporate name, as a distinctive trademark for its products in 1976. 112

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KUNNAN also alleged that it registered the “PRO KENNEX” trademark not only in the Philippines but also in

31 other countries, and widely promoted the “KENNEX” and “PRO KENNEX” trademarks through worldwide

advertisements in print media and sponsorships of known tennis players.

 On October 1, 1982, after the expiration of its initial distributorship agreement with another company,

[15] KUNNAN appointed SUPERIOR as its exclusive distributor in thePhilippines under a Distributorship

Agreement whose pertinent provisions state:[16]

 Whereas, KUNNAN intends to acquire ownership of KENNEX trademark registered by the Superior in

the Philippines.  Whereas, the Superior is desirous of having been appointed [sic] as the sole distributor by

KUNNAN in the territory of the Philippines.

                         Now, therefore, the parties hereto agree as follows:

 1.      KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in

the Philippines, and this Agreement could be renewed with the consent of both parties upon the time of

expiration.

 2.      The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark,

under the registration of Patent Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its

ten (10) years contract of distributorship, and it is required that the ownership of the said trademark shall be

genuine, complete as a whole and without any defects.

 3.      KUNNAN will guarantee to the Superior that no other third parties will be permitted to supply the

KENNEX PRODUCTS in the Philippines except only to the Superior.  If KUNNAN violates this stipulation, the

transfer of the KENNEX trademark shall be null and void.

 4.      If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the

agent in the Philippines with full power to exercise and granted the power of attorney, to pursue any case of

Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory.

 5.      The Superior will be granted from [sic] KUNNAN’s approval before making and selling any KENNEX

products made in the Philippines and the other countries, and if this is the situation, KUNNAN is entitled to

have a royalty of 5%-8% of FOB as the right.

 6.      Without KUNNAN’s permission, the Superior cannot procure other goods supply under KENNEX brand

of which are not available to supply [sic] by KUNNAN.  However, in connection with the sporting goods, it is

permitted that the Superior can procure them under KENNEX brand of which are not available to be supplied

by KUNNAN. [Emphasis supplied.]

 Even though this Agreement clearly stated that SUPERIOR was obligated to assign the ownership of the

KENNEX trademark to KUNNAN, the latter claimed that the Certificate of Registration for the KENNEX

trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIOR’s

President and General Manager, misled KUNNAN’s officers into believing that KUNNAN was not qualified to

hold the same due to the  “many requirements set by the Philippine Patent Office” that KUNNAN could not

meet.[17]   KUNNAN further asserted that SUPERIOR deceived it into assigning its applications for

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registration of the “PRO KENNEX” trademark in favor of SUPERIOR, through an Assignment Agreement dated

June 14, 1983 whose pertinent provisions state:[18]

 1.                   In consideration of the distributorship relationship between KUNNAN and Superior, KUNNAN,

who is the seller in the distributorship relationship, agrees to assign the following trademark applications

owned by itself in the Philippines to Superior who is the buyer in the distributorship relationship.

 Trademark                             Application Number                  Class

 PROKENNEX                              49999                                   28

PROKENNEX                              49998                                   25

PROKENNEX                              49997                                   18  

 2.                  Superior shall acknowledge that KUNNAN is still the real and truthful owner of the

abovementioned trademarks, and shall agree that it will not use the right of the abovementioned trademarks to

do anything which is unfavourable or harmful to KUNNAN.

 3.                  Superior agrees that it will return back the abovementioned trademarks to KUNNAN without

hesitation at the request of KUNNAN at any time.  KUNNAN agrees that the cost for the concerned

assignment of the abovementioned trademarks shall be compensated by KUNNAN.

 4.                  Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be

clean and without any incumbency.

 5.                  Superior agrees that after the assignment of the abovementioned trademarks, it shall have no

right to reassign or license the said trademarks to any other parties except KUNNAN. [Emphasis supplied]

 Prior to and during the pendency of the infringement and unfair competition case before the RTC, KUNNAN

filed with the now defunct Bureau of Patents, Trademarks and Technology Transfer[19] separate Petitions for

the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed as

Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial

Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for

Cancellation) involving the KENNEX and PRO KENNEX trademarks.[20]  In essence, KUNNAN filed the

Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and

appropriated the disputed trademarks; as mere distributor and not as lawful owner, it obtained the

registrations and assignments of the disputed trademarks in violation of the terms of the Distributorship

Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended.[21] 

 On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN

appointed SPORTS CONCEPT as its new distributor. Subsequently, KUNNAN also caused the publication of a

Notice and Warning in the Manila Bulletin’s January 29, 1993 issue, stating that (1) it is the owner of the

disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed

SPORTS CONCEPT as its exclusive distributor.  This notice promptedSUPERIOR to file its Complaint for

Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN.[22]

 The RTC Ruling

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           On March 31, 1998, the RTC issued its decision[23] holding KUNNAN liable for trademark infringement

and unfair competition.  The RTC also issued a writ of preliminary injunction enjoining KUNNAN and SPORTS

CONCEPT from using the disputed trademarks.

 The RTC found that SUPERIOR sufficiently proved that it was the first user and owner of the disputed

trademarks in the Philippines, based on the findings of the Director of Patents in Inter Partes Case No. 1709

and 1734 that SUPERIOR was “rightfully entitled to register the mark ‘KENNEX’ as user and owner

thereof.”  It also considered the “Whereas clause” of the Distributorship Agreement, which categorically stated

that “KUNNAN intends to acquire ownership of [the] KENNEX trademark registered bySUPERIOR in

the Philippines.”  According to the RTC, this clause amounts to KUNNAN’s express recognition of SUPERIOR’s

ownership of the KENNEX trademarks.[24] 

KUNNAN and SPORTS CONCEPT appealed the RTC’s decision to the CA where the appeal was docketed as

CA-G.R. CV No. 60777.   KUNNAN maintained thatSUPERIOR was merely its distributor and could not be the

owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and

numerous valid registrations. 

Intervening Developments:

The IPO and CA Rulings

In the course of its appeal to the CA, KUNNAN filed on  December 19, 2003 a Manifestation and Motion

praying that the decision of the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO), dated

October 30, 2003, in the Consolidated Petitions for Cancellation  be made of record and be considered by the

CA in resolving the case.[25]  The BLA ruled in this decision –

In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to

the mark “PRO KENNEX”.  It was proven that actual use by Respondent-Registrant is not in the concept of an

owner but as a mere distributor (Exhibits “I”, “S” to “S-1”, “P” and “P-1” and “Q” and “Q-2”) and as enunciated

in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, “a mere distributor of a product bearing

a trademark, even if permitted to use said trademark has no right to and cannot register the said trademark.”

          WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the

prior user and owner of the trademark “PRO-KENNEX”, the consolidated Petitions for Cancellation and the

Notices of Opposition are hereby GRANTED.  Consequently, the trademark “PRO-KENNEX” bearing

Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior

Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal Register and SR No. 6663 are

hereby CANCELLED.  Accordingly, trademark application Nos. 84565 and 84566, likewise for the registration

of the mark PRO-KENNEX are hereby REJECTED.

            Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative

Finance and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance

with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information and update

of its record.[26]

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On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director General’s

decision on appeal dated December 8, 2004, denyingSUPERIOR’s appeal, be given weight in the disposition of

the case.[27]  The dispositive portion of the decision reads:[28]

WHEREFORE, premises considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30

October 2003 rendered by the Director of the Bureau of Legal Affairs.  Accordingly, the instant appeal is

DENIED and the appealed decision is hereby AFFIRMED.

          We take judicial notice that SUPERIOR questioned the IPO Director General’s ruling before the Court of

Appeals on a petition for review under Rule 43 of the Rules of Court, docketed as CA–G.R. SP No. 87928

(Registration Cancellation Case).  On August 30, 2007, the CA rendered its decision dismissing SUPERIOR’s

petition.[29]  On December 3, 2007, the CA decision was declared final and executory and entry of judgment

was accordingly made.  Hence, SUPERIOR’s registration of the disputed trademarks now stands effectively

cancelled. 

The CA Ruling   

On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTC’s

decision of March 31, 1998.[30]  It dismissedSUPERIOR’s Complaint for Infringement of Trademark and Unfair

Competition with Preliminary Injunction on the ground that SUPERIOR failed to establish by preponderance of

evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks.  The CA found the

Certificates of Principal and Supplemental Registrations and the “whereas clause” of the Distributorship

Agreement insufficient to support SUPERIOR’s claim of ownership over the disputed trademarks.

          The CA stressed that SUPERIOR’s possession of the aforementioned Certificates of Principal

Registration does not conclusively establish its ownership of the disputed trademarks as dominion  over

trademarks is not acquired by the fact of registration alone;[31] at best, registration merely raises a

presumption of ownership that can be rebutted by contrary evidence.[32] The CA further emphasized that the

Certificates of Supplemental Registration issued in SUPERIOR’s name do not even enjoy the presumption of

ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of

the validity of registration or of the registrant’s exclusive right to use the trademarks in connection with the

goods, business, or services specified in the certificate.[33]

In contrast with the failure of SUPERIOR’s evidence, the CA found that KUNNAN presented sufficient evidence

to rebut SUPERIOR’s presumption of ownership over the trademarks.  KUNNAN established that SUPERIOR,

far from being the rightful owner of the disputed trademarks, was merely KUNNAN’s exclusive

distributor.  This conclusion was based on three pieces of evidence that, to the CA, clearly established

that SUPERIOR had no proprietary interest over the disputed trademarks. 

First, the CA found that the Distributorship Agreement, considered in its entirety, positively confirmed

that SUPERIOR sought to be the KUNNAN’s exclusive distributor. The CA based this conclusion on the

following provisions of the Distributorship Agreement:

(1) that SUPERIOR was “desirous of [being] appointed as the sole distributor by KUNNAN in the territory of

the Philippines;”

(2) that “KUNNAN will appoint the sole distributorship right to Superior in the Philippines;” and

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(3) that “no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only

to Superior.”

The CA thus emphasized that the RTC erred in unduly relying on the first whereas clause, which states

that “KUNNAN intends to acquire ownership of [the] KENNEX trademark registered by SUPERIOR in the

Philippines” without considering the entirety of the Distributorship Agreement indicating that SUPERIOR had

been merely appointed by KUNNAN as its distributor.

Second, the CA also noted that SUPERIOR made the express undertaking in the Assignment Agreement to

“acknowledge that KUNNAN is still the real and truthful owner of the [PRO KENNEX] trademarks,” and that it

“shall agree that it will not use the right of the abovementioned trademarks to do anything which is

unfavourable or harmful to KUNNAN.” To the CA, these provisions are clearly inconsistent with SUPERIOR’s

claim of ownership of the disputed trademarks. The CA also observed that although the Assignment Agreement

was a private document, its authenticity and due execution was proven by the similarity of Mr. Tan Bon

Diong’s signature in the Distributorship Agreement and the Assignment Agreement.

Third, the CA also took note of SUPERIOR’s Letter dated November 12, 1986 addressed to Brig. Gen. Jose

Almonte, identifying itself as the “sole and exclusive licensee and distributor in the Philippines of all its

KENNEX and PRO-KENNEX products.”  Attached to the letter was an agreement with KUNNAN, identifying

the latter as the “foreign manufacturer of all KENNEX products.” The CA concluded that in this

letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN, and even in its

transactions with third persons.

Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and had no right to the

registration of the disputed trademarks since the right to register a trademark is based on ownership. Citing

Section 4 of Republic Act No. 166[34] and established jurisprudence,[35] the CA held that SUPERIOR – as an

exclusive distributor – did not acquire any proprietary interest in the principal’s (KUNNAN’s) trademark.

          The CA denied SUPERIOR’s motion for reconsideration for lack of merit in its Resolution dated October

4, 2005.

THE PETITION

          In the present petition, SUPERIOR raises the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT

THE TRUE AND RIGHTFUL OWNER OF THE TRADEMARKS “KENNEX” AND “PRO-KENNEX” IN

THE PHILIPPINES

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES

III.

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WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE

THE DECISION OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-93-14888,

LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS

CONCEPT AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR

COMPETITION WITH PRELIMINARY INJUNCTION

THE COURT’S RULING

We do not find the petition meritorious. 

On the Issue of Trademark Infringement

          We first consider the effect of the final and executory decision in the Registration Cancellation Case on

the present case.  This decision - rendered after the CA decision for trademark infringement and unfair

competition in CA-G.R. CV No. 60777 (root of the present case) - states:

As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior,

the former sufficiently established the fraudulent registration of the questioned trademarks by Superior.  The

Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the

KENNEX trademark were fraudulently obtained by petitioner Superior.  Even before PROKENNEX products

were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and

had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976.  Riding on

the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew

fully well that it did not own nor did it manufacture the PROKENNEX products.  Superior claimed ownership of

the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of

KENNEX and PROKENNEX products in the Philippines.

           While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to

Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superiorhowever breached

its obligation and failed to assign the same to Kunnan.  In a letter dated 13 February 1987, Superior, through

Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines.  Thus,

Kunnan was misled into assigning to Superior its (Kunnan’s) own application for the disputed trademarks. In

the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks

under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any

incumbency when requested by the latter.

            In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision

of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in the name of

petitioner Superior and denying its new application for registration, upon a finding that Superior is not the

rightful owner of the subject marks.

            WHEREFORE, the foregoing considered, the petition is DISMISSED.

The CA decided that the registration of the “KENNEX” and “PRO KENNEX” trademarks should be cancelled

because SUPERIOR was not the owner of, and could not in the first place have validly registered these

trademarks.  Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations

were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks.

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Section 22 of Republic Act No. 166, as amended (“RA 166”),[36] the law applicable to this case, defines

trademark infringement as follows:

Section 22.       Infringement, what constitutes. — Any person who [1] shall use, without the consent of

the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-

name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in

connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as

to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit,

copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or

colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be

used upon or in connection with such goods, business or services, shall be liable to a civil action by the

registrant for any or all of the remedies herein provided. [Emphasis supplied]

Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for

infringement.  Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant

under the provisions of RA 166[37] terminates when the judgment or order of cancellation has become

final, viz: 

Section 19. Cancellation of registration. - If the Director finds that a case for cancellation has been made out

he shall order the cancellation of the registration. The order shall not become effective until the period for

appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or

judgment becomes final, any right conferred by such registration upon the registrant or any person in interest

of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving

the registrant of protection from infringement from the moment judgment or order of cancellation has become

final.[38]   

In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect

of SUPERIOR’s case has been rendered moot and academic in view of the finality of the decision in the

Registration Cancellation Case.  In short, SUPERIOR is left without any cause of action for trademark

infringement since the cancellation of registration of a trademark deprived it of protection from infringement

from the moment judgment or order of cancellation became final.   To be sure, in a trademark infringement,

title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of

registration.[39]  With its certificates of registration over the disputed trademarks effectively cancelled with

finality, SUPERIOR’s case for trademark infringement lost its legal basis and no longer presented a valid cause

of action.

          Even assuming that SUPERIOR’s case for trademark infringement had not been rendered moot and

academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the

rightful owner of the disputed trademarks in the Registration Cancellation Case.    Even prior to the

cancellation of the registration of the disputed trademarks, SUPERIOR – as a mere distributor and not the

owner – cannot assert any protection from trademark infringement as it had no right in the first place to the

registration of the disputed trademarks.   In fact, jurisprudence holds that in the absence of any inequitable

conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the

manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by 119

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the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate

before application for registration is filed.[40]  Thus, the CA in the Registration Cancellation Case correctly

held:

As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its

name.  Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be based on

ownership.  When the applicant is not the owner of the trademark being applied for, he has no right to apply

for the registration of the same.  Under the Trademark Law, only the owner of the trademark, trade name or

service mark used to distinguish his goods, business or service from the goods, business or service of others is

entitled to register the same.  An exclusive distributor does not acquire any proprietary interest in the

principal’s trademark and cannot register it in his own name unless it is has been validly assigned to him.

In addition, we also note that the doctrine of res judicata bars SUPERIOR’s present case for trademark

infringement. The doctrine of res judicata embraces two (2) concepts:  the first is "bar by prior judgment"

under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph

(c) thereof.  

In the present case, the second concept – conclusiveness of judgment – applies.  Under the concept of res

judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent

jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters

determined in the former suit.[41] Stated differently, facts and issues actually and directly resolved in a former

suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a

different cause of action.[42]  This second branch of the principle of res judicata bars the re-litigation of

particular facts or issues in another litigation between the same parties on a different claim or cause of action.

[43] 

Because the Registration Cancellation Case and the present case involve the same parties, litigating with

respect to and disputing the same trademarks, we are bound to examine how one case would affect the other.

In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of

trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks),

the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and

issues that are determinative of the present case. 

To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiff’s

mark; (2) the plaintiff’s ownership of the mark; and (3) the use of the mark or its colorable imitation by the

alleged infringer results in “likelihood of confusion.”[44] 

Based on these elements, we find it immediately obvious that the second element – the plaintiff’s ownership of

the mark – was what the Registration Cancellation Casedecided with finality.  On this element depended the

validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on,

the issue of ownership.[45] 

In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a

mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed

trademarks.  Significantly, these are the exact terms of the ruling the CA arrived at in the present petition now

under our review.  Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks

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is the same.  Given, however, the final and executory ruling in the Registration Cancellation Case on the issue

of ownership that binds us and the parties, any further discussion and review of the issue of ownership –

although the current CA ruling is legally correct and can stand on its own merits – becomes a pointless

academic discussion. 

On the Issue of Unfair Competition

Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to

the issue of unfair competition.  In its Complaint,SUPERIOR alleged that:[46]

17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint

the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting

goods bearing the trademark “PRO-KENNEX.”   For this reason, on January 20, 1993, the plaintiff, through

counsel, wrote the defendant Sports Concept and Distributor’s Inc. advising said defendant that the trademark

“PRO-KENNEX” was registered and owned by the plaintiff herein.

18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin

issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the

defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and

equipment bearing the trademarks “KENNEX and “PRO-KENNEX” which trademarks are owned by and

registered in the name of plaintiff herein as alleged hereinabove.

x  x  x  x

27.  The acts of defendants, as previously complained herein, were designed to and are of the nature so as to

create confusion with the commercial activities of plaintiff in the Philippines and is liable to mislead the public

as to the nature and suitability for their purposes of plaintiff’s business and the defendant’s acts are likely to

discredit the commercial activities and future growth of plaintiff’s business. 

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to

pass off upon the public of the goods or business of one person as the goods or business of another with the

end and probable effect of deceiving the public.  The essential elements of unfair competition[47] are (1)

confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a

competitor.[48]

Jurisprudence also formulated the following “true test” of unfair competition:  whether the acts of the

defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases

under the ordinary conditions of 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, actual or probable

must be shown before the right to recover can exist.[49]

In the present case, no evidence exists showing that KUNNAN ever attempted to pass off the goods it sold (i.e.

sportswear, sporting goods and equipment) as those ofSUPERIOR.  In addition, there is no evidence of bad

faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to

adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the

identity of the goods sold or of the manufacturer of the goods sold.  InMcDonald’s Corporation v. L.C. Big Mak

Burger, Inc.,[50] we held that there can be trademark infringement without unfair competition such as when

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the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the

public from being deceived that the goods originate from the trademark owner.    In this case, no issue of

confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at

issue.  Furthermore, KUNNAN’s January 29, 1993 notice by its terms prevents the public from being deceived

that the goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer

of the goods bearing the trademarks “KENNEX” and “PRO KENNEX.”  This notice states in full:[51]

NOTICE AND WARNING

Kunnan Enterprises Ltd. is the owner and first user of the internationally-renowned trademarks KENNEX and

PRO KENNEX for sportswear and sporting goods and equipment.  Kunnan Enterprises Ltd. has registered the

trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide

where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing

the KENNEX and PRO KENNEX trademarks.

Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with

Superior Commercial Enterprises, Inc. on December 31, 1991.  As a result, Superior Commercial Enterprises,

Inc. is no longer authorized to sell sportswear and sporting goods and equipment manufactured by Kunnan

Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX.

x  x  x  x

In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine

distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO

KENNEX.  The public is advised to buy sporting goods and equipment bearing these trademarks only from

SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured

by Kunnan Enterprises Ltd. [Emphasis supplied.]  

Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that

SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIOR’s name, the

latter is left with no effective right to make a claim.  In other words, with the CA’s final ruling in the

Registration Cancellation Case, SUPERIOR’s case no longer presents a valid cause of action.  For this reason,

the unfair competition aspect of the SUPERIOR’s case likewise falls.  

WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.’s petition for review

on certiorari for lack of merit.  Cost against petitioner Superior Commercial Enterprises, Inc.

In-N-Out Burger vs. Sehwani Incorporated, G.R. No. 179127, December 24, 2008

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the

Decision[1] dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the

Decision[2] dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal

No. 10-05-01.  The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and

the IPO Director General do not have jurisdiction over cases involving unfair competition.

 

Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California,

United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial

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Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).  Petitioner is

engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. [3]

 

Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in

the Philippines.[4] 

 

On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of

Trademarks (BOT) of the IPO for “IN-N-OUT” and “IN-N-OUT Burger & Arrow Design.”  Petitioner later found

out, through the Official Action Papers issued by the  IPO on 31 May 2000, that respondent Sehwani,

Incorporated had already obtained Trademark Registration for the mark “IN N OUT (the inside of the letter

“O” formed like a star).”[5]  By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered

mark of respondent Sehwani, Incorporated.

 

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO 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.[6]  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.[7]

 

Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing

respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark “IN-N-OUT” and

to voluntarily cancel its trademark registration.  In a letter-reply dated 23 October 2000, respondents refused

to accede to petitioner’ demand, but expressed willingness to surrender the registration of

respondent Sehwani, Incorporated of the “IN N OUT” trademark for a fair and reasonable consideration. [8]

         

Petitioner was able to register the mark “Double Double” on 4 July 2002, based on their application

filed on 2 June 1997.[9]  It alleged that respondents also used this mark, as well as the menu color

scheme.   Petitioners also averred that respondent Benita’s receipts bore the phrase, “representing IN-N-OUT

Burger.”[10]  It should be noted that 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.”[11]

 

To counter petitioner’s complaint, respondents filed before the BLA-IPO an Answer with

Counterclaim.  Respondents asserted therein that they had been using the mark “IN N OUT” in

the Philippines since 15 October 1982.  On 15 November 1991, respondent Sehwani, Incorporated filed with

the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of

the mark “IN N OUT (the inside of the letter “O” formed like a star).”  Upon approval of its application, a

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certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17

December 1993.  On 30 August 2000, respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a

Licensing Agreement, wherein the former entitled the latter to use its registered mark, “IN N

OUT.”  Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark

“IN N OUT,” should be accorded the presumption of a valid registration of its mark with the exclusive right to

use the same.  Respondents argued that none of the grounds provided under the Intellectual Property Code for

the cancellation of a certificate of registration are present in this case.  Additionally, respondents maintained

that petitioner had no legal capacity to sue as it had never operated in the Philippines.[12]

 

Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision

dated 22 December 2003,[13] in favor of petitioner.  According to said Decision, petitioner had the legal capacity

to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the

Convention of Paris on Protection of Industrial Property.  And 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 IPO Director for Legal Affairs pronounced in

her Decision 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.  In addition, the simple act of respondent Sehwani, Incorporated

of inquiring into the existence of a pending application for registration of the “IN-N-OUT” mark was not

deemed fraudulent.    The dispositive part of the Decision of the IPO Director for Legal Affairs reads:

 

With the foregoing disquisition, Certificate of Registration No. 56666 dated 17

December 1993 for the mark “IN-N-OUT” (the inside of the letter “O” formed like a star) issued

in favor of Sehwani, Incorporated is hereby CANCELLED.  Consequently,

respondents Sehwani, Inc. and Benita’s Frites are hereby ordered to permanently cease and

desist from using the mark “IN-N-OUT” and “IN-N-OUT BURGER LOGO” on its goods and in its

business.  With regards the mark “Double-Double,” considering that as earlier discussed, the

mark has been approved by this Office for publication and that as shown by evidence,

Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently

cease and desist from using the mark Double-Double.  NO COSTS. [14]

 

 

Both parties filed their respective Motions for Reconsideration of the aforementioned

Decision.  Respondents’ Motion for Reconsideration[15] and petitioner’s Motion for Partial

Reconsideration[16] were denied by the IPO Director for Legal Affairs in Resolution No. 2004-18[17] dated 28

October 2004 and Resolution No. 2005-05 dated 25 April 2005,[18] respectively.

 

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Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No.

179127, the case at bar.

 

G.R. No. 171053  

 

On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October

2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal

Memorandum with IPO Director General Emma Francisco (Director General Francisco).  However, in an Order

dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-

day reglementary period to appeal. 

 

Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of

Court, filed on 20 December 2004 and docketed as CA-G.R. SP No. 88004, challenging the dismissal of their

appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the

IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the

name of respondent Sehwani, Incorporated and enjoining respondents from using the same.  In particular,

respondents based their Petition on the following grounds:

 

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO.

14-2004-00004 ON A MERE TECHNICALITY

 

THE BUREAU OF LEGAL AFFAIR’S (SIC) DECISION AND RESOLUTION (1) CANCELLING

RESPONDENT’S CERTIFICATE OF REGISTRATION FOR THE MARK “IN-N-OUT,” AND (2)

ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE

SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT

SUPPORTED BY EVIDENCE.

 

 

Respondents thus prayed:

 

          WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to

this petition, and thereafter order the Office of the Director General of the Intellectual Property

Office to reinstate and give due course to [respondent]’s Appeal No. 14-2004-00004.

 

            Other reliefs, just and equitable under the premises, are likewise prayed for.

 

 

On 21 October 2005, the Court of Appeals rendered a Decision denying respondents’ Petition in CA-

G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General.  The appellate

court confirmed that respondents’ appeal before the IPO Director General was filed out of time and that it was

only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani,

Incorporated and to permanently enjoin respondents from using the same.  Effectively, the 22 December

2003 Decision of IPO Director of Legal Affairs was likewise affirmed.  On 10 November 2005, respondents

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moved for the reconsideration of the said Decision.  On 16 January 2006, the Court of Appeals denied their

motion for reconsideration.

 

Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the

matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January

2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.[19]

 

This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,[20] finding that herein

respondents failed to file their Appeal Memorandum before the IPO Director General within the period

prescribed by law and, consequently, they lost their right to appeal.  The Court further affirmed the Decision

dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal

capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines,

and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the

internationally well-known marks of petitioner, and directing respondents to stop using the said

marks.  Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it

was denied with finality in a Resolution dated 21 January 2008.

 

G.R. No. 179127

 

Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of

the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General

on 27 May 2005.  

 

During the pendency of petitioner’s appeal before the IPO Director General, the Court of Appeals

already rendered on 21 October 2005 its Decision dismissing respondents’ Petition in CA-G.R. SP No. 88004.

 

In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioner’s

appeal meritorious and modified the Decision dated 22 December 2003of the IPO Director of Legal

Affairs.  The IPO Director General declared that respondents were 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

because it was allegedly difficult to print.  The IPO Director General expressed his disbelief over the

respondents’ reasoning for the non-use of the star symbol.  The IPO Director General also considered

respondents’ use of petitioner’s registered mark “Double-Double” as a sign of bad faith and an intent to

mislead the public.  Thus, the IPO Director General ruled that petitioner was entitled to an award for the

actual damages it suffered by reason of respondents’ acts of unfair competition, exemplary damages, and

attorney’s fees.[21]   The fallo of the Decision reads:

 

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WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair

competition.  Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED

as follows:

 

[Herein Respondents] are hereby ordered to jointly and severally pay [herein

petitioner]:

 

   1.  Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE

HUNDRED SEVENTY FOUR AND 28/100(P212,574.28);

 

   2.  Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS

(P500,000.00);

 

    3.    Attorney’s fees and expenses of litigation in the amount of FIVE HUNDRED

THOUSAND PESOS (P500,000.00).

 

All products of [herein respondents] including the labels, signs, prints, packages,

wrappers, receptacles and materials used by them in committing unfair competition should be

without compensation of any sort be seized and disposed of outside the channels of commerce.

 

Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for

appropriate action, and the records be returned to her for proper disposition.  Further, let a

copy of this Decision be furnished the Documentation, Information and Technology Transfer

Bureau for their information and records purposes.[22]

 

 

Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals

another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No.

92785.  Respondents based their second Petition before the appellate court on the following grounds: 

 

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS

LIABLE FOR UNFAIR COMPETITION AND IN ORDERING THEM TO PAY DAMAGES AND

ATTORNEY’S FEES TO RESPONDENTS

 

THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU

OF LEGAL AFFAIR’S DECISION (1) CANCELLING PETITIONER’S CERTIFICATE OF

REGISTRATION FOR THE MARK “IN-N-OUT,” AND (2) ORDERING PETITIONERS TO

PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS

AND BUSINESS

 

 

Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO

Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence,

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they should not be held liable for damages.  They argued that petitioner had never entered into any transaction

involving its goods and services in the Philippines and, therefore, could not claim that its goods and services

had already been identified in the mind of the public.  Respondents added that the disputed mark was not well-

known.  Finally, they maintained that petitioner’s complaint was already barred by laches.[23]

 

At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer:

 

            WHEREFORE, [respondents herein] respectfully pray that this Honorable Court:

 

(a)    upon the filing of this petition, issue a temporary restraining order enjoining the IPO and

[petitioner], their agents, successors and assigns, from executing, enforcing and

implementing the IPO Director General’s Decision dated 23 December 2005, which

modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further

orders from this Honorable Court.

 

(b)    after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and

assigns, from executing, enforcing and implementing the Decision dated 23 December

2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the

status quo ante pending the resolution of the merits of this petition; and

 

(c)    after giving due course to this petition:

 

(i)                  reverse and set aside the Decision dated 23 December 2005 of the

Director General  of the IPO in IPV No. 10-2001-00004 finding the

[respondents] guilty of unfair competition and awarding damages and

attorney’s fees to the respondent

 

(ii)                in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December

2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it

finds [respondents] not guilty of unfair competition and hence not liable to the

[petitioner] for damages and attorney’s fees;

 

(iii)               reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and

Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld

[petitioner]’s legal capacity to sue; that [petitioner]’s trademarks are well-

known; and that respondent has the exclusive right to use the same; and

 

(iv)              make the injunction permanent.

 

[Respondents] also pray for other reliefs, as may deemed just or equitable.[24]

 

 

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On 18 July 2006, the Court of Appeals promulgated a Decision[25] in CA-G.R. SP No. 92785 reversing

the Decision dated 23 December 2005 of the IPO Director General. 

 

The Court of Appeals, in its Decision, initially addressed petitioner’s assertion that respondents had

committed forum shopping by the institution of CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785.  It ruled that

respondents were not guilty of forum shopping, distinguishing between the respondents’ two Petitions.  The

subject of Respondents’ Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO

Director General dismissing respondents’ appeal of the 22 December 2003 Decision of the IPO Director of

Legal Affairs.  Respondents questioned therein the cancellation of the trademark registration of

respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed

trademark.  Respondents’ Petition in CA-G.R. SP No. 92785 sought the review of the 23 December

2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO

Director of Legal Affairs.  Respondents raised different issues in their second petition before the appellate

court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair

competition and the awarding of actual and exemplary damages, as well as attorney’s fees, to petitioner. 

 

The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not

raised by the parties.  The appellate court declared that Section 163 of the Intellectual Property Code

specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases

involving provisions of the Intellectual Property Code, particularly trademarks.  Consequently, the IPO Director

General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these

provisions of the Intellectual Property Code.

 

In the end, the Court of Appeals decreed:

 

WHEREFORE, the Petition is GRANTED.  The Decision dated 23 December 2005

rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal

No. 10-05-01 is REVERSED and SET ASIDE.  Insofar as they pertain to acts governed by

Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code,

respondent’s claims in its Complaint docketed as IPV No. 10-2001-00004 are

hereby DISMISSED.[26]

 

 

The Court of Appeals, in a Resolution dated 31 July 2007,[27] denied petitioner’s Motion for

Reconsideration of its aforementioned Decision. 

 

Hence, the present Petition, where petitioner raises the following issues:

 

I

           

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE

QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007

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DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS

FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS;

 

II

 

WHETHER OR NOT THE INSTANT PETITION IS FORMALLY DEFECTIVE; AND

 

 

III

 

WHETHER OR NOT THE COURT OF APPEALS ERRED IN  ISSUING THE

QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY

2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A

PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM

SHOPPING PROPER.[28]

 

 

As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this

Court already promulgated its Decision[29] in G.R. No. 171053 on 15 October 2007, which affirmed the IPO

Director General’s dismissal of respondents’ appeal for being filed beyond the reglementary period, and left

the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of

respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks.

 

Before discussing the merits of this case, this Court must first rule on the procedural flaws that each

party has attributed to the other.

 

Formal Defects of the Petition

 

Respondents contend that the Verification/Certification executed by Atty. Edmund

Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and

should result in the dismissal of the said Petition. 

 

Respondents point out that the Secretary’s Certificate executed by Arnold M. Wensinger on 20 August

2007, stating that petitioner had authorized the lawyers of Villarazaand Angangco to represent it in the

present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was

not properly notarized.  Thejurat of the aforementioned Secretary’s Certificate reads:

 

Subscribed and sworn to me this 20th day of August 2007 in Irving California.

 

                                                            Rachel A. Blake (Sgd.)

                                                                  Notary Public[30]

 

 

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Respondents aver that the said Secretary’s Certificate cannot properly authorize Atty. Barranda to sign

the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state

that: (1)  petitioner’s Corporate Secretary, Mr. Wensinger, was known to her; (2)  he was the same person who

acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required

under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.[31] 

 

Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on

Atty. Baranda’s Verification/Certification attached to the instant Petition, noting the absence of (1) the serial

number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of

attorneys’ number and the IBP membership number; and (4) a statement that the Verification/Certification was

notarized within the notary public’s territorial jurisdiction, as required under the 2004 Rules

onNotarial Practice. [32]

 

Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present

case.  The requirements enumerated therein refer to documents which require an acknowledgement, and not a

mere jurat. 

 

A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was

subscribed and sworn to by the executor.  Ordinarily, the language of the jurat should avow that the document

was subscribed and sworn to before the notary public.  In contrast, an acknowledgment is the act of one who

has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It

involves an extra step undertaken whereby the signor actually declares to the notary  that the executor of a

document has attested to the notary that the same is his/her own free act and deed.[33]  A Secretary’s

Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only

requires a jurat.[34]

 

Even assuming that the Secretary’s Certificate was flawed, Atty. Barranda may still sign the

Verification attached to the Petition at bar.  A pleading is verified by an affidavit that the affiant has read the

pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic

records. [35]  The party itself need not sign the verification.  A party’s representative, lawyer or any other person

who personally knows the truth of the facts alleged in the pleading may sign the verification. [36]  Atty.Barranda,

as petitioner’s counsel, was in the position to verify the truth and correctness of the allegations of the present

Petition.  Hence, the Verification signed by Atty. Barrandasubstantially complies with the formal requirements

for such.  

 

Moreover, the Court deems it proper not to focus on the supposed technical infirmities of

Atty. Baranda’s Verification.  It must be borne in mind that the purpose of requiring a verification is to secure

an assurance that  the allegations of the petition has been made in good faith; or are true and correct, not

merely speculative.  This requirement is simply a condition affecting the form of pleadings, and non-

compliance therewith does not necessarily render it fatally defective.  Indeed, verification is only a formal, not

a jurisdictional requirement.  In the interest of substantial justice, strict observance of procedural rules may be

dispensed with for compelling reasons.[37]  The vital issues raised in the instant Petition on the jurisdiction of

the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal

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application of the rules, so that the Court may give the said Petition due course and resolve the same on the

merits.   

 

This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were

less than careful with their jurats or notarial certificates.  Parties and their counsel should take care not to

abuse the Court’s zeal to resolve cases on their merits.  Notaries public in the Philippines are reminded to

exert utmost care and effort in complying with the 2004 Rules on Notarial Practice.  Parties and their counsel

are further charged with the responsibility of ensuring that documents notarized abroad be in their proper

form before presenting said documents before Philippine courts. 

 

Forum Shopping

 

          Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP

No. 92785, following their earlier filing of the Petition in CA-G.R SP No. 88004.  Petitioner also asserts that

respondents were guilty of submitting to the Court of Appeals a patently false Certification of Non-forum

Shopping in CA-G.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004.

 

Forum shopping is the institution of two or more actions or proceedings grounded on the same cause

on the supposition that one or the other court would make a favorable disposition.  It is an act of malpractice

and is prohibited and condemned as trifling with courts and abusing their processes.  In determining whether

or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a

party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant

the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions

being rendered by the different bodies upon the same issues.[38]

 

Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2)

rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such

that any judgment rendered in the other action, will, regardless of which party is successful, amount

to res judicata in the action under consideration.[39]

 

After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CA-G.R. SP No. 92785, it would

at first seem that respondents are guilty of forum shopping. 

 

There is no question that both Petitions involved identical parties, and raised at least one similar

ground for which they sought the same relief.  Among the grounds stated by the respondents for their Petition

in CA-G.R SP No. 88004 was that “[T]he Bureau of Legal Affair’s (sic) Decision and Resolution (1) canceling

[herein respondent Sehwani, Incorporated]’s certificate of registration for the mark ‘IN-N-OUT’ and (2)

ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and

business are contrary to law and/or is (sic) not supported by evidence.”[40]  The same ground was again invoked

by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows:  “The IPO Director General

committed grave error in affirming the Bureau of Legal Affair’s (sic) Decision (1) canceling [herein

respondent Sehwani, Incorporated]’s certificate of registration for the mark “IN-N-OUT,” and (2) ordering

[herein respondents] to permanently cease and desist from using the subject mark on its goods and

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business.”[41]  Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director

of Legal Affairs.  Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said

Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from

making a contrary ruling in the other Petition, under the principle of res judicata.

 

Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which

respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e.,

whether  respondents are liable for unfair competition.  Hence, respondents seek additional reliefs in CA-G.R.

SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair

competition, and the nullification of the award of damages in favor of petitioner resulting from said

finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No.

88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had

not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof

and awarded damages to petitioner. 

 

In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is

only predictable, although not necessarily legally tenable, for respondents to reassert their right to register,

own, and use the disputed mark.  Respondents again raise the issue of who has the better right to the disputed

mark, because their defense from the award of damages for unfair competition depends on the resolution of

said issue in their favor.  While this reasoning may be legally unsound, this Court cannot readily presume bad

faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents

breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals.

         

True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum

Shopping, which they attached to their Petition in CA-G.R. SP No. 92785.  Nonetheless, the factual background

of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the

relaxation of another procedural rule.  Although the submission of a certificate against forum shopping is

deemed obligatory, it is not jurisdictional.[42]  Hence, in this case in which such a certification was in fact

submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the

Petition in light of attendant exceptional circumstances. 

 

The parties and their counsel, however, are once again warned against taking procedural rules

lightly.  It will do them well to remember that the Courts have taken a stricter stance against the disregard of

procedural rules, especially in connection with the submission of the certificate against forum shopping, and it

will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances.

 

The Jurisdiction of the IPO

 

The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision

dated 18 July 2006 in CA-G.R. SP No. 92785.  In the afore-stated Decision, the Court of Appeals adjudged that

the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative

proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property

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Code confers jurisdiction over particular provisions in the law on trademarks on regular courts

exclusively.  According to the said provision:

 

Section 163. Jurisdiction of Court.—All actions under Sections 150, 155, 164, and 166

to 169 shall be brought before the proper courts with appropriate jurisdiction under existing

laws.

 

 

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on

Remedies on Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods

Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair

Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False

Description or Representation.

 

The Court disagrees with the Court of Appeals.

 

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal

Affairs, thus:

 

 Section 10. The Bureau of Legal Affairs.—The Bureau of Legal Affairs shall have the

following functions:

 

10.1  Hear and decide opposition to the application for registration of

marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of

patents and utility models, and industrial designs; and petitions for compulsory licensing of

patents;

 

10.2          (a) Exercise original jurisdiction in administrative complaints for

violations of laws involving intellectual property rights; Provided, That its jurisdiction

is limited to complaints where the total damages claimed are not less than Two

hundred thousand pesos (P200,000): Provided, futher, That availment of the

provisional remedies may be granted in accordance with the Rules of Court.  The

Director of Legal Affairs shall have the power to hold and punish for contempt all those who

disregard orders or writs issued in the course of the proceedings.

 

(b) After formal investigation, the Director for Legal Affairs may impose one (1) or more

of the following administrative penalties:

 

(i)         The issuance of a cease and desist order which shall specify the acts

that the respondent shall cease and desist from and shall require him to submit a

compliance report within a reasonable time which shall be fixed in the order;

 

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(ii)        The acceptance of a voluntary assurance of compliance or

discontinuance as may be imposed.  Such voluntary assurance may include one or more

of the following:

 

(1)        An assurance to comply with the provisions of the

intellectual property law violated;

 

(2)                An assurance to refrain from engaging in unlawful

and unfair acts and practices subject of the formal investigation

 

(3)               An assurance to recall, replace, repair, or refund

the money value of defective goods distributed in commerce; and

 

(4)               An assurance to reimburse the complainant the

expenses and costs incurred in prosecuting the case in the Bureau of

Legal Affairs.

 

The Director of Legal Affairs may also require the respondent to

submit periodic compliance reports and file a bond to guarantee

compliance of his undertaking.

 

(iii)       The condemnation or seizure of products which are subject of the

offense.  The goods seized hereunder shall be disposed of in such manner as may be

deemed appropriate by the Director of Legal Affairs, such as by sale, donation to

distressed local governments or to charitable or relief institutions, exportation,

recycling into other goods, or any combination thereof, under such guidelines as he

may provide;

 

(iv)              The forfeiture of paraphernalia and all real and personal properties

which have been used in the commission of the offense;

 

(v)                The imposition of administrative fines in such amount as deemed

reasonable by the Director of Legal Affairs, which shall in no case be less than Five

thousand pesos (P5,000) nor more than One hundred fifty thousand pesos

(P150,000).  In addition, an additional fine of not more than One thousand pesos

(P1,000) shall be imposed for each day of continuing violation;

 

(vi)              The cancellation of any permit, license, authority, or

registration which may have been granted by the Office, or the suspension of the

validity thereof for such period of time as the Director of Legal Affairs may deem

reasonable which shall not exceed one (1) year;

 

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(vii)             The withholding of any permit, license, authority, or registration

which is being secured by the respondent from the Office;

 

(viii)           The assessment of damages;

 

(ix)              Censure; and

 

(x)                Other analogous penalties or sanctions.

 

10.3          The Director General may by Regulations establish the procedure to govern

the implementation of this Section.[43]  (Emphasis provided.)

 

 

Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name of

respondent Sehwani, Incorporated, and damages for violation of petitioner’s intellectual property rights, falls

within the jurisdiction of the IPO Director of Legal Affairs.  

 

The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director

General over the decisions of the IPO Director of Legal Affairs, to wit:

 

Section 7.  The Director General and Deputies Director General.  7.1  Fuctions.—The

Director General  shall exercise the following powers and functions:

 

x x x x

 

b)         Exercise exclusive appellate jurisdiction over all decisions rendered by the

Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director

of Documentation, Information and Technology Transfer Bureau.  The decisions of the Director

General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of

Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in

accordance with the Rules of Court; and those in respect of the decisions of the Director of

Documentation, Information and Technology Transfer Bureau shall be appealable to the

Secretary of Trade and Industry;

 

 

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code,

conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property

rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under

Part III thereof particularly governing trademarks, service marks, and tradenames, must

prevail.  Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving

trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts.

 

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Such interpretation is not supported by the provisions of the Intellectual Property Code.  While Section

163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states

that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative

bodies.  On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property

Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases.  These

two provisions read:

 

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark

Enforcement Action.—Any foreign national or juridical person who meets the requirements of

Section 3 of this Act and does not engage in business in the Philippines may bring a civil

or administrative action hereunder for opposition, cancellation, infringement, unfair

competition, or false designation of origin and false description, whether or not it is licensed to

do business in the Philippines under existing laws.

 

x x x x

 

Section 170. Penalties.—Independent of the civil and administrative

sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5)

years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos

(P200,000), shall be imposed on any person who is found guilty of committing any of the acts

mentioned in Section 155, Section168, and Subsection169.1.

 

 

Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the

petitioner’s administrative case against respondents and the IPO Director General had exclusive jurisdiction

over the appeal of the judgment of the IPO Director of Legal Affairs.

 

Unfair Competition

 

The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003

Decision of the IPO Director of Legal Affairs which:  (1) directed the cancellation of the certificate of

registration of respondent Sehwani, Incorporated for the mark “IN-N-OUT” and (2) ordered respondents to

permanently cease and desist from using the disputed mark on its goods and business.  Such an issue has

already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No.

171053, Sehwani, Incorporated v. In-N-Out Burger,[44] ultimately affirming the foregoing judgment of the IPO

Director of Legal Affairs.  That petitioner has the superior right to own and use the “IN-N-OUT”

trademarks vis-à-vis respondents is a finding which this Court may no longer disturb under the doctrine of

conclusiveness of judgment.  In conclusiveness of judgment, any right, fact, or matter in issue directly

adjudicated or necessarily involved in the determination of an action before a competent court in which

judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be

litigated between the parties and their privies whether or not the claims, demands, purposes, or subject

matters of the two actions are the same.[45]

 

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Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly

found respondents guilty of unfair competition for which he awarded damages to petitioner.

 

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.[46]

 

 In his Decision dated 23 December 2005, the IPO Director General ably explains 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. x x x.

 

x x x x

 

[Respondents’] use of IN-N-OUT BURGER in busineses 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

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in Baldwin Park, California in theUnited States of America since 1948.  Thus it

has the exclusive right to use the tradenems “In-N-Out” Burger in

the Philippines and the respondents’ are unlawfully using and appropriating the

same.”

 

The Office cannot give credence to the [respondent’s] claim of good faith and that they

have openly and continuously used the subject mark since 1982 and is (sic) in the process of

expanding its business.  They contend that assuming that there is value in the foreign

registrations presented as evidence by the [petitioner], the purported exclusive right to the use

of the subject mark based on such foreign registrations is not essential to a right of action for

unfair competition. [Respondents] also claim that actual or probable deception and confusion

on the part of customers by reason of respondents’ practices must always appear, and in the

present case, the BLA has found none.  This Office finds the arguments untenable.

 

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. [47]

 

 

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.[48]  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.   

 

With such finding, the award of damages in favor of petitioner is but proper.  This is in accordance with

Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and

161 for infringement shall apply mutatis mutandis to unfair competition.  The remedies provided under Section

156 include the right to damages, to be computed in the following manner:

 

Section 156.  Actions, and Damages and Injunction for Infringement.—156.1  The

owner of a registered mark may recover damages from any person who infringes his rights,

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and the measure of the damages suffered shall be either the reasonable profit which the

complaining party would have made, had the defendant not infringed his rights, or the profit

which the defendant actually made out of the infringement, or in the event such measure of

damages cannot be readily ascertained with reasonable certainty, then the court may award as

damages a reasonable percentage based upon the amount of gross sales of the defendant or

the value of the services in connection with which the mark or trade name was used in the

infringement of the rights of the complaining party.

 

 

In the present case, the Court deems it just and fair that the IPO Director General computed the

damages due to petitioner by applying the reasonable percentage of 30% to the respondents’ gross sales, and

then doubling the amount thereof on account of respondents’ actual intent to mislead the public or defraud the

petitioner,[49] thus, arriving at the amount of actual damages of P212,574.28.    

 

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only

proper that petitioner be awarded exemplary damages.  Article 2229 of the Civil Code provides that such

damages may be imposed by way of example or correction for the public good, such as the enhancement of the

protection accorded to intellectual property and the prevention of similar acts of unfair competition.  However,

exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent

against or as a negative incentive to curb socially deleterious action.[50]  While there is no hard and fast rule in

determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate

with the actual loss or injury suffered.[51]  Thus, exemplary damages of P500,000.00 should be reduced

to P250,000.00 which more closely approximates the actual damages awarded.

 

In accordance with Article 2208(1) of the Civil Code, attorney’s fees may likewise be awarded to

petitioner since exemplary damages are awarded to it.  Petitioner was compelled to protect its rights over the

disputed mark.  The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged

on for more than seven years, despite the respondent’s failure to present countervailing evidence.  Considering

moreover the reputation of petitioner’s counsel, the actual attorney’s fees paid by petitioner would far exceed

the amount that was awarded to it.[52]

 

IN VIEW OF THE FOREGOING, the instant Petition is GRANTED.  The assailed Decision of the

Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED.   The Decision of the

IPO Director General, dated 23 December 2005, is hereby REINSTATED IN PART, with the modification that

the amount of exemplary damages awarded be reduced to P250,000.00.

George Yao vs. CA, G.R. No. 132428, October 24, 2000

In this petition for review on certiorari, George Yao (hereafter YAO) assails the 25 April 1995 Resolution of the

Court of Appeals in CA-G.R. No. 16893 which dismissed his appeal and ordered the remand of the records of

the case to the Metropolitan Trial Court, Branch 52, Caloocan * City (hereafter MeTC) for execution. YAO was

convicted by said MeTC for unfair competition.

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YAO's legal dilemma commenced in June 1990 when the Philippine Electrical Manufacturing Company

(hereafter PEMCO) noticed the proliferation locally of General Electric (GE) lamp starters. As the only local

subsidiary of GE-USA, PEMCO knew that it was a highly unlikely market situation considering that no GE

starter was locally manufactured or imported since 1983. PEMCO commissioned Gardsmarks, Inc. to conduct a

market survey. Gardsmarks, Inc., thru its trademark specialist, Martin Remandaman, discovered that thirty

(30) commercial establishments sold GE starters. All these establishments pointed to Tradeway Commercial

Corporation (hereafter TCC) as their source. Remandaman was able to purchase from TCC fifty (50) pieces of

fluorescent lamp starters with the GE logo and design. Assessing that these products were counterfeit, PEMCO

applied for the issuance of a search warrant. This was issued by the MeTC, Branch 49, Caloocan City. Eight

boxes, each containing 15,630 starters, were thereafter seized from the TCC warehouse in Caloocan City.

Indicted before the MeTC, Branch 52, Caloocan City for unfair competition under Article 189 of the Revised

Penal Code were YAO, who was TCC's President and General Manager, and Alfredo Roxas, a member of TCC's

Board of Directors. The indictment1 charged YAO and Roxas of having mutually and in conspiracy sold

fluorescent lamp starters which have the General Electric (GE) logo, design and containers, making them

appear as genuine GE fluorescent lamp starters; and inducing the public to believe them as such, when they

were in fact counterfeit. The case was docketed as Criminal Case No. C-155713.

Both accused pleaded not guilty. At the trial, the prosecution presented evidence tending to establish the

foregoing narration of facts. Further, the State presented witnesses Atty. Hofilena of the Castillo Laman Tan

and Pantaleon Law Offices who underwent a familiarization seminar from PEMCO in 1990 on how to

distinguish a genuine GE starter from a counterfeit, and Allan de la Cruz, PEMCO's marketing manager. Both

described a genuine GE starter as having "a stenciled silk-screen printing which includes the GE logo . . . back

to back around the starter, a drumlike glowbulb and a condenser/capacitor shaped like an M&M candy with

the numbers .006." They then compared and examined random samples of the seized starters with the genuine

GE products. They concluded that the seized starters did not possess the full design complement of a GE

original. They also observed that some of the seized starters did not have capacitors or if they possessed

capacitors, these were not shaped like M&M. Still others merely had sticker jackets with prints of the GE logo.

Mr. de la Cruz added that only Hankuk Stars of Korea manufactured GE starters and if these were imported by

PEMCO, they would cost P7.00 each locally. As TCC's starters cost P1.60 each, the witnesses agreed that the

glaring differences in the packaging, design and costs indisputably proved that TCC's GE starters were

counterfeit.

The defense presented YAO as its lone witness. YAO admitted that as general manager, he has overall

supervision of the daily operation of the company. As such, he has the final word on the particular brands of

products that TCC would purchase and in turn sold. He also admitted that TCC is not an accredited distributor

of GE starters. However, he disclaimed liability for the crime charged since (1) he had no knowledge or

information that the GE starters supplied to TCC were fake; (2) he had not attended any seminar that helped

him determine which TCC products were counterfeit; (3) he had no participation in the manufacture, branding,

stenciling of the GE names or logo in the starters; (4) TCC's suppliers of the starters delivered the same

already branded and boxed; and (5) he only discussed with the suppliers matters regarding pricing and peak-

volume items.

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In its 13-page 20 October 1993 decision,2 the MeTC acquitted Roxas but convicted YAO. In acquitting Roxas,

the trial court declared that the prosecution failed to prove that he was still one of the Board of Directors at

the time the goods were seized. It anchored its conviction of YAO on the following: (1) YAO's admission that he

knew that the starters were not part of GE's line products when he applied with PEMCO for TCC's

accreditation as distributor; (2) the prosecution's evidence (Exhibit G-7), a delivery receipt dated 25 May 1989

issued by Country Supplier Center, on which a TCC personnel noted that the 2000 starters delivered were GE

starters despite the statement therein that they were China starters; this fact gave rise to a presumption that

the TCC personnel knew of the anomaly and that YAO as general manager and overall supervisor knew and

perpetrated the deception of the public; (3) the fact that no genuine GE starter could be sold from 1986

whether locally manufactured or imported or at the very least in such large commercial quantity as those

seized from TCC; and (4) presence of the elements of unfair competition.

The dispositive portion of the decision reads as follows:

For the failure of the prosecution to prove the guilt of the accused, Alfredo Roxas, of Unfair

Competition under Article 189 (1) of the Revised Penal Code . . . i.e., to prove that he was Chairman of

the Board of the Tradeway Commercial Corporation on October 10, 1990, as well as to have him

identified in open court during the trial, he is acquitted of the same.

But because the prosecution proved the guilt of the other accused, George Yao, beyond reasonable

doubt as principal under the said Article 189 (1) for Unfair Competition, he is convicted of the same. In

the absence of any aggravating or mitigating circumstances alleged/proven, and considering the

provisions of the Indeterminate Sentence Law, he is sentenced to a minimum of four (4) months and

twenty-one (21)days of arresto mayor to a maximum of one (1) year and five (5) months of prision

correccional.

This case was prosecuted by the law offices of Castillo Laman Tan and Pantaleon for . . . PEMCO . . .

Considering that no document was submitted by the private complainant to show how the claim of

300,000 for consequential damages was reached and/or computed, the court is not in a position to

make a pronouncement on the whole amount. However, the offender, George Yao, is directed to pay

PEMCO the amount of P20,000 by way of consequential damages under Article 2202 of the New Civil

Code, and to pay the law offices of Castillo, Laman Tan and Pantaleon the amount of another

P20,000.00 as PEMCO's attorney's fees under Article 2208 (11) of the same.

This decision should have been promulgated in open court on July 28, 1993 but the promulgation was

reset for August 31, 1993 in view of the absence of parties; it was again re-set for today.

Promulgated this 20th day of October, 1993 in Kalookan City, Philippines.3

YAO filed a motion for reconsideration, which the MeTC denied in its order4 of 7 March 1994.

YAO appealed to the Regional Trial Court of Caloocan City (RTC). The appeal was docketed as Criminal Case

No. C-47255(94) and was assigned to Branch 121 of the court.

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On 24 May 1994, Presiding Judge Adoracion G. Angeles of Branch 121 issued an order5 directing the parties to

file their respective memoranda.

On 4 July 1994 YAO filed his Appeal Memorandum.6

Without waiting for the Memorandum on Appeal of the prosecution, which was filed only on 20 August

1994,7Judge Adoracion Angeles rendered on 27 July 1994 a one-page Decision8 which affirmed in toto the

MeTC decision. In so doing, she merely quoted the dispositive portion of the MeTC and stated that "[a]fter

going over the evidence on record, the Court finds no cogent reason to disturb the findings of the Metropolitan

Trial Court."

YAO filed a motion for reconsideration9 and assailed the decision as violative of Section 2, Rule 20 of the Rules

of Court.10 In its order11 of 28 September 1994, the RTC denied the motion for reconsideration as devoid of

merit and reiterated that the findings of the trial court are entitled to great weight on appeal and should not be

disturbed on appeal unless for strong and cogent reasons.

On 4 October 1994, YAO appealed to the Court of Appeals by filing a notice of appeal.12

The appealed case was docketed as CA-G.R. CR No. 16893. In its Resolution13 of 28 February 1995, the Court

of Appeals granted YAO an extension of twenty (20) days from 10 February or until 12 March 1995 within

which to file the Appellant's Brief. However, on 25 April 1995 the Court of Appeals promulgated a

Resolution14 declaring that "[t]he decision rendered on July 27, 1994 by the Regional Trial Court, Branch 121,

has long become final and executory" and ordering the records of the case remanded to said court for the

proper execution of judgment. The pertinent portion of the Resolution reads:

In Our resolution, dated February 28, 1995, accused-appellant was granted an extension of twenty (20)

days from February 10, 1995, or until March 12, 1995 within which to file appellant's brief.

To date, no appellant's brief has been filed.

From the Manifestation, filed on March 24, 1995, by City Prosecutor Gabriel N. dela Cruz, Kalookan

City, it would appear that:

xxx             xxx             xxx

2. George Yao received a copy of the RTC's decision on August 16, 1994, and filed a motion for

reconsideration on August 30, 1994. On October 3, 1994, George Yao received a copy of the RTC's

order, dated September 28, 1994, denying his motion for reconsideration.

3. On October 4, 1994, George Yao filed a notice of appeal by registered mail.

We will assume from the said Manifestation that the decision of the RTC and the order denying YAO's

motion for reconsideration were sent to and received by YAO's counsel.

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Proceeding from said assumption, Yao had fifteen (15) days from August 16, 1994 to elevate his case to

this Court. On August 30, 1994, or fourteen (14) days thereafter, Yao filed a motion for

reconsideration. When he received the Order denying his aforesaid motion on October 3, 1994, he had

one more day left to elevate his case to this Court by the proper mode of appeal, which is by petition

for review. Yao, however, on October 4, 1994, filed a notice of appeal by registered mail informing the

RTC that he is appealing his conviction to the Court of Appeals. By then, the fifteen (15) day period had

already elapsed.

That notwithstanding, the Branch Clerk of Court, RTC, Branch 121, transmitted to this Court the entire

records of the case, thru a transmittal letter, dated October 13, 1994, and received by the Criminal

Section of this Court on October 28, 1994. YAO's counsel, on February 20, 1995, filed with this Court, a

motion for extension of period to file brief for accused-appellant which was granted in Our resolution

mentioned in the opening paragraph of this resolution.

Petitions for review shall be filed within the period to appeal. This period has already elapsed even

when Yao filed a notice of appeal by registered mail, with the RTC of Kalookan City. Worse, the notice

of appeal is procedurally infirm.

YAO filed an Urgent Motion to Set Aside Entry of Judgment contending that the 25 April 1995 resolution did

not specifically dismiss the appeal, for which reason, there was no Judgment on which an entry of judgment

could be issued. He also argued that the attendant procedural infirmities in the appeal, if any, were cured with

the issuance of the 28 February 1995 resolution granting him twenty (20) days from 10 February 1995 or until

12 March 1995 within which to file an appellant's brief and in compliance thereto, consequently filed his

appellant's brief on 2 March 1995.15

In its Resolution16 of 26 January 1998, the Court of Appeals denied the Urgent Motion to Set Aside the Entry of

Judgment for lack of merit. It considered the 25 April 1995 resolution as having "in effect dismissed the appeal,

[hence] the Entry of Judgment issued on May 26, 1995. . . was proper."

In this petition for review on certiorari, YAO reiterates the arguments he raised in his Urgent Motion to Set

Aside the Entry of Judgment of the Court of Appeals, thus: (1) that the entry of judgment was improvidently

issued in the absence of a final resolution specifically dismissing the appeal; (2) the procedural infirmity in the

appeal, if any, has been cured; and (3) the Court of Appeals committed grave abuse of discretion amounting to

lack of jurisdiction in denying him (YAO) due process of law.

In support of his first argument, YAO cites Section 1, Rule 11 of the Revised Internal Rules of the Court of

Appeals, thus:

SECTION 1. Entry of Judgment — Unless a motion for reconsideration is filed or an appeal is taken to

the Supreme Court, judgments and final resolutions of the Court of Appeals shall be entered upon the

expiration of fifteen (15) days after notice to parties.

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YAO claims that the 25 April 1995 resolution of the Court of Appeals was not a judgment on his appeal nor was

it "a final resolution" contemplated in the Internal Rules since it did not specifically dismiss his appeal. A

fortiori, the entry of judgment was improvidently issued for lack of legal basis.

YAO also repeats his argument that any procedural infirmity in the appeal was cured when the RTC gave due

course to the appeal, elevated the records to the Court of Appeals which in turn issued on 13 December 1994 a

notice to file his Appellant's Brief and granted him until 12 March 1995 within which to file the appellant's

brief.

Finally, YAO asserts that he was denied due process considering that (1) none of the elements of unfair

competition are present in this case; (2) he filed his appeal to the Court of Appeals within the reglementary

period; and (3) notwithstanding his filing of a notice of appeal (instead of a petition for review), it was a mere

procedural lapse, a technicality which should not bar the determination of the case based on intrinsic merits.

YAO then invokes the plethora of jurisprudence wherein the Supreme Court "in the exercise of equity

jurisdiction decided to disregard technicalities"; "decided [the case] on merits and not on technicalities";

"found manifest in the petition strong considerations of substantial justice necessitating the relaxing of the

stringent application of technical rules," or "heeded petitioner's cry for justice because the basic merits of the

case warrant so, as where the petition embodies justifying circumstances"; discerned "not to sacrifice justice to

technicality"; discovered that the application of "res judicata" and estoppel by judgment amount to a denial of

justice and/or a bar to a vindication of a legitimate grievance."17

In its Comment, the Office of the Solicitor General prays that the petition should be dismissed for lack of merit.

It maintains that although the 25 April 1995 resolution did not specifically state that the appeal was being

dismissed, the intent and import are clear and unequivocable. It asserts that the appeal was obviously

dismissed because the RTC decision has long become final and executory. YAO failed to challenge the RTC

decision, within the reglementary period, by filing a petition for review of the same with the Court of Appeals

pursuant to Section 1 of Rule 42 of the Rules of Court. Instead, he filed an ordinary appeal by way of a notice

of appeal. Hence, the period to file the correct procedural remedy had lapsed.

There is no dispute that YAO availed of the wrong procedural remedy in assailing the RTC decision. It is clear

from the records that YAO received a copy of the adverse RTC judgment on 16 August 1994. He has fifteen

(15) days or until 31 August 1994 within which to file either a motion for reconsideration or a petition for

review with the Court of Appeals. Fourteen (14) days thereafter or on 30 August 1994, YAO opted to file a

motion for reconsideration the pendency of which tolled the running of the period. He received a copy of the

RTC's order denying the motion for reconsideration on 3 October 1994. He had therefore, only one day left, 4

October 1994 as the last day, within which to file with the Court of Appeals a petition for review.18 However, on

said date, YAO filed a notice of appeal. He palpably availed of the wrong mode of appeal. And since he never

instituted the correct one, he lost it.

The right to appeal is not a constitutional, natural or inherent right. It is a statutory privilege of statutory

origin and, therefore, available only if granted or provided by statute.19 Since the right to appeal is not a

natural right nor a part of due process, it may be exercised only in the manner and in accordance with the

provisions of law.20Corollarily, its requirements must be strictly complied with.

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That an appeal must be perfected in the manner and within the period fixed by law is not only mandatory but

jurisdictional.21 Non-compliance with such legal requirements is fatal,22 for it renders the decision sought to be

appealed final and executory,23 with the end result that no court can exercise appellate jurisdiction to review

the decision.24

In the light of these procedural precepts, YAO's petition appears to be patently without merit and does not

deserve a second look. Hence, the reasons he enumerated to persuade this Court to grant his petition and

reinstate his appeal are obviously frivolous if not downright trivial. They need not even be discussed here.

In the normal and natural course of events, we should dismiss the petition outright, if not for an important

detail which augurs well for YAO and would grant him a reprieve in his legal battle. The decision of the RTC

affirming the conviction of YAO palpably transgressed Section 14, Article VIII of the Constitution, which states:

SECTION 14. No decision shall be rendered by any court without expressing therein clearly and

distinctly the facts and the law on which it is based.

xxx             xxx             xxx

Let us quote in full the RTC judgment:

This is an appeal from the decision of the Metropolitan Trial Court, Branch 52, Kalookan City, in Crim.

Case No. C-155713, the dispositive portion of which reads as follows:

xxx             xxx             xxx

But because the prosecution proved the guilt of the other accused, George Yao, beyond reasonable

doubt as principal under the said Article 189 (1) for Unfair Competition, he is convicted of the same. In

the absence of any aggravating or mitigating circumstances alleged/proven, and considering the

provisions of the Indeterminate Sentence Law, he is sentenced to a minimum of four (4) months and

twenty-one (21) days of arresto mayor to a maximum of one (1) year and five (5) months of prision

correccional.

xxx             xxx             xxx

After going over the evidence on record, the Court finds no cogent reason to disturb the findings of the

Metropolitan Trial Court.

WHEREFORE, this Court affirms in toto the decision of the Metropolitan Trial Court dated October 20,

1993.

SO ORDERED.

That is all there is to it.

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We have sustained decisions of lower courts as having substantially or sufficiently complied with the

constitutional injunction notwithstanding the laconic and terse manner in which they were written and even if

"there (was left) much to be desired in terms of (their) clarity, coherence and comprehensibility" provided that

they eventually set out the facts and the law on which they were based,25 as when they stated the legal

qualifications of the offense constituted by the facts proved, the modifying circumstances, the participation of

the accused, the penalty imposed and the civil liability;26 or discussed the facts comprising the elements of the

offense that was charged in the information, and accordingly rendered a verdict and imposed the

corresponding penalty;27 or quoted the facts narrated in the prosecution's memorandum but made their own

findings and assessment of evidence, before finally agreeing with the prosecution's evaluation of the case.28

We have also sanctioned the use of memorandum decisions,29 a specie of succinctly written decisions by

appellate courts in accordance with the provisions of Section 40, B.P. Blg. 129 30 on the grounds of

expediency, practicality, convenience and docket status of our courts. We have also declared that

memorandum decisions comply with the constitutional mandate.31

In Francisco v. Permskul,32 however, we laid down the conditions for the of validity of memorandum

decisions, thus:

The memorandum decision, to be valid, cannot incorporate the findings of fact and the conclusions of

law of the lower court only by remote reference, which is to say that the challenged decision is not

easily and immediately available to the person reading the memorandum decision. For the

incorporation by reference to be allowed, it must provide for direct access to the facts and the law

being adopted, which must be contained in a statement attached to the said decision. In other words,

the memorandum decision authorized under Section 40 of B.P. Blg. 129 should actually embody the

findings of fact and conclusions of law of the lower court in an annex attached to and made an

indispensable part of the decision.

It is expected that this requirement will allay the suspicion that no study was made of the decision of

the lower court and that its decision was merely affirmed without a proper examination of the facts and

the law on which it is based. The proximity at least of the annexed statement should suggest that such

an examination has been undertaken. It is, of course, also understood that the decision being adopted

should, to begin with, comply with Article VIII, Section 14 as no amount of incorporation or adoption

will rectify its violation.

The Court finds necessary to emphasize that the memorandum decision should be sparingly used lest it

become an addictive excuse for judicial sloth. It is an additional condition for the validity that this kind

of decision may be resorted to only in cases where the facts are in the main accepted by both parties

and easily determinable by the judge and there are no doctrinal complications involved that will

require an extended discussion of the laws involved. The memorandum decision may be employed in

simple litigations only, such as ordinary collection cases, where the appeal is obviously groundless and

deserves no more than the time needed to dismiss it.

xxx             xxx             xxx

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Henceforth, all memorandum decisions shall comply with the requirements herein set forth both as to

the form prescribed and the occasions when they may be rendered. Any deviation will summon the

strict enforcement of Article VIII, Section 14 of the Constitution and strike down the flawed judgment

as a lawless disobedience.

Tested against these standards, we find that the RTC decision at bar miserably failed to meet them and,

therefore, fell short of the constitutional injunction. The RTC decision is brief indeed, but it is starkly hallow,

otiosely written, vacuous in its content and trite in its form. It achieved nothing and attempted at nothing, not

even at a simple summation of facts which could easily be done. Its inadequacy speaks for itself.

We cannot even consider or affirm said RTC decision as a memorandum decision because it failed to comply

with the measures of validity laid down in Francisco vs. Permskul. It merely affirmed in toto the MeTC decision

without saying more. A decision or resolution, especially one resolving an appeal, should directly meet the

issues for resolution; otherwise, the appeal would be pointless.33

We therefore reiterate our admonition in Nicos Industrial Corporation v. Court of Appeals,34 in that while we

conceded that brevity in the writing of decisions is an admirable trait, it should not and cannot be substituted

for substance; and again in Francisco v. Permskul,35 where we cautioned that expediency alone, no matter how

compelling, cannot excuse non-compliance with the constitutional requirements.

This is not to discourage the lower courts to write abbreviated and concise decisions, but never at the expense

of scholarly analysis, and more significantly, of justice and fair play, lest the fears expressed by Justice Feria as

the ponente in Romero v. Court of Appeals36 come true, i.e., if an appellate court failed to provide the appeal

the attention it rightfully deserved, said court deprived the appellant of due process since he was not accorded

a fair opportunity to be heard by a fair and responsible magistrate. This situation becomes more ominous in

criminal cases, as in this case, where not only property rights are at stake but also the liberty if not the life of a

human being.

Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is indisputably a

paramount component of due process and fair play.37 It is likewise demanded by the due process clause of the

Constitution.38 The parties to a litigation should be informed of how it was decided, with an explanation of the

factual and legal reasons that led to the conclusions of the court. The court cannot simply say that judgment is

rendered in favor of X and against Y and just leave it at that without any justification whatsoever for its action.

The losing party is entitled to know why he lost, so he may appeal to the higher court, if permitted, should he

believe that the decision should be reversed. A decision that does not clearly and distinctly state the facts and

the law on which it is based leaves the parties in the dark as to how it was reached and is precisely prejudicial

to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher

tribunal.39 More than that, the requirement is an assurance to the parties that, in reaching judgment, the judge

did so through the processes of legal reasoning. It is, thus, a safeguard against the impetuosity of the judge,

preventing him from deciding ipse dixit. Vouchsafed neither the sword nor the purse by the Constitution but

nonetheless vested with the sovereign prerogative of passing judgment on the life, liberty or property of his

fellowmen, the judge must ultimately depend on the power of reason for sustained public confidence in the

justness of his decision.40

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Thus the Court has struck down as void, decisions of lower courts and even of the Court of Appeals whose

careless disregard of the constitutional behest exposed their sometimes cavalier attitude not only to their

magisterial responsibilities but likewise to their avowed fealty to the Constitution.

Thus, we nullified or deemed to have failed to comply with Section 14, Article VIII of the Constitution, a

decision, resolution or order which: contained no analysis of the evidence of the parties nor reference to any

legal basis in reaching its conclusions; contained nothing more than a summary of the testimonies of the

witnesses of both parties;41 convicted the accused of libel but failed to cite any legal authority or principle to

support conclusions that the letter in question was libelous42 ; consisted merely of one (1) paragraph with

mostly sweeping generalizations and failed to support its conclusion of parricide43 ; consisted of five (5) pages,

three (3) pages of which were quotations from the labor arbiter's decision including the dispositive portion and

barely a page (two [2] short paragraphs of two [2] sentences each) of its own discussion or reasonings 44 ; was

merely based on the findings of another court sans transcript of stenographic notes;45 or failed to explain the

factual and legal bases for the award of moral damages.46

In the same vein do we strike down as a nullity the RTC decision in question.

In sum, we agree with YAO that he was denied due process but not on the grounds he ardently invoked but on

the reasons already extensively discussed above. While he indeed resorted to the wrong mode of appeal and

his right to appeal is statutory, it is still an essential part of the judicial system that courts should proceed with

caution so as not to deprive a party of the prerogative, but instead afford every party-litigant the amplest

opportunity for the proper and just disposition of his case, freed from the constraints of technicalities.47

In the interest of substantial justice, procedural rules of the most mandatory character in terms of compliance,

may be relaxed.48 In other words, if strict adherence to the letter of the law would result in absurdity and

manifest injustice49 or where the merit of a party's cause is apparent and outweighs consideration of non-

compliance with certain formal requirements,50 procedural rules should definitely be liberally construed. A

party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather

than for him to lose life, liberty, honor or property on mere technicalities.51 We therefore withhold legal

approbation on the RTC decision at bar for its palpable failure to comply with the constitutional and legal

mandates thereby denying YAO of his day in court. We also remind all magistrates to heed the demand of

Section 14, Article VIII of the Constitution. It is their solemn and paramount duty to uphold the Constitution

and the principles enshrined therein, lest they be lost in the nitty-gritty of their everyday judicial work.

WHEREFORE, in view of all the foregoing, the petition in this case is GRANTED. The questioned 25 April

1995 resolution of the Court of AppeaLs in CA-G.R. No. 16893 is hereby SET ASIDE and the 27 July 1994

decision of the Regional Trial Court, Branch 121 of Kalookan City rendered in its appellate jurisdiction

is NULLIFIED. The records are hereby remanded to said Regional Trial Court for further proceedings and for

the rendition of judgment in accordance with the mandate of Section 14, Article VIII of the Constitution.

McDonalds vs. LC Big Mak, G.R. No. 143993, August 28, 2004

The Case

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals2 finding

respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and

ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000

denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994 Decision3 of the

Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark

infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of Delaware,

United States. McDonald's operates, by itself or through its franchisees, a global chain of fast-food restaurants.

McDonald's4 owns a family of marks5 including the "Big Mac" mark for its "double-decker hamburger

sandwich."6McDonald's registered this trademark with the United States Trademark Registry on 16 October

1979.7 Based on this Home Registration, McDonald's applied for the registration of the same mark in

the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology

("PBPTT"), now the Intellectual Property Office ("IPO"). Pending approval of its application, McDonald's

introduced its "Big Mac" hamburger sandwiches in the Philippine market in September 1981. On 18 July

1985, the PBPTT allowed registration of the "Big Mac" mark in the Principal Register based on its Home

Registration in the United States.

Like its other marks, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its restaurants,

and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5 million in advertisement

for "Big Mac" hamburger sandwiches alone.10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's

Philippine franchisee.11

Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which operates

fast-food outlets and snack vans in Metro Manila and nearby provinces.12 Respondent corporation's menu

includes hamburger sandwiches and other food items.13 Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy,

William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto ("private respondents") are the

incorporators, stockholders and directors of respondent corporation.14

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big Mak"

mark for its hamburger sandwiches. McDonald's opposed respondent corporation's application on the ground

that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same food products.

McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of the Board of Directors of

respondent corporation, of its exclusive right to the "Big Mac" mark and requested him to desist from using the

"Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional

Trial Court of Makati, Branch 137 ("RTC"), for trademark infringement and unfair competition. In its Order of

11 July 1990, the RTC issued a temporary restraining order ("TRO") against respondents enjoining them from

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using the "Big Mak" mark in the operation of their business in the National Capital Region.15 On 16 August

1990, the RTC issued a writ of preliminary injunction replacing the TRO.16

In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for their fast-

food business. Respondents claimed, however, that McDonald's does not have an exclusive right to the "Big

Mac" mark or to any other similar mark. Respondents point out that the Isaiyas Group of Corporations

("Isaiyas Group") registered the same mark for hamburger sandwiches with the PBPTT on 31 March 1979. One

Rodolfo Topacio ("Topacio") similarly registered the same mark on 24 June 1983, prior to McDonald's

registration on 18 July 1985.Alternatively, respondents claimed that they are not liable for trademark

infringement or for unfair competition, as the "Big Mak" mark they sought to register does not constitute a

colorable imitation of the "Big Mac" mark. Respondents asserted that they did not fraudulently pass off their

hamburger sandwiches as those of petitioners' Big Mac hamburgers.17 Respondents sought damages in their

counterclaim.

In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of the "Big

Mac" mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the "Big Mac" mark

ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such

registration does not provide any protection. McDonald's disclosed that it had acquired Topacio's rights to his

registration in a Deed of Assignment dated 18 May 1981.18

The Trial Court's Ruling

On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation liable for

trademark infringement and unfair competition. However, the RTC dismissed the complaint against private

respondents and the counterclaim against petitioners for lack of merit and insufficiency of evidence. The RTC

held:

Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as such, it is

entitled [to] protection against infringement.

xxxx

There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as appearing in the

respective signages, wrappers and containers of the food products of the parties. But infringement

goes beyond the physical features of the questioned name and the original name. There are still other

factors to be considered.

xxxx

Significantly, the contending parties are both in the business of fast-food chains and restaurants. An

average person who is hungry and wants to eat a hamburger sandwich may not be discriminating

enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]" hamburger. Once he sees a stall

selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a "B[ig] M[ak]"

hamburger sandwich. Plaintiff McDonald's fast-food chain has attained wide popularity and acceptance

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by the consuming public so much so that its air-conditioned food outlets and restaurants will perhaps

not be mistaken by many to be the same as defendant corporation's mobile snack vans located along

busy streets or highways. But the thing is that what is being sold by both contending parties is a food

item – a hamburger sandwich which is for immediate consumption, so that a buyer may easily be

confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a food-

product of plaintiff McDonald's, or a subsidiary or allied outletthereof. Surely, defendant corporation

has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other

brands in the market, considering the keen competition among mushrooming hamburger stands and

multinational fast-food chains and restaurants. Hence, the trademark "B[ig] M[ac]" has been infringed

by defendant corporation when it used the name "B[ig] M[ak]" in its signages, wrappers, and

containers in connection with its food business. xxxx

Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or tradename in their

signages, or in causing the name "B[ig] M[ak]" to be printed on the wrappers and containers of their

food products also constitute an act of unfair competition under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive than the

lawconcerning the infringement of trademark, which is of more limited range, but within its narrower

range recognizes a more exclusive right derived by the adoption and registration of the trademark by

the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction

between an action for trademark infringement and an action for unfair competition, however, the law

extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of

Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the

goods of one man as the goods of another. The choice of "B[ig] M[ak]" as tradename by defendant

corporation is not merely for sentimental reasons but was clearly made to take advantage of the

reputation, popularity and the established goodwill of plaintiff McDonald's. For, as stated in Section 29,

a person is guilty of unfair competition who in selling his goods shall give them the general

appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the

wrapping of the packages in which they are contained, or the devices or words thereon, or in any other

feature of their appearance, which would likely influence purchasers to believe that the goods offered

are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs

have established their valid cause of action against the defendants for trademark infringement and

unfair competition and for damages.19

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and McGeorge Food

Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent;

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2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount

ofP400,000.00, exemplary damages in the amount of P100,000.00, and attorney's fees and expenses of

litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus

Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of

merit as well asfor insufficiency of evidence.20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision") reversing the

RTC Decision and ordering McDonald's to pay respondents P1,600,000 as actual and compensatory damages

and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-

appellants of its corporate name – the whole "L.C. B[ig] M[ak] B[urger], I[nc]." which appears on their

food packages, signages and advertisements is an infringement of their trademark "B[ig] M[ac]" which

they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with

the McDonald's logo of umbrella "M" stamped thereon, together with the printed mark in red bl[o]ck

capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that

defendants-appellants' use of their corporate name is a colorable imitation of their trademark "Big

Mac".

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition

dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-

all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD

or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of

the way the trademark "B[ig] M[ac]" is being used by plaintiffs-appellees and corporate name L.C. Big

Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or

that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the

plaintiffs-appellees' trademark is used to designate only one product, a double decker sandwich sold in

a Styrofoam box with the "McDonalds" logo. On the other hand, what the defendants-appellants

corporation is using is not a trademark for its food product but a business or corporate name. They use

the business name "L.C. Big Mak Burger, Inc." in their restaurant business which serves diversified

food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and

hamburger. Secondly, defendants-appellants' corporate or business name appearing in the food

packages and signages are written in silhouette red-orange letters with the "b" and "m" in upper case

letters. Above the words "Big Mak" are the upper case letter "L.C.". Below the words "Big Mak" are the

words "Burger, Inc." spelled out in upper case letters.Furthermore, said corporate or business name

appearing in such food packages and signages is always accompanied by the company mascot, a young

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chubby boy named Maky who wears a red T-shirt with the upper case "m" appearing therein and a blue

lower garment. Finally, the defendants-appellants' food packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of

the product and the manner that the tradename "Big Mak" is being used and presented to the public.

As earlier noted, there are glaring dissimilarities between plaintiffs-appellees' trademark and

defendants-appellants' corporate name. Plaintiffs-appellees' product carrying the trademark "B[ig]

M[ac]" is a double decker sandwich (depicted in the tray mat containing photographs of the various

food products xxx sold in a Styrofoam box with the "McDonald's" logo and trademark in red, bl[o]ck

capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants'

comparable food products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned

"McDonald's" restaurant usually located in a nearby commercial center, advertised and identified by its

logo - the umbrella "M", and its mascot – "Ronald McDonald". A typical McDonald's restaurant boasts

of a playground for kids, a second floor to accommodateadditional customers, a drive-thru to allow

customers with cars to make orders without alighting from their vehicles, the interiors of the building

are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it

is necessary to specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter

it first before he can find a hamburger sandwich which carry the mark "Big Mac".  On the other

hand, defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the

same untenable.

Unfair competition is defined as "the employment of deception or any other means contrary to good

faith by which a person shall pass off the goods manufactured by him or in which he deals, or his

business, or service, for those of another who has already established good will for his similar good,

business or services, or any acts calculated to produce the same result" (Sec. 29, Rep. Act No. 166, as

amended).

To constitute unfair competition therefore it must necessarily follow that there was malice and that the

entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-

appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-

appellees. The mere suspected similarity in the sound of the defendants-appellants' corporate name

with the plaintiffs-appellees' trademark is not sufficient evidence to conclude unfair competition.

Defendants-appellants explained that the name "M[ak]" in their corporate name was derived

from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima

and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith  on the part

of defendants-appellants. It is a settled rule that the law always presumes good faith such

that any person who seeks to be awarded damages due to acts of another has the burden of proving

that the latter acted in bad faith or with ill motive. 21

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Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied their

motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE NAME "L.C.

BIG MAK BURGER, INC." IS NOT A COLORABLE IMITATION OF THE MCDONALD'S TRADEMARK

"BIG MAC", SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words "Big Mak" as trademark for their products and not merely as

their business or corporate name.

B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar to

petitioners' "Big Mac" trademark based on the dominancy test and the idem sonans test

resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY

BETWEEN THE MARK "BIG MAK" AND THE WORD MARK "BIG MAC" AS AN INDICATION OF

RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR

COMPETITION.22

Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly raises only

questions of fact. On the merits, respondents contend that the Court of Appeals committed no reversible error

in finding them not liable for trademark infringement and unfair competition and in ordering petitioners to pay

damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule

45.

2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the corporate name

"L.C. Big Mak Burger, Inc." but also as a trademark for their hamburger products, and (b) whether respondent

corporation is liable for trademark infringement and unfair competition.23

The Court's Ruling

The petition has merit.

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On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for

review under Section 1 of Rule 45 ("Section 1")24 raising only questions of law. A question of law exists when

the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the

doubt or difference arises on the truth or falsity of the alleged facts. 25

Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on respondent

corporation's non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny

due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of

Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.26 We

took a similar course of action in Asia Brewery, Inc. v. Court of Appeals27 which also involved a suit for

trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at

conflicting findings.

On the Manner Respondents Used 

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak Burger,

Inc." appears in the packaging for respondents' hamburger products and not the words "Big Mak" only.

The contention has merit.

The evidence presented during the hearings on petitioners' motion for the issuance of a writ of preliminary

injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger

sandwiches bore the words "Big Mak." The other descriptive words "burger" and "100% pure beef" were set in

smaller type, along with the locations of branches.28 Respondents' cash invoices simply refer to their

hamburger sandwiches as "Big Mak."29 It is respondents' snack vans that carry the words "L.C. Big Mak

Burger, Inc."30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their

hamburger sandwiches relied on by the Court of Appeals.31 Respondents' plastic wrappers and bags were

identical with those petitioners presented during the hearings for the injunctive writ except that the letters

"L.C." and the words "Burger, Inc." in respondents' evidence were added above and below the words "Big

Mak,"respectively. Since petitioners' complaint was based on facts existing before and during the hearings on

the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition

of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this

case,32defines trademark infringement as follows:

Infringement, what constitutes. — Any person who [1] shall use, without the consent of the

registrant, anyreproduction, counterfeit, copy or colorable imitation of any registered mark or trade-156

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name in connection with the sale, offering for sale, or advertising of any goods, business or services on

or in connection withwhich such use is likely to cause confusion or mistake or to deceive purchasers or

others as to the source or origin of such goods or services, or identity of such business; or [2]

reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such

reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers,

receptacles or advertisements intended to be usedupon or in connection with such goods, business or

services, shall be liable to a civil action by the registrant for any or all of the

remedies herein provided.33

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly used,

without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and selling

respondents' hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the

source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark;

(2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable imitation by

the alleged infringer results in "likelihood of confusion."34 Of these, it is the element of likelihood of confusion

that is the gravamen of trademark infringement.35

On the Validity of the "Big Mac"Mark 

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from registration under Section 436 of RA 166 ("Section

4").However, once registered, not only the mark's validity but also the registrant's ownership of the mark is

prima facie presumed.37

Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is valid

because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus "incapable of

exclusive appropriation."38

The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not dissected

word for word,39 is neither generic nor descriptive. Generic marks are commonly used as the name or

description of akind of goods,40 such as "Lite" for beer41 or "Chocolate Fudge" for chocolate soda

drink.42 Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of

a product to one who has never seen it or does not know it exists,43 such as "Arthriticare" for arthritis

medication.44 On the contrary, "Big Mac" falls under the class of fanciful or arbitrary marks as it bears no

logical relation to the actual characteristics of the product it represents.45 As such, it is highly distinctive and

thus valid. Significantly, the trademark "Little Debbie" for snack cakes was found arbitrary or fanciful.46

The Court also finds that petitioners have duly established McDonald's exclusive ownership of the "Big Mac"

mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of McDonald's, Topacio,

as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas Group, on the other hand,

registered its trademark only in the Supplemental Register. A mark which is not registered in

the PrincipalRegister, and thus not distinctive, has no real protection.47 Indeed, we have held that registration

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in the Supplemental Register is not even a prima facie evidence of the validity of the registrant's exclusive

right to use the mark on the goods specified in the certificate.48

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation marks, namely,

confusion of goods (product confusion) and confusion of business (source or origin confusion). In Sterling

Products International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,49 the Court

distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which event the

ordinarily prudent purchaser would be induced to purchase one product in the belief that he was

purchasing the other." xxx The other is the confusion of business: "Here though the goods of the

parties are different, the defendant's product is such as might reasonably be assumed to originate with

the plaintiff, and the public would then be deceived either into that belief or into the belief that there is

some connection between the plaintiff and defendant which, in fact, does not exist."

Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only, when the

infringing mark is used on "goods of a similar kind."51 Thus, no relief was afforded to the party whose

registered mark or its colorable imitation is used on different although related goods. To remedy this situation,

Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted

the requirement in question and expanded its scope to include such use of the mark or its colorable imitation

that is likely to result in confusion on "the source or origin of such goods or services, or identity of such

business."52Thus, while there is confusion of goods when the products are competing, confusion of business

exists when the products are non-competing but related enough to produce confusion of affiliation.53

On Whether Confusion of Goods and 

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in confusion

of goods, particularly with respect to petitioners' hamburgers labeled "Big Mac." Thus, petitioners alleged in

their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of plaintiffs in

the McDonald's Marks, particularly the mark "B[ig] M[ac]". Defendants' unauthorized acts are likely,

and calculated, to confuse, mislead or deceive the public into believing that the products and services

offered by defendant Big Mak Burger, and the business it is engaged in, are approved and sponsored

by, or affiliated with, plaintiffs.54 (Emphasis supplied)

Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that petitioners'

"Big Mac" mark is used, trademark infringement through confusion of goods is a proper issue in this case.

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Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the same

business that petitioners are engaged in, results in confusion of business. Petitioners alleged in their

complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald's nor its

licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to use and/or

appropriate the McDonald's marks, defendant Big Mak Burger acting through individual defendants,

has been operating "Big Mak Burger", a fast food restaurant business dealing in the sale of hamburger

and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on

the wrapper of defendant's food products and incorporated in its signages the name "Big Mak Burger",

which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonald's mark "B[ig]

M[ac]", xxx. Defendant Big Mak Burger has thus unjustly created the impression that its

business is approved and sponsored by, or affiliated with, plaintiffs .  xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and

infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner and rightful

proprietor, and the licensee/franchisee, respectively, of the McDonald's marks, and which are likely to

have   caused confusion or deceived the public   as to   the true source, sponsorship or affiliation

of defendants' food products and restaurant business, plaintiffs have suffered and continue to

suffer actual damages in the form of injury to their business reputation and goodwill, and

of the dilution of the distinctive quality of the McDonald's marks, in particular, the mark "B[ig]

M[ac]".55 (Emphasis supplied)

Respondents admit that their business includes selling hamburger sandwiches, the same food product that

petitioners sell using the "Big Mac" mark. Thus, trademark infringement through confusion of business is also

a proper issue in this case.

Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while petitioners'

"Big Mac" hamburgers cater to the middle and upper income groups. Even if this is true, the likelihood of

confusion of business remains, since the low-income group might be led to believe that the "Big Mak"

hamburgers are the low-end hamburgers marketed by petitioners. After all, petitioners have the exclusive right

to use the "Big Mac" mark.On the other hand, respondents would benefit by associating their low-end

hamburgers, through the use of the "Big Mak" mark, with petitioners' high-end "Big Mac" hamburgers, leading

to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker

hamburgers, while respondents use the "Big Mak" mark on hamburgers and other products like siopao,

noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-deckers in a styrofoam

box with the "McDonald's" logo and trademark in red, block letters at a price more expensive than the

hamburgers of respondents. In contrast, respondents sell their Big Mak hamburgers in plastic wrappers and

plastic bags. Respondents further point out that petitioners' restaurants are air-conditioned buildings with

drive-thru service, compared to respondents' mobile vans.

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These and other factors respondents cite cannot negate the undisputed fact that respondents use their "Big

Mak" mark on hamburgers, the same food product that petitioners' sell with the use of their registered mark

"Big Mac." Whether a hamburger is single, double or triple-decker, and whether wrapped in plastic or

styrofoam, it remains the same hamburger food product. Even respondents' use of the "Big Mak" mark on non-

hamburger food products cannot excuse their infringement of petitioners' registered mark, otherwise

registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different segments of

the market, and at different price levels depending on variations of the products for specific segments of the

market. The Court has recognized that the registered trademark owner enjoys protection in product and

market areas that are the normal potential expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited

to guarding his goods or business from actual market competition with identical or similar products of

the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-

name is likely to lead to a confusion of source, as where prospective purchasers would be misled into

thinking that the complaining party has extended his business into the field (see 148 ALR 56 et seq; 53

Am Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the

normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).56 (Emphasis

supplied)

On Whether Respondents' Use of the "Big Mak" 

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the

holistic test.57 The dominancy test focuses on the similarity of the prevalent features of the competing

trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety

of the marks as applied to the products, including the labels and packaging, in determining confusing

similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use

of respondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of Appeals ruled

that "it is not sufficientthat a similarity exists in both name(s), but that more importantly,

the overall presentation, or in their essential, substantive and distinctive parts is such as would likely

MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article." The holistic test

considers the two marks in their entirety, as they appear on the goods with their labels and packaging. It is not

enough to consider their words and compare the spelling and pronunciation of the words.58

Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this case is

correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test

considers the dominant features in the competing marks in determining whether they are confusingly similar.

Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising

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from theadoption of the dominant features of the registered mark, disregarding minor differences.59 Courts will

consider more the aural and visual impressions created by the marks in the public mind, giving little weight to

factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents,60 the Court ruled:

xxx It has been consistently held that the question of infringement of a trademark is to

be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not

conclusive. If the competing trademark contains the main or essential or dominant features of

another, and confusion and deception is likely to result, infringement takes place. Duplication

or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to

imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White

Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is

whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the

public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588;

xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry, Inc. v.

Standard Brands Inc.,62 Converse Rubber Corporation v. Universal Rubber Products, Inc.,63 and Asia

Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits Nestlé, S.A. v. Court of

Appeals,65 the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks

and unfair competition that confusing similarity is to be determined on the basis of visual, aural,

connotative comparisons and overall impressions engendered by the marks in controversy as they

areencountered in the realities of the marketplace. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code

which defines infringement as the "colorable imitation of a registered mark xxx or a dominant

feature thereof."

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in likelihood

of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first word in "Big Mak"

is exactly the same as the first word in "Big Mac." Third, the first two letters in "Mak" are the same as the first

two letters in "Mac." Fourth, the last letter in "Mak" while a "k" sounds the same as "c" when the word "Mak"

is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the

second word of both marks also phonetically the same. Visually, the two marks have both two words and six

letters, with the first word of both marks having the same letters and the second word having the same first

two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same.

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Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the

features of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely result in

confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks

in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra Hawpia &

Co., et al.,66 the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims,

Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that "SALONPAS" and

"LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop"; "Jantzen" and "Jass-Sea";

"Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite"; "Celluloid" and "Cellonite";

"Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe" and "Meje"; "Kotex" and "Femetex";

"Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-Mark Law and Practice", pp. 419-421, cities, as

coming within the purview of the idem sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and

"Steinberg Pianos", and "Seven-Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court

unequivocally said that "Celdura" and "Cordura" are confusingly similar in sound; this Court held in

Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark

"Sapolin", as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally but also

visually.

Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big Mac" or

"Big Mak" hamburger advertisement over the radio, one would not know whether the "Mac" or "Mak" ends

with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses, has built

goodwill and reputation for such mark making it one of the easily recognizable marks in the market today.

Thisincreases the likelihood that consumers will mistakenly associate petitioners' hamburgers and business

with those of respondents'.

Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their hamburger

sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the Court of Appeals'

finding, respondents' claim that their "Big Mak" mark was inspired by the first names of respondent Dy's

mother (Maxima) and father (Kimsoy) is not credible. As petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice

for a corporate name by using the names of his parents, especially since he was allegedly driven by

sentimental reasons. For one, he could have put his father's name ahead of his mother's, as is usually

done in this patriarchal society, and derived letters from said names in that order. Or, he could have

taken an equalnumber of letters (i.e., two) from each name, as is the more usual thing done. Surely, the

more plausible reason behind Respondents' choice of the word "M[ak]", especially when taken in

conjunction with the word "B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]"

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trademark, with their allegedsentiment-focused "explanation" merely thought of as a

convenient, albeit unavailing, excuse or defense for such an unfair choice of name.67

Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was

fortuitous,68 the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on the

coattails" of the more established "Big Mac" mark.69 This saves respondents much of the expense in advertising

to create market recognition of their mark and hamburgers.70

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of trademark

infringement.

On the Lack of Proof of 

Actual Confusion

Petitioners' failure to present proof of actual confusion does not negate their claim of trademark infringement.

As noted in American Wire & Cable Co. v. Director of Patents,71 Section 22 requires the less stringent

standard of "likelihood of confusion" only. While proof of actual confusion is the best evidence of infringement,

its absence is inconsequential.72

On the Issue of Unfair Competition

Section 29 ("Section 29")73 of RA 166 defines unfair competition, thus:

xxxx

Any person who will employ deception or any other means contrary to good faith by which

he 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 such goodwill, or who shall commit any acts calculated to produce

said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the following shall be

deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of goods of

another manufacturer or dealer, either as to the goods themselves or in the wrapping of the

packages in which they are contained, or the devices or words thereon, or in any feature of their

appearance, which would be likely to influence purchasers to believe that the goods offered are those

of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes

the goods with such appearance as shall deceive the public and defraud another of his legitimate trade,

or anysubsequent vendor of such goods or any agent of any vendor engaged in selling such goods with

a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the

false belief that such person is offering the services of another who has identified such services in the

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(c) Any person who shall make any false statement in the course of trade or

who shall commit any other act contrary to good faith of a nature calculated to discredit the goods,

business or services of another. (Emphasis supplied)

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.74 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.75 Actual fraudulent intent need not

be shown.76

Unfair competition is broader than trademark infringement and includes passing off goods with or without

trademark infringement. Trademark infringement is a form of unfair competition.77 Trademark infringement

constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable

deception on the public because of the general appearance of the goods. There can be trademark infringement

without unfair competition as when the infringer discloses on the labels containing the mark that he

manufactures the goods, thus preventing the public from being deceived that the goods originate from the

trademark owner.78

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off their

hamburgers as "Big Mac" hamburgers. Petitioners add that respondents' fraudulent intent can be inferred

from the similarity of the marks in question.79

Passing off (or palming off) takes place where the defendant, by imitative devices on the general appearance of

the goods, misleads prospective purchasers into buying his merchandise under the impression that they are

buying that of his competitors.80 Thus, the defendant gives his goods the general appearance of the goods of

his competitor with the intention of deceiving the public that the goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker hamburger

sandwich. The packaging material is a styrofoam box with the McDonald's logo and trademark in red

with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are also in red and block

capital letters. On the other hand, defendants' "B[ig] M[ak]" script print is in orange with only the

letter "B" and "M" being capitalized and the packaging material is plastic wrapper. xxxx Further,

plaintiffs' logo and mascot are the umbrella "M" and "Ronald McDonald's", respectively, compared to

the mascot of defendant Corporation which is a chubby boy called "Macky" displayed or printed

between the words "Big" and "Mak."81 (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their hamburgers the general

appearance of petitioners' "Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that give

respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac" hamburgers. Section

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29(a) expressly provides that the similarity in the general appearance of the goods may be in the "devices or

words" used on the wrappings. Respondents have applied on their plastic wrappers and bags almost the same

wordsthat petitioners use on their styrofoam box. What attracts the attention of the buying public are the

words "Big Mak" which are almost the same, aurally and visually, as the words "Big Mac." The dissimilarities

in the material and other devices are insignificant compared to the glaring similarity in the words used in the

wrappings.

Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of another

manufacturer." Respondents' goods are hamburgers which are also the goods of petitioners. If respondents

sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big Mak" mark would not give

their goods the general appearance of petitioners' "Big Mac" hamburgers. In such case, there is only

trademark infringement but no unfair competition. However, since respondents chose to apply the "Big Mak"

mark on hamburgers, just like petitioner's use of the "Big Mac" mark on hamburgers, respondents

have obviously clothed their goods with the general appearance of petitioners' goods.

Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak

Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words "L.C. Big Mak

Burger, Inc." to inform the public of the name of the seller of the hamburgers. However, petitioners introduced

during the injunctive hearings plastic wrappers and bags with the "Big Mak" mark without the name "L.C. Big

Mak Burger, Inc." Respondents' belated presentation of plastic wrappers and bags bearing the name of "L.C.

Big Mak Burger, Inc." as the seller of the hamburgers is an after-thought designed to exculpate them from

their unfair business conduct. As earlier stated, we cannot consider respondents' evidence since petitioners'

complaint was based on facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak

Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac" mark. This clearly

shows respondents' intent to deceive the public. Had respondents' placed a notice on their plastic wrappers

and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then they could validly claim that they

did not intend to deceive the public. In such case, there is only trademark infringement but no unfair

competition.82Respondents, however, did not give such notice. We hold that as found by the RTC, respondent

corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 2383 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully maintains

trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the

RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5

September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The

injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also, the

amount of actual damages is a reasonable percentage (11.9%) of respondent corporation's gross sales for three

(1988-1989 and 1991) of the six years (1984-1990) respondents have used the "Big Mak" mark.84

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The RTC also did not err in awarding exemplary damages by way of correction for the public good85 in view

of the finding of unfair competition where intent to deceive the public is essential. The award of attorney's fees

and expenses of litigation is also in order.86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November 1999 of the

Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994

of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for

trademark infringement and unfair competition.

McDonalds vs. MacJoy, G.R. No. 166115, February 2, 2007

In this petition for review on certiorari under Rule 45 of the Rules of Court, herein petitioner McDonald’s

Corporation seeks the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-

G.R. SP No. 57247, to wit:

1. Decision dated 29 July 20041 reversing an earlier decision of the Intellectual Property Office (IPO)

which rejected herein respondent MacJoy FastFood Corporation’s application for registration of the

trademark "MACJOY & DEVICE"; and

2. Resolution dated 12 November 20042 denying the petitioner’s motion for reconsideration.

As culled from the record, the facts are as follows:

On 14 March 1991, respondent MacJoy Fastfood Corporation, a domestic corporation engaged in the sale of

fast food products in Cebu City, filed with the then Bureau of Patents, Trademarks and Technology Transfer

(BPTT), now the Intellectual Property Office (IPO), an application, thereat identified as Application Serial No.

75274, for the registration of the trademark "MACJOY & DEVICE" for fried chicken, chicken barbeque,

burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo and steaks under classes 29 and 30 of the

International Classification of Goods.

Petitioner McDonald’s Corporation, a corporation duly organized and existing under the laws of the State of

Delaware, USA, filed a verified Notice of Opposition3 against the respondent’s application claiming that the

trademark "MACJOY & DEVICE" so resembles its corporate logo, otherwise known as the Golden Arches or

"M" design, and its marks "McDonalds," McChicken," "MacFries," "BigMac," "McDo," "McSpaghetti,"

"McSnack," and "Mc," (hereinafter collectively known as the MCDONALD’S marks) such that when used on

identical or related goods, the trademark applied for would confuse or deceive purchasers into believing that

the goods originate from the same source or origin. Likewise, the petitioner alleged that the respondent’s use

and adoption in bad faith of the "MACJOY & DEVICE" mark would falsely tend to suggest a connection or

affiliation with petitioner’s restaurant services and food products, thus, constituting a fraud upon the general

public and further cause the dilution of the distinctiveness of petitioner’s registered and internationally

recognized MCDONALD’S marks to its prejudice and irreparable damage. The application and the opposition

thereto was docketed as Inter Partes Case No. 3861.

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Respondent denied the aforementioned allegations of the petitioner and averred that it has used the mark

"MACJOY" for the past many years in good faith and has spent considerable sums of money for said mark’s

extensive promotion in tri-media, especially in Cebu City where it has been doing business long before the

petitioner opened its outlet thereat sometime in 1992; and that its use of said mark would not confuse

affiliation with the petitioner’s restaurant services and food products because of the differences in the design

and detail of the two (2) marks.

In a decision4 dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter "M," and

the prefixes "Mac/Mc" in both the "MACJOY" and the "MCDONALDS" marks lead to the conclusion that there

is confusing similarity between them especially since both are used on almost the same products falling under

classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food, sustained the

petitioner’s opposition and rejected the respondent’s application, viz:

WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried chicken and

chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and steaks is, as it is

hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein Respondent-Applicant is

REJECTED.

Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial and Human

Resources Development Bureau for appropriate action in accordance with this Decision, with a copy to be

furnished the Bureau of Trademarks for information and to update its record.

SO ORDERED.

In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order5 of January 14,

2000.

Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary

Injunction6 under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-G.R. SP

No. 57247.

Finding no confusing similarity between the marks "MACJOY" and "MCDONALD’S," the CA, in its herein

assailed Decision7 dated July 29, 2004, reversed and set aside the appealed IPO decision and order, thus:

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us REVERSING and SETTING ASIDE

the Decision of the IPO dated 28 December 1998 and its Order dated 14 January 2000 and ORDERING the IPO

to give due course to petitioner’s Application Serial No. 75274.

SO ORDERED.

Explains the CA in its decision:

xxx, it is clear that the IPO brushed aside and rendered useless the glaring and drastic differences and

variations in style of the two trademarks and even decreed that these pronounced differences are "miniscule"

and considered them to have been "overshadowed by the appearance of the predominant features" such as 167

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"M," "Mc," and "Mac" appearing in both MCDONALD’S and MACJOY marks. Instead of taking into account

these differences, the IPO unreasonably shrugged off these differences in the device, letters and marks in the

trademark sought to be registered. The IPO brushed aside and ignored the following irrefutable facts and

circumstances showing differences between the marks of MACJOY and MCDONALD’S. They are, as averred by

the petitioner [now respondent]:

1. The word "MacJoy" is written in round script while the word "McDonald’s" is written in single stroke

gothic;

2. The word "MacJoy" comes with the picture of a chicken head with cap and bowtie and wings

sprouting on both sides, while the word "McDonald’s" comes with an arches "M" in gold colors, and

absolutely without any picture of a chicken;

3. The word "MacJoy" is set in deep pink and white color scheme while "McDonald’s" is written in red,

yellow and black color combination;

4. The façade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A, show that

[respondent’s] restaurant is set also in the same bold, brilliant and noticeable color scheme as that of

its wrappers, containers, cups, etc., while [petitioner’s] restaurant is in yellow and red colors, and with

the mascot of "Ronald McDonald" being prominently displayed therein." (Words in brackets supplied.)

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged Resolution8 of

November 12, 2004, the CA denied the motion, as it further held:

Whether a mark or label of a competitor resembles another is to be determined by an inspection of the points

of difference and resemblance as a whole, and not merely the points of resemblance. The articles and

trademarks employed and used by the [respondent] Macjoy Fastfood Corporation are so different and distinct

as to preclude any probability or likelihood of confusion or deception on the part of the public to the injury of

the trade or business of the [petitioner] McDonald’s Corporation. The "Macjoy & Device" mark is dissimilar in

color, design, spelling, size, concept and appearance to the McDonald’s marks. (Words in brackets supplied.)

Hence, the petitioner’s present recourse on the following grounds:

I.

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT’S "MACJOY & DEVICE" MARK IS NOT

CONFUSINGLY SIMILAR TO PETITIONER’S "McDONALD’S MARKS." IT FAILED TO CORRECTLY APPLY THE

DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED BY THIS HONORABLE COURT IN

DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY BETWEEN COMPETING MARKS.

A. The McDonald’s Marks belong to a well-known and established "family of marks" distinguished by

the use of the prefix "Mc" and/or "Mac" and the corporate "M" logo design.

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B. The prefix "Mc" and/or "Mac" is the dominant portion of both Petitioner’s McDonald’s Marks and the

Respondent’s "Macjoy & Device" mark. As such, the marks are confusingly similar under the

Dominancy Test.

C. Petitioner’s McDonald’s Marks are well-known and world-famous marks which must be protected

under the Paris Convention.

II.

THE COURT OF APPEALS ERRED IN RULING THAT THE DECISION OF THE IPO DATED 28 DECEMBER

1998 AND ITS ORDER DATED 14 JANUARY 2000 WERE NOT BASED ON SUBSTANTIAL EVIDENCE.

In its Comment,9 the respondent asserts that the petition should be dismissed outright for being procedurally

defective: first, because the person who signed the certification against forum shopping in behalf of the

petitioner was not specifically authorized to do so, and second, because the petition does not present a

reviewable issue as what it challenges are the factual findings of the CA. In any event, the respondent insists

that the CA committed no reversible error in finding no confusing similarity between the trademarks in

question.

The petition is impressed with merit.

Contrary to respondent’s claim, the petitioner’s Managing Counsel, Sheila Lehr, was specifically authorized to

sign on behalf of the petitioner the Verification and Certification10 attached to the petition. As can be gleaned

from the petitioner’s Board of Director’s Resolution dated December 5, 2002, as embodied in the Certificate of

the Assistant Secretary dated December 21, 2004,11 Sheila Lehr was one of those authorized and empowered

"to execute and deliver for and on behalf of [the petitioner] all documents as may be required in connection

with x x x the protection and maintenance of any foreign patents, trademarks, trade-names, and copyrights

owned now or hereafter by [the petitioner], including, but not limited to, x x x documents required to institute

opposition or cancellation proceedings against conflicting trademarks, and to do such other acts and things

and to execute such other documents as may be necessary and appropriate to effect and carry out the intent of

this resolution." Indeed, the afore-stated authority given to Lehr necessarily includes the authority to execute

and sign the mandatorily required certification of non-forum shopping to support the instant petition for review

which stemmed from the "opposition proceedings" lodged by the petitioner before the IPO. Considering that

the person who executed and signed the certification against forum shopping has the authority to do so, the

petition, therefore, is not procedurally defective.

As regards the respondent’s argument that the petition raises only questions of fact which are not proper in a

petition for review, suffice it to say that the contradictory findings of the IPO and the CA constrain us to give

due course to the petition, this being one of the recognized exceptions to Section 1, Rule 45 of the Rules of

Court. True, this Court is not the proper venue to consider factual issues as it is not a trier of

facts.12 Nevertheless, when the factual findings of the appellate court are mistaken, absurd, speculative,

conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court

of origin,13 as here, this Court will review them.

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The old Trademark Law, Republic Act (R.A.) No. 166, as amended, defines a "trademark" as any distinctive

word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer

or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by

others.14

Under the same law, the registration of a trademark is subject to the provisions of Section 4 thereof,

paragraph (d) of which is pertinent to this case. The provision reads:

Section 4. Registration of trademarks, trade-names and service-marks on the principal register. – There is

hereby established a register of trademarks, tradenames and service-marks which shall be known as the

principal register. The owner of the trade-mark, trade-name or service-mark used to distinguish his goods,

business or services of others shall have the right to register the same on the principal register, unless it:

xxx xxx xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the

Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be

likely, when applied to or used in connection with the goods, business or services of the applicant, to cause

confusion or mistake or to deceive purchasers;

xxx xxx xxx

Essentially, the issue here is whether there is a confusing similarity between the MCDONALD’S marks of the

petitioner and the respondent’s "MACJOY & DEVICE" trademark when applied to Classes 29 and 30 of the

International Classification of Goods, i.e., food and ingredients of food.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the dominancy

test and the holistic test.15 The dominancy test focuses on the similarity of the prevalent features of the

competing trademarks that might cause confusion or deception.16 In contrast, the holistic test requires the

court to consider the entirety of the marks as applied to the products, including the labels and packaging, in

determining confusing similarity.17 Under the latter test, a comparison of the words is not the only determinant

factor.18 1awphi1.net

Here, the IPO used the dominancy test in concluding that there was confusing similarity between the two (2)

trademarks in question as it took note of the appearance of the predominant features "M", "Mc" and/or "Mac"

in both the marks. In reversing the conclusion reached by the IPO, the CA, while seemingly applying the

dominancy test, in fact actually applied the holistic test. The appellate court ruled in this wise:

Applying the Dominancy test to the present case, the IPO should have taken into consideration the entirety of

the two marks instead of simply fixing its gaze on the single letter "M" or on the combinations "Mc" or "Mac".

A mere cursory look of the subject marks will reveal that, save for the letters "M" and "c", no other similarity

exists in the subject marks.

We agree with the [respondent] that it is entirely unwarranted for the IPO to consider the prefix "Mac" as the

predominant feature and the rest of the designs in [respondent’s] mark as details. Taking into account such 170

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paramount factors as color, designs, spelling, sound, concept, sizes and audio and visual effects, the prefix

"Mc" will appear to be the only similarity in the two completely different marks; and it is the prefix "Mc" that

would thus appear as the miniscule detail. When pitted against each other, the two marks reflect a distinct and

disparate visual impression that negates any possible confusing similarity in the mind of the buying public.

(Words in brackets supplied.)

Petitioner now vigorously points out that the dominancy test should be the one applied in this case.

We agree.

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no

set rules can be deduced because each case must be decided on its merits.19 In such cases, even more than in

any other litigation, precedent must be studied in the light of the facts of the particular case.20 That is the

reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are

specifically in point.21

While we agree with the CA’s detailed enumeration of differences between the two (2) competing trademarks

herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being

the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used

and applied the dominancy test in determining confusing similarity or likelihood of confusion between

competing trademarks.22

Notably, in McDonalds Corp. v. LC Big Mak Burger, Inc.,23 a case where the trademark "Big Mak" was found to

be confusingly similar with the "Big Mac" mark of the herein the petitioner, the Court explicitly held:

This Court, xxx, has relied on the dominancy test rather than the holistic test. The dominancy test considers

the dominant features in the competing marks in determining whether they are confusingly similar. Under the

dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the

adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider

more the aural and visual impressions created by the marks in the public mind, giving little weight to factors

like prices, quality, sales outlets and market segments.

Moreover, in Societe Des Produits Nestle, S.A. v. CA24 the Court, applying the dominancy test, concluded that

the use by the respondent therein of the word "MASTER" for its coffee product "FLAVOR MASTER" was likely

to cause confusion with therein petitioner’s coffee products’ "MASTER ROAST" and "MASTER BLEND" and

further ruled:

xxx, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair

competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons

and overall impressions engendered by the marks in controversy as they are encountered in the marketplace.

The totality or holistic test only relies on visual comparisons between two trademarks whereas the dominancy

test relies not only on the visual but also on the aural and connotative comparisons and overall impressions

between the two trademarks.

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Applying the dominancy test to the instant case, the Court finds that herein petitioner’s "MCDONALD’S" and

respondent’s "MACJOY" marks are confusingly similar with each other such that an ordinary purchaser can

conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant

features. The first letter "M" in both marks puts emphasis on the prefixes "Mc" and/or "Mac" by the similar way

in which they are depicted i.e. in an arch-like, capitalized and stylized manner.25

For sure, it is the prefix "Mc," an abbreviation of "Mac," which visually and aurally catches the attention of the

consuming public. Verily, the word "MACJOY" attracts attention the same way as did "McDonalds," "MacFries,"

"McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALD’S marks which all use the prefixes Mc

and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the

respondent’s trademark application for the "MACJOY & DEVICE" trademark covers goods under Classes 29

and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries,

spaghetti, etc. Likewise, the petitioner’s trademark registration for the MCDONALD’S marks in the Philippines

covers goods which are similar if not identical to those covered by the respondent’s application.

Thus, we concur with the IPO’s findings that:

In the case at bar, the predominant features such as the "M," "Mc," and "Mac" appearing in both McDonald’s

marks and the MACJOY & DEVICE" easily attract the attention of would-be customers. Even non-regular

customers of their fastfood restaurants would readily notice the predominance of the "M" design, "Mc/Mac"

prefixes shown in both marks. Such that the common awareness or perception of customers that the

trademarks McDonalds mark and MACJOY & DEVICE are one and the same, or an affiliate, or under the

sponsorship of the other is not far-fetched.

The differences and variations in styles as the device depicting a head of chicken with cap and bowtie and

wings sprouting on both sides of the chicken head, the heart-shaped "M," and the stylistic letters in "MACJOY

& DEVICE;" in contrast to the arch-like "M" and the one-styled gothic letters in McDonald’s marks are of no

moment. These minuscule variations are overshadowed by the appearance of the predominant features

mentioned hereinabove.

Thus, with the predominance of the letter "M," and prefixes "Mac/Mc" found in both marks, the inevitable

conclusion is there is confusing similarity between the trademarks Mc Donald’s marks and "MACJOY AND

DEVICE" especially considering the fact that both marks are being used on almost the same products falling

under Classes 29 and 30 of the International Classification of Goods i.e. Food and ingredients of food.

With the existence of confusing similarity between the subject trademarks, the resulting issue to be resolved is

who, as between the parties, has the rightful claim of ownership over the said marks.

We rule for the petitioner.

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A mark is valid if it is distinctive and hence not barred from registration under the Trademark Law. However,

once registered, not only the mark’s validity but also the registrant’s ownership thereof is prima facie

presumed.26

Pursuant to Section 3727 of R.A. No. 166, as amended, as well as the provision regarding the protection of

industrial property of foreign nationals in this country as embodied in the Paris Convention28 under which the

Philippines and the petitioner’s domicile, the United States, are adherent-members, the petitioner was able to

register its MCDONALD’S marks successively, i.e., "McDonald’s" in 04 October, 197129 ; the corporate logo

which is the "M" or the golden arches design and the "McDonald’s" with the "M" or golden arches design both

in 30 June 197730 ; and so on and so forth.31

On the other hand, it is not disputed that the respondent’s application for registration of its trademark

"MACJOY & DEVICE" was filed only on March 14, 1991 albeit the date of first use in the Philippines was

December 7, 1987.32

Hence, from the evidence on record, it is clear that the petitioner has duly established its ownership of the

mark/s.

Respondent’s contention that it was the first user of the mark in the Philippines having used "MACJOY &

DEVICE" on its restaurant business and food products since December, 1987 at Cebu City while the first

McDonald’s outlet of the petitioner thereat was opened only in 1992, is downright unmeritorious. For the

requirement of "actual use in commerce x x x in the Philippines" before one may register a trademark, trade-

name and service mark under the Trademark Law33 pertains to the territorial jurisdiction of the Philippines and

is not only confined to a certain region, province, city or barangay.

Likewise wanting in merit is the respondent’s claim that the petitioner cannot acquire ownership of the word

"Mac" because it is a personal name which may not be monopolized as a trademark as against others of the

same name or surname. As stated earlier, once a trademark has been registered, the validity of the mark is

prima facie presumed. In this case, the respondent failed to overcome such presumption. We agree with the

observations of the petitioner regarding the respondent’s explanation that the word "MACJOY" is based on the

name of its president’s niece, Scarlett Yu Carcell. In the words of the petitioner:

First of all, Respondent failed to present evidence to support the foregoing claim which, at best, is a mere self-

serving assertion. Secondly, it cannot be denied that there is absolutely no connection between the name

"Scarlett Yu Carcel" and "MacJoy" to merit the coinage of the latter word. Even assuming that the word

"MacJoy" was chosen as a term of endearment, fondness and affection for a certain Scarlett Yu Carcel,

allegedly the niece of Respondent’s president, as well as to supposedly bring good luck to Respondent’s

business, one cannot help but wonder why out of all the possible letters or combinations of letters available to

Respondent, its president had to choose and adopt a mark with the prefix "Mac" as the dominant feature

thereof. A more plausible explanation perhaps is that the niece of Respondent’s president was fond of the food

products and services of the Respondent, but that is beside the point." 34

By reason of the respondent’s implausible and insufficient explanation as to how and why out of the many

choices of words it could have used for its trade-name and/or trademark, it chose the word "MACJOY," the only

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logical conclusion deducible therefrom is that the respondent would want to ride high on the established

reputation and goodwill of the MCDONALD’s marks, which, as applied to petitioner’s restaurant business and

food products, is undoubtedly beyond question.

Thus, the IPO was correct in rejecting and denying the respondent’s application for registration of the

trademark "MACJOY & DEVICE." As this Court ruled in Faberge Inc. v. IAC,35 citing Chuanchow Soy &

Canning Co. v. Dir. of Patents and Villapanta:36

When one applies for the registration of a trademark or label which is almost the same or very closely

resembles one already used and registered by another, the application should be rejected and dismissed

outright, even without any opposition on the part of the owner and user of a previously registered label or

trademark, this not only to avoid confusion on the part of the public, but also to protect an already used and

registered trademark and an established goodwill.

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution of the Court

of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the Decision of the Intellectual

Property Office in Inter Partes Case No. 3861 is REINSTATED.

Philip Morris vs. Fortune Tobacco, G.R. No. 158589, June 27, 2006

Via this petition for review under Rule 45 of the Rules of Court, herein petitioners Philip Morris, Inc., Benson &

Hedges (Canada) Inc., and Fabriques de Tabac Reunies, S.A. (now Philip Morris Products S.A.) seek the

reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 66619, to

wit:

1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court of Pasig

City, Branch 166, in its Civil Case No. 47374, which dismissed the complaint for trademark

infringement and damages thereat commenced by the petitioners against respondent Fortune Tobacco

Corporation; and

2. Resolution dated May 30, 20032 denying petitioners’ motion for reconsideration.

Petitioner Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, United States of

America, is, per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office

(PPO), the registered owner of the trademark "MARK VII" for cigarettes. Similarly, petitioner Benson &

Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of the trademark "MARK

TEN" for cigarettes as evidenced by PPO Certificate of Registration No. 11147. And as can be seen in

Trademark Certificate of Registration No. 19053, another subsidiary of Philip Morris, Inc., the Swiss company

Fabriques de Tabac Reunies, S.A., is the assignee of the trademark "LARK," which was originally registered in

1964 by Ligget and Myers Tobacco Company. On the other hand, respondent Fortune Tobacco Corporation, a

company organized in the Philippines, manufactures and sells cigarettes using the trademark "MARK."

The legal dispute between the parties started when the herein petitioners, on the claim that an infringement of

their respective trademarks had been committed, filed, on August 18, 1982, a Complaint for Infringement of

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Trademark and Damages against respondent Fortune Tobacco Corporation, docketed as Civil Case No. 47374

of the Regional Trial Court of Pasig, Branch 166.

The decision under review summarized what happened next, as follows:

In the Complaint xxx with prayer for the issuance of a preliminary injunction, [petitioners] alleged that they

are foreign corporations not doing business in the Philippines and are suing on an isolated transaction. xxx

they averred that the countries in which they are domiciled grant xxx to corporate or juristic persons of the

Philippines the privilege to bring action for infringement, xxx without need of a license to do business in those

countries. [Petitioners] likewise manifested [being registered owners of the trademark "MARK VII" and "MARK

TEN" for cigarettes as evidenced by the corresponding certificates of registration and an applicant for the

registration of the trademark "LARK MILDS"]. xxx. [Petitioners] claimed that they have registered the

aforementioned trademarks in their respective countries of origin and that, by virtue of the long and extensive

usage of the same, these trademarks have already gained international fame and acceptance. Imputing bad

faith on the part of the [respondent], petitioners claimed that the [respondent], without any previous consent

from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar

trademark "MARK" xxx Accordingly, they argued that [respondent’s] use of the trademark "MARK" in its

cigarette products have caused and is likely to cause confusion or mistake, or would deceive purchasers and

the public in general into buying these products under the impression and mistaken belief that they are buying

[petitioners’] products.

Invoking the provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris

Convention, for brevity), to which the Philippines is a signatory xxx, [petitioners] pointed out that upon the

request of an interested party, a country of the Union may prohibit the use of a trademark which constitutes a

reproduction, imitation, or translation of a mark already belonging to a person entitled to the benefits of the

said Convention. They likewise argued that, in accordance with Section 21-A in relation to Section 23 of

Republic Act 166, as amended, they are entitled to relief in the form of damages xxx [and] the issuance of a

writ of preliminary injunction which should be made permanent to enjoin perpetually the [respondent] from

violating [petitioners’] right to the exclusive use of their aforementioned trademarks.

[Respondent] filed its Answer xxx denying [petitioners’] material allegations and xxx averred [among other

things] xxx that "MARK" is a common word, which cannot particularly identify a product to be the product of

the [petitioners] xxx

xxx xxx xxx.

Meanwhile, after the [respondent] filed its Opposition (Records, Vo. I, p. 26), the matter of the [petitioners’]

prayer for the issuance of a writ of preliminary injunction was negatively resolved by the court in an Order xxx

dated March 28, 1973. [The incidental issue of the propriety of an injunction would eventually be elevated to

the CA and would finally be resolved by the Supreme Court in its Decision dated July 16, 1993 in G.R. No.

91332]. xxx.

xxx xxx xxx

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After the termination of the trial on the merits xxx trial court rendered its Decision xxx dated November 3,

1999 dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit

trademark infringement against the [petitioners]. Resolving first the issue of whether or not [petitioners] have

capacity to institute the instant action, the trial court opined that [petitioners’] failure to present evidence to

support their allegation that their respective countries indeed grant Philippine corporations reciprocal or

similar privileges by law xxx justifies the dismissal of the complaint xxx. It added that the testimonies of

[petitioners’] witnesses xxx essentially declared that [petitioners] are in fact doing business in the Philippines,

but [petitioners] failed to establish that they are doing so in accordance with the legal requirement of first

securing a license. Hence, the court declared that [petitioners] are barred from maintaining any action in

Philippine courts pursuant to Section 133 of the Corporation Code.

The issue of whether or not there was infringement of the [petitioners’] trademarks by the [respondent] was

likewise answered xxx in the negative. It expounded that "in order for a name, symbol or device to constitute a

trademark, it must, either by itself or by association, point distinctly to the origin or ownership of the article to

which it is applied and be of such nature as to permit an exclusive appropriation by one person". Applying such

principle to the instant case, the trial court was of the opinion that the words "MARK", "TEN", "LARK" and the

Roman Numerals "VII", either alone or in combination of each other do not by themselves or by association

point distinctly to the origin or ownership of the cigarettes to which they refer, such that the buying public

could not be deceived into believing that [respondent’s] "MARK" cigarettes originated either from the USA,

Canada, or Switzerland.

Emphasizing that the test in an infringement case is the likelihood of confusion or deception, the trial court

stated that the general rule is that an infringement exists if the resemblance is so close that it deceives or is

likely to deceive a customer exercising ordinary caution in his dealings and induces him to purchase the goods

of one manufacturer in the belief that they are those of another. xxx. The trial court ruled that the [petitioners]

failed to pass these tests as it neither presented witnesses or purchasers attesting that they have bought

[respondent’s] product believing that they bought [petitioners’] "MARK VII", "MARK TEN" or "LARK", and have

also failed to introduce in evidence a specific magazine or periodical circulated locally, which promotes and

popularizes their products in the Philippines. It, moreover, elucidated that the words consisting of the

trademarks allegedly infringed by [respondent] failed to show that they have acquired a secondary meaning as

to identify them as [petitioners’] products. Hence, the court ruled that the [petitioners] cannot avail themselves

of the doctrine of secondary meaning.

As to the issue of damages, the trial court deemed it just not to award any to either party stating that, since the

[petitioners] filed the action in the belief that they were aggrieved by what they perceived to be an

infringement of their trademark, no wrongful act or omission can be attributed to them. xxx.3 (Words in

brackets supplied)

Maintaining to have the standing to sue in the local forum and that respondent has committed trademark

infringement, petitioners went on appeal to the CA whereat their appellate recourse was docketed as CA-G.R.

CV No. 66619.

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Eventually, the CA, in its Decision dated January 21, 2003, while ruling for petitioners on the matter of their

legal capacity to sue in this country for trademark infringement, nevertheless affirmed the trial court’s

decision on the underlying issue of respondent’s liability for infringement as it found that:

xxx the appellants’ [petitioners’] trademarks, i.e., "MARK VII", "MARK TEN" and "LARK", do not qualify as

well-known marks entitled to protection even without the benefit of actual use in the local market and that the

similarities in the trademarks in question are insufficient as to cause deception or confusion tantamount to

infringement. Consequently, as regards the third issue, there is likewise no basis for the award of damages

prayed for by the appellants herein.4 (Word in bracket supplied)

With their motion for reconsideration having been denied by the CA in its equally challenged Resolution of May

30, 2003, petitioners are now with this Court via this petition for review essentially raising the following

issues: (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce

trademark rights in this country; and (2) whether or not respondent has committed trademark infringement

against petitioners by its use of the mark "MARK" for its cigarettes, hence liable for damages.

In its Comment,5 respondent, aside from asserting the correctness of the CA’s finding on its liability for

trademark infringement and damages, also puts in issue the propriety of the petition as it allegedly raises

questions of fact.

The petition is bereft of merit.

Dealing first with the procedural matter interposed by respondent, we find that the petition raises both

questions of fact and law contrary to the prescription against raising factual questions in a petition for review

on certiorari filed before the Court. A question of law exists when the doubt or difference arises as to what the

law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth

or falsity of alleged facts.6

Indeed, the Court is not the proper venue to consider factual issues as it is not a trier of facts.7 Unless the

factual findings of the appellate court are mistaken, absurd, speculative, conflicting, tainted with grave abuse

of discretion, or contrary to the findings culled by the court of origin,8 we will not disturb them.

It is petitioners’ posture, however, that their contentions should

be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed

facts.

Concededly, when the facts are undisputed, the question of whether or not the conclusion drawn therefrom by

the CA is correct is one of law.9 But, even if we consider and accept as pure questions of law the issues raised

in this petition, still, the Court is not inclined to disturb the conclusions reached by the appellate court, the

established rule being that all doubts shall be resolved in favor of the correctness of such conclusions.10

Be that as it may, we shall deal with the issues tendered and determine whether the CA ruled in accordance

with law and established jurisprudence in arriving at its assailed decision.

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A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof

adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those

manufactured, sold, or dealt in by others.11 Inarguably, a trademark deserves protection. For, as Mr. Justice

Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:12

The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is true that

we live by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-

cut which induces a purchaser to select what he wants, or what he has been led to believe what he wants. The

owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the

market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same - to

convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it

appears. Once this is attained, the trade-mark owner has something of value. If another poaches upon the

commercial magnetism of the symbol he has created, the owner can obtain legal redress.

It is thus understandable for petitioners to invoke in this recourse their entitlement to enforce trademark

rights in this country, specifically, the right to sue for trademark infringement in Philippine courts and be

accorded protection against unauthorized use of their Philippine-registered trademarks.

In support of their contention respecting their right of action, petitioners assert that, as corporate nationals of

member-countries of the Paris Union, they can sue before Philippine courts for infringement of trademarks, or

for unfair competition, without need of obtaining registration or a license to do business in the Philippines, and

without necessity of actually doing business in the Philippines. To petitioners, these grievance right and

mechanism are accorded not only by Section 21-A of Republic Act (R.A.) No. 166, as amended, or the

Trademark Law, but also by Article 2 of the Paris Convention for the Protection of Industrial Property,

otherwise known as the Paris Convention.

In any event, petitioners point out that there is actual use of their trademarks in the Philippines as evidenced

by the certificates of registration of their trademarks. The marks "MARK TEN" and "LARK" were registered on

the basis of actual use in accordance with Sections 2-A13 and 5(a)14 of R.A. No. 166, as amended, providing for

a 2-month pre-registration use in local commerce and trade while the registration of "MARK VII" was on the

basis of registration in the foreign country of origin pursuant to Section 37 of the same law wherein it is

explicitly provided that prior use in commerce need not be alleged.15

Besides, petitioners argue that their not doing business in the Philippines, if that be the case, does not mean

that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber

Corporation v. Universal Rubber Products, Inc.,16 petitioners state that such availability and sale may be

effected through the acts of importers and distributors.

Finally, petitioners would press on their entitlement to protection even in the absence of actual use of

trademarks in the country in view of the Philippines’ adherence to the Trade Related Aspects of Intellectual

Property Rights or the TRIPS Agreement and the enactment of R.A. No. 8293, or the Intellectual Property Code

(hereinafter the "IP Code"), both of which provide that the fame of a trademark may be acquired through

promotion or advertising with no explicit requirement of actual use in local trade or commerce.

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Before discussing petitioners’ claimed entitlement to enforce trademark rights in the Philippines, it must be

emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA. It

ought to be pointed out, however, that the appellate court qualified its holding with a statement, following G.R.

No. 91332, entitled Philip Morris, Inc., et al. v. The Court of Appeals and Fortune Tobacco Corporation,17 that

such right to sue does not necessarily mean protection of their registered marks in the absence of actual use in

the Philippines.

Thus clarified, what petitioners now harp about is their entitlement to protection on the strength of

registration of their trademarks in the Philippines.

As we ruled in G.R. No. 91332,18 supra, so it must be here.

Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages denied non-

registrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions arising

from such registration,19 i.e., as to the validity of the registration, ownership and the exclusive right to use the

registered marks, they may not successfully sue on the basis alone of their respective certificates of

registration of trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to

availment of the rights and privileges vis-à-vis their trademarks in this country, to show proof that, on top of

Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens

pursuant to Section 21-A20 of R.A. No. 166.

In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity requirement is a

condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would

justify dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166

not being sufficient. In a subsequent case,22 however, the Court held that where the complainant is a national

of a Paris Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice,

because the reciprocal agreement between the two countries is embodied and supplied by the Paris

Convention which, being considered part of Philippine municipal laws, can be taken judicial notice of in

infringement suits.23

As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are,

together with the Philippines, members of the Paris Union does not automatically entitle petitioners to the

protection of their trademarks in this country absent actual use of the marks in local commerce and trade.

True, the Philippines’ adherence to the Paris Convention24 effectively obligates the country to honor and

enforce its provisions25 as regards the protection of industrial property of foreign nationals in this country.

However, any protection accorded has to be made subject to the limitations of Philippine laws.26 Hence,

despite Article 2 of the Paris Convention which substantially provides that (1) nationals of member-countries

shall have in this country rights specially provided by the Convention as are consistent with Philippine laws,

and enjoy the privileges that Philippine laws now grant or may hereafter grant to its nationals, and (2) while no

domicile requirement in the country where protection is claimed shall be required of persons entitled to the

benefits of the Union for the enjoyment of any industrial property rights,27 foreign nationals must still observe

and comply with the conditions imposed by Philippine law on its nationals.

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Considering that R.A. No. 166, as amended, specifically Sections 228 and 2-A29 thereof, mandates actual use of

the marks and/or emblems in local commerce and trade before they may be registered and ownership thereof

acquired, the petitioners cannot, therefore, dispense with the element of actual use. Their being nationals of

member-countries of the Paris Union does not alter the legal situation.

In Emerald Garment Mfg. Corporation v. Court of Appeals,30 the Court reiterated its rulings in Sterling

Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,31 Kabushi Kaisha Isetan v.

Intermediate Appellate Court,32 and Philip Morris v. Court of Appeals and Fortune Tobacco Corporation33 on

the importance of actual commercial use of a trademark in the Philippines notwithstanding the Paris

Convention:

The provisions of the 1965 Paris Convention … relied upon by private respondent and Sec. 21-A of the

Trademark Law were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc., et. al.

vs. Court of Appeals:

xxx xxx xxx

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirements of

actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is

being decided by a municipal tribunal. Xxx. Withal, the fact that international law has been made part of the

law of the land does not by any means imply the primacy of international law over national law in the municipal

sphere. Under the doctrine of incorporation as applied in most countries, rules of International Law are given a

standing equal, not superior, to national legislative enactments.

xxx xxx xxx

In other words, (a foreign corporation) may have the capacity to sue for infringement … but the question of

whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will

depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It

is thus incongruous for petitioners to claim that when a foreign corporation not licensed to do business in the

Philippines files a complaint for infringement, the entity need not be actually using its trademark in commerce

in the Philippines. Such a foreign corporation may have the personality to file a suit for infringement but it may

not necessarily be entitled to protection due to absence of actual use of the emblem in the local market.

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the

actual use of such trademark in local commerce. As it were, registration does not confer upon the registrant an

absolute right to the registered mark. The certificate of registration merely constitutes prima facie evidence

that the registrant is the owner of the registered mark. Evidence of non-usage of the mark rebuts the

presumption of trademark ownership,34 as what happened here when petitioners no less admitted not doing

business in this country.35

Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an

absolute right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management,

Ltd. v. Development Group of Companies, Inc.36 trademark is a creation of use and, therefore, actual use is a

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pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the

right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting

ingredient.37

Petitioners’ reliance on Converse Rubber Corporation38 is quite misplaced, that case being cast in a different

factual milieu. There, we ruled that a foreign owner of a Philippine trademark, albeit not licensed to do, and

not so engaged in, business in the Philippines, may actually earn reputation or goodwill for its goods in the

country. But unlike in the instant case, evidence of actual sales of Converse rubber shoes, such as sales

invoices, receipts and the testimony of a legitimate trader, was presented in Converse.

This Court also finds the IP Code and the TRIPS Agreement to be inapplicable, the infringement complaint

herein having been filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. The IP Code,

however, took effect only on January 1, 1998 without a provision as to its retroactivity.39 In the same vein, the

TRIPS Agreement was inexistent when the suit for infringement was filed, the Philippines having adhered

thereto only on December 16, 1994.

With the foregoing perspective, it may be stated right off that the registration of a trademark unaccompanied

by actual use thereof in the country accords the registrant only the standing to sue for infringement in

Philippine courts. Entitlement to protection of such trademark in the country is entirely a different matter.

This brings us to the principal issue of infringement.

Section 22 of R.A. No. 166, as amended, defines what constitutes trademark infringement, as follows:

Sec. 22. Infringement, what constitutes. – Any person who shall use, without the consent of the registrant, any

reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with

the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such

use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such

goods or services, or identity of such business; or reproduce, counterfeit, copy of color ably imitate any such

mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs,

prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such

goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies

herein provided.

Petitioners would insist on their thesis of infringement since respondent’s mark "MARK" for cigarettes is

confusingly or deceptively similar with their duly registered "MARK VII," "MARK TEN" and "LARK" marks

likewise for cigarettes. To them, the word "MARK" would likely cause confusion in the trade, or deceive

purchasers, particularly as to the source or origin of respondent’s cigarettes.

The "likelihood of confusion" is the gravamen of trademark infringement.40 But likelihood of confusion is a

relative concept, the particular, and sometimes peculiar, circumstances of each case being determinative of its

existence. Thus, in trademark infringement cases, more than in other kinds of litigation, precedents must be

evaluated in the light of each particular case.41

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In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the dominancy

test and the holistic test.42 The dominancy test43 sets sight on the similarity of the prevalent features of the

competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this

norm, the question at issue turns on whether the use of the marks involved would be likely to cause confusion

or mistake in the mind of the public or deceive purchasers.44

In contrast, the holistic test45 entails a consideration of the entirety of the marks as applied to the products,

including the labels and packaging, in determining confusing similarity.

Upon consideration of the foregoing in the light of the peculiarity of this case, we rule against the likelihood of

confusion resulting in infringement arising from the respondent’s use of the trademark "MARK" for its

particular cigarette product.

For one, as rightly concluded by the CA after comparing the trademarks involved in their entirety as they

appear on the products,46 the striking dissimilarities are significant enough to warn any purchaser that one is

different from the other. Indeed, although the perceived offending word "MARK" is itself prominent in

petitioners’ trademarks "MARK VII" and "MARK TEN," the entire marking system should be considered as a

whole and not dissected, because a discerning eye would focus not only on the predominant word but also on

the other features appearing in the labels. Only then would such discerning observer draw his conclusion

whether one mark would be confusingly similar to the other and whether or not sufficient differences existed

between the marks.47

This said, the CA then, in finding that respondent’s goods cannot be mistaken as any of the three cigarette

brands of the petitioners, correctly relied on the holistic test.

But, even if the dominancy test were to be used, as urged by the petitioners, but bearing in mind that a

trademark serves as a tool to point out distinctly the origin or ownership of the goods to which it is

affixed,48 the likelihood of confusion tantamount to infringement appears to be farfetched. The reason for the

origin and/or ownership angle is that unless the words or devices do so point out the origin or ownership, the

person who first adopted them cannot be injured by any appropriation or imitation of them by others, nor can

the public be deceived.49

Since the word "MARK," be it alone or in combination with the word "TEN" and the Roman numeral "VII," does

not point to the origin or ownership of the cigarettes to which they apply, the local buying public could not

possibly be confused or deceived that respondent’s "MARK" is the product of petitioners and/or originated

from the U.S.A., Canada or Switzerland. And lest it be overlooked, no actual commercial use of petitioners’

marks in local commerce was proven. There can thus be no occasion for the public in this country, unfamiliar

in the first place with petitioners’ marks, to be confused.

For another, a comparison of the trademarks as they appear on the goods is just one of the appreciable

circumstances in determining likelihood of confusion. Del Monte Corp. v. CA50 dealt with another, where we

instructed to give due regard to the "ordinary purchaser," thus:

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The question is not whether the two articles are distinguishable by their label when set side by side but

whether the general confusion made by the article upon the eye of the casual purchaser who is unsuspicious

and off his guard, is such as to likely result in his confounding it with the original. As observed in several cases,

the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and

giving the attention such purchasers usually give in buying that class of goods is the touchstone.

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to

the "ordinarily intelligent buyer" considering the type of product involved.51

It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those

who are already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too

familiar with his brand and discriminating as well. We, thus, concur with the CA when it held, citing a

definition found in Dy Buncio v. Tan Tiao Bok,52 that the "ordinary purchaser" in this case means "one

accustomed to buy, and therefore to some extent familiar with, the goods in question."

Pressing on with their contention respecting the commission of trademark infringement, petitioners finally

point to Section 22 of R.A. No. 166, as amended. As argued, actual use of trademarks in local commerce is,

under said section, not a requisite before an aggrieved trademark owner can restrain the use of his trademark

upon goods manufactured or dealt in by another, it being sufficient that he had registered the trademark or

trade-name with the IP Office. In fine, petitioners submit that respondent is liable for infringement, having

manufactured and sold cigarettes with the trademark "MARK" which, as it were, are identical and/or

confusingly similar with their duly registered trademarks "MARK VII," "MARK TEN" and "LARK".

This Court is not persuaded.

In Mighty Corporation v. E & J Gallo Winery,53 the Court held that the following constitute the elements of

trademark infringement in accordance not only with Section 22 of R.A. No. 166, as amended, but also Sections

2, 2-A, 9-A54 and 20 thereof:

(a) a trademark actually used in commerce in the Philippines and registered in the principal register of

the Philippine Patent Office,

(b) is used by another person in connection with the sale, offering for sale, or advertising of any goods,

business or services or in connection with which such use is likely to cause confusion or mistake or to

deceive purchasers or others as to the source or origin of such goods or services, or identity of such

business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another

person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs,

prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection

with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers,

(c) the trademark is used for identical or similar goods, and

(d) such act is done without the consent of the trademark registrant or assignee.

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As already found herein, while petitioners have registered the trademarks "MARK VII," "MARK TEN" and

"LARK" for cigarettes in the Philippines, prior actual commercial use thereof had not been proven. In fact,

petitioners’ judicial admission of not doing business in this country effectively belies any pretension to the

contrary.

Likewise, we note that petitioners even failed to support their claim that their respective marks are well-known

and/or have acquired goodwill in the Philippines so as to be entitled to protection even without actual use in

this country in accordance with Article 6bis55 of the Paris Convention. As correctly found by the CA, affirming

that of the trial court:

xxx the records are bereft of evidence to establish that the appellants’ [petitioners’] products are indeed well-

known in the Philippines, either through actual sale of the product or through different forms of advertising.

This finding is supported by the fact that appellants admit in their Complaint that they are not doing business

in the Philippines, hence, admitting that their products are not being sold in the local market. We likewise see

no cogent reason to disturb the trial court’s finding that the appellants failed to establish that their products

are widely known by local purchasers as "(n)o specific magazine or periodical published in the Philippines, or

in other countries but circulated locally" have been presented by the appellants during trial. The appellants

also were not able to show the length of time or the extent of the promotion or advertisement made to

popularize their products in the Philippines.56

Last, but not least, we must reiterate that the issue of trademark infringement is factual, with both the trial

and appellate courts having peremptorily found allegations of infringement on the part of respondent to be

without basis. As we said time and time again, factual determinations of the trial court, concurred in by the CA,

are final and binding on this Court.57

For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to

respondent’s use of its mark and for petitioners’ failure to demonstrate confusing similarity between said

trademarks, the dismissal of their basic complaint for infringement and the concomitant plea for damages must

be affirmed. The law, the surrounding circumstances and the equities of the situation call for this disposition.

WHEREFORE, the petition is hereby DENIED. Accordingly, the assailed decision and resolution of the Court of

Appeals are AFFIRMED.

Espiritu, et. al. vs. Petron Corporation, G.R. No. 170891, November 24, 2009

This case is about the offense or offenses that arise from the reloading of the liquefied petroleum gas cylinder

container of one brand with the liquefied petroleum gas of another brand.

 

The Facts and the Case

 

Respondent Petron Corporation (Petron) sold and distributed liquefied petroleum gas (LPG) in cylinder

tanks that carried its trademark “Gasul.”[1]  Respondent Carmen J. Doloiras owned and operated Kristina

Patricia Enterprises (KPE), the exclusive distributor of Gasul LPGs in the whole of Sorsogon.[2]  Jose Nelson

Doloiras (Jose) served as KPE’s manager.   

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Bicol Gas Refilling Plant Corporation (Bicol Gas) was also in the business of selling and distributing

LPGs in Sorsogon but theirs carried the trademark “Bicol Savers Gas.”  Petitioner Audie Llona managed Bicol

Gas. 

 

In the course of trade and competition, any given distributor of LPGs at times acquired possession of

LPG cylinder tanks belonging to other distributors operating in the same area.  They called these “captured

cylinders.”  According to Jose, KPE’s manager, in April 2001 Bicol Gas agreed with KPE for the swapping of

“captured cylinders” since one distributor could not refill captured cylinders with its own brand of LPG.  At one

time, in the course of implementing this arrangement, KPE’s Jose visited the Bicol Gas refilling plant.   While

there, he noticed several Gasul tanks in Bicol Gas’ possession.  He requested a swap but Audie Llona of Bicol

Gas replied that he first needed to ask the permission of the Bicol Gas owners.  That permission was given and

they had a swap involving around 30 Gasul tanks held by Bicol Gas in exchange for assorted tanks held by

KPE. 

 

KPE’s Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard.   He offered to

make a swap for these but Llona declined, saying the Bicol Gas owners wanted to send those tanks to

Batangas.  Later Bicol Gas told Jose that it had no more Gasul tanks left in its possession.  Jose observed on

almost a daily basis, however, that Bicol Gas’ trucks which plied the streets of the province carried a load of

Gasul tanks.  He noted that KPE’s volume of sales dropped significantly from June to July 2001.

 

On August 4, 2001 KPE’s Jose saw a particular Bicol Gas truck on the Maharlika Highway.  While the

truck carried mostly Bicol Savers LPG tanks, it had on it one unsealed 50-kg Gasul tank and one 50-kg

Shellane tank.  Jose followed the truck and when it stopped at a store, he asked the driver, Jun Leorena, and

the Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck.   They said it was empty

but, when Jose turned open its valve, he noted that it was not.  Misal and Leorena then admitted that the Gasul

and Shellane tanks on their truck belonged to a customer who had them filled up by Bicol Gas.  Misal then

mentioned that his manager was a certain Rolly Mirabena.

 

Because of the above incident, KPE filed a complaint[3] for violations of Republic Act (R.A.) 623

(illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of trade marks) and

169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293).  The complaint charged the following:

Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and several John and Jane Does, described as the

directors, officers, and stockholders of Bicol Gas.  These directors, officers, and stockholders were eventually

identified during the preliminary investigation. 

 

Subsequently, the provincial prosecutor ruled that there was probable cause only for violation of R.A.

623 (unlawfully filling up registered tanks) and that only the four Bicol Gas employees, Mirabena, Misal,

Leorena, and petitioner Llona, could be charged.  The charge against the other petitioners who were the

stockholders and directors of the company was dismissed.

 

Dissatisfied, Petron and KPE filed a petition for review with the Office of the Regional State Prosecutor,

Region V, which initially denied the petition but partially granted it on motion for reconsideration.  The Office

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of the Regional State Prosecutor ordered the filing of additional informations against the four employees of

Bicol Gas for unfair competition.  It ruled, however, that no case for trademark infringement was present.  The

Secretary of Justice denied the appeal of Petron and KPE and their motion for reconsideration. 

 

Undaunted, Petron and KPE filed a special civil action for certiorari with the Court of Appeals[4] but the

Bicol Gas employees and stockholders concerned opposed it, assailing the inadequacy in its certificate of non-

forum shopping, given that only Atty. Joel Angelo C. Cruz signed it on behalf of Petron.  In its Decision[5] dated

October 17, 2005, the Court of Appeals ruled, however, that Atty. Cruz’s certification constituted sufficient

compliance.  As to the substantive aspect of the case, the Court of Appeals reversed the Secretary of Justice’s

ruling.  It held that unfair competition does not necessarily absorb trademark infringement.  Consequently, the

court ordered the filing of additional charges of trademark infringement against the concerned Bicol Gas

employees as well. 

 

Since the Bicol Gas employees presumably acted under the direct order and control of its owners, the

Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the various charges, bringing to

16 the number of persons to be charged, now including petitioners Manuel C. Espiritu, Jr., Freida F. Espiritu,

Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna,

Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. de Castro, Geronima A. Almonite, and Manuel C. Dee

(together with Audie Llona), collectively, petitioners Espiritu, et al.  The court denied the motion for

reconsideration of these employees and stockholders in its Resolution dated January 6, 2006, hence, the

present petition for review[6] before this Court.

 

The Issues Presented

 

          The petition presents the following issues:

 

1.       Whether or not the certificate of non-forum shopping that accompanied the

petition filed with the Court of Appeals, signed only by Atty. Cruz on behalf of Petron, complied

with what the rules require;

 

2.       Whether or not the facts of the case warranted the filing of charges against the

Bicol Gas people for:

 

a)       Filling up the LPG tanks registered to another manufacturer

without the latter’s consent in violation of R.A. 623, as amended;

 

b)      Trademark infringement consisting in Bicol Gas’ use of a

trademark that is confusingly similar to Petron’s registered “Gasul” trademark

in violation of section 155 also of R.A. 8293; and

 

c)       Unfair competition consisting in passing off Bicol Gas-produced

LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293.

 

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The Court’s Rulings

 

First.  Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents

KPE and Petron attached to the petition they filed with the Court of Appeals was inadequate, having been

signed only by Petron, through Atty. Cruz. 

 

But, while procedural requirements such as that of submittal of a certificate of non-forum shopping

cannot be totally disregarded, they may be deemed substantially complied with under justifiable

circumstances.[7]  One of these circumstances is where the petitioners filed a collective action in which they

share a common interest in its subject matter or raise a common cause of action.  In such a case, the

certification by one of the petitioners may be deemed sufficient.[8] 

 

Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely, the

violation of their proprietary rights with respect to the use of Gasul tanks and trademark.  Furthermore, Atty.

Cruz said in his certification that he was executing it “for and on behalf of the Corporation, and co-petitioner

Carmen J. Doloiras.”[9] Thus, the object of the requirement – to ensure that a party takes no recourse to

multiple forums – was substantially achieved.  Besides, the failure of KPE to sign the certificate of non-forum

shopping does not render the petition defective with respect to Petron which signed it through Atty. Cruz.[10]  The Court of Appeals, therefore, acted correctly in giving due course to the petition before it.

 

Second.  The Court of Appeals held that under the facts of the case, there is probable cause that

petitioners Espiritu, et al. committed all three crimes: (a) illegally filling up an LPG tank registered to Petron

without the latter’s consent in violation of R.A. 623, as amended; (b) trademark infringement which consists in

Bicol Gas’ use of a trademark that is confusingly similar to Petron’s registered “Gasul” trademark in violation

of Section 155 of R.A. 8293; and (c) unfair competition which consists in petitioners Espiritu, et al. passing off

Bicol Gas-produced LPGs for Petron-produced Gasul LPG in violation of Section 168.3 of R.A. 8293. 

 

Here, the complaint adduced at the preliminary investigation shows that the one 50-kg Petron Gasul

LPG tank found on the Bicol Gas’ truck “belonged to [a Bicol Gas] customer who had the same filled up by

BICOL GAS.”[11]  In other words, the customer had that one Gasul LPG tank brought to Bicol Gas for refilling

and the latter obliged. 

 

R.A. 623, as amended,[12] punishes any person who, without the written consent of the manufacturer or

seller of gases contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank, for the

purpose of sale, disposal or trafficking, other than the purpose for which the manufacturer or seller registered

the same.  This was what happened in this case, assuming the allegations of KPE’s manager to be true.  Bicol

Gas employees filled up with their firm’s gas the tank registered to Petron and bearing its mark without the

latter’s written authority.  Consequently, they may be prosecuted for that offense. 

 

But, as for the crime of trademark infringement, Section 155 of R.A. 8293 (in relation to Section 170 [13])

provides that it is committed by any person who shall, without the consent of the owner of the registered mark:

 

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1.         Use in commerce any reproduction, counterfeit, copy or colorable imitation of a

registered mark or the same container or a dominant feature thereof in connection with the

sale, offering for sale, distribution, advertising of any goods or services including other

preparatory steps necessary to carry out the sale of any goods or services on or in connection

with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

 

2.         Reproduce, counterfeit, copy or colorably imitate a registered mark or a

dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation

to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used

in commerce upon or in connection with the sale, offering for sale, distribution, or advertising

of goods or services on or in connection with which such use is likely to cause confusion, or to

cause mistake, or to deceive.

 

KPE and Petron have to show that the alleged infringer, the responsible officers and staff of Bicol Gas,

used Petron’s Gasul trademark or a confusingly similar trademark on Bicol Gas tanks with intent to deceive the

public and defraud its competitor as to what it is selling.[14]   Examples of this would be the acts of an

underground shoe manufacturer in Malabon producing “Nike” branded rubber shoes or the acts of a local shirt

company with no connection to La Coste, producing and selling shirts that bear the stitched logos of an open-

jawed alligator.

 

Here, however, the allegations in the complaint do not show that Bicol Gas painted on its own tanks

Petron’s Gasul trademark or a confusingly similar version of the same to deceive its customers and cheat

Petron.  Indeed, in this case, the one tank bearing the mark of Petron Gasul found in a truck full of Bicol Gas

tanks was a genuine Petron Gasul tank, more of a captured cylinder belonging to competition.  No proof has

been shown that Bicol Gas has gone into the business of distributing imitation Petron Gasul LPGs. 

 

As to the charge of unfair competition, Section 168.3 (a) of R.A. 8293 (also in relation to Section 170)

describes the acts constituting the offense as follows:

 

168.3.  In particular, and without in any way limiting the scope of protection against

unfair competition, the following shall be deemed guilty of unfair competition:

 

(a)        Any person, who is selling his goods and gives them the general

appearance of goods of another manufacturer or dealer, either as to the goods

themselves or in the wrapping of the packages in which they are contained, or

the devices or words thereon, or in any other feature of their appearance,

which would be likely to influence purchasers to believe that the goods offered

are those of a manufacturer or dealer, other than the actual manufacturer or

dealer, or who otherwise clothes the goods with such appearance as shall

deceive the public and defraud another of his legitimate trade, or any

subsequent vendor of such goods or any agent of any vendor engaged in selling

such goods with a like purpose;

 

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Essentially, what the law punishes is the act of giving one’s goods the general appearance of the goods

of another, which would likely mislead the buyer into believing that such goods belong to the latter.  Examples

of this would be the act of manufacturing or selling shirts bearing the logo of an alligator, similar in design to

the open-jawed alligator in La Coste shirts, except that the jaw of the alligator in the former is closed, or the

act of a producer or seller of tea bags with red tags showing the shadow of a black dog when his competitor is

producing or selling popular tea bags with red tags showing the shadow of a black cat. 

 

Here, there is no showing that Bicol Gas has been giving its LPG tanks the general appearance of the

tanks of Petron’s Gasul.  As already stated, the truckfull of Bicol Gas tanks that the KPE manager arrested on a

road in Sorsogon just happened to have mixed up with them one authentic Gasul tank that belonged to

Petron.  

 

The only point left is the question of the liability of the stockholders and members of the board of

directors of Bicol Gas with respect to the charge of unlawfully filling up a steel cylinder or tank that belonged

to Petron.  The Court of Appeals ruled that they should be charged along with the Bicol Gas employees who

were pointed to as directly involved in overt acts constituting the offense.

 

Bicol Gas is a corporation.  As such, it is an entity separate and distinct from the persons of its officers,

directors, and stockholders.  It has been held, however, that corporate officers or employees, through whose

act, default or omission the corporation commits a crime, may themselves be individually held answerable for

the crime.[15] 

 

Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol

Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the owners of Bicol Gas

about it.  Subsequently, Bicol Gas declined the offer to swap cylinders for the reason that the owners wanted to

send their captured cylinders to Batangas.  The Court of Appeals seized on this as evidence that the employees

of Bicol Gas acted under the direct orders of its owners and that “the owners of Bicol Gas have full control of

the operations of the business.”[16]

 

The “owners” of a corporate organization are its stockholders and they are to be distinguished from its

directors and officers.  The petitioners here, with the exception of Audie Llona, are being charged in their

capacities as stockholders of Bicol Gas.  But the Court of Appeals forgets that in a corporation, the

management of its business is generally vested in its board of directors, not its stockholders. [17]  Stockholders

are basically investors in a corporation.  They do not have a hand in running the day-to-day business operations

of the corporation unless they are at the same time directors or officers of the corporation.  Before a

stockholder may be held criminally liable for acts committed by the corporation, therefore, it must be shown

that he had knowledge of the criminal act committed in the name of the corporation and that he took part in

the same or gave his consent to its commission, whether by action or inaction.

 

The finding of the Court of Appeals that the employees “could not have committed the crimes without

the consent, [abetment], permission, or participation of the owners of Bicol Gas”[18] is a sweeping speculation

especially since, as demonstrated above, what was involved was just one Petron Gasul tank found in a truck

filled with Bicol Gas tanks. Although the KPE manager heard petitioner Llona say that he was going to consult

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the owners of Bicol Gas regarding the offer to swap additional captured cylinders, no indication was given as

to which Bicol Gas stockholders Llona consulted.  It would be unfair to charge all the stockholders involved,

some of whom were proved to be minors.[19]  No evidence was presented establishing the names of the

stockholders who were charged with running the operations of Bicol Gas.  The complaint even failed to allege

who among the stockholders sat in the board of directors of the company or served as its officers.

 

The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr. as

the registered owner of the truck that the KPE manager brought to the police for investigation because that

truck carried a tank of Petron Gasul.  But the act that R.A. 623 punishes is the unlawful filling up of registered

tanks of another.  It does not punish the act of transporting such tanks.  And the complaint did not allege that

the truck owner connived with those responsible for filling up that Gasul tank with Bicol Gas LPG. 

 

WHEREFORE, the Court REVERSES and SETS ASIDE the Decision of the Court of Appeals in CA-

G.R. SP 87711 dated October 17, 2005 as well as its Resolution dated January 6, 2006, the Resolutions of the

Secretary of Justice dated March 11, 2004 and August 31, 2004, and the Order of the Office of the Regional

State Prosecutor, Region V, dated February 19, 2003.  The Court REINSTATES the Resolution of the Office of

the Provincial Prosecutor of Sorsogon in I.S. 2001-9231 (inadvertently referred in the Resolution itself as I.S.

2001-9234), dated February 26, 2002.  The names of petitioners Manuel C. Espiritu, Jr., Freida F. Espititu,

Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna, Hermilyn A. Mirabuna, Kim Roland A. Mirabuna,

Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna, Juanito P. De Castro, Geronima A. Almonite and Manuel C. Dee

are ORDERED excluded from the charge.

Manolo Samson vs. Caterpillar, G.R. No. 169882, August 12, 2007

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Amended

Decision[1] dated 8 August 2005, rendered by the Court of Appeals in CA-G.R. SP No. 80532, (1) reversing its

Decision,[2] dated 13 December 2004, in which it set aside the Order dated 31 January 2003 of Branch 211 of

the MandaluyongRegional Trial Court (RTC), dismissing Criminal Case No. MC02-5019 filed against

petitioner Manolo P. Samson (Samson) for violation of Republic Act No. 8293, otherwise known as the

Intellectual Property Code of the Philippines, specifically Section 168.3(a) on Unfair Competition, Section

123.1 (e) and Section 131.3 on registration of trademarks, in relation to Section 170 thereof; and (2) directing

the Mandaluyong RTC to conduct an independent assessment of whether the Motion to Withdraw Information

filed by the state prosecutor is warranted.

 

Samson is the owner of retail outlets within the Philippines, which sell, among other things, footwear,

clothing, bags and other similar items, bearing the mark “Caterpillar” and “Cat.”  Samson registered the

aforementioned marks for shoes, slippers, sandals and boots with the Bureau of Patents, Trademarks &

Technology Transfer (whose functions are presently exercised by Intellectual Property Office) in 1997.[3]

 

Caterpillar is a foreign corporation, primarily in the business of manufacturing equipment used in

construction, mining, road building and agricultural industries.  Since the 1960’s, however, it had expanded its

product line to clothing and, since 1988, to footwear.  Caterpillar alleges that it is a widely known brand name

and that its products are being internationally distributed.[4]

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          As early as 26 July 2000, Branch 56 of the Makati RTC, issued Search Warrants No. 00-022 to No. 00-

032 against establishments owned by Samson.  This led to the seizure of various retail items such as footwear,

clothing, accessories, and leatherware for Unfair Competition under the Intellectual Property

Code.  Caterpillar filed criminal complaints before the Department of Justice (DOJ).  In addition, Caterpillar

filed a civil action on 31 July 2000, heard before Branch 90 of the Quezon City RTC for Unfair Competition,

Damages and Cancellation of Trademark with an Application for a Temporary Restraining Order and/or Writ of

Preliminary Injunction docketed as Civil Case No. Q-00-41445.[5]

 

Since Samson allegedly continued to sell and distribute merchandise which bore the disputed

“Caterpillar” marks, Caterpillar sought the issuance of another set of search warrants against Samson.  On 18

December 2000, Branch 172 of the Valenzuela RTC in Search Warrants No. 12-V-00 to No. 37-V-00 issued 26

writs of search warrants under which various clothing items were seized by National Bureau of Investigation

(NBI) agents as evidence of violations of the law on unfair competition.

 

On 23 January 2001, Caterpillar, through its legal counsel, filed 26 criminal complaints against Samson

before the DOJ, for alleged violations of Section 168.3(a) on Unfair Competition, Section 123.1(e) and Section

131.3 on registration of trademarks, in relation to Section 170 of the Intellectual Property Code.[6]

 

The complaints were docketed as I.S. Nos. 2001-42 to 2001-67 and assigned to State

Prosecutor Zenaida Lim of the Task Force on Anti-Intellectual Property Piracy.  But before the determination

by the DOJ on whether Samson should be criminally charged with Unfair Competition, the Valenzuela RTC

already issued an Order, dated 26 June 2001, quashing the search warrants issued in Search Warrants No. 12-

V-00 to No. 37-V-00.[7]

 

The DOJ, through State Prosecutor Lim, subsequently issued a Joint Resolution, dated 28 September

2001, recommending that Samson be criminally charged with unfair competition under Section 168.3(a), in

relation to Section 131.1, 123.1 and 170 of the Intellectual Property Code.  Resulting from the said Resolution,

Criminal Case No. MC02-5019 was filed with the Mandaluyong RTC.[8]

 

Samson filed a Petition for Review of the foregoing Joint Resolution, with the Secretary of Justice.  His

petition was granted.  In a Resolution dated 13 January 2003, the Acting Secretary of

Justice, Merceditas Gutierrez, recommended the withdrawal of the criminal informations filed against Samson

before various courts on the ground that there was lack of probable cause.  Caterpillar filed a Motion for

Reconsideration, which was denied by Acting Secretary of Justice Gutierrez on 25 September 2003.  An appeal

questioning the DOJ Resolution dated 13 January 2003 of Acting Secretary of Justice Gutierrez was filed by

Caterpillar before the Court of Appeals docketed as CA-G.R. No. 79937.[9]

 

Meanwhile, pursuant to the Resolution dated 13 January 2003 of Acting Secretary of Justice Gutierrez,

State Prosecutor Lim filed an Ex Parte Motion to Withdraw Information in Criminal Case No. MC02-5019

before the Mandaluyong RTC.  On 31 January 2003, the Mandaluyong RTC issued an Order granting the

withdrawal of the Information against Samson.[10]  The entire text of the said Decision reads:     

           

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This refers to the Ex-Parte Motion to Withdraw Information filed on January 31,

2003 by State Prosecution Zenaida M. Lim of the Department of Justice in connection with

Resolution No. 011, Series of 2003, dated January 13, 2003 of the Acting Secretary of Justice

Ma. Merceditas N. Gutierrez reversing and setting aside the resolution of said state prosecutor

and directed the Chief State Prosecutor Jovencito R. Zuño to withdraw the informations filed in

this court against Manolo Samson.

 

WHEREFORE, finding the said motion to be in order and it appearing that accused has

not yet been arraigned and therefore the court has not yet acquired jurisdiction over the

subject accused, the court hereby grants the withdrawal of the information in the above-

entitled case as it is hereby ordered withdrawn form the record files of the court. [11]

 

 

Caterpillar filed a Motion for Reconsideration, which was denied by the Mandaluyong RTC in an Order

dated 27 August 2003:

 

For resolution is a Motion for Reconsideration of the order of the court dated January 31,

2003 granting the withdrawal of the information from the record files of the court, filed

on February 21, 2003, by the plaintiff in the above-entitled case.

 

Hearing on the motion together with the opposition thereto was held after which, the

same was submitted for resolution.

 

After the court examined with great care the bases advanced by both parties in the

aforesaid motion, the court was unable to find any cogent justification to overturn or set aside its

previous order, there being no new issues raised and the same are rehash of its previous

pleadings.

 

WHEREFORE, premises considered, plaintiff’s Motion for Reconsideration is hereby

DENIED.[12]

 

 

Caterpillar filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules of Court,

assailing the Order dated 31 January 2003 of the MandaluyongRTC, docketed as CA-G.R. SP No. 80532.  The

Court of Appeals, in a Decision dated 13 December 2004, dismissed the Petition on the ground that Caterpillar

lacked the legal standing to question the proceedings involving the criminal aspect of the case, and that its

participation is limited only to the recovery of civil liability.  The appellate court also took into account the

denial by the Acting Secretary of Justice Gutierrez of Caterpillar’s Motion for Reconsideration of her order to

withdraw the Informations against Samson and, thus, ruled that this rendered the case moot and academic.[13]

 

Caterpillar filed a Motion for Reconsideration of the aforementioned Decision rendered by the Court of

Appeals.  In its Amended Decision dated 8 August 2005, the Court of Appeals reversed its earlier ruling and

declared that the Mandaluyong RTC gravely abused its discretion when it merely relied on the Resolution,

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dated 13 January 2003 of Acting Secretary of Justice Gutierrez in ordering the withdrawal of the information

filed before it without making an independent assessment of the case. [14]  In the dispositiveportion of its

Amended Decision, the Court of Appeals ruled that:

 

            WHEREFORE, in view [of] the foregoing rationications, the petitioner’s Motion for

Reconsideration is hereby GRANTED.  The decision of this Court dated 13 December 2004, as

well as the assailed orders of the respondent court dated 31 January 2003 and 27 August 2003

are hereby REVERSED and SET ASIDE.

 

            The respondent court is hereby ordered to CONDUCT an independent assessment of

whether the motion to withdraw information filed by the state prosecutor is warranted under

the circumstances obtaining in the case. [15]

 

 

Samson filed with the Court of Appeals a Motion for Reconsideration of the Amended Decision, dated 8

August 2005, which was denied on 27 September 2005.  Hence, the present Petition, where he is raising

the following issues:

 

I

THE COURT OF APPEALS GROSSLY ERRED IN RULING THAT THE RESPONDENT JUDGE IN

CA-G.R. NO. SP 80532 FAILED IN HER BOUNDEN DUTY TO DETERMINE THE MERITS OF

THE PROSECUTION’S EX-PARTE MOTION TO WITHDRAW; and

 

 

II

THE COURT OF APPEALS LIKEWISE ERRED IN IGNORING ITS OWN DECISION FINDING

RESPONDENT CATERPILLAR, INC., AS PRIVATE COMPLAINANT, BEREFT OF AUTHORITY

TO ASSAIL THE STATE PROSECUTOR’S EX-PARTE MOTION TO WITHDRAW THE

INFORMATION BECAUSE THE CRIMINAL ASPECT OF A CRIMINAL CASE IS UNDER THE

DIRECTION AND CONTROL OF THE PROSECUTION AND, CONSEQUENTLY, PRIVATE

COMPLAINANT HAS NO BUSINESS WHATSEOEVER IN THE PROCEEDINGS. [16]

 

 

Before discussing the merits of the Petition at bar, this Court notes that on 15 February 2005, the

Court of Appeals rendered a Decision in CA-G.R. SP No. 79937 in favor of Caterpillar.  To recall, this was the

petition filed by Caterpillar to assail the Resolution of Acting Secretary of Justice Gutierrez dated 13 January

2003, directing the Chief State Prosecutor to cause the withdrawal of Informations against Samson.  The

appellate court reversed said Resolution and pronounced that sufficient probable cause existed to justify the

filing of Informations against Samson.  Thus, it ordered the re-filing of the Informations before the proper trial

courts.[17]  

 

In its Decision in CA-G.R. SP No. 79937, the Court of Appeals held that the withdrawal of

the Informations against Samson, predicated on the quashal of the search warrants, was a manifest

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error.  Consistent with the doctrine laid out in Solid Triangle Sales Corporation v. The Sheriff of

RTC, Quezon City, Branch 93,[18]  the appellate court ruled that the earlier finding of probable cause against

Samson was not affected by the quashal of the warrants since independent evidence gathered by the NBI from

the 24 test-buy operations it conducted in 1999 is sufficient to support such finding.  It reiterated the findings

of State Prosecutor Lim:

 

Respondent’s use of depictions of heavy machinery and equipment, such as tractors, to

market his products, would verily show that he is passing off his products as those of

Caterpillar’s xxx. Meanwhile, the similarity in the appearance of the goods manufactured or sold

by respondent with those of Caterpillar’s footwear products would demonstrate that he is passing

off his product as those of genuine Caterpillar footwear products.  Accordingly, “where the

similarity in the appearance of the goods as packed and offered for sale is so striking, this fact

shows intent on the part of defendant to deceive the public and defraud plaintiff out of his

trade.  The intent to deceive may be inferred from the similarity of the goods as packed and

offered for sale, and an action will lie to restrain such unfair competition and for damages.”

x x x[19].

 

 

On appeal docketed as G.R. No. 169199, this Court ruled that the Court of Appeals did not commit any

reversible error. 

 

By sustaining the Decision of the Court of Appeals in said case, this Court, in a Resolution dated 17

October 2005, had already ruled that probable cause exists for the re-filing of a criminal case against Samson

for unfair competition under the Intellectual Property Code.  Samson filed a Motion for Reconsideration of this

Court’s Resolution, which was denied with finality on 20 March 2006.  Entry of judgment was already made in

said case on 18 April 2006; hence, rendering said judgment final and executory.  The repeated confirmation of

the finding of probable cause against Samson, which this Court cannot now overturn, effectively and decisively

determines the issues in this petition.

 

The findings of the Court of Appeals in CA-G.R. SP No. 79937, affirmed by this Court in G.R. No.

169199, have rendered the present petition moot and academic.  It is a rule that is unanimously observed that

courts of justice will take cognizance only of justiciable controversies wherein actual and not merely

hypothetical issues are involved.[20]  A case becomes moot and academic when there is no more actual

controversy between the parties and no useful purpose can be served in passing upon the merits. [21]  Since this

Court, in affirming the said Decision of the Court of Appeals, already found it imperative for the Chief State

Prosecutor to re-file the Informations against Samson for unfair competition, Criminal Case No. MC02-5019

should be re-opened and heard by the Mandaluyong RTC.   The rendering of a decision on the merits of this

case would be of no practical value.   Hence, this case is dismissible.[22]

 

IN VIEW OF THE FOREGOING, the instant Petition is DENIED and the assailed Amended Decision

of the Court of Appeals in CA-G.R. SP No. 80532, promulgated on 8 August 2005, is AFFIRMED WITH

MODIFICATION.  The Order of the Court of Appeals in C.A.-G.R. SP No. 80532 directing Branch 211 of

the MandaluyongRegional Trial Court to conduct an independent assessment is REVERSED.  This

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Court ORDERS Branch 211 of the Mandaluyong Regional Trial Court to re-open and hear Criminal Case

No. MC02-5019.  Costs against the petitioner.

Levi’s Strauss vs. Tony Lim, G.R. No. 162311, December 4, 2008

THE remedy of a party desiring to elevate to the appellate court an adverse resolution of the Secretary

of Justice is a petition for certiorari under Rule 65.  A Rule 43 petition for review is a wrong mode of appeal.[1]

 

During preliminary investigation, the prosecutor is vested with authority and discretion to determine if

there is sufficient evidence to justify the filing of an information.  If he finds probable cause to indict the

respondent for a criminal offense, it is his duty to file the corresponding information in court.  However, it is

equally his duty not to prosecute when after an investigation, the evidence adduced is not sufficient to

establish a prima faciecase.[2]                                                                                                                                                                                 

                                                                                                                                                                           

           Before the Court is a petition for review on certiorari[3] of the Decision[4] and Resolution[5] of the Court of

Appeals (CA), affirming the resolutions of the Department of Justice (DOJ) finding that there is no probable

cause to indict respondent Tony Lim, a.k.a. Antonio Guevarra, for unfair competition.

 

The Facts

 

Petitioner Levi Strauss (Phils.), Inc. is a duly-registered domestic corporation.  It is a wholly-owned

subsidiary of Levi Strauss & Co. (LS & Co.) a Delaware, USAcompany.

 

In 1972, LS & Co. granted petitioner a non-exclusive license to use its registered trademarks and trade

names[6] for the manufacture and sale of various garment products, primarily pants, jackets, and shirts, in the

Philippines.[7]  Presently, it 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.  These trademarks are

registered in over 130 countries, including the Philippines,[8] and were first used in commerce in

the Philippines in 1946.[9]

 

Sometime in 1995, petitioner lodged a complaint[10] before the Inter-Agency Committee on Intellectual

Property Rights, alleging  that  a  certain establishment in Metro Manila was manufacturing garments using

colorable imitations of the LEVI’S trademarks.[11]  Thus, surveillance was conducted on the premises of

respondent Tony Lim, doing business under the name Vogue Traders Clothing Company.[12]  The investigation

revealed that respondent was engaged in the manufacture, sale, and distribution of products similar to those of

petitioner and under the brand name “LIVE’S.”[13]

 

On December 13, 1995, operatives of the Philippine National Police (PNP) Criminal Investigation

Unit[14] served search warrants[15] on respondent’s premises at 1042 and1082 Carmen Planas Street,

Tondo, Manila.  As a result, several items[16] were seized from the premises.[17]

 

 

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The PNP Criminal Investigation Command (PNP CIC) then filed a complaint[18] against respondent

before the DOJ for unfair competition[19] under the old Article 189 of the Revised Penal Code, prior to its repeal

by Section 239 of Republic Act (RA) No. 8293.[20]  The PNP CIC claimed that a “confusing similarity” could be

noted between petitioner’s LEVI’s jeans and respondent’s LIVE’S denim jeans and pants.

 

In his counter-affidavit,[21] 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, [22] while the patch

pocket design for “LIVE’S” pants has copyright registration,[23] 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[24] 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.[25]

 

In its reply-affidavit, petitioner maintained that there is likelihood of confusion between the competing

products because: (1) a slavish imitation of petitioner’s “arcuate” trademark has been stitched on the

backpocket of “LIVE’S” jeans; (2) the appearance of the mark “105” on respondent’s product is obviously a

play on petitioner’s “501” trademark; (3) the appearance of the word/phrase “LIVE’S” and “LIVE’S ORIGINAL

JEANS” is confusingly similar to petitioner’s “LEVI’S” trademark; (4) a red tab, made of fabric, attached at the

left seam of the right backpocket of petitioner’s standard five-pocket jeans, also appears at the same place on

“LIVE’S” jeans; (5) the patch used on “LIVE’S” jeans (depicting three men on each side attempting to pull

apart a pair of jeans) obviously thrives on petitioner’s own patch showing two horses being whipped by two

men in an attempt to tear apart a pair of jeans; and (6) “LEVI’S” jeans are packaged and sold with carton

tickets, which are slavishly copied by respondent in his own carton ticket bearing the marks “LIVE’S,” “105,”

the horse mark, and basic features of petitioner’s ticket designs, such as two red arrows curving and pointing

outward, the arcuate stitching pattern, and a rectangular portion with intricate border orientation.[26]

 

DOJ Rulings

 

On October 8, 1996, Prosecution Attorney Florencio D. Dela Cruz recommended the dismissal[27] of the

complaint.  The prosecutor agreed with respondent that his products are not clothed with an appearance

which is likely to deceive the ordinary purchaser exercising ordinary care.  The recommendation was approved

by Assistant Chief State Prosecutor Lualhati R. Buenafe.

 

On appeal, then DOJ Secretary Teofisto Guingona affirmed the prosecutor’s

dismissal  of  the  complaint on  January 9, 1998.[28]  Prescinding from the basic rule that to be found guilty of

unfair competition, a person shall, by imitation or any unfair device, induce the public to believe that his goods

are those of another, Secretary Guingona stated:

 

 

 

            In the case at bar, complainant has not shown that anyone was actually deceived by

respondent.  Respondent’s product, which bears the trademark LIVE’s, has an entirely different

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spelling and meaning with the trademark owned by complainant which is LEVI’s.

Complainant’s trademark comes from a Jewish name while that of respondent is merely an

adjective word. Both, when read and pronounced, would resonate different sounds. While

respondent’s “LIVE’s” trademark may appear similar, such could not have been intended by

the respondent to deceive since he had the same registered with the appropriate government

agencies. Granting arguendo, that respondent’s trademark or products possessed similar

characteristics with the trademark and products of complainant, on that score alone, without

evidence or proof that such was a device of respondent to deceive the public to the damage of

complainant no unfair competition is committed.[29]

 

          On February 13, 1998, petitioner filed a motion for reconsideration of Secretary Guingona’s resolution,

alleging, among others, that only a likelihood of confusion is required to sustain a charge of unfair

competition.  It also submitted the results of a consumer survey[30] involving a comparison of petitioner’s and

respondent’s products.

 

On June 5, 1998, Justice Secretary Silvestre Bello III, Guingona’s successor, granted petitioner’s

motion and directed the filing of an information against respondent.[31]

 

WHEREFORE, our resolution dated 9 January 1998 is hereby reversed and set aside.

You are directed to file an information for unfair competition under Article 189 of the Revised

Penal Code, as amended, against respondent Tony Lim. Report the action taken thereon within

ten (10) days from receipt hereof.[32]

 

Secretary Bello reasoned that under Article 189 of the Revised Penal Code, as amended, exact

similarity of the competing products is not required.  However, Justice Guingona’s resolution  incorrectly

dwelt  on  the specific differences in the details of the products.[33]  Secretary Bello’s own factual findings

revealed:

 

 

x x x [I]t is not difficult to discern that respondent gave his products the general

appearance as that of the product of the complainant.  This was established by the

respondent’s use of the complainant’s arcuate backpocket design trademark; the 105 mark

which apparently is a spin-off of the 501 mark of the complainant; the patch which was clearly

patterned after that of the complainant’s two horse patch design trademark; the red tab on the

right backpocket; the wordings which were crafted to look similar with the Levis trademark of

the complainant; and even the packaging.  In appropriating himself the general appearance of

the product of the complainant, the respondent clearly intended to deceive the buying public.

Verily, any person who shall employ deception or any other means contrary to good faith by

which he shall pass of the goods manufactured by him or in which he deals, or his business, or

services for those of the one having established good will shall guilty of unfair competition.

 

Respondent’s registration of his trademark can not afford him any remedy. Unfair

competition may still be prosecuted despite such registration.[34]  (Citation omitted)

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          Respondent then filed his own motion for reconsideration of the Bello resolution. On May 7, 1999, new

DOJ Secretary Serafin Cuevas granted respondent’s motion and ordered the dismissal of the charges against

him.[35]

 

CA Disposition

 

          Dissatisfied with the DOJ rulings, petitioner sought recourse with the CA via a petition for review under

Rule 43 of the 1997 Rules of Civil Procedure.  On October 17, 2003, the appellate court affirmed the dismissal

of the unfair competition complaint.

 

WHEREFORE, premises considered, the petition for review is DENIED and is

accordingly DISMISSED for lack of merit.

 

SO ORDERED.[36]

 

The CA pointed out that to determine the likelihood of confusion, mistake or deception, all relevant

factors and circumstances should be taken into consideration, such as the circumstances under which the

goods are sold, the class of purchasers, and the actual occurrence or absence of confusion.[37]

 

Thus, 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 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.[38]

 

Issues

 

          Petitioner submits that the CA committed the following errors:

 

I.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT ACTUAL CONFUSION IS

NECESSARY TO SUSTAIN A CHARGE OF UNFAIR COMPETITION, AND THAT THERE MUST

BE DIRECT EVIDENCE OR PROOF OF INTENT TO DECEIVE THE PUBLIC.

 

II.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENT’S LIVE’S

JEANS DO NOT UNFAIRLY COMPETE WITH LEVI’S ® JEANS AND/OR THAT THERE IS NO

POSSIBILITY THAT THE FORMER WILL BE CONFUSED FOR THE LATTER, CONSIDERING

THAT RESPONDENT’S LIVE’S JEANS BLATANTLY COPY OR COLORABLY IMITATE NO LESS

THAN SIX (6) TRADEMARKS OF LEVI’S JEANS.

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III.

THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE EVIDENCE ON

RECORD, CONSISTING OF THE SCIENTIFICALLY CONDUCTED MARKET SURVEY ANDTHE

AFFIDAVIT OF THE EXPERT WITNESS ON THE RESULTS THEREOF, WHICH SHOW THAT

RESPONDENT’S LIVE’S JEANS ARE, IN FACT, BEING CONFUSED FOR LEVI’S JEANS.

 

IV.

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE ISSUE OF CONFUSION

SHOULD ONLY BE DETERMINED AT THE POINT OF   SALE .

 

V.

THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DIRECT THE SECRETARY OF

JUSTICE TO CAUSE THE FILING OF THE APPROPRIATE INFORMATION IN COURT AGAINST

THE RESPONDENT.[39]  (Underscoring supplied)

 

Our Ruling

 

          In essence, petitioner asks this Court to determine if probable cause exists to charge respondent with

the crime of unfair competition under Article 189(1) of the Revised Penal Code, prior to its repeal by Section

239 of RA No. 8293.

 

However, that is a factual issue[40] the resolution of which is improper in a Rule 45 petition.[41]  The only

legal issue left for the Court to determine is whether the issue of confusion

should  be  determined  only  at  the  point  of sale.

 

Nonetheless, there is sufficient reason for this Court to dismiss this petition merely by looking at the

procedural avenue petitioner used to have the DOJ resolutions reviewed by the CA.

 

Petitioner filed with the CA a petition for review under Rule 43 of the 1997 Rules of Civil Procedure.[42]  Rule 43 governs all appeals from [the Court of Tax Appeals and] quasi-judicial bodies to the CA.  Its Section

1 provides:

 

 

 

Section 1. Scope. – This Rule shall apply to appeals from [judgments or final orders of

the Court of Tax Appeals and from] awards, judgments, final orders or resolutions of or

authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among

these agencies are the Civil Service Commission, Central Board of Assessment Appeals,

Securities and Exchange Commission, Office  of  the  President, Land Registration Authority,

Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and

Technology Transfer, National Electrification Administration, Energy Regulatory Board,

National Telecommunications Commission, Department of Agrarian Reform under Republic Act

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No. 6657, Government Service Insurance System, Employees Compensation Commission,

Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission,

Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators

authorized by law.[43]

 

          Clearly, the DOJ is not one of the agencies enumerated in Section 1 of Rule 43 whose awards,

judgments, final orders, or resolutions may be appealed to the CA.

 

The Court has consistently ruled that the filing with the CA of a petition for review under Rule

43 to question the Justice Secretary’s resolution regarding the determination of probable cause is an

improper remedy.[44]

 

Under the 1993 Revised Rules on Appeals from Resolutions in Preliminary Investigations or

Reinvestigations,[45] the resolution of the investigating prosecutor is subject to appeal to the Justice

Secretary[46] who, under the Revised Administrative Code, exercises the power of control and supervision over

said Investigating Prosecutor; and who may affirm, nullify, reverse, or modify the ruling of such prosecutor.[47]  If the appeal is dismissed, and after the subsequent motion for reconsideration is resolved, a party has no

more appeal or other remedy available in the ordinary course of law.[48]  Thus, the Resolution of the Justice

Secretary affirming, modifying or reversing the resolution of the Investigating Prosecutor is final.[49]

 

There being no more appeal or other remedy available in the ordinary course of law, the remedy of the

aggrieved party is to file a petition for certiorari under Rule 65. Thus, while the  CA  may review the

resolution of the Justice Secretary, it  may do so  only  in  a  petition  for  certiorari  under Rule 65 of the 1997

Rules of Civil Procedure,solely on the ground that the Secretary of Justice committed grave abuse of

discretion amounting to excess or lack of jurisdiction.[50]

 

Verily, when respondent filed a petition for review under Rule 43 instead of a petition

for certiorari under Rule 65, the CA should have dismissed  it  outright.  However, the appellate court chose to

determine if DOJ Secretaries Guingona and Cuevas correctly determined the absence of probable cause.

 

Now, even if We brush aside technicalities and consider the petition for review filed with the CA as one

under Rule 65, the petition must fail just the same.

 

While the resolution of the Justice Secretary may be reviewed by the Court, it is not

empowered to substitute its judgment for that of the executive branchwhen there is no grave abuse

of discretion.[51]

 

Courts are without power to directly decide matters over which full discretionary authority has been

delegated to the legislative or executive branch of the government. [52] The determination of probable cause is

one such matter because that authority has been given to the executive branch, through the DOJ.[53]

 

It bears stressing that the main function of a government prosecutor is to determine the existence of

probable cause and to file the corresponding information should he find it to be so. [54]  Thus, the decision

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whether or not to dismiss the criminal complaint against respondent is necessarily dependent on the sound

discretion of the investigating prosecutor and ultimately, that of the Secretary of Justice.[55]

 

A prosecutor, by the nature of his office, is under no compulsion to file a particular criminal

information where he is not convinced that he has evidence to prop up its averments, or that the evidence at

hand points to a different conclusion. This is not to discount the possibility of the commission of abuses on the

part of the prosecutor.  But this Court must recognize that a prosecutor should not be unduly compelled to

work against his conviction.  Although the power and prerogative of the prosecutor to determine whether or

not the evidence at hand is sufficient to form a reasonable belief that a person committed an offense is not

absolute but subject to judicial review, it would be embarrassing for him to be compelled to prosecute a case

when he is in no position to do so, because in his opinion he does not have the necessary evidence to secure a

conviction, or he is not convinced of the merits of the case.[56]

 

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 exercised the discretion lodged in

him by law.  He found that:

 

 

First,  the  LIVE’S mark of the respondent’s goods is spelled and pronounced differently

from the LEVI’S mark of the complainant.

 

Second, the backpocket design allegedly copied by the respondent from the registered

arcuate design of the complainant, appears to be different in view of the longer curved arms

that stretch deep downward to a point of convergence where the stitches form a rectangle. The

arcuate design for complainant LEVI’s jeans form a diamond instead. And

assuming  arguendo  that there is similarity in the design of backpockets between the

respondent’s goods and that of the complainant, this alone does not establish that respondent’s

jeans were intended to copy the complainant’s goods and pass them off as the latter’s products

as this design is simple and may not be said to be strikingly distinct absent the other LEVI’S

trademark such as the prints on the button, rivets, tags and the like. x x x Further, the

presence of accessories bearing Levi’s trademark was not established as there were no such

accessories seized from the respondent and instead genuine LIVE’S hangtags, button and

patches were confiscated during the search of latter’s premises.

 

Second, the design of the patches attached to the backpockets of the respondent’s

goods depicts three men on either side of a pair of jeans attempting to pull apart said jeans,

while the goods manufactured by complainant with patches also attached at the right

backpockets depicts two horses being whipped by two men in an attempt to tear apart a pair of

jeans.  It is very clear therefore that the design of the backpocket patches by the respondent is

different from that of the complainant, in the former the men were trying to pull apart the

pants while in the latter horses are the ones doing the job. Obviously, there is a great

difference between a man and a horse and this will naturally not escape the eyes of an ordinary

purchaser.

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Third, the manner by which Levi’s jeans are packed and sold with carton tickets

attached to the products cannot be appropriated solely by complainant to the exclusion of all

other manufacturers of same class.  It frequently happens that goods of a particular class are

labeled by all manufacturer[s] in a common manner. In cases of that sort, no manufacturer may

appropriate for himself the method of labeling or packaging [of] his merchandise and then

enjoin other merchants from using it. x x x.

 

Fourth, evidence shows that there is a copyright registration issued by the National

Library over the backpocket design of the respondent. And this copyright registration gives the

respondent the right to use the same in his goods x x x.[57]

 

The determination of probable cause is part of the discretion granted to the investigating prosecutor

and ultimately, the Secretary of Justice.  Courts are not empowered to substitute their own judgment for that

of the executive branch.[58]

 

 

The court’s duty in an appropriate case is confined to a determination of whether the assailed

executive or judicial determination of probable cause was done without or in excess of jurisdiction or with

grave abuse of discretion amounting to want of jurisdiction.[59]  For grave abuse of discretion to prosper as a

ground for certiorari, it must be demonstrated that the lower court or tribunal has exercised its power in an

arbitrary and despotic manner, by reason of passion or personal hostility, and it must be patent and gross as

would amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplation of

law.[60]

 

In the case at bar, no grave abuse of discretion on the part of the DOJ was shown.  Petitioner merely

harps on the error committed by the DOJ and the CA in arriving at their factual finding that there is no

confusing similarity between petitioner’s and respondent’s products. While it is possible that the investigating

prosecutor and Secretaries Guingona and Cuevas erroneously exercised their discretion when they found that

unfair competition was not committed, this by itself does not render their acts amenable to correction and

annulment by the extraordinary remedy of certiorari.  There must be a showing of grave abuse of discretion

amounting to lack or excess of jurisdiction.[61]

 

We are 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.

 

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.[62]

 

The elements of unfair competition under Article 189(1)[63] of the Revised Penal Code are:

 

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(a)      That the offender gives his goods the general appearance of the goods of another

manufacturer or dealer;

(b)      That the general appearance is shown in the (1) goods themselves, or in the (2)

wrapping of their packages, or in the (3) device or words therein, or in (4) any other

feature of their appearance;

(c)      That the offender offers to sell or sells those goods or gives other persons a chance or

opportunity to do the same with a like purpose; and

(d)      That there is actual intent to deceive the public or defraud a competitor.[64]

 

All these elements must be proven.[65]  In finding that probable cause for unfair competition does not

exist, the investigating prosecutor and Secretaries Guingona and Cuevas arrived at the same conclusion that

there is insufficient evidence to prove all the elements of the crime that would allow them to secure a

conviction.

 

Secretary Guingona 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.[66]  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.[67]  Indeed,  registration  does  not  negate unfair competition where the goods are

packed or offered for sale and passed off as those of complainant.[68]  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.

 

For his part, Justice Cuevas failed to find the possibility of confusion and of intent to deceive the public,

relying on Emerald Garment Manufacturing Corporation v. Court of Appeals.[69]  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.

 

We cannot subscribe to petitioner’s stance that Emerald Garment cannot apply because there was only

one point of comparison, i.e., “LEE” as it appears in Emerald Garment’s “STYLISTIC MR. LEE.” 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,[70] 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.

 

The rule laid down in Emerald Garment and Del Monte is consistent with Asia Brewery, Inc. v. Court of

Appeals,[71] 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.[72]

 

Petitioner argues that the element of intent to deceive may be inferred from the similarity of the goods

or their appearance.[73]  The argument is specious on two fronts. First, where the similarity in the appearance

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of the goods as packed and offered for sale is so striking, intent to deceive may be inferred.[74]  However, as

found by the investigating prosecutor and the DOJ Secretaries, striking similarity between the competing

goods is not present.

 

Second, the confusing similarity of the goods was precisely in issue during the preliminary

investigation.  As such, the element of intent to deceive  could  not  arise  without the  investigating

prosecutor’s or the DOJ Secretary’s  finding  that  such  confusing similarity exists.  Since confusing similarity

was not found, the element of fraud or deception could not be inferred.

 

We cannot sustain Secretary Bello’s opinion that to establish probable cause, “it is enough that the

respondent gave to his product the general appearance of the product”[75] of petitioner.  It bears stressing that

that is only one element of unfair competition.  All others must be shown to exist.  More importantly, the

likelihood of confusion exists not only if there is confusing similarity.  It should also be likely to cause confusion

or mistake or deceive purchasers.[76]  Thus, the CA correctly ruled that the mere fact that some resemblance

can be pointed out between the marks used does not in itself prove unfair competition. [77]  To reiterate, the

resemblance must be such as is likely to deceive the ordinary purchaser exercising ordinary care.[78]

The consumer survey alone does not equate to actual confusion.  We note that the survey was made by

showing the interviewees actual samples of petitioner’s and respondent’s respective products, approximately

five feet away from them.  From  that  distance, they were asked to identify the jeans’ brand and  state the

reasons for thinking so.[79]  This method discounted the possibility that the ordinary intelligent buyer would be

able to closely scrutinize, and even fit, the jeans to determine if they were “LEVI’S” or not.  It also ignored that

a consumer would consider the price of the competing goods when choosing a brand of jeans.  It is undisputed

that “LIVE’S” jeans are priced much lower than “LEVI’S.”

 

The Court’s observations in Emerald Garment are illuminating on this score:

 

First, the products involved in the case at bar are, in the main, various kinds of jeans. x

x x  Maong pants or jeans are not inexpensive.   Accordingly, the casual buyer is predisposed to

be more cautious and discriminating in and would prefer to mull over his purchase.  Confusion

and deception, then, is less likely.  In Del Monte Corporation v. Court of Appeals, we noted

that:

 

… Among these, what essentially determines the attitudes of the

purchaser, specifically his inclination to be cautious, is the cost of the

goods.  To be sure, a person who buys a box of candies will not exercise as

much care as one who buys an expensive watch. As a general rule, an ordinary

buyer does not exercise as much prudence in buying an article for which he

pays a few centavos as he does in purchasing a more valuable

thing.  Expensive and valuable items are normally bought only after

deliberate, comparative and analytical investigation. But mass products,

low priced articles in wide use, and matters of everyday purchase requiring

frequent replacement are bought by the casual consumer without great care.[80]  (Emphasis supplied)

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          We find 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.[81]

 

In sum, absent a grave abuse of discretion on the part of the executive branch tasked with the

determination of probable cause during preliminary investigation, We cannot nullify acts done in the exercise

of the executive officers’ discretion. Otherwise, We shall violate the principle that the purpose of a preliminary

investigation is to secure the innocent against hasty, malicious and oppressive prosecution, and to protect him

from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial, and also

to protect the State from useless and expensive trials.[82]

 

WHEREFORE, the petition is DENIED and the appealed Decision of the Court of

Appeals AFFIRMED.

Sketchers, USA vs. Inter Pacific Industrial, G.R. NO. 164321, March 23, 2011

 For resolution are the twin Motions for Reconsideration[1] filed by petitioner and petitioner-intervenor from the

Decision rendered in favor of respondents, dated November 30, 2006.

 

          At the outset, a brief narration of the factual and procedural antecedents that transpired and led to the

filing of the motions is in order.

 

          The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court (RTC) of

Manila an application for the issuance of search warrants against an outlet and warehouse operated by

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respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic Act No.

8293, otherwise known as theIntellectual Property Code of the Philippines.[2] In the course of its business,

petitioner has registered the trademark “SKECHERS”[3] and the trademark “S” (within an oval design)[4] with

the Intellectual Property Office (IPO).

 

          Two search warrants[5] were issued by the RTC and were served on the premises of respondents. As a

result of the raid, more than 6,000 pairs of shoes bearing the “S” logo were seized.

 

          Later, respondents moved to quash the search warrants, arguing that there was no confusing similarity

between petitioner’s “Skechers” rubber shoes and its “Strong” rubber shoes.

 

          On November 7, 2002, the RTC issued an Order[6] quashing the search warrants and directing the NBI to

return the seized goods. The RTC agreed with respondent’s view that Skechers rubber shoes and Strong

rubber shoes have glaring differences such that an ordinary prudent purchaser would not likely be misled or

confused in purchasing the wrong article.

 

          Aggrieved, petitioner filed a petition for certiorari[7] with the Court of Appeals (CA) assailing the RTC

Order. On November 17, 2003, the CA issued a Decision[8]affirming the ruling of the RTC.

           

          Subsequently, petitioner filed the present petition[9] before this Court which puts forth the following

assignment of errors:

 

 

A.    WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK

INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN

IT SHOULD HAVE LIMITED ITSELF TO A DETERMINATION OF WHETHER THE TRIAL

COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH

WARRANTS.

 

B.     WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

FINDING THAT RESPONDENTS ARE NOT GUILTY OF TRADEMARK INFRINGEMENT IN

THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE

CAUSE TO ISSUE A SEARCH WARRANT.[10]

In the meantime, petitioner-intervenor filed a Petition-in-Intervention[11] with this Court claiming to be

the sole licensed distributor of Skechers products here in thePhilippines.

 

On November 30, 2006, this Court rendered a Decision[12] dismissing the petition.

 

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

 

In petitioner’s motion for reconsideration, petitioner moved for a reconsideration of the earlier decision

on the following grounds:

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(a)        THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO

THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b)       COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED

REPRODUCTIONS OF THE “S” TRADEMARK OWNED BY PETITIONER WERE

INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF

PETITIONER – RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY

AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c)        THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED WITH

GRAVE ABUSE OF DISCRETION.

(d)       THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE EVIDENCE

PRESENTED DURING THE SEARCH WARRANT APPLICATION PROCEEDINGS.

(e)        THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED ON

A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE

THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS

WAS IMPROPER.

(f)        THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS

CLEAR. THE DOMINANCY TEST SHOULD BE USED.

(g)       THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION.[13]

 

On the other hand, petitioner-intervenor’s motion for reconsideration raises the following errors for

this Court’s consideration, to wit:

 

(a)                THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED

CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED

HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b)               THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED

CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR

TRADEMARK INFRINGEMENT; AND

(c)                THE COURT OF APPEALS SANCTIONED THE TRIAL COURT’S DEPARTURE

FROM THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT

UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A

FINDING THAT THERE IS NO CONFUSING SIMILARITY.[14]

 

 

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the primary

issue posed by them dwells on the issue of whether or not respondent is guilty of trademark infringement.

 

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

 

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293.

Specifically, Section 155 of R.A. No. 8293 states:

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Remedies; Infringement. — Any person who shall, without the consent of the owner of

the registered mark:

 

155.1. Use in commerce any reproduction, counterfeit, copy, or

colorable imitation of a registered mark or the same container or a

dominant feature thereof in connection with the sale, offering for sale,

distribution, advertising of any goods or services including other preparatory

steps necessary to carry out the sale of any goods or services on or in

connectionwith which such use is likely to cause confusion, or to cause

mistake, or to deceive; or

 

155.2. Reproduce, counterfeit, copy or colorably imitate a registered

mark or a dominant feature thereof and apply such reproduction,

counterfeit, copy or colorable imitation to labels, signs, prints, packages,

wrappers, receptacles or advertisements intended to be used in commerce

upon or in connection with the sale, offering for sale, distribution, or

advertising of goods or services on or in connection with which such use is

likely to cause confusion, or to cause mistake, or to deceive, shall be

liable in a civil action for infringement by the registrant for the remedies

hereinafter set forth: Provided, That the infringement takes place at the

moment any of the acts stated in Subsection 155.1 or this subsection are

committed regardless of whether there is actual sale of goods or services using

the infringing material.[15]

 

 

          The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause

confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests  the

Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent

or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the

mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark

sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual

impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality,

sales outlets, and market segments.[16]

 

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as

applied to the products, including the labels and packaging, in determining confusing similarity. The

discerning eye of the observer must focus not only on the predominant words, but also on the other features

appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to

the other.[17]

 

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types

of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be

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induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business

(source or origin confusion), where, although the goods of the parties are different, the product, the mark of

which registration is applied for by one party, is such as might reasonably be assumed to originate with the

registrant of an earlier product, and the public would then be deceived either into that belief or into the belief

that there is some connection between the two parties, though inexistent.[18]

 

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized “S” by

respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the IPO.

While it is undisputed that petitioner’s stylized “S” is within an oval design, to this Court’s mind, the dominant

feature of the trademark is the stylized “S,” as it is precisely the stylized “S” which catches the eye of the

purchaser.  Thus, even if respondent did not use an oval design, the mere fact that it used the same stylized

“S”, the same being the dominant feature of petitioner’s trademark, already constitutes infringement under the

Dominancy Test.

 

This Court cannot agree with the observation of the CA that the use of the letter “S” could hardly be

considered as highly identifiable to the products of petitioner alone. The CA even supported its conclusion by

stating that the letter “S” has been used in so many existing trademarks, the most popular of which is the

trademark “S” enclosed by an inverted triangle, which the CA says is identifiable to Superman. Such

reasoning, however, misses the entire point, which is that respondent had used a stylized “S,” which is the

same stylized “S” which petitioner has a registered trademark for.  The letter “S” used in the Superman logo,

on the other hand, has a block-like tip on the upper portion and a round elongated tip on the lower portion.

Accordingly, the comparison made by the CA of the letter “S” used in the Superman trademark with

petitioner’s stylized “S” is not appropriate to the case at bar.

 

 Furthermore, respondent did not simply use the letter “S,” but it appears to this Court that based on

the font and the size of the lettering, the stylized “S” utilized by respondent is the very same stylized “S” used

by petitioner; a stylized “S” which is unique and distinguishes petitioner’s trademark. Indubitably, the

likelihood of confusion is present as purchasers will associate the respondent’s use of the stylized “S” as

having been authorized by petitioner or that respondent’s product is connected with petitioner’s business.

 

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed

petitioner’s trademark. For its part, the RTC noted the following supposed dissimilarities between the shoes,

to wit:

 

1.      The mark “S” found in Strong Shoes is not enclosed in an “oval design.”

2.      The word “Strong” is conspicuously placed at the backside and insoles.

3.      The hang tags and labels attached to the shoes bears the word “Strong” for respondent

and “Skechers U.S.A.” for private complainant;

4.      Strong shoes are modestly priced compared to the costs of Skechers Shoes.[19]

 

 

While there may be dissimilarities between the appearances of the shoes, to this Court’s mind such

dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be readily

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observed by simply comparing petitioner’s Energy[20] model and respondent’s Strong[21] rubber shoes,

respondent also used the color scheme of blue, white and gray utilized by petitioner. Even the design and

“wavelike” pattern of the midsole and outer sole of respondent’s shoes are very similar to petitioner’s shoes, if

not exact patterns thereof. At the side of the midsole near the heel of both shoes are two elongated designs in

practically the same location. Even the outer soles of both shoes have the same number of ridges, five at the

back and six in front.  On the side of respondent’s shoes, near the upper part, appears the stylized “S,” placed

in the exact location as that of the stylized “S” on petitioner’s shoes. On top of the "tongue" of both shoes

appears the stylized “S” in practically the same location and size. Moreover, at the back of petitioner’s shoes,

near the heel counter, appears “Skechers Sport Trail” written in white lettering. However, on respondent’s

shoes appears “Strong Sport Trail” noticeably written in the same white lettering, font size, direction and

orientation as that of petitioner’s shoes. On top of the heel collar of petitioner’s shoes are two grayish-white

semi-transparent circles. Not surprisingly, respondent’s shoes also have two grayish-white semi-transparent

circles in the exact same location.

 

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic

test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to this Court

that there is colorable imitation.  The dissimilarities between the shoes are too trifling and frivolous that it is

indubitable that respondent’s products will cause confusion and mistake in the eyes of the public.

Respondent’s shoes may not be an exact replica of petitioner’s shoes, but the features and overall design are

so similar and alike that confusion is highly likely.

 

In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc.,[22] this Court, in a case for unfair

competition, had opined that even if not all the details are identical, as long as the general appearance of the

two products are such that any ordinary purchaser would be deceived, the imitator should be liable, to wit:

 

From said examination, We find the shoes manufactured by defendants to contain, as

found by the trial court, practically all the features of those of the plaintiff Converse Rubber

Corporation and manufactured, sold or marketed by plaintiff Edwardson Manufacturing

Corporation, except for their respective brands, of course. We fully agree with the trial court

that "the respective designs, shapes, the colors of the ankle patches, the bands, the toe patch

and the soles of the two products are exactly the same ... (such that) at a distance of a few

meters, it is impossible to distinguish "Custombuilt" from "Chuck Taylor." These elements are

more than sufficient to serve as basis for a charge of unfair competition. Even if not all the

details just mentioned were identical, with the general appearances alone of the two products,

any ordinary, or even perhaps even a not too perceptive and discriminating customer could be

deceived, and, therefore, Custombuilt could easily be passed off for Chuck Taylor.

Jurisprudence supports the view that under such circumstances, the imitator must be held

liable. x x x[23]

 

 

Neither can the difference in price be a complete defense in trademark infringement. In McDonald’s

Corporation v. L.C. Big Mak Burger. Inc.,[24] this Court held:

 

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INTELLECTUAL PROPERTY TRADEMARK PUP COLLEGE OF LAW

Modern law recognizes that the protection to which the owner of a trademark is

entitled is not limited to guarding his goods or business from actual market competition with

identical or similar products of the parties, but extends to all cases in which the use by a

junior appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as

where prospective purchasers would be misled into thinking that the complaining party has

extended his business into the field (see 148 ALR 56 et seq; 53 Am. Jur. 576) or is in any way

connected with the activities of the infringer; or when it forestalls the normal potential

expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). x x x[25]

 

 

Indeed, the registered trademark owner may use its mark on the same or similar products, in different

segments of the market, and at different price levels depending on variations of the products for specific

segments of the market.[26] The purchasing public might be mistaken in thinking that petitioner had ventured

into a lower market segment such that it is not inconceivable for the public to think that Strong or Strong

Sport Trail might be associated or connected with petitioner’s brand, which scenario is plausible especially

since both petitioner and respondent manufacture rubber shoes.  

 

Withal, the protection of trademarks as intellectual property is intended not only to preserve the

goodwill and reputation of the business established on the goods bearing the mark through actual use over a

period of time, but also to safeguard the public as consumers against confusion on these goods. [27] While

respondent’s shoes contain some dissimilarities with petitioner’s shoes, this Court cannot close its eye to the

fact that for all intents and purpose, respondent had deliberately attempted to copy petitioner’s mark and

overall design and features of the shoes. Let it be remembered, that defendants in cases of infringement do not

normally copy but only make colorable changes.[28] The most successful form of copying is to employ enough

points of similarity to confuse the public, with enough points of difference to confuse the courts.[29]

 

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED.  The Decision

dated November 30, 2006 is RECONSIDERED and SET ASIDE.

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