intellectual property law cases

G.R. No. 180073

November 25, 2009

PROSOURCE INTERNATIONAL, INC., Petitioner, vs. HORPHAG RESEARCH MANAGEMENT SA, Respondent. DECISION NACHURA, J.: 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, 2007 and Resolution 2 dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court (RTC) 3 Decision4 dated January 16, 2006 and Order5 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). 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. 16618 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 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 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 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. In Marvex 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 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. 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. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice WE CONCUR:

G.R. No. 166115

February 2, 2007

McDONALD’S CORPORATION, Petitioner, vs. MACJOY FASTFOOD CORPORATION, Respondent. DECISION GARCIA, J.: 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 Opposition 3 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. 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 Order 5 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 CAG.R. SP No. 57247. Finding no confusing similarity between the marks "MACJOY" and "MCDONALD’S," the CA, in its herein assailed Decision 7 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 "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 Resolution 8 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. 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 Certification 10 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. 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 purc hasers; 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 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 c onfusingly 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. CA 24 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. 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. 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 37 27 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 1977 30 ; 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 Law 33 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 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. No pronouncement as to costs. SO ORDERED. CANCIO C. GARCIA Associate Justice

G.R. No. 143993

August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, vs. L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

DECISION

CARPIO, J.: The Case This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals 2 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's 4 owns a family of marks5 including the "Big Mac" mark for its "double-decker hamburger sandwich." 6 McDonald'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 items 8 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 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 fastfood 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 by the consuming public so much so that its airconditioned 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 outlet thereof. 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 law concerning 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; 2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of P400,000.00, 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 as for 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 defendantsappellants, 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 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 plaintiffsappellees' 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 accommodate additional customers, a drivethru 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 plaintiffsappellees 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 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. 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 Appeals 27 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,32 defines trademark infringement as follows: 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.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 4 36 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 a kind 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 Principal Register, and thus not distinctive, has no real protection. 47 Indeed, we have held that registration 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." 52 Thus, 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. 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 doubledeckers 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. 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 sufficient that 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 from the adoption 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, s ales 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 are encountered 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. 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. This increases 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 equal number 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]" trademark, with their alleged sentimentfocused "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 any subsequent 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 mind of the public; or

(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 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 words that 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. 82 Respondents, 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 The RTC also did not err in awarding exemplary damages by way of correction for the public good 85 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. SO ORDERED.

G.R. No. L-5378

May 24, 1954

In Re Petition for Registration of Trademark "Freedom" under section 4 of Republic Act No. 166 filed in the Philippine Patent Office bearing Serial No. 38. CO TIONG SA, applicantpetitioner, vs. DIRECTOR OF PATENTS, respondent, SAW WOO CHIONG AND CO., oppositor. Antonio Fa., Quesada, Floro Crisologo, Manuel A. Panis and Rizalino L. Favilla for petitioner. Eufemio E. de Mesa and E. L. Gonzales for oppositor. First Assistant Solicitor General Ruperto Kapunan Jr. and Solicitor Pacifico P. de Castro for respondent. LABRADOR, J.: This is an appeal filed by Co Tiong Sa, applicant for registration of the trademark "Freedom" and its corresponding design, against a decision of the Director of Patents sustaining the opposition thereto of Saw Woo Chiong and Co., and denying the application. The application in said registration proceeding, now petitioner in this Court, has used the trademark on undershirts and T-shirts since March, 1947. The trademark sought to be registered is "Freedom". The word "Freedom" is in hand print, with a slight to the right. In the facsimiles attached to the original application, there are no letters, lines, or figures around the word, but in the label, Exhibit D-1, the said word is preceded by a triangle, with the letter "F" inside and small letters "H.L." under. A capital letter "L" is on the lower right-hand corner; and all of these are enclosed in a rectangle of double lines. In Exhibit D-2, the label is the same word "Freedom" with a capital letter "M" above it, a flourish under the word "Freedom", and the words "HIGH QUALITY" thereunder. The label used for boxes is similar to label Exhibit D-1, except that the rectangle is in a heavy line and is longer. The label presented by Saw Woo Chiong and Co., oppositor-respondent herein (Exhibit D-3), consist of the word "Freeman" in hand print, with a right slant, above the middle of which is a vignette of a man wearing a to what, which vignette is preceded by the small word "The" in print and followed by two parallel lines close to each other, and the words "PERFECT WEAR" in smaller letters under the word "FREEMAN". This trademark was registered in 1947 in the Bureau of Commerce and reregistered in the Patent Office on September 22, 1948. This trademark is used not only on shirts, but also on polo shirts, undershirts, pajamas, skippers, and T-shirts, although in the year 1947 Saw Woo Chiong and Co. discontinued manufacturing skippers and T-shirts on the ground of scarcity of materials. This trademark has been used since 1938, and it had been advertised extensively in newspapers, magazines, etc. The applicant-petitioner claims that in sustaining the objection of the oppositor-respondent, the Director of Patents erred: (1) in holding that in determining an opposition in the registration of trademarks, attention should be centered upon the central idea of each trademark, disregarding their differences in details; (2) in holding that if the central idea of each trademark gives the same general impression, the two trademarks should be adjudged as confusingly similar; (3) in holding that the word "FREEDOM" and "FREEMAN" convey the same general impression, hence must be adjudged to be confusingly similar; (4) in holding that if the word "FREEDOM" is allowed to be registered as trademark, although no confusion and deception will actually take place, the oppositor will nevertheless be damaged; and (5) in holding that the oppositor is not required to introduce testimony on substantiate the claim made in its opposition. The first four assignments of error are related to each other and may be considered together. There is no question that if the details of the two trademarks are to be considered, many differences would be noted that would enable a careful and scrutinizing eye to distinguish one trademark from the other. Thus, we have the vignette of a man wearing a to what, which would distinguish the oppositor's label from the triangle with the letter "F" on the right hand corner of applicant's label. Then we also have the rectangle enclosing the applicant's mark, which rectangle is absent in that of the oppositor's. But differences of variations in the details of one trademark and of another are not the legally accepted tests of similarity in trademarks. 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, infrigement takes place.

Duplication or limitation 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 mistake in the mind of the public or to deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d, 588, citing Procter and Gamble Co. vs. J. L. Prescott Co., 49 F. 2d, 959, 18 CCPA, Patent, 1433; Pepsodent Co. vs. Comfort Manufacturing Co., 83 F. 2d 906, 23 CCPA, Patents, 1224.) When would a trademark cause confusion in the mind of the public or in those unwary customers or purchasers? It must be remembered that infringement of a trademark is a form of unfair competition (Clarke vs. Manila Candy Co., 36 Phil., 100), and unfair competition is always a question of fact. The universal test has been said to be whether the public is likely to be deceived. (Alhambra Cigar and Cigarette Co. vs. Mojica, 27 Phil., 266.) When a person sees an object, a central or dominant idea or picture thereof is formed in his mind. This dominant picture or idea is retained in the mind, and the decorations or details are forgotten. When one sees the city hall of Baguio, the dominant characteristics which are likely to be retained in the mind are the portico in the middle of the building, the tower thereon, the four columns supporting it, and the wings on both sides. The features that are retained are the peculiar, dominant features. When on sees the Legislative Building in Manila, the picture that is retained is that of a majestic low building with concrete columns all around. In this mind-picture the slight or minor decorations are lost sight of, and the central figure only is retained. So is it with a customer or purchaser who sees a label. He retains in his mind the dominant characteristics or features or c entral idea in the label, and does not retain or forgets the attendant decorations, flourishes, or variations. The ordinary customer does not scrutinize the details of the label; he forgets or overlooks these, but retains a general impression, or a central figure, or a dominant characteristic. The reason for the above has been explained in the following manner: . . . This rule has a basis in experience. The average person usually will not, and often can not, take in at a casual glance all, or even a large part of the details of what he looks at. What part or parts of two trademarks which are alleged to be similar does the average ordinary buyer see when he looks at them? What features of them are remembered by the average buyer? We do not really hear all that is spoken in our hearing. Far from all we see or hear casually is retained sufficiently clearly or insufficient detail for us to get a lasting impression of it which we can remember when we encounter the mark again. The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of the help of our eyes and must depend entirely on the ear. The average buyer usually seeks a sign, some special, easily remembered earmarks of the brand he has in mind. It may be the color, sound, design, or a peculiar shape or name. Once his eyes see that or his ear hears it, he is satisfied. An unfair competitor need not copy the entire mark to accomplish his fraudulent purpose. It is enough if he takes the one feature which the average buyer is likely to remember. (Nims, The Law of Unfair Competition and Trademarks, 4th ed., Vol. 2, pp. 678-679). The question of infringement is to be determined by the test of dominancy. The dissimilarity in size, form and color of the label and the place where applied are not conclusive. If the competing label contains the trademark of another, and confusion or deception is likely to result, infringement takes place, regardless of the fact that the accessories are dissimilar. Duplication or exact 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, citing Eagle Co. vs. Pflugh (C.C.) 180 F., 579.) In order to constitute infringement, it is not necessary that the trademark be literally copied. ... . Neither is it necessary that every word be appropriated. There may be infringement where the substantial and distinctive part of the trademark is copied or imitated .... Dissimilarity in size, form and color of the label and place where it is applied are not conclusive against infringement. ... . The resemblances may so far dominate the differences as to be likely to deceive ordinary purchasers. (Queen Mfg. Co. vs. Isaac Ginsberg Bros. Co., 25 F 2d 284, 287. See also Finchley, Inc. vs. George Hess Co., Inc., et al., 24 F., Supp. 94.)

Upon examination of the trademark of the oppositor-respondent, one will readily see that the dominant feature is the word "FREEMAN" written in a peculiar print, slightly slanting to the right, with a peculiarly written capital letters "FF". These dominant features or characteristics of oppositor's trademarks are reproduced or imitated in applicant's trademark. In the first place, the word "FREEDOM" conveys a similar idea as the word "FREEMAN". In the second place, the style in which both capital "F" are written are similar. The print and slant of the letters are also similar. An ordinary purchaser or an unsuspecting customer who has seen the oppositor's label sometime before will not recognize the difference between that label and applicant's label. He may notice some variations, but he will ignore these, believing that they are variations of the same trademark to distinguish one kind or quality of goods from another. For purposes of illustration, the following words have been held to have the same significance or to have the same appearance and meaning. "CELDURA" and "CORDURA". — That both marks considered as a whole are similar in meaning and appearance can not be doubted. When spoken as written they sound very much alike. Similarity of sound alone, under such circumstances, is sufficient to cause the marks to be regarded as confusingly similar when applied to merchandise of the same descriptive properties. (Celanes Corporation of America vs. E. I. Du Pont de Nemours and Co. (1946),154 F. 2d 146, 148.) "SKOAL" and "SKOL", and "SKOAL" was held identical in sound and meaning to "SKOL". (SKOL Co., Inc., vs. Olson, 151 F. 2d, 200.) In this jurisdiction we have held that that name "Lusolin" is an infringement of the trademark "Sapolin," as the sound of the two names is almost the same, and the labels of containers being almost the same in respect to color, size, and other characteristics. (Sapolin Co. vs. Balmeceda and Germann and Co., 67 Phil., 705.) In the case of La Insular vs. Jao Oge, 47 Phil., 75, plaintiff's label represented an European female, while defendant's was a Filipino, but both labels exhibited a matron seated on a platform with a view of Manila Bay looking towards Mariveles at sunset. In spite of the fact that the posture and coloring were slightly different, defendant's labels were declared to constitute an infringement of plaintiff's labels. After a careful study, we find that the dominant characteristic of oppositor's trademark "FREEMAN" has been imitated in applicant's trademark "FREEDOM," such as to confuse the public and unwary customers and puchasers, and to deceive them into believing that the articles bearing one label are similar or produced by the same manufacturer as those carrying the other label. The decision of the Director of Patents sustaining the opposition and denying the application must, therefore, be affirmed. With respect to the fifth assignment of error (first in petitioner's brief), it must be remembered that the question of similarity or dissimilarity while it is a question of opinion, is to be determined by the court mainly on the basis of the facsimiles or labels or pictures submitted to the Director of Patents. In the case at bar, innumerable exhibits were presented to show the similarity. Similarity or dissimilarity can be determined by the Director of Patents, or by this Court on appeal, by a mere examination and comparison of the competing trademarks. Failure on the part of the oppositor to submit the testimony of witnesses, who are to give opinions on the alleged similarity or dissimilarity, can not, therefore, be a ground for a dismissal of an opposition. We hold that the Director of Patents did not err in denying the motion for dismissal presented by the applicant upon the failure of the oppositor to submit witnesses to sustain his opposition. Finding no error in the decision appealed from, the same is hereby affirmed, with costs against the applicant-petitioner Co Tiong Sa. Paras, C. J., Pablo, Bengzon, Montemayor, Reyes, A., Jugo, Bautista Angelo, and Concepcion, JJ., concur.

SOCIETE DES PRODUITS NESTLE, S.A., Petitioner,

G.R. No. 172276

Present: CARPIO, J., Chairperson, NACHURA, - versus -

PERALTA, ABAD, and MENDOZA, JJ.

MARTIN T. DY, JR., Promulgated: Respondent. August 8, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition challenges the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The Court of Appeals reversed the 18 September 1998 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345. The Facts

Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the laws of Switzerland. It manufactures food products and beverages. As evidenced by Certificate of Registration No. R-14621 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and Technology Transfer, Nestle owns the “NAN” trademark for its line of infant powdered milk products, consisting of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6 — “diatetic preparations for infant feeding.”

Nestle distributes and sells its NAN milk products all over the Philippines.

It has been

investing tremendous amounts of resources to train its sales force and to promote the NAN milk products through advertisements and press releases.

Dy, Jr. owns 5M Enterprises.

He imports Sunny Boy powdered milk from Australia and

repacks the powdered milk into three sizes of plastic packs bearing the name “NANNY.” The packs weigh 80, 180 and 450 grams and are sold for P8.90, P17.50 and P39.90, respectively. NANNY is is also classified under Class 6 — “full cream milk for adults in [sic] all ages.” Dy, Jr. distributes and sells the powdered milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao. In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using “NANNY” and to

undertake that he would stop infringing the “NAN” trademark. Dy, Jr. did not act on Nestle’s request. On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a complaint against Dy, Jr. for infringement. Dy, Jr. filed a motion to dismiss alleging that the complaint did not state a cause of action. In its 4 June 1990 order, the trial court dismissed the complaint. Nestle appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further proceedings.

Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion to transfer the case to the RTC, Judicial Region 7, Branch 9, Cebu City, which was designated as a special court for intellectual property rights. The RTC’s Ruling

In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court held:

If determination of infringement shall only be limited on whether or not the mark used would likely cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the most considered view of this forum would be highly unlikely to happen in the instant case. This is because upon comparison of the plaintiff’s NAN and defendant’s NANNY, the following features would reveal the absence of any deceptive tendency in defendant’s NANNY: (1) all NAN products are contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the labels of NAN products are blue and white, while the predominant colors in the plastic packings of NANNY are blue and green; (3) the labels of NAN products have at the bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name “Nestle”, while the plastic packs of NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends; and (5) all NAN products are milk formulas intended for use of [sic] infants, while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use of the “test of dominancy” because the deceptive tendency of the unregistered trademark NANNY is not apparent from the essential features of the registered trademark NAN. However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug. 31, 1982, the Supreme Court took the occasion of discussing what is implied in the definition of “infringement” when it stated: “Implicit in this definition is the concept that the goods must be so related that there is likelihood either of confusion of goods or business. x x x But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For noncompeting goods may be those which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be those which, being entirely unrelated, could not reasonably be assumed to have a common source. In the former case of related goods, confusion of business could arise out of the use of similar marks; in the

latter case of non-related goods, it could not.” Furthermore, in said case the Supreme Court as well discussed on when goods may become so related for purposes of infringement when it stated: “Goods are related when they belong to the same class or have same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. x x x Considering that defendant’s NANNY belongs to the same class as that of plaintiff’s NAN because both are food products, the defendant’s unregistered trade mark NANNY should be held an infringement to plaintiff’s registered trademark NAN because defendant’s use of NANNY would imply that it came from the manufacturer of NAN. Furthermore, since the word “nanny” means a “child’s nurse,” there might result the not so remote probability that defendant’s NANNY may be confused with infant formula NAN despite the aparent [sic] disparity between the features of the two products. Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals. The Court of Appeals’ Ruling In its 1 September 2005 Decision, the Court of Appeals reversed the trial court’s 18 September 1998 Decision and found Dy, Jr. not liable for infringement. The Court of Appeals held:

[T]he trial court appeared to have made a finding that there is no colorable imitation of the registered mark “NAN” in Dy’s use of “NANNY” for his own milk packs. Yet it did not stop there. It continued on applying the “concept of related goods.” The Supreme Court utlilized the “concept of related goods” in the said case of Esso Standard Easter, Inc. versus Court of Appeals, et al. wherein two contending parties used the same trademark “ESSO” for two different goods, i.e. petroleum products and cigarettes. It rules that there is infringement of trademark involving two goods bearing the same mark or label, even if the said goods are non-competing, if and only if they are so related that the public may be, or is actually, deceived that they originate from the one maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow through different trade channels, and since the possibility of confusion is unlikely in the general appearances of each mark as a whole, the Court held in this case that they cannot be so related in the context of infringement. In applying the concept of related goods in the present case, the trial court haphazardly concluded that since plaintiff-appellee’s NAN and defendant-appellant’s NANNY belong to the same class being food products, the unregistered NANNY should be held an infringement of Nestle’s NAN because “the use of NANNY would imply that it came from the manufacturer of NAN.” Said court went on to elaborate further: “since the word “NANNY” means a “child’s nurse,” there might result the not so remote probability that defendant’s NANNY may be confused with infant formula NAN despite the aparent (sic) disparity between the features of the two products as discussed above.” The trial court’s application of the doctrine laid down by the Supreme Court in the Esso Standard case aforementioned and the cases cited therein is quite misplaced. The goods of the two contending parties in those cases bear similar marks or labels: “Esso” for petroleum products and cigarettes, “Selecta” for biscuits and milk, “X-7” for soap and perfume, lipstick and nail polish. In the instant case, two dissimilar marks are involved — plaintiff-appellee’s “NAN” and defendant-appellant’s “NANNY.” Obviously, the concept of related goods cannot be utilized in the instant case in the same way that it was used in the Esso Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, precedent must be studied in the light of the facts of the particular case. Each case must be decided on its own merits. In the more recent case of Societe Des Produits Nestle S.A. Versus Court of Appeals, the High Court further stressed that due to the peculiarity of the facts of each infringement case, a judicial forum should not readily apply a certain test or standard just because of seeming similarities. The entire panoply of elements constituting the relevant factual landscape should be comprehensively examined. While it is true that both NAN and NANNY are milk products and that the word “NAN” is contained in the word “NANNY,” there are more glaring dissimilarities in the entirety of their trademarks as they appear in their respective labels and also in r elation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. Even the trial court found these glaring dissimilarities as above-quoted. We need not add more of these factual dissimilarities. NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations, while NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing 80, 180 and 450 grams and worth P8.90, P17.50 and P39.90 per milk pack. The labels of NAN products are of the colors blue and white and have at the bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name “Nestle.” On the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow-capped mountains and using the predominant colors of blue and green. The word NAN are [sic] all in large, formal and conservativelike block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends. With these material differences apparent in the packaging of both milk products, NANNY full cream milk cannot possibly be an infringement of NAN infant milk. Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The cheaper price of NANNY would give, at the very first instance, a considerable warning to the ordinary purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory examination of the packaging would confirm the striking differences between the products in question. In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy therefore cannot be held liable for infringement. Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied the motion for lack of merit. Hence, the present petition.

Issue

The issue is whether Dy, Jr. is liable for infringement. The Court’s Ruling

The petition is meritorious.

Section 22 of Republic Act (R.A.) No. 166, as amended, states:

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 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. Section 155 of R.A. No. 8293 states: 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 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.

In Prosource International, Inc. v. Horphag Research Management SA, the Court laid down the elements of infringement under R.A. Nos. 166 and 8293: 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 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.” On the other hand, the elements of infringement under R.A. No. 8293 are as follows: The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; 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; 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 idenity of such business; and It is without the consent of the trademark or trade name owner or the assignee thereof.

Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement. There are two types of confusion in trademark infringement: confusion of goods and confusion of business.

In Sterling Products International, Inc. v. Farbenfabriken Bayer

Aktiengesellschaft, the Court distinguished the two types of confusion: 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.” In which case, “defendant’s goods are then bought as the plaintiff’s, and the poorer quality of the former reflects adversely on the plaintiff’s reputation.” 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.”

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary.

The question is whether the use of the marks is likely to cause confusion or deceive purchasers. The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels.

In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of each particular case. In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court held:

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. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable.

In recent cases with similar factual milieus, the Court has consistently applied the

dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that “PCO-GENOLS” is confusingly similar to “PYCNOGENOL.” The Court held: 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 through 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 product’s name is 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.” We find no cogent reason to depart from such conclusion. This is not the first time the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., cited in McDonald’s

Corporation v. L.C. Big Mak Burger, Inc., 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. 419421, cities [sic], 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 “Condura” 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.”

In McDonald’s Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in holding that “MACJOY” is confusingly similar to “MCDONALD’S.” The Court held: 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. xxxx Applying the dominancy test to the instant case, the Court finds that herein petitioner’s “MCDONALD’S” and respondent’s “MACJOY” marks are are confusingly similar with each other 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. x x x For sure, it is the prefix “Mc,” and 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. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test

in holding that “BIG MAK” is confusingly similar to “BIG MAC.” The Court held: This Court x x x 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. Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled: x x x 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; x x x) xxxx 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 x x x 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 “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 Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the dominancy test in holding that “FLAVOR MASTER” is confusingly similar to “MASTER ROAST” and “MASTER BLEND.” The Court held: While this Court agrees with the Court of Appeals’ detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, 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 realities of the marketplace. The totality or holistic test only relies on visual comparison 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. For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that:

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposer’s mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. x x x In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposer’s goods. x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposer’s advertising schemes is carried over when the same is incorporated into respondent-applicant’s trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (exh. 4) one’s attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched.

Applying the dominancy test in the present case, the Court finds that “NANNY” is confusingly similar to “NAN.” “NAN” is the prevalent feature of Nestle’s line of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2.

Clearly, “NANNY” contains the prevalent feature “NAN.”

The first three letters of

“NANNY” are exactly the same as the letters of “NAN.” When “NAN” and “NANNY” are pronounced, the aural effect is confusingly similar. In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks.

In Marvex Commercial Company, Inc. v. Petra Hawpia &

Company, the Court held:

It is our considered view that the trademarks “SALONPAS” and “LIONPAS” are confusingly similar in sound. Both these words have the same suffix, “PAS”, which is used to denote a plaster that adheres to the body with curative powers. “PAS,” being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase. xxxx

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 [sic], 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 “Condura” 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.

The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners. Section 138 of R.A. No. 8293 states: Certificates of Registration. — A certificate of registration of a mark shall be prima facie evidence of 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 or services and those that are related thereto specified in the certificate. (Emphasis supplied)

In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, “Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion business can arise out of the use of similar marks.” In that case, in determining whether goods are related:

of

the Court enumerated factors

(1) classification of the goods; (2) nature of the goods;

(3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold.

NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and NAN are displayed in the same section of stores — the milk section. The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is intended for infants while NANNY is intended for children past their infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the registered owner of the “NAN” mark, Nestle should be free to use its mark on similar products, in different segments of the market, and at different price levels. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection afforded to registered trademark owners extends to market areas that are the normal expansion of business: xxx

Even respondent’s 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 sq; 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). (Emphasis supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the

1 September 2005 Decision

and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730 and REINSTATE the 18 September 1998 Decision of the Regional Trial Court, Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

SO ORDERED.

G.R. No. L-19297

December 22, 1966

MARVEX COMMERCIAL CO., INC., petitioner, vs. PETRA HAWPIA and CO., and THE DIRECTOR OF PATENTS, respondents. Sta. Ana and Lasam for petitioner. A.S. Donato for respondent Petra Hawpia and Co. Office of the Solicitor General for respondent Director of Patents. CASTRO, J.: Petra Hawpia & Co., a partnership duly organized under the laws of the Philippines and doing business at 543 M. de Santos (Botica Divisoria), Manila (hereinafter referred to as the applicant), on October 14, 1958 filed a petition for the registration of the trademark "LIONPAS" used on medicated plaster, with the Philippine Patent Office, asserting its continuous use in the Philippines since June 9, 1958.1 The Marvex Commercial Co., Inc., a corporation also duly organized under the laws of the Philippines (hereinafter referred to as the oppositor), on July 24, 1959 filed an opposition thereto, alleging that the registration of such trademark would violate its right to and interest in the trademark "SALONPAS" used on another medicated plaster, which is registered in its name under Certificate of Registration 5486, issued by the Director of Patents on September 29, 1956, and that both trademarks when used on medicated plaster would mislead the public as they are confusingly similar. After due hearing, the Director of Patents in his decision of August 18, 1961 dismissed the opposition and gave due course to the petition, stating in part that "confusion, mistake, or deception among the purchasers will not likely and reasonably occur" when both trademarks are applied to medicated plaster. The oppositor moved to have the decision reconsidered. This motion was denied in a resolution of November 27, 1961. The oppositor then interposed the present appeal. The issues stated by the Director of Patents in his decision are the same ones now tendered by the oppositor for resolution, namely, (1) Is the applicant the owner of the trademark "LIONPAS"?; (2) Should the application be rejected on the ground that the applicant made false representations in placing the phrase "Reg. Phil. Pat. Off." below the trademark "LIONPAS" on its cartons?, and (3) Is the trademark "LIONPAS" confusingly similar to the trademark "SALONPAS"? We do not consider the second issue of any importance; we will thus proceed to resolve the first and third issues. Is the applicant the owner of the trademark "LIONPAS?" Under sections 2 and 2-A of the Trade Mark Law, as amended, the right to register trademarks, tradenames and service marks by any person, corporation, partnership or association domiciled in the Philippines or in any foreign country, is based on ownership, and the burden is upon the applicant to prove such ownership (Operators, Inc. vs. The Director of Patents, et al., L-17901, Oct. 29, 1965). The Director of Patents found, on the strength of exhibits 5 and 6 for the applicant, that the latter has "satisfactorily shown" its ownership of the trademark sought to be registered. Exhibit 5 is a letter dated June 20, 1958, sent by "OSAKA BOEKI KAISHA, LTD." to the applicant which tends to show that the former, for a $1 consideration, has assigned, ceded, and conveyed all its "rights, interests and goodwill in the tradename LIONPAS Medicated Plaster . . ." in favor of the latter. Exhibit 6 is a joint "SWORN STATEMENT" which appears to have been executed by the presidents of "OSAKA BOEKI KAISHA, LTD." and "ASUNARO PHARMACEUTICAL INDUSTRY CO.", and tends to confirm the contents of exhibit 5. A careful scrutiny of exh. 5 will reveal, however, that the sender of the letter, "OSAKA BOEKI KAISHA LTD.", and which appears to be the seller, is merely a representative of the manufacturer "ASUNARO PHARMACEUTICAL INDUSTRY CO." There is no proof that as such representative, the former has been authorized by the latter to sell the trademark in question. Moreover, exh. 5 on its face appears to have been signed only by someone whose position in the company's "Sundries Dept." is not described; the signature is not legible. It is even contradicted by exh. 6. While exh. 5 shows that "OSAKA BOEKI KAISHA, LTD." is a representative of "ASUNARO PHARMACEUTICAL INDUSTRY CO."; exh. 6 asserts that the former is not a representative of the latter, but that it is the owner of the

trademark "LIONPAS" (par. 2, exh. 6). At all events, neither averment can be accorded the weight of an assignment of ownership of the trademark in question under the Trade Mark Law. Exh. 5 is not acknowledged. Exh. 6 does not bear the acknowledgment contemplated by the aforesaid law, particularly by the last paragraph of section 37 and paragraph 2 of section 31 of R.A. 166, as amended, which provide as follows: The registration of a mark under the provisions of this section shall be independent of the registration in the country of origin and the duration, validity or transfer in the Philippines of such registration shall be governed by the provisions of this Act. (Sec. 37, last par.) (Emphasis ours) The assignment must be in writing, acknowledged before a notary public or other officer authorized to administer oaths or perform other notarial acts and certified under the hand and official seal of the notary or other officer. (Sec. 31, par. 2) In this case, although a sheet of paper is attached to exh. 6, on which is typewritten a certification that the signatures of the presidents of the two named companies (referring to the signatures in exh. 6) "have been duly written by themselves", this sheet is unmarked, unpaged, unsigned, undated and unsealed. We have thumbed the record in quest of any definitive evidence that it is a correct translation of the Japanese characters found on another unmarked and unpaged sheet, and have found none. It follows from the above disquisition that exhs. 5 and 6 are legally insufficient to prove that the applicant is the owner of the trademark in question. As a matter of fact, the other evidence on record conclusively belies the import of exh. 6. Thus exh. A states that the applicant is merely the "exclusive distributor" in the Philippines of the "LIONPAS" penetrative plaster; exh. A-1 describes the applicant as the "Philippine sole distributor" of "LIONPAS"; exh. B simply states that "LIONPAS" is "manufactured exclusively for Petra Hawpia & Co. for distribution in the Philippines." Not being the owner of the trademark "LIONPAS" but being merely an importer and/or distributor of the said penetrative plaster, the applicant is not entitled under the law to register it in its name (Operators, Inc. vs. Director of Patents, supra). Upon the third issue, the applicant preliminarily asserts that there is no justification for this Court to disturb any finding made by the Director of Patents on appeal. This assertion is not tenable. Although the Director of Patents is the official vested by law with the power to administer the registration of trademarks and tradenames, his opinion on the matter of similarity or dissimilarity of trademarks and tradenames is not conclusive upon this Court which may pass upon such determination. The "SALONPAS" mark is not before this Court. Our meticulous examination of the entire record has failed to yield a sample of such mark. We have therefore proceeded to analyze the two marks, vis-avis each other, on the basis of what we can derive from the record for a comparative study. And our conclusion, in disagreement with that of the Director of Patents, is not based on a comparison of the appearance, form, style, shape, size or format of the trademarks, which we can not make bec ause, as we have already observed, the "SALONPAS" mark is not before us, but on a comparison of the spelling, sound and pronunciation of the two words. It is our considered view that the trademarks "SALONPAS" and "LIONPAS" are confusingly similar in sound. Both these words have the same suffix, "PAS", which is used to denote a plaster that adheres to the body with curative powers. "Pas, being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase. Two letters of "SALONPAS" are missing in "LIONPAS"; the first letter a and the letter s. Be that as it may, when the two words are pronounced, the sound effects are confusingly similar. And where goods are advertised over the radio, similarity in sound is of especial significance (Co Tiong Sa vs. Director of Patents, 95 Phil. 1 citing Nims, The Law of Unfair Competition and Trademarks, 4th ed.,

vol. 2, pp. 678-679). "The importance of this rule is emphasized by the increase of radio advertising in which we are deprived of help of our eyes and must depend entirely on the ear" (Operators, Inc. vs. Director of Patents, supra). 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 "Jazz-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 "TradeMark Law and Practice", pp. 419-421, cites, 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. In the case at bar, "SALONPAS" and "LIONPAS", when spoken, sound very much alike. Similarity of sound is sufficient ground for this Court to rule that the two marks are confusingly similar when applied to merchandise of the same descriptive properties (see Celanese Corporation of America vs. E. I. Du Pont, 154 F. 2d. 146, 148). The registration of "LIONPAS" cannot therefore be given due course. ACCORDINGLY, the decision of the respondent Director of Patents is set aside, and the petition below of the respondent Petra Hawpia & Co. is hereby dismissed, at the cost of the latter respondent. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

Footnotes 1

Sec. 2 of the Trade Mark Law requires actual use in the Philippines of not less than two months before application may be filed.

G.R. No. 180677

February 18, 2013

VICTORIO P. DIAZ, Petitioner, vs. PEOPLE OF THE PHILIPPINES AND LEVI STRAUSS [PHILS.], INC., Respondents. DECISION BERSAMIN, J.: It is the tendency of the allegedly infringing mark to be confused with the registered trademark that is the gravamen of the offense of infringement of a registered trademark. The acquittal of the accused should follow if the allegedly infringing mark is not likely to cause confusion. Thereby, the evidence of the State does not satisfy the quantum of proof beyond reasonable doubt. Accused Victorio P. Diaz (Diaz) appeals the resolutions promulgated on July 17, 20071 and November 22, 2007,2 whereby the Court of Appeals (CA), respectively, dismissed his appeal in C.A.G.R. CR No. 30133 for the belated filing of the appellant's brief, and denied his motion for reconsideration. Thereby, the decision rendered on February 13, 2006 in Criminal Case No. 00-0318 and Criminal Case No. 00-0319 by the Regional Trial Court, Branch 255, in Las Pifias City (RTC) convicting him for two counts of infringement of trademark were affirmed. 3 Antecedents On February 10, 2000, the Department of Justice filed two informations in the RTC of Las Piñas City, charging Diaz with violation of Section 155, in relation to Section 170, of Republic Act No. 8293, also known as the Intellectual Property Code of the Philippines (Intellectual Property Code), to wit: Criminal Case No. 00-0318 That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levi’s Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully, feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting, copying and colorably imitating Levi’s registered trademarks or dominant features thereof such as the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH, and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans, which likely caused confusion, mistake, and /or deceived the general consuming public, without the consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of LEVI’S. CONTRARY TO LAW.4 Criminal Case No. 00-0319 That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levi’s Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully, feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting, copying and colorably imitating Levi’s registered trademarks or dominant features thereof such as the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH, and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans, which likely caused confusion, mistake, and /or deceived the general consuming public, without the consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter

of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of LEVI’S. CONTRARY TO LAW.5 The cases were consolidated for a joint trial. Diaz entered his pleas of not guilty to each information on June 21, 2000.6 1. Evidence of the Prosecution Levi Strauss and Company (Levi’s), a foreign corporation based in the State of Delaware, United States of America, had been engaged in the apparel business. It is the owner of trademarks and designs of Levi’s jeans like LEVI’S 501, the arcuate design, the two-horse brand, the two-horse patch, the two-horse patch with pattern arcuate, and the composite tab arcuate. LEVI’S 501 has the following registered trademarks, to wit: (1) the leather patch showing two horses pulling a pair of pants; (2) the arcuate pattern with the inscription "LEVI STRAUSS & CO;" (3) the arcuate design that refers to "the two parallel stitching curving downward that are being sewn on both back pockets of a Levi’s Jeans;" and (4) the tab or piece of cloth located on the structural seam of the right back pocket, upper left side. All these trademarks were registered in the Philippine Patent Office in the 1970’s, 1980’s and early part of 1990’s.7 Levi Strauss Philippines, Inc. (Levi’s Philippines) is a licensee of Levi’s. After receiving information that Diaz was selling counterfeit LEVI’S 501 jeans in his tailoring shops in Almanza and Talon, Las Piñas City, Levi’s Philippines hired a private investigation group to verify the information. Surveillance and the purchase of jeans from the tailoring shops of Diaz established that the jeans bought from the tailoring shops of Diaz were counterfeit or imitations of LEVI’S 501. Levi’s Philippines then sought the assistance of the National Bureau of Investigation (NBI) for purposes of applying for a search warrant against Diaz to be served at his tailoring shops. The search warrants were issued in due course. Armed with the search warrants, NBI agents searched the tailoring shops of Diaz and seized several fake LEVI’S 501 jeans from them. Levi’s Philippines claimed that it did not authorize the making and selling of the seized jeans; that each of the jeans were mere imitations of genuine LEVI’S 501 jeans by each of them bearing the registered trademarks, like the arcuate design, the tab, and the leather patch; and that the seized jeans could be mistaken for original LEVI’S 501 jeans due to the placement of the arcuate, tab, and two-horse leather patch.8 2. Evidence of the Defense On his part, Diaz admitted being the owner of the shops searched, but he denied any criminal liability. Diaz stated that he did not manufacture Levi’s jeans, and that he used the label "LS Jeans Tailoring" in the jeans that he made and sold; that the label "LS Jeans Tailoring" was registered with the Intellectual Property Office; that his shops received clothes for sewing or repair; that his shops offered made-to-order jeans, whose styles or designs were done in accordance with instructions of the customers; that since the time his shops began operating in 1992, he had received no notice or warning regarding his operations; that the jeans he produced were easily recognizable because the label "LS Jeans Tailoring," and the names of the customers were placed inside the pockets, and each of the jeans had an "LSJT" red tab; that "LS" stood for "Latest Style;" and that the leather patch on his jeans had two buffaloes, not two horses.9 Ruling of the RTC On February 13, 2006, the RTC rendered its decision finding Diaz guilty as charged, disposing thus: WHEREFORE, premises considered, the Court finds accused Victorio P. Diaz, a.k.a. Vic Diaz, GUILTY beyond reasonable doubt of twice violating Sec. 155, in relation to Sec. 170, of RA No. 8293, as alleged in the Informations in Criminal Case Nos. 00-0318 & 00-0319, respectively, and hereby sentences him to suffer in each of the cases the penalty of imprisonment of TWO (2) YEARS of prision correcional, as minimum, up to FIVE (5) YEARS of prision correcional, as maximum, as well

as pay a fine of P50,000.00 for each of the herein cases, with subsidiary imprisonment in case of insolvency, and to suffer the accessory penalties provided for by law. Also, accused Diaz is hereby ordered to pay to the private complainant Levi’s Strauss (Phils.), Inc. the following, thus: 1. P50,000.00 in exemplary damages; and 2. P222,000.00 as and by way of attorney’s fees. Costs de officio. SO ORDERED. 10 Ruling of the CA Diaz appealed, but the CA dismissed the appeal on July 17, 2007 on the ground that Diaz had not filed his appellant’s brief on time despite being granted his requested several extension periods. Upon denial of his motion for reconsideration, Diaz is now before the Court to plead for his acquittal. Issue Diaz submits that: THE COURT OF APPEALS VIOLATED EXISTING LAW AND JURISPRUDENCE WHEN IT APPLIED RIGIDLY THE RULE ON TECHNICALITIES AND OVERRIDE SUBSTANTIAL JUSTICE BY DISMISSING THE APPEAL OF THE PETITIONER FOR LATE FILING OF APPELLANT’S BRIEF.11 Ruling The Court first resolves whether the CA properly dismissed the appeal of Diaz due to the late filing of his appellant’s brief. Under Section 7, Rule 44 of the Rules of Court, the appellant is required to file the appellant’s brief in the CA "within forty-five (45) days from receipt of the notice of the clerk that all the evidence, oral and documentary, are attached to the record, seven (7) copies of his legibly typewritten, mimeographed or printed brief, with proof of service of two (2) copies thereof upon the appellee." Section 1(e) of Rule 50 of the Rules of Court grants to the CA the discretion to dismiss an appeal either motu proprio or on motion of the appellee should the appellant fail to serve and file the required number of copies of the appellant’s brief within the time provided by the Rules of Court.12 The usage of the word may in Section 1(e) of Rule 50 indicates that the dismissal of the appeal upon failure to file the appellant’s brief is not mandatory, but discretionary. Verily, the failure to serve and file the required number of copies of the appellant’s brief within the time provided by the Rules of Court does not have the immediate effect of causing the outright dismissal of the appeal. This means that the discretion to dismiss the appeal on that basis is lodged in the CA, by virtue of which the CA may still allow the appeal to proceed despite the late filing of the appellant’s brief, when the circumstances so warrant its liberality. In deciding to dismiss the appeal, then, the CA is bound to exercise its sound discretion upon taking all the pertinent circumstances into due consideration. The records reveal that Diaz’s counsel thrice sought an extension of the period to file the appellant’s brief. The first time was on March 12, 2007, the request being for an extension of 30 days to commence on March 11, 2007. The CA granted his motion under its resolution of March 21, 2007. On April 10, 2007, the last day of the 30-day extension, the counsel filed another motion, seeking an additional 15 days. The CA allowed the counsel until April 25, 2007 to serve and file the appellant’s brief. On April 25, 2007, the counsel went a third time to the CA with another request for 15 days. The CA still granted such third motion for extension, giving the counsel until May 10, 2007. Notwithstanding the liberality of the CA, the counsel did not literally comply, filing the appellant’s brief only on May 28, 2007, which was the 18th day beyond the third extension period granted.

Under the circumstances, the failure to file the appellant’s brief on time rightly deserved the outright rejection of the appeal. The acts of his counsel bound Diaz like any other client. It was, of course, only the counsel who was well aware that the Rules of Court fixed the periods to file pleadings and equally significant papers like the appellant’s brief with the lofty objective of avoiding delays in the administration of justice. Yet, we have before us an appeal in two criminal cases in which the appellant lost his chance to be heard by the CA on appeal because of the failure of his counsel to serve and file the appellant’s brief on time despite the grant of several extensions the counsel requested. Diaz was convicted and sentenced to suffer two indeterminate sentences that would require him to spend time in detention for each conviction lasting two years, as minimum, to five years, as maximum, and to pay fines totaling P100,000.00 (with subsidiary imprisonment in case of his insolvency). His personal liberty is now no less at stake. This reality impels us to look beyond the technicality and delve into the merits of the case to see for ourselves if the appeal, had it not been dismissed, would have been worth the time of the CA to pass upon. After all, his appellant’s brief had been meanwhile submitted to the CA. While delving into the merits of the case, we have uncovered a weakness in the evidence of guilt that cannot be simply ignored and glossed over if we were to be true to our oaths to do justice to everyone. We feel that despite the CA being probably right in dismissing the excuses of oversight and excusable negligence tendered by Diaz’s counsel to justify the belated filing of the appellant’s brief as unworthy of serious consideration, Diaz should not be made to suffer the dire consequence. Any accused in his shoes, with his personal liberty as well as his personal fortune at stake, expectedly but innocently put his fullest trust in his counsel’s abilities and professionalism in the handling of his appeal. He thereby delivered his fate to the hands of his counsel. Whether or not those hands were efficient or trained enough for the job of handling the appeal was a learning that he would get only in the end. Likelier than not, he was probably even unaware of the three times that his counsel had requested the CA for extensions. If he were now to be left to his unwanted fate, he would surely suffer despite his innocence. How costly a learning it would be for him! That is where the Court comes in. It is most important for us as dispensers of justice not to allow the inadvertence or incompetence of any counsel to result in the outright deprivation of an appellant’s right to life, liberty or property. 13 We do not mind if this softening of judicial attitudes be mislabeled as excessive leniency. With so much on the line, the people whose futures hang in a balance should not be left to suffer from the incompetence, mindlessness or lack of professionalism of any member of the Law Profession. They reasonably expect a just result in every litigation. The courts must give them that just result. That assurance is the people’s birthright. Thus, we have to undo Diaz’s dire fate. Even as we now set aside the CA’s rejection of the appeal of Diaz, we will not remand the records to the CA for its review. In an appeal of criminal convictions, the records are laid open for review. To avoid further delays, therefore, we take it upon ourselves to review the records and resolve the issue of guilt, considering that the records are already before us. Section 155 of R.A. No. 8293 defines the acts that constitute infringement of trademark, viz: 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 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. The elements of the offense of trademark infringement under the Intellectual Property Code are, therefore, the following: 1. The trademark being infringed is registered in the Intellectual Property Office; 2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer; 3. The infringing mark is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark 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 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. The use or application of the infringing mark is without the consent of the trademark owner or the assignee thereof. 14 As can be seen, the likelihood of confusion is the gravamen of the offense of trademark infringement.15 There are two tests to determine likelihood of confusion, namely: the dominancy test, and the holistic test. The contrasting concept of these tests was explained in Societes Des Produits Nestle, S.A. v. Dy, Jr., thus: x x x. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers. The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels.16 As to what test should be applied in a trademark infringement case, we said in McDonald’s Corporation v. Macjoy Fastfood Corporation 17 that: 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. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point. The case of Emerald Garment Manufacturing Corporation v. Court of Appeals,18 which involved an alleged trademark infringement of jeans products, is worth referring to. There, H.D. Lee Co., Inc. (H.D. Lee), a corporation based in the United States of America, claimed that Emerald Garment’s trademark of "STYLISTIC MR. LEE" that it used on its jeans products was confusingly similar to the "LEE" trademark that H.D. Lee used on its own jeans products. Applying the holistic test, the Court ruled that there was no infringement. The holistic test is applicable here considering that the herein criminal cases also involved trademark infringement in relation to jeans products. Accordingly, the jeans trademarks of Levi’s Philippines and Diaz must be considered as a whole in determining the likelihood of confusion between them. The maong pants or jeans made and sold by Levi’s Philippines, which included LEVI’S 501, were very popular in the Philippines. The consuming public knew that the original LEVI’S 501 jeans were under a foreign brand and quite expensive. Such jeans could be purchased only in malls or boutiques as ready-to-wear items, and were not available in tailoring shops like those of Diaz’s as well as not acquired on a "made-to-order" basis. Under the circumstances, the consuming public could easily discern if the jeans were original or fake LEVI’S 501, or were manufactured by other brands of jeans. Confusion and deception were remote, for, as the Court has observed in Emerald Garments:

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soy sauce or soap which are of minimal cost. 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.... Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the 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. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase. 19 Diaz used the trademark "LS JEANS TAILORING" for the jeans he produced and sold in his tailoring shops. His trademark was visually and aurally different from the trademark "LEVI STRAUSS & CO" appearing on the patch of original jeans under the trademark LEVI’S 501. The word "LS" could not be confused as a derivative from "LEVI STRAUSS" by virtue of the "LS" being connected to the word "TAILORING", thereby openly suggesting that the jeans bearing the trademark "LS JEANS TAILORING" came or were bought from the tailoring shops of Diaz, not from the malls or boutiques selling original LEVI’S 501 jeans to the consuming public. There were other remarkable differences between the two trademarks that the consuming public would easily perceive. Diaz aptly noted such differences, as follows: The prosecution also alleged that the accused copied the "two horse design" of the petitionerprivate complainant but the evidence will show that there was no such design in the seized jeans. Instead, what is shown is "buffalo design." Again, a horse and a buffalo are two different animals which an ordinary customer can easily distinguish. x x x. The prosecution further alleged that the red tab was copied by the accused. However, evidence will show that the red tab used by the private complainant indicates the word "LEVI’S" while that of the accused indicates the letters "LSJT" which means LS JEANS TAILORING. Again, even an ordinary customer can distinguish the word LEVI’S from the letters LSJT. xxxx In terms of classes of customers and channels of trade, the jeans products of the private complainant and the accused cater to different classes of customers and flow through the different channels of trade. The customers of the private complainant are mall goers belonging to class A and B market group – while that of the accused are those who belong to class D and E market who can only afford Php 300 for a pair of made-toorder pants. 20 x x x.

Moreover, based on the certificate issued by the Intellectual Property Office, "LS JEANS TAILORING" was a registered trademark of Diaz. He had registered his trademark prior to the filing of the present cases. 21 The Intellectual Property Office would certainly not have allowed the registration had Diaz’s trademark been confusingly similar with the registered trademark for LEVI’S 501 jeans. Given the foregoing, it should be plain that there was no likelihood of confusion between the trademarks involved. Thereby, the evidence of guilt did not satisfy the quantum of proof required for a criminal conviction, which is proof beyond reasonable doubt. According to Section 2, Rule 133 of the Rules of Court, proof beyond a reasonable doubt does not mean such a degree of proof as, excluding possibility of error, produces absolute certainty. Moral certainty only is required, or that degree of proof which produces conviction in an unprejudiced mind. Consequently, Diaz should be acquitted of the charges. WHEREFORE, the Court ACQUITS petitioner VICTORIO P. DIAZ of the crimes of infringement of trademark charged in Criminal Case No. 00-0318 and Criminal Case No. 00-0319 for failure of the State to establish his guilt by proof beyond reasonable doubt. No pronouncement on costs of suit. SO ORDERED. LUCAS P. BERSAMIN Associate Justice

G.R. No. 114508 November 19, 1999 PRIBHDAS J. MIRPURI, petitioner, vs. COURT OF APPEALS, DIRECTOR OF PATENTS and the BARBIZON CORPORATION, respondents.

PUNO, J.: The Convention of Paris for the Protection of Industrial Property is a multi-lateral treaty which the Philippines bound itself to honor and enforce in this country. As to whether or not the treaty affords protection to a foreign corporation against a Philippine applicant for the registration of a similar trademark is the principal issue in this case. On June 15, 1970, one Lolita Escobar, the predecessor-in-interest of petitioner Pribhdas J. Mirpuri, filed an application with the Bureau of Patents for the registration of the trademark "Barbizon" for use in brassieres and ladies undergarments. Escobar alleged that she had been manufacturing and selling these products under the firm name "L & BM Commercial" since March 3, 1970. Private respondent Barbizon Corporation, a corporation organized and doing business under the laws of New York, U.S.A., opposed the application. It claimed that: The mark BARBIZON of respondent-applicant is confusingly similar to the trademark BARBIZON which opposer owns and has not abandoned. That opposer will be damaged by the registration of the mark BARBIZON and its business reputation and goodwill will suffer great and irreparable injury. That the respondent-applicant's use of the said mark BARBIZON which resembles the trademark used and owned by opposer, constitutes an unlawful appropriation of a mark previously used in the Philippines and not abandoned and therefore a statutory violation of Section 4 (d) of Republic Act No. 166, as amended. 1 This was docketed as Inter Partes Case No. 686 (IPC No. 686). After filing of the pleadings, the parties submitted the case for decision. On June 18, 1974, the Director of Patents rendered judgment dismissing the opposition and giving due course to Escobar's application, thus: WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010 for the registration of the trademark BARBIZON, of respondent Lolita R. Escobar, is given due course. IT IS SO ORDERED.

2

This decision became final and on September 11, 1974, Lolita Escobar was issued a certificate of registration for the trademark "Barbizon." The trademark was "for use in "brassieres and lady's underwear garments like panties." 3 Escobar later assigned all her rights and interest over the trademark to petitioner Pribhdas J. Mirpuri who, under his firm name then, the "Bonito Enterprises," was the sole and exclusive distributor of Escobar's "Barbizon" products. In 1979, however, Escobar failed to file with the Bureau of Patents the Affidavit of Use of the trademark required under Section 12 of Republic Act (R.A.) No. 166, the Philippine Trademark Law. Due to this failure, the Bureau of Patents cancelled Escobar's certificate of registration.

On May 27, 1981, Escobar reapplied for registration of the cancelled trademark. Mirpuri filed his own application for registration of Escobar's trademark. Escobar later assigned her application to herein petitioner and this application was opposed by private respondent. The case was docketed as Inter Partes Case No. 2049 (IPC No. 2049). In its opposition, private respondent alleged that: (a) The Opposer has adopted the trademark BARBIZON (word), sometime in June 1933 and has then used it on various kinds of wearing apparel. On August 14, 1934, Opposer obtained from the United States Patent Office a more recent registration of the said mark under Certificate of Registration No. 316,161. On March 1, 1949, Opposer obtained from the United States Patent Office a more recent registration for the said trademark under Certificate of Registration No. 507,214, a copy of which is herewith attached as Annex "A." Said Certificate of Registration covers the following goods — wearing apparel: robes, pajamas, lingerie, nightgowns and slips; (b) Sometime in March 1976, Opposer further adopted the trademark BARBIZON and Bee design and used the said mark in various kinds of wearing apparel. On March 15, 1977, Opposer secured from the United States Patent Office a registration of the said mark under Certificate of Registration No. 1,061,277, a copy of which is herein enclosed as Annex "B." The said Certificate of Registration covers the following goods: robes, pajamas, lingerie, nightgowns and slips; (c) Still further, sometime in 1961, Opposer adopted the trademark BARBIZON and a Representation of a Woman and thereafter used the said trademark on various kinds of wearing apparel. Opposer obtained from the United States Patent Office registration of the said mark on April 5, 1983 under Certificate of Registration No. 1,233,666 for the following goods: wearing apparel: robes, pajamas, nightgowns and lingerie. A copy of the said certificate of registration is herewith enclosed as Annex "C." (d) All the above registrations are subsisting and in force and Opposer has not abandoned the use of the said trademarks. In fact, Opposer, through a wholly-owned Philippine subsidiary, the Philippine Lingerie Corporation, has been manufacturing the goods covered by said registrations and selling them to various countries, thereby earning valuable foreign exchange for the country. As a result of respondent-applicant's misappropriation of Opposer's BARBIZON trademark, Philippine Lingerie Corporation is prevented from selling its goods in the local market, to the damage and prejudic e of Opposer and its wholly-owned subsidiary. (e) The Opposer's goods bearing the trademark BARBIZON have been used in many countries, including the Philippines, for at least 40 years and has enjoyed international reputation and good will for their quality. To protect its registrations in countries where the goods covered by the registrations are being sold, Opposer has procured the registration of the trademark BARBIZON in the following countries: Australia, Austria, Abu Dhabi, Argentina, Belgium, Bolivia, Bahrain, Canada, Chile, Colombia, Denmark, Ecuador, France, West Germany, Greece, Guatemala, Hongkong, Honduras, Italy, Japan, Jordan, Lebanon, Mexico, Morocco, Panama, New Zealand, Norway, Sweden, Switzerland, Syria, El Salvador, South Africa, Zambia, Egypt, and Iran, among others; (f) To enhance its international reputation for quality goods and to further promote goodwill over its name, marks and products, Opposer has extensively advertised its products, trademarks and name in various publications which are circulated in the United States and many countries around the world, including the Philippines; (g) The trademark BARBIZON was fraudulently registered in the Philippines by one Lolita R. Escobar under Registration No. 21920, issued on September 11, 1974, in violation of Article 189 (3) of the Revised Penal Code and Section 4 (d) of the Trademark Law. Herein respondent applicant acquired by assignment the "rights" to the said mark previously registered by Lolita Escobar, hence respondent-applicant's title is vitiated by the same fraud and criminal act. Besides, Certificate of Registration No. 21920 has been cancelled for failure of either Lolita Escobar or herein respondentapplicant, to seasonably file the statutory affidavit of use. By applying for a re-

registration of the mark BARBIZON subject of this opposition, respondent-applicant seeks to perpetuate the fraud and criminal act committed by Lolita Escobar. (h) Opposer's BARBIZON as well as its BARBIZON and Bee Design and BARBIZON and Representation of a Woman trademarks qualify as well-known trademarks entitled to protection under Article 6bis of the Convention of Paris for the Protection of Industrial Property and further amplified by the Memorandum of the Minister of Trade to the Honorable Director of Patents dated October 25, 1983 [sic], 4 Executive Order No. 913 dated October 7, 1963 and the Memorandum of the Minister of Trade and Industry to the Honorable Director of Patents dated October 25, 1983. (i) The trademark applied for by respondent applicant is identical to Opposer's BARBIZON trademark and constitutes the dominant part of Opposer's two other marks namely, BARBIZON and Bee design and BARBIZON and a Representation of a Woman. The continued use by respondent-applicant of Opposer's trademark BARBIZON on goods belonging to Class 25 constitutes a clear case of commercial and criminal piracy and if allowed registration will violate not only the Trademark Law but also Article 189 of the Revised Penal Code and the commitment of the Philippines to an international treaty. 5 Replying to private respondent's opposition, petitioner raised the defense of res judicata. On March 2, 1982, Escobar assigned to petitioner the use of the business name "Barbizon International." Petitioner registered the name with the Department of Trade and Industry (DTI) for which a certificate of registration was issued in 1987. Forthwith, private respondent filed before the Office of Legal Affairs of the DTI a petition for cancellation of petitioner's business name. On November 26, 1991, the DTI, Office of Legal Affairs, cancelled petitioner's certificate of registration, and declared private respondent the owner and prior user of the business name "Barbizon International." Thus: WHEREFORE, the petition is hereby GRANTED and petitioner is declared the owner and prior user of the business name "BARBIZON INTERNATIONAL" under Certificate of Registration No. 87-09000 dated March 10, 1987 and issued in the name of respondent, is [sic] hereby ordered revoked and cancelled. . . . . 6 Meanwhile, in IPC No. 2049, the evidence of both parties were received by the Director of Patents. On June 18, 1992, the Director rendered a decision declaring private respondent's opposition barred by res judicata and giving due course to petitioner's application for registration, to wit: WHEREFORE, the present Opposition in Inter Partes Case No. 2049 is hereby DECLARED BARRED by res judicata and is hereby DISMISSED. Accordingly, Application Serial No. 45011 for trademark BARBIZON filed by Pribhdas J. Mirpuri is GIVEN DUE COURSE. SO ORDERED.

7

Private respondent questioned this decision before the Court of Appeals in CA-G.R. SP No. 28415. On April 30, 1993, the Court of Appeals reversed the Director of Patents finding that IPC No. 686 was not barred by judgment in IPC No. 2049 and ordered that the case be remanded to the Bureau of Patents for further proceedings, viz: WHEREFORE, the appealed Decision No. 92-13 dated June 18, 1992 of the Director of Patents in Inter Partes Case No. 2049 is hereby SET ASIDE; and the case is hereby remanded to the Bureau of Patents for further proceedings, in accordance with this pronouncement. No costs. 8 In a Resolution dated March 16, 1994, the Court of Appeals denied reconsideration of its decision. 9 Hence, this recourse.

Before us, petitioner raises the following issues: 1. WHETHER OR NOT THE DECISION OF THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 686 RENDERED ON JUNE 18, 1974, ANNEX C HEREOF, CONSTITUTED RES JUDICATA IN SO FAR AS THE CASE BEFORE THE DIRECTOR OF PATENTS IS CONCERNED; 2. WHETHER OR NOT THE DIRECTOR OF PATENTS CORRECTLY APPLIED THE PRINCIPLE OF RES JUDICATA IN DISMISSING PRIVATE RESPONDENT BARBIZON'S OPPOSITION TO PETITIONER'S APPLICATION FOR REGISTRATION FOR THE TRADEMARK BARBIZON, WHICH HAS SINCE RIPENED TO CERTIFICATE OF REGISTRATION NO. 53920 ON NOVEMBER 16, 1992; 3. WHETHER OR NOT THE REQUISITE THAT A "JUDGMENT ON THE MERITS" REQUIRED A "HEARING WHERE BOTH PARTIES ARE SUPPOSED TO ADDUCE EVIDENCE" AND WHETHER THE JOINT SUBMISSION OF THE PARTIES TO A CASE ON THE BASIS OF THEIR RESPECTIVE PLEADINGS WITHOUT PRESENTING TESTIMONIAL OR DOCUMENTARY EVIDENCE FALLS WITHIN THE MEANING OF "JUDGMENT ON THE MERITS" AS ONE OF THE REQUISITES TO CONSTITUTE RES JUDICATA; 4. WHETHER A DECISION OF THE DEPARTMENT OF TRADE AND INDUSTRY CANCELLING PETITIONER'S FIRM NAME "BARBIZON INTERNATIONAL" AND WHICH DECISION IS STILL PENDING RECONSIDERATION NEVER OFFERED IN EVIDENCE BEFORE THE DIRECTOR OF PATENTS IN INTER PARTES CASE NO. 2049 HAS THE RIGHT TO DECIDE SUCH CANCELLATION NOT ON THE BASIS OF THE BUSINESS NAME LAW (AS IMPLEMENTED BY THE BUREAU OF DOMESTIC TRADE) BUT ON THE BASIS OF THE PARIS CONVENTION AND THE TRADEMARK LAW (R.A. 166) WHICH IS WITHIN THE ORIGINAL AND EXCLUSIVE JURISDICTION OF THE DIRECTOR OF PATENTS. 10 Before ruling on the issues of the case, there is need for a brief background on the function and historical development of trademarks and trademark law. A "trademark" is defined under R.A. 166, the Trademark Law, as including "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. 11 This definition has been simplified in R.A. No. 8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as "any visible sign capable of distinguishing goods." 12 In Philippine jurisprudence, the function of a trademark is to point out distinctly the origin or ownership of the goods to which it is affixed; to secure to him, who has been instrumental in bringing into the market a superior article of merchandise, the fruit of his industry and skill; to assure the public that they are procuring the genuine article; to prevent fraud and imposition; and to protect the manufacturer against substitution and sale of an inferior and different article as his product. 13 Modern authorities on trademark law view trademarks as performing three distinct functions: (1) they indicate origin or ownership of the articles to which they are attached; (2) they guarantee that those articles come up to a certain standard of quality; and (3) they advertise the articles they symbolize. 14 Symbols have been used to identify the ownership or origin of articles for several centur ies. 15 As early as 5,000 B.C., markings on pottery have been found by archaeologists. Cave drawings in southwestern Europe show bison with symbols on their flanks. 16 Archaeological discoveries of ancient Greek and Roman inscriptions on sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some features which are thought to be marks or symbols. These marks were affixed by the creator or maker of the article, or by public authorities as indicators for the payment of tax, for disclosing state monopoly, or devices for the settlement of accounts between an entrepreneur and his workmen. 17 In the Middle Ages, the use of many kinds of marks on a variety of goods was commonplace. Fifteenth century England saw the compulsory use of identifying marks in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's marks, tanner's marks, watermarks on paper, etc. 18 Every guild had its own mark and every master belonging to it had a special mark of his own.

The marks were not trademarks but police marks compulsorily imposed by the sovereign to let the public know that the goods were not "foreign" goods smuggled into an area where the guild had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the artisan. 19 For a similar reason, merchants also used merchants' marks. Merchants dealt in goods acquired from many sources and the marks enabled them to identify and reclaim their goods upon recovery after shipwreck or piracy. 20 With constant use, the mark acquired popularity and became voluntarily adopted. It was not intended to create or continue monopoly but to give the customer an index or guarantee of quality. 21 It was in the late 18th century when the industrial revolution gave rise to mass production and distribution of consumer goods that the mark became an important instrumentality of trade and commerce. 22 By this time, trademarks did not merely identify the goods; they also indicated the goods to be of satisfactory quality, and thereby stimulated further purchases by the consuming public. 23 Eventually, they came to symbolize the goodwill and business reputation of the owner of the product and became a property right protected by law. 24 The common law developed the doctrine of trademarks and tradenames "to prevent a person from palming off his goods as another's, from getting another's business or injuring his reputation by unfair means, and, from defrauding the public." 25 Subsequently, England and the United States enacted national legislation on trademarks as part of the law regulating unfair trade. 26 It became the right of the trademark owner to exclude others from the use of his mark, or of a confusingly similar mark where confusion resulted in diversion of trade or financial injury. At the same time, the trademark served as a warning against the imitation or faking of products to prevent the imposition of fraud upon the public. 27 Today, the trademark is not merely a symbol of origin and goodwill; it is often the most effective ag ent for the actual creation and protection of goodwill. It imprints upon the public mind an anonymous and impersonal guaranty of satisfaction, creating a desire for further satisfaction. In other words, the mark actually sells the goods. 28 The mark has become the "silent salesman," the conduit through which direct contact between the trademark owner and the consumer is assured. It has invaded popular culture in ways never anticipated that it has become a more convincing selling point than even the quality of the article to which it refers. 29 In the last half century, the unparalleled growth of industry and the rapid development of communications technology have enabled trademarks, tradenames and other distinctive signs of a product to penetrate regions where the owner does not actually manufacture or sell the product itself. Goodwill is no longer confined to the territory of actual market penetration; it extends to zones where the marked article has been fixed in the public mind through advertising. 30 Whether in the print, broadcast or electronic communications medium, particularly on the Internet, 31 advertising has paved the way for growth and expansion of the product by creating and earning a reputation that crosses over borders, virtually turning the whole world into one vast marketplace. This is the mise-en-scene of the present controversy. Petitioner brings this action claiming that "Barbizon" products have been sold in the Philippines since 1970. Petitioner developed this market by working long hours and spending considerable sums of money on advertisements and promotion of the trademark and its products. Now, almost thirty years later, private respondent, a foreign corporation, "swaggers into the country like a conquering hero," usurps the trademark and invades petitioner's market. 32 Justice and fairness dictate that private respondent be prevented from appropriating what is not its own. Legally, at the same time, private respondent is barred from questioning petitioner's ownership of the trademark because of res judicata. 33 Literally, res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. 34 In res judicata, the judgment in the first action is considered conclusive as to every matter offered and received therein, as to any other admissible matter which might have been offered for that purpose, and all other matters that could have been adjudged therein. 35 Res judicata is an absolute bar to a subsequent action for the same cause; and its requisites are: (a) the former judgment or order must be final; (b) the judgment or order must be one on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and parties; (d) there must be between the first and second actions, identity of parties, of subject matter and of causes of action. 36 The Solicitor General, on behalf of respondent Director of Patents, has joined cause with petitioner. Both claim that all the four elements of res judicata have been complied with: that the judgment in IPC No. 686 was final and was rendered by the Director of Patents who had jurisdiction over the subject matter and parties; that the judgment in IPC No. 686 was on the merits; and that the lack of a hearing

was immaterial because substantial issues were raised by the parties and passed upon by the Director of Patents. 37 The decision in IPC No. 686 reads as follows: xxx xxx xxx. Neither party took testimony nor adduced documentary evidence. They submitted the case for decision based on the pleadings which, together with the pertinent records, have all been carefully considered. Accordingly, the only issue for my disposition is whether or not the herein opposer would probably be damaged by the registration of the trademark BARBIZON sought by the respondent-applicant on the ground that it so resembles the trademark BARBIZON allegedly used and owned by the former to be "likely to cause confusion, mistake or to deceive purchasers." On record, there can be no doubt that respondent-applicant's sought-to-be-registered trademark BARBIZON is similar, in fact obviously identical, to opposer's alleged trademark BARBIZON, in spelling and pronunciation. The only appreciable but very negligible difference lies in their respective appearances or manner of presentation. Respondent-applicant's trademark is in bold letters (set against a black background), while that of the opposer is offered in stylish script letters. It is opposer's assertion that its trademark BARBIZON has been used in trade or commerce in the Philippines prior to the date of application for the registration of the identical mark BARBIZON by the respondent-applicant. However, the allegation of facts in opposer's verified notice of opposition is devoid of such material information. In fact, a reading of the text of said verified opposition reveals an apparent, if not deliberate, omission of the date (or year) when opposer's alleged trademark BARBIZON was first used in trade in the Philippines (see par. No. 1, p. 2, Verified Notice of Opposition, Rec.). Thus, it cannot here and now be ascertained whether opposer's alleged use of the trademark BARBIZON could be prior to the use of the identical mark by the herein respondent-applicant, since the opposer attempted neither to substantiate its claim of use in local commerce with any proof or evidence. Instead, the opposer submitted the case for decision based merely on the pleadings. On the other hand, respondent-applicant asserted in her amended application for registration that she first used the trademark BARBIZON for brassiere (or "brasseire") and ladies underwear garments and panties as early as March 3, 1970. Be that as it may, there being no testimony taken as to said date of first use, respondent-applicant will be limited to the filing date, June 15, 1970, of her application as the date of first use (Rule 173, Rules of Practice in Trademark Cases). From the foregoing, I conclude that the opposer has not made out a case of probable damage by the registration of the respondent-applicant's mark BARBIZON. WHEREFORE, the opposition should be, as it is hereby, DISMISSED. Accordingly, Application Serial No. 19010, for the registration of the trademark BARBIZON of respondent Lolita R. Escobar, is given due course. 38 The decision in IPC No. 686 was a judgment on the merits and it was error for the Court of Appeals to rule that it was not. A judgment is on the merits when it determines the rights and liabilities of the parties based on the disclosed facts, irrespective of formal, technical or dilatory objections. 39 It is not necessary that a trial should have been conducted. If the court's judgment is general, and not based on any technical defect or objection, and the parties had a full legal opportunity to be heard on their respective claims and contentions, it is on the merits although there was no actual hearing or arguments on the facts of the case. 40 In the case at bar, the Director of Patents did not dismiss private respondent's opposition on a sheer technicality. Although no hearing was c onducted, both parties filed their respective pleadings and were given opportunity to present evidence. They, however, waived their right to do so and submitted the case for decision based on their pleadings. The lack of evidence did not deter the Director of Patents from ruling on the case, particularly on the

issue of prior use, which goes into the very substance of the relief sought by the parties. Since private respondent failed to prove prior use of its trademark, Escobar's claim of first use was upheld. The judgment in IPC No. 686 being on the merits, petitioner and the Solicitor General allege that IPC No. 686 and IPC No. 2049 also comply with the fourth requisite of res judicata, i.e., they involve the same parties and the same subject matter, and have identical causes of action. Undisputedly, IPC No. 686 and IPC No. 2049 involve the same parties and the same subject matter. Petitioner herein is the assignee of Escobar while private respondent is the same American corporation in the first case. The subject matter of both cases is the trademark "Barbizon." Private respondent counter-argues, however, that the two cases do not have identical causes of action. New causes of action were allegedly introduced in IPC No. 2049, such as the prior use and registr ation of the trademark in the United States and other countries worldwide, prior use in the Philippines, and the fraudulent registration of the mark in violation of Article 189 of the Revised Penal Code. Private respondent also cited protection of the trademark under the Convention of Paris for the Protection of Industrial Property, specifically Article 6bis thereof, and the implementation of Article 6bis by two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents, as well as Executive Order (E.O.) No. 913. The Convention of Paris for the Protection of Industrial Property, otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or appellations of origin, and at the same time aims to repress unfair competition. 41 The Convention is essentially a compact among various countries which, as members of the Union, have pledged to accord to citizens of the other member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws for an effective protection against unfair competition. 42 In short, foreign nationals are to be given the same treatment in each of the member countries as that country makes available to its own citizens. 43 Nationals of the various member nations are thus assured of a certain minimum of international protec tion of their industrial property. 44 The Convention was first signed by eleven countries in Paris on March 20, 1883. 45 It underwent several revisions — at Brussels in 1900, at Washington in 1911, at The Hague in 1925, at London in 1934, at Lisbon in 1958, 46 and at Stockholm in 1967. Both the Philippines and the United States of America, herein private respondent's country, are signatories to the Convention. The United States acceded on May 30, 1887 while the Philippines, through its Senate, concurred on May 10, 1965. 47 The Philippines' adhesion became effective on September 27, 1965, 48 and from this date, the country obligated itself to honor and enforce the provisions of the Convention. 49 In the case at bar, private respondent anchors its cause of action on the first paragraph of Article 6bis of the Paris Convention which reads as follows: Article 6bis (1) 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, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well-known in that country as being already the mark of a person entitled to the benefits of this 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. (2) A period of at least five years from the date of registration shall be allowed for seeking the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be sought. (3) No time limit shall be fixed for seeking the cancellation or the prohibition of the use of marks registered or used in bad faith. 50 This Article governs protection of well-known trademarks. Under the first paragraph, each country of the Union bound itself to undertake to refuse or cancel the registration, and prohibit

the use of a trademark which is a reproduction, imitation or translation, or any essential part of which trademark constitutes a reproduction, liable to create confusion, of a mark considered by the competent authority of the country where protection is sought, to be well-known in the country as being already the mark of a person entitled to the benefits of the Convention, and used for identical or similar goods. Art. 6bis was first introduced at The Hague in 1925 and amended in Lisbon in 1952. 51 It is a selfexecuting provision and does not require legislative enactment to give it effect in the member country. 52 It may be applied directly by the tribunals and officials of each member country by the mere publication or proclamation of the Convention, after its ratification according to the public law of each state and the order for its execution. 53 The essential requirement under Article 6bis is that the trademark to be protected must be "wellknown" in the country where protection is sought. The power to determine whether a trademark is well-known lies in the "competent authority of the country of registration or use." This competent authority would be either the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before a court. 54 Pursuant to Article 6bis, on November 20, 1980, then Minister Luis Villafuerte of the Ministry of Trade issued a Memorandum to the Director of Patents. The Minister ordered the Director that: 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.

55

Three years later, on October 25, 1983, then Minister Roberto Ongpin issued another Memorandum to the Director of Patents, viz: Pursuant to Executive Order No. 913 dated 7 October 1983 which strengthens the rulemaking and adjudicatory powers of the Minister of Trade and Industry and provides inter alia, that "such rule-making and adjudicatory powers should be revitalized in order that the Minister of Trade and Industry can . . . apply more swift and effective solutions and remedies to old and new problems . . . such as infringement of internationally-known tradenames and trademarks . . ." and in view of the decision of the Intermediate Appellate Court in the case of LA CHEMISE LACOSTE, S.A., versus RAM SADWHANI [AC-G.R. SP NO. 13359 (17) June 1983] 56 which affirms the validity of the MEMORANDUM of then Minister Luis R. Villafuerte dated 20 November 1980 confirming our obligations under the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY to which the Republic of the Philippines is a signatory, you are hereby directed to implement measures necessary to effect compliance with our obligations under said Convention in general, and, more specifically, to honor our commitment under Section 6bis 57 thereof, as follows: 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 date of such registration; (d) that the trademark has long been established and obtained goodwill and 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. 4. The Philippine Patent Office shall give due course to the Opposition in cases already or hereafter filed against the registration of trademarks entitled to protection of Section 6bis of said PARIS CONVENTION as outlined above, by remanding applications filed by one not entitled to such protection for final disallowance by the Examination Division. 5. All pending applications for Philippine registration of signature and other world-famous trademarks filed by applicants other than their original owners or users shall be rejected forthwith. Where such applicants have already obtained registration contrary to the abovementioned PARIS CONVENTION and/or Philippine Law, they shall be directed to surrender their Certificates of Registration to the Philippine Patent Office for immediate cancellation proceedings. xxx xxx xxx.

58

In the Villafuerte Memorandum, the Minister of Trade instructed the Director of Patents to reject all pending applications for Philippine registration of signature and other world-famous trademarks by applicants other than their original owners or users. The Minister enumerated several internationallyknown trademarks and ordered the Director of Patents to require Philippine registrants of such marks to surrender their certificates of registration. In the Ongpin Memorandum, the Minister of Trade and Industry did not enumerate well-known trademarks but laid down guidelines for the Director of Patents to observe in determining whether a

trademark is entitled to protection as a well-known mark in the Philippines under Article 6bis of the Paris Convention. This was to be established through Philippine Patent Office procedures in inter partes and ex parte cases pursuant to the criteria enumerated therein. The Philippine Patent Office was ordered to refuse applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person who is a citizen of a member of the Union. All pending applications for registration of world-famous trademarks by persons other than their original owners were to be rejected forthwith. The Ongpin Memorandum was issued pursuant to Executive Order No. 913 dated October 7, 1983 of then President Marcos which strengthened the rule-making and adjudicatory powers of the Minister of Trade and Industry for the effective protection of consumers and the application of swift solutions to problems in trade and industry. 59 Both the Villafuerte and Ongpin Memoranda were sustained by the Supreme Court in the 1984 landmark case of La Chemise Lacoste, S.A. v. Fernandez. 60 This court ruled therein that under the provisions of Article 6bis of the Paris Convention, the Minister of Trade and Industry was the "competent authority" to determine whether a trademark is well-known in this country. 61 The Villafuerte Memorandum was issued in 1980, i.e., fifteen (15) years after the adoption of the Paris Convention in 1965. In the case at bar, the first inter partes case, IPC No. 686, was filed in 1970, before the Villafuerte Memorandum but five (5) years after the effectivity of the Paris Convention. Article 6bis was already in effect five years before the first case was instituted. Private respondent, however, did not cite the protection of Article 6bis, neither did it mention the Paris Convention at all. It was only in 1981 when IPC No. 2049 was instituted that the Paris Convention and the Villafuerte Memorandum, and, during the pendency of the case, the 1983 Ongpin Memorandum were invoked by private respondent. The Solicitor General argues that the issue of whether the protection of Article 6bis of the Convention and the two Memoranda is barred by res judicata has already been answered in Wolverine Worldwide, Inc. v. Court of Appeals. 62 In this case, petitioner Wolverine, a foreign corporation, filed with the Philippine Patent Office a petition for cancellation of the registration certificate of private respondent, a Filipino citizen, for the trademark "Hush Puppies" and "Dog Device." Petitioner alleged that it was the registrant of the internationally-known trademark in the United States and other countries, and cited protection under the Paris Convention and the Ongpin Memorandum. The petition was dismissed by the Patent Office on the ground of res judicata. It was found that in 1973 petitioner's predecessor-in-interest filed two petitions for cancellation of the same trademark against respondent's predecessor-in-interest. The Patent Office dismissed the petitions, ordered the cancellation of registration of petitioner's trademark, and gave due course to respondent's application for registration. This decision was sustained by the Court of Appeals, which decision was not elevated to us and became final and executory. 63 Wolverine claimed that while its previous petitions were filed under R.A. No. 166, the Trademark Law, its subsequent petition was based on a new cause of action, i.e., the Ongpin Memorandum and E.O. No. 913 issued in 1983, after finality of the previous decision. We held that the said Memorandum and E.O. did not grant a new cause of action because it did "not amend the Trademark Law," . . . "nor did it indicate a new policy with respect to the registration in the Philippines of world-famous trademarks." 64 This conclusion was based on the finding that Wolverine's two previous petitions and subsequent petition dealt with the same issue of ownership of the trademark. 65 In other words, since the first and second cases involved the same issue of ownership, then the first case was a bar to the second case. In the instant case, the issue of ownership of the trademark "Barbizon" was not raised in IPC No. 686. Private respondent's opposition therein was merely anchored on: (a) "confusing similarity" of its trademark with that of Escobar's; (b) that the registration of Escobar's similar trademark will cause damage to private respondent's business reputation and goodwill; and (c) that Escobar's use of the trademark amounts to an unlawful appropriation of a mark previously used in the Philippines which act is penalized under Section 4 (d) of the Trademark Law.

In IPC No. 2049, private respondent's opposition set forth several issues summarized as follows: (a) as early as 1933, it adopted the word "BARBIZON" as trademark on its products such as robes, pajamas, lingerie, nightgowns and slips; (b) that the trademark "BARBIZON" was registered with the United States Patent Office in 1934 and 1949; and that variations of the same trademark, i.e., "BARBIZON" with Bee design and "BARBIZON" with the representation of a woman were also registered with the U.S. Patent Office in 1961 and 1976; (c) that these marks have been in use in the Philippines and in many countries all over the world for over forty years. "Barbizon" products have been advertised in international publications and the marks registered in 36 countries worldwide; (d) Escobar's registration of the similar trademark "BARBIZON" in 1974 was based on fraud; and this fraudulent registration was cancelled in 1979, stripping Escobar of whatsoever right she had to the said mark; (e) Private respondent's trademark is entitled to protection as a well-known mark under Article 6bis of the Paris Convention, Executive Order No. 913, and the two Memoranda dated November 20, 1980 and October 25, 1983 of the Minister of Trade and Industry to the Director of Patents; (f) Escobar's trademark is identical to private respondent's and its use on the same class of goods as the latter's amounts to a violation of the Trademark Law and Article 189 of the Revised Penal Code. IPC No. 2049 raised the issue of ownership of the trademark, the first registration and use of the trademark in the United States and other countries, and the international recognition and reputation of the trademark established by extensive use and advertisement of private respondent's products for over forty years here and abroad. These are different from the issues of confusing similarity and damage in IPC No. 686. The issue of prior use may have been raised in IPC No. 686 but this claim was limited to prior use in the Philippines only. Prior use in IPC No. 2049 stems from private respondent's claim as originator of the word and symbol "Barbizon," 66 as the first and registered user of the mark attached to its products which have been sold and advertised worldwide for a considerable number of years prior to petitioner's first application for registration of her trademark in the Philippines. Indeed, these are substantial allegations that raised new issues and necessarily gave private respondent a new cause of action. Res judicata does not apply to rights, claims or demands, although growing out of the same subject matter, which constitute separate or distinct causes of action and were not put in issue in the former action. 67 Respondent corporation also introduced in the second case a fact that did not exist at the time the first case was filed and terminated. The cancellation of petitioner's certificate of registration for failure to file the affidavit of use arose only after IPC No. 686. It did not and could not have occurred in the first case, and this gave respondent another cause to oppose the second application. Res judicata extends only to facts and conditions as they existed at the time judgment was rendered and to the legal rights and relations of the parties fixed by the facts so determined. 68 When new facts or conditions intervene before the second suit, furnishing a new basis for the claims and defenses of the parties, the issues are no longer the same, and the former judgment cannot be pleaded as a bar to the subsequent action. 69 It is also noted that the oppositions in the first and second cases are based on different laws. The opposition in IPC No. 686 was based on specific provisions of the Trademark Law, i.e., Section 4 (d) 70 on confusing similarity of trademarks and Section 8 71 on the requisite damage to file an opposition to a petition for registration. The opposition in IPC No. 2049 invoked the Paris Convention, particularly Article 6bis thereof, E.O. No. 913 and the two Memoranda of the Minister of Trade and Industry. This opposition also invoked Article 189 of the Revised Penal Code which is a statute totally different from the Trademark Law. 72 Causes of action which are distinct and independent from each other, although arising out of the same contract, transaction, or state of facts, may be sued on separately, recovery on one being no bar to subsequent actions on others. 73 The mere fact that the same relief is sought

in the subsequent action will not render the judgment in the prior action operative as res judicata, such as where the two actions are based on different statutes. 74 Res judicata therefore does not apply to the instant case and respondent Court of Appeals did not err in so ruling. Intellectual and industrial property rights cases are not simple property cases. Trademarks deal with the psychological function of symbols and the effect of these symbols on the public at large. 75 Trademarks play a significant role in communication, commerce and trade, and serve valuable and interrelated business functions, both nationally and internationally. For this reason, all agreements concerning industrial property, like those on trademarks and tradenames, are intimately connected with economic development. 76 Industrial property encourages investments in new ideas and inventions and stimulates creative efforts for the satisfaction of human needs. They speed up transfer of technology and industrialization, and thereby bring about social and economic progress. 77 These advantages have been acknowledged by the Philippine government itself. The Intellectual Property Code of the Philippines declares that "an effective intellectual and industrial property system is vital to the development of domestic and creative activity, facilitates transfer of technology, it attracts foreign investments, and ensures market access for our products." 78 The Intellectual Property Code took effect on January 1, 1998 and by its express provision, 79 repealed the Trademark Law, 80 the Patent Law, 81 Articles 188 and 189 of the Revised Penal Code, the Decree on Intellectual Property, 82 and the Decree on Compulsory Reprinting of Foreign Textbooks. 83 The Code was enacted to strengthen the intellectual and industrial property system in the Philippines as mandated by the country's accession to the Agreement Establishing the World Trade Organization (WTO). 84 The WTO is a common institutional framework for the conduct of trade relations among its members in matters related to the multilateral and plurilateral trade agreements annexed to the WTO Agreement. 85 The WTO framework ensures a "single undertaking approach" to the administration and operation of all agreements and arrangements attached to the WTO Agreement. Among those annexed is the Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPs. 86 Members to this Agreement "desire to reduce distortions and impediments to international trade, taking into account the need to promote effective and adequate protection of intellectual property rights, and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade." To fulfill these objectives, the members have agreed to adhere to minimum standards of protection set by several Conventions. 87 These Conventions are: the Berne Convention for the Protection of Literary and Artistic Works (1971), the Rome Convention or the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations, the Treaty on Intellectual Property in Respect of Integrated Circuits, and the Paris Convention (1967), as revised in Stockholm on July 14, 1967. 88 A major proportion of international trade depends on the protection of intellectual property rights. 89 Since the late 1970's, the unauthorized counterfeiting of industrial property and trademarked products has had a considerable adverse impact on domestic and international trade revenues. 90 The TRIPs Agreement seeks to grant adequate protection of intellectual property rights by creating a favorable economic environment to encourage the inflow of foreign investments, and strengthening the multilateral trading system to bring about economic, cultural and technological independence. 91 The Philippines and the United States of America have acceded to the WTO Agreement. This Agreement has revolutionized international business and economic relations among states, and has propelled the world towards trade liberalization and economic globalization. 92 Protectionism and isolationism belong to the past. Trade is no longer confined to a bilateral system. There is now "a new era of global economic cooperation, reflecting the widespread desire to operate in a fairer and more open multilateral trading system." 93 Conformably, the State must reaffirm its commitment to the global community and take part in evolving a new international economic order at the dawn of the new millenium. IN VIEW WHEREOF, the petition is denied and the Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 28415 are affirmed. SO ORDERED.

COFFEE PARTNERS, INC., Petitioner,

G.R. No. 169504 Present:

- versus -

CARPIO, J., Chairperson, VELASCO, JR.,* DEL CASTILLO, ABAD, and PEREZ, JJ.

SAN FRANCISCO COFFEE & Promulgated: ROASTERY, INC., Respondent. March 3, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case This is a petition for review 1[1] of the 15 June 2005 Decision 2[2] and the Resolution3[3] of the Court of Appeals in CA-G.R. SP

1 September 2005

No. 80396. In its 15 June 2005 Decision, the

Court of Appeals set aside the 22 October 2003 Decision 4[4] of the Office of the Director GeneralIntellectual Property Office and reinstated the 14 August 2002 Decision 5[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[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 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). The Ruling of the Office of the Director GeneralIntellectual 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[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 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[8]

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research

Management SA,9[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, rec eptacles, 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[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[11] Section 22 of Republic Act No. 166, 12[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 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[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[14]

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[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[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[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 W ITH THE CORPORATION WHICH HAS GIVEN A REPUTATION TO THE NAME.18[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. 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 AFFAIRSINTELLECTUAL 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.

G.R. No. 139983

March 26, 2008

MANUEL P. SAMSON, Petitioner, vs. COURT OF APPEALS and WILFRO LUMINLUN, Respondents. DECISION CARPIO, J.: The Case This is a petition for review of the Decision 1 dated 6 September 1999 of the Court of Appeals in CAG.R. CV No. 31904 reversing the Decision2 dated 15 May 1990 and 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: 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 letter4 dated 29 March 1989, Samson, through counsel, informed Luminlun that he was revoking the latter’s authority to use the trademark "OTTO." Samson advised Luminlun 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. 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. 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 Dec ember 19907 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; (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 Luminlun sustained 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) xxx

xxx

xxx

"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 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) 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.lavvphil 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 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. ANTONIO T. CARPIO Associate Justice WE CONCUR:

G.R. No. 158589

June 27, 2006

PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., and FABRIQUES DE TABAC REUNIES, S.A., (now known as PHILIP MORRIS PRODUCTS S.A.), Petitioners, vs. FORTUNE TOBACCO CORPORATION, Respondent. DECISION GARCIA, J.: 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, 2003 1 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, 2003 2 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 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 lawphil.net

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

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. 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 decept ion 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. 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 trademark 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. 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 Convention 24 effectively obligates the country to honor and enforce its provisions 25 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. Considering that R.A. No. 166, as amended, specifically Sections 2 28 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 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 Corporation 38 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 inapplic able, 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 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. CA 50 dealt with another, where we instructed to give due regard to the "ordinary purchaser," thus: 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.lawphil.net 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 6bis 55 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. Costs against the petitioners. SO ORDERED. CANCIO C. GARCIA

G.R. No. 161051

July 23, 2009

COMPANIA GENERAL DE TABACOS DE FILIPINAS and LA FLOR DE LA ISABELA, INC., Petitioners, vs. 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., Respondents. DECISION VELASCO, JR., J.: The Case This Petition for Review on Certiorari under Rule 45 seeks the reversal of the June 16, 2003 Decision1 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. On October 1, 1993, petitioners filed a Letter-Complaint5 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 entitled Compania 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. 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, 199515 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 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 transmission of light into the said bottle and thus protect the beer inside the bottle.

3. The phrase "pale pilsen" is carried in their trademark.

This phrase is a generic one even if respective included in their trademarks.

4. The bottle has a capacity of 320 ML and is printed on the label.

It is a metrication and standardization requirement of the defunct Metric System Board (now a function of the Bureau of Product Standards, DTI).

5. The color of the words and design on the label is white.

It is the most economical to use on 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 with a neck.

It is commonly and universally used.

In the same case of Supreme Court stated the following, citing Callman, Unfair Competition, Trademarks and Monopolies: "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 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’: 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: 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, 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 brand registered 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 respec tive 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. 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. xxxx 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: 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 finishedproduct 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. xxxx 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.1awph!1 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 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. xxxx 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, 200325 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 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, or every erroneous conclusion of law or fact, is grave abuse of discretion. (Emphasis supplied)1avvphi1 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, 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: xxxx (c) The VENDEE, and his heirs and/or successors, shall actually occupy and be in possession of the PROPERTY at all times"

xxxx 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 employeebeneficiary. 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 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. 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 c ase," 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) 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 are AFFIRMED. Costs against petitioners. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice

G.R. No. 164321

March 23, 2011

SKECHERS, U.S.A., INC., Petitioner, vs. INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor, vs. INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents. RESOLUTION PERALTA, J.: 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 respondents for infringement of trademark under Section 155, in relation to Section 170 of Republic Act No. 8293, otherwise known as the Intellectual 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 warrants5 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 petition9 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-Intervention11 with this Court claiming to be the sole licensed distributor of Skechers products here in the Philippines. On November 30, 2006, this Court rendered a Decision12 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: (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 OW NED 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: 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 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 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 observed by simply comparing petitioner’s Energy20 model and respondent’s Strong21 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 semitransparent circles. Not surprisingly, respondent’s shoes also have two grayish-white semitransparent circles in the exact same location.lihpwa1 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.1avvphi1 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 x23 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: 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 tradename 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. SO ORDERED. DIOSDADO M. PERALTA

G.R. No. 169974

April 20, 2010

SUPERIOR COMMERCIAL ENTERPRISES, INC., Petitioner, vs. KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., Respondents. DECISION BRION, J.: We review in this petition for review on certiorari 1 the (1) decision2 of the Court of Appeals (CA) in CAG.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 resolution4 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, SUPERIOR5 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. 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 the Philippines 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 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.1avvphi1

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 prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN.22 The RTC Ruling On March 31, 1998, the RTC issued its decision23 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 by SUPERIOR 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 that SUPERIOR 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 On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director General’s decision on appeal dated December 8, 2004, denying SUPERIOR’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 dismissed SUPERIOR’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

(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. 16634 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. 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, Superior however 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. 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 16637 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 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 Case decided 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 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. xxxx 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 competition47 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 of SUPERIOR. 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. In McDonald’s Corporation v. L.C. Big Mak Burger, Inc., 50 we held that there can be trademark infringement without unfair competition such 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. 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. xxxx 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. SO ORDERED.

G.R. No. 170891

November 24, 2009

MANUEL C. ESPIRITU, JR., AUDIE LLONA, 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, who are the officers and directors of BICOL GAS REFILLING PLANT CORPORATION, Petitioners, vs. PETRON CORPORATION and CARMEN J. DOLOIRAS, doing business under the name "KRISTINA PATRICIA ENTERPRISES," Respondents. DECISION ABAD, J.: 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. 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 50kg 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 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 Petronproduced Gasul LPG in violation of Section 168.3 of R.A. 8293. 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 manufactur er 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: 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; 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.1avvphi1 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-today 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 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 CAG.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. SO ORDERED. ROBERTO A. ABAD Associate Justice

G.R. No. 179127

December 24, 2008

IN-N-OUT BURGER, INC., petitioner, vs. SEHWANI, INCORPORATED AND/OR BENITA’S FRITES, INC., respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1 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 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-NOUT" 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 INN-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 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 Reconsideration16 were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817 dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18 respectively. 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. 14-200400004. 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 CAG.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 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 2003 of 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: 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, 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 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. 10-200100004 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 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 Villaraza and 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. The jurat 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 Public30 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 on Notarial 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. Barranda substantially 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 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 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 CAG.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 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; (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; (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: xxxx 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. 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. xxxx 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 subjec t matters of the two actions are the same. 45 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-NOUT 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. xxxx [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 in Baldwin Park, California in the United 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, 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. SO ORDERED.

G.R. No. 184850

October 20, 2010

E.Y. INDUSTRIAL SALES, INC. and ENGRACIO YAP, Petitioners, vs. SHEN DAR ELECTRICITY AND MACHINERY CO., LTD., Respondent. DECISION VELASCO, JR., J.: The Case This Petition for Review on Certiorari under Rule 45 seeks to nullify and reverse the February 21, 2008 Decision 1 and the October 6, 2008 Resolution2 rendered by the Court of Appeals (CA) in CAG.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, 2007 3 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, 2006 4 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 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. 4-1999005393 in favor of EYIS. 12 Thereafter, on February 8, 2007, Shen Dar was also issued COR No. 41997-121492.13 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: WHEREFORE, premises considered, the appeal is DENIED. Certificate of Registration No. 4-1999005393 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. 41997-121492 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 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 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: Section 10. The Bureau of Legal Affairs.¾The Bureau of Legal Affairs shall have the following functions: xxxx 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 "Exhibi ts" 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. 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. 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: 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 quasijudicial 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: 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, 1995 34 where EYIS sold four units of VESPA air compressors to Veteran Paint Trade Center. Shen Dar f ailed 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. 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 earli er 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.) 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: xxxx (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 (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. xxxx 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. xxxx 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: 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 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. No costs. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice

G.R. No. 185917

June 1, 2011

FREDCO MANUFACTURING CORPORATION Petitioner, vs. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review 1 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. 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 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.lawphi1 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 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 t o 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 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 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: 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 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. xxxx 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 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 R oberto 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; (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: (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; (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 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 Decision 37 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. ANTONIO T. CARPIO Associate Justice

G.R. No. 190065

August 16, 2010

DERMALINE, INC., Petitioner, vs. MYRA PHARMACEUTICALS, INC. Respondent. DECISION NACHURA, J.: This is a petition for review on certiorari1 seeking to reverse and set aside the Decision dated August 7, 20092 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 58 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, 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. 2008-7011 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. 200912(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 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. 2007-179 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.1avvphi1 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 tradename 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 t he normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577). 23 (Emphasis supplied) 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. ANTONIO EDUARDO B. NACHURA Associate Justice

G.R. No. 100098 December 29, 1995 EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs. HON. COURT OF APPEALS, BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC., respondents.

KAPUNAN, J.: In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November 1990 in CA-G.R. SP No. 15266 declaring petitioner's trademark to be confusingly similar to that of private respondent and the resolution dated 17 May 1991 denying petitioner's motion for reconsideration. The record reveals the following antecedent facts: On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark "STYLISTIC MR. LEE" used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts, shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine laws. The petition was docketed as Inter Partes Case No. 1558. 1 Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris Convention for the Protection of Industrial Property, averred that petitioner's trademark "so closely resembled its own trademark, 'LEE' as previously registered and used in the Philippines, and not abandoned, as to be likely, when applied to or used in connection with petitioner's goods, to cause confusion, mistake and deception on the part of the purchasing public as to the origin of the goods." 2 In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and unmistakably different from that of private respondent and that its certificate of registration was legally and validly granted. 3 On 20 February 1984, petitioner caused the publication of its application for registration of the trademark "STYLISTIC MR. LEE" in the Principal Register." 4 On 27 July 1984, private respondent filed a notice of opposition to petitioner's application for registration also on grounds that petitioner's trademark was confusingly similar to its "LEE" trademark. 5 The case was docketed as Inter Partes Case No. 1860. On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985, issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common question of law was involved. 6 On 19 July 1988, the Director of Patents rendered a decision granting private respondent's petition for cancellation and opposition to registration. The Director of Patents found private respondent to be the prior registrant of the trademark "LEE" in the Philippines and that it had been using said mark in the Philippines. 7 Moreover, the Director of Patents, using the test of dominancy, declared that petitioner's trademark was confusingly similar to private respondent's mark because "it is the word 'Lee' which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. It is undeniably the dominant feature of the mark." 8

On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that the same would cause it great and irreparable damage and injury. Private respondent submitted its opposition on 22 August 1988. 9 On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioner's motion to stay execution subject to the following terms and conditions: 1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock using the mark "STYLISTIC MR. LEE"; 2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock; 3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals and, if the Respondent's appeal loses, all goods bearing the mark "STYLISTIC MR. LEE" shall be removed from the market, otherwise such goods shall be seized in accordance with the law. SO ORDERED. 10 On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the Director of Patents dated 19 July 1988 in all respects. 11 In said decision the Court of Appeals expounded, thus: xxx xxx xxx Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes place; that duplication or imitation is not necessary, a similarity in the dominant features of the trademark would be sufficient. The word "LEE" is the most prominent and distinctive feature of the appellant's trademark and all of the appellee's "LEE" trademarks. It is the mark which draws the attention of the buyer and leads him to conclude that the goods originated from the same manufacturer. While it is true that there are other words such as "STYLISTIC", printed in the appellant's label, such word is printed in such small letters over the word "LEE" that it is not conspicuous enough to draw the attention of ordinary buyers whereas the word "LEE" is printed across the label in big, bold letters and of the same color, style, type and size of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be noticeable. Even granting arguendo that the word "STYLISTIC" is conspicuous enough to draw attention, the goods may easily be mistaken for just another variation or line of garments under the ap appelle's "LEE" trademarks in view of the fact that the appellee has registered trademarks which use other words in addition to the principal mark "LEE" such as "LEE RIDERS", "LEESURES" and "LEE LEENS". The likelihood of confusion is further made more probable by the fact that both parties are engaged in the same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not the marks are confusingly similar to each other is not whether the challenged mark would actually cause confusion or deception of the purchasers but whether the use of such mark would likely cause confusion or mistake on the part of the buying public. xxx xxx xxx The appellee has sufficiently established its right to prior use and registration of the trademark "LEE" in the Philippines and is thus entitled to protection from any infringement upon the same. It is thus axiomatic that one who has identified a peculiar

symbol or mark with his goods thereby acquires a property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this property right. The merchandise or goods being sold by the parties are not that expensive as alleged to be by the appellant and are quite ordinary commodities purchased by the average person and at times, by the ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed on the label but will simply be guided by the presence of the striking mark "LEE". Whatever difference there may be will pale in insignificance in the face of an evident similarity in the dominant features and overall appearance of the labels of the parties. 12 xxx xxx xxx On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and unrelated arguments and defenses not previously raised in the proceedings below such as laches and a claim that private respondent appropriated the style and appearance of petitioner's trademark when it registered its "LEE" mark under Registration No. 44220. 13 On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioner's motion for reconsideration and ruled thus: xxx xxx xxx A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for the first time on appeal and not raised timely in the proceedings in the lower court is barred by estoppel. The object of requiring the parties to present all questions and issues to the lower court before they can be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to require the party to first present the question he contends for in the lower court so that the other party may not be taken by surprise and may present evidence to properly meet the issues raised. Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case is tried and decided based upon such theory presented in the court below, he will not be permitted to change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question raised for the first time on appeal, there having opportunity to raise them in the court of origin constitutes a change of theory which is not permissible on appeal. In the instant case, appellant's main defense pleaded in its answer dated March 23, 1982 was that there was "no confusing similarity between the competing trademark involved. On appeal, the appellant raised a single issue, to wit: The only issue involved in this case is whether or not respondentregistrant's trademark "STYLISTIC MR. LEE" is confusingly similar with the petitioner's trademarks "LEE or LEERIDERS, LEE-LEENS and LEESURES." Appellant's main argument in this motion for reconsideration on the other hand is that the appellee is estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that appellee went to court with "unclean hands" by changing the appearance of its trademark to make it identical to the appellant's trademark. Neither defenses were raised by the appellant in the proceedings before the Bureau of Patents. Appellant cannot raise them now for the first time on appeal, let alone on a

mere motion for reconsideration of the decision of this Court dismissing the appellant's appeal. While there may be instances and situations justifying relaxation of this rule, the circumstance of the instant case, equity would be better served by applying the settled rule it appearing that appellant has not given any reason at all as to why the defenses raised in its motion for reconsideration was not invoked earlier. 14 xxx xxx xxx Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors: I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE OF A FOURTH "LEE" TRADEMARK IMITATING THAT OF THE PETITIONER'S ON MAY 5, 1989 OR MORE THAN EIGHT MONTHS AFTER THE BUREAU OF PATENT'S DECISION DATED JULY 19, 1988. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER. III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENT'S PRIOR REGISTRATION OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION. 15 In addition, petitioner reiterates the issues it raised in the Court of Appeals: I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONER'S TRADEMARK SYTLISTIC MR. LEE, IS CONFUSINGLY SIMILAR W ITH THE PRIVATE RESPONDENT'S TRADEMARK LEE OR LEE-RIDER, LEE-LEENS AND LEE-SURES. II. PETITIONER'S EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS TRADEMARK IS DIFFERENT FROM THAT OF THE PRIVATE RESPONDENT. III. PETITIONER'S TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENT'S AND THE REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH. IV. PETITIONER'S "STYLISTIC MR. LEE" TRADEMARK CANNOT BE CONFUSED WITH PRIVATE RESPONDENT'S LEE TRADEMARK. 16 Petitioner contends that private respondent is estopped from instituting an action for infringement before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise known as the Law on Trade-marks, Trade-names and Unfair Competition: Sec. 9-A. Equitable principles to govern proceedings. — In opposition proceedings and in all other inter partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and acquiescence, where applicable, may be c onsidered and applied. Petitioner alleges that it has been using its trademark "STYLISTIC MR. LEE" since 1 May 1975, yet, it was only on 18 September 1981 that private respondent filed a petition for cancellation of petitioner's certificate of registration for the said trademark. Similarly, private respondent's notice of opposition to petitioner's application for registration in the principal register was belatedly filed on 27 July 1984. 17 Private respondent counters by maintaining that petitioner was barred from raising new issues on appeal, the only contention in the proceedings below being the presence or absence of confusing similarity between the two trademarks in question. 18

We reject petitioner's contention. Petitioner's trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that "marks and tradenames for the supplemental register shall not be published for or be subject to opposition, but shall be published on registration in the Official Gazette." 19 The reckoning point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, 20 the date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to petitioner. It was only on the date of publication and issuance of the registration certificate that private respondent may be considered "officially" put on notice that petitioner has appropriated or is using said mark, which, after all, is the function and purpose of registration in the supplemental register. 21 The record is bereft of evidence that private respondent was aware of petitioner's trademark before the date of said publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18 September 1981, less than a year had passed. Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of opposition to petitioner's application for registration in the principal register since said applicati on was published only on 20 February 1984. 22 From the time of publication to the time of filing the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of estoppel and laches, the delay must be lengthy. 23 More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently contends that its trademark "STYLISTIC MR. LEE" is entirely different from and not confusingly similar to private respondent's "LEE" trademark. Private respondent maintains otherwise. It asserts that petitioner's trademark tends to mislead and confuse the public and thus constitutes an infringement of its own mark, since the dominant feature therein is the word "LEE." The pertinent provision of R.A. No. 166 (Trademark Law) states thus: 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 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 imitable 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. Practical application, however, of the aforesaid provision is easier said than done. In the history of trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits. In Esso Standard Eastern, Inc. v. Court of Appeals, 24 we held: . . . But likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn vs. Puritan Mills, Inc.: "In trademark cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case." xxx xxx xxx Likewise, it has been observed that:

In determining whether a particular name or mark is a "colorable imitation" of another, no all-embracing rule seems possible in view of the great number of factors which must necessarily be considered in resolving this question of fact, such as the class of product or business to which the article belongs; the product's quality, quantity, or size, including its wrapper or container; the dominant color, style, size, form, meaning of letters, words, designs and emblems used; the nature of the package, wrapper or container; the character of the product's purchasers; location of the business; the likelihood of deception or the mark or name's tendency to confuse; etc. 25 Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the other." 26 Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all the details be literally copied. Colorable imitation refers to such similarity in form, content, words, sound, meaning, special arrangement, or general appearance of the trademark or tradename with that of the other mark or tradename in their over-all presentation or in their essential, substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article. 27 In determining whether colorable imitation exists, jurisprudence has developed two kinds of tests — the Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals 28 and other cases 29 and the Holistic Test developed in Del Monte Corporation v. Court of Appeals 30 and its proponent cases. 31 As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitutes infringement. xxx xxx xxx . . . 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 it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman Brewing Co. v. 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; . . .) 32 xxx xxx xxx On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity. xxx xxx xxx In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. 33 xxx xxx xxx Applying the foregoing tenets to the present controversy and taking into account the factual circumstances of this case, we considered the trademarks involved as a whole and rule that petitioner's "STYLISTIC MR. LEE" is not confusingly similar to private respondent's "LEE" trademark.

Petitioner's trademark is the whole "STYLISTIC MR. LEE." Although on its label the word "LEE" is prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities between the two marks become conspicuous, noticeable and substantial enough to matter especially in the light of the following variables that must be factored in. First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your ordinary household items like catsup, soysauce or soap which are of minimal cost. 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, 34 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. . . . Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is, therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted. Finally, in line with the foregoing discussions, more credit should be given to the "ordinary purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved. The definition laid down in Dy Buncio v. Tan Tiao Bok 35 is better suited to the present case. There, the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the 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. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase." There is no cause for the Court of Appeal's apprehension that petitioner's products might be mistaken as "another variation or line of garments under private respondent's 'LEE' trademark". 36 As one would readily observe, private respondent's variation follows a standard format "LEERIDERS," "LEESURES" and "LEELEENS." It is, therefore, improbable that the public would immediately and naturally conclude that petitioner's "STYLISTIC MR. LEE" is but another variation under private respondent's "LEE" mark. As we have previously intimated the issue of confusing similarity between trademarks is resolved by considering the distinct characteristics of each case. In the present controversy, taking into account these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as to likely cause deception and confusion tantamount to infringement. Another way of resolving the conflict is to consider the marks involved from the point of view of what marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4 (e): CHAPTER II-A.— The Principal Register (Inserted by Sec. 2, Rep. Act No. 638.) Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-

mark, 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: xxx xxx xxx (e) Consists of a mark or trade-name which, when applied to or used in connection with the goods, business or services of the applicant is merely descriptive or deceptively misdescriptive of them, or when applied to or used in connection with the goods, business or services of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname; (Emphasis ours.) xxx xxx xxx "LEE" is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term. . . . It has been held that a personal name or surname may not be monopolized as a trademark or tradename as against others of the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his name or surname in all legitimate ways. Thus, "Wellington" is a surname, and its first user has no cause of action against the junior user of "Wellington" as it is incapable of exclusive appropriation. 37 In addition to the foregoing, we are constrained to agree with petitioner's contention that private respondent failed to prove prior actual commercial use of its "LEE" trademark in the Philippines before filing its application for registration with the BPTTT and hence, has not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which explicitly provides that: CHAPTER II. Registration of Marks and Trade-names. Sec. 2. What are registrable. — Trade-marks, 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 trade-marks, trade-names, or service marks are actually 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. (As amended.) (Emphasis ours.) Sec. 2-A. Ownership of trade-marks, trade-names and service-marks; how acquired. — Anyone who lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders any lawful service in commerce, by actual use hereof in manufacture or trade, in business, and in the service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark not so appropriated by another, to distinguish his merchandise, business or services from others. The ownership or possession of trade-mark, 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 to the law. (As amended.) (Emphasis ours.) The provisions of the 1965 Paris Convention for the Protection of Industrial Property 38 relied upon by private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166) 39 were sufficiently expounded upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals: 40

xxx xxx xxx 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 (Mortisen 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. xxx xxx xxx In other words, (a foreign corporation) may have the capacity to sue for infringement irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law 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. xxx xxx xxx Undisputably, private respondent is the senior registrant, having obtained several registration certificates for its various trademarks "LEE," "LEERIDERS," and "LEESURES" in both the supplemental and principal registers, as early as 1969 to 1973. 41 However, registration alone will not suffice. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 42 we declared: xxx xxx xxx 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 prerequisite in the acquisition of the right of ownership over a trademark. xxx xxx xxx It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto. Such right "grows out of their actual use." Adoption is not use. One may make advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the trade he has built up and the goodwill he has accumulated from use of the trademark. Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing right. Registration does not, however, perfect a trademark right. (Emphasis ours.) xxx xxx xxx To augment its arguments that it was, not only the prior registrant, but also the prior user, private respondent invokes Sec. 20 of the Trademark Law, thus: Sec. 20. Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or tradename shall be a prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's

exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. The credibility placed on a certificate of registration of one's trademark, or its weight as evidence of validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and may be rebutted by controverting evidence. Moreover, the aforequoted provision applies only to registrations in the principal register. 43 Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was created precisely for the registration of marks which are not registrable on the principal register due to some defects. 44 The determination as to who is the prior user of the trademark is a question of fact and it is this Court's working principle not to disturb the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court provided they are supported by substantial evidence. 45 In the case at bench, however, we reverse the findings of the Director of Patents and the Court of Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court of Appeals relied mainly on the registration certificates as proof of use by private respondent of the trademark "LEE" which, as we have previously discussed are not sufficient. We cannot give credence to private respondent's claim that its "LEE" mark first reached the Philippines in the 1960's through local sales by the Post Exchanges of the U.S. Military Bases in the Philippines 46 based as it was solely on the self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent. 47 Similarly, we give little weight to the numerous vouchers representing various advertising expenses in the Philippines for "LEE" products. 48 It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.), Inc. after it entered into a licensing agreement with private respondent on 11 May 1981. 49 On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and other garments adopting its "STYLISTIC MR. LEE" trademark since 1975 as evidenced by appropriate sales invoices to various stores and retailers. 50 Our rulings in Pagasa Industrial Corp. v. Court of Appeals 51 and Converse Rubber Corp. v. Universal Rubber Products, Inc., 52 respectively, are instructive: The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration. There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to invest it with exclusive, continuous adoption of the trademark which should consist among others, of considerable sales since its first use. The invoices submitted by respondent which were dated way back in 1957 show that the zippers sent to the Philippines were to be used as "samples" and "of no commercial value." The evidence for respondent must be clear, definite and free from inconsistencies. "Samples" are not for sale and therefore, the fact of exporting them to the Philippines cannot be considered to be equivalent to the "use" contemplated by law. Respondent did not expect income from such "samples." There were no receipts to establish sale, and no proof were presented to show that they were subsequently sold in the Philippines. xxx xxx xxx The sales invoices provide the best proof that there were actual sales of petitioner's product in the country and that there was actual use for a protracted period of petitioner's trademark or part thereof through these sales. For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioner's use of its own mark and for failure to establish confusing similarity between said trademarks, private respondent's action for infringement must necessarily fail.

WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and SET ASIDE. SO ORDERED.

G.R. No. L-48226

December 14, 1942

ANA L. ANG, petitioner, vs. TORIBIO TEODORO, respondent. Cirilo Lim for petitioner. Marcial P. Lichauco and Manuel M. Mejia for respondent.

OZAETA, J.: Petitioner has appealed to this Court by certiorari to reverse the judgment of the Court of Appeals reversing that of the Court of First Instance of Manila and directing the Director of Commerce to cancel the registration of the trade-mark "Ang Tibay" in favor of said petitioner, and perpetually enjoining the latter from using said trade-mark on goods manufactured and sold by her. Respondent Toribio Teodoro, at first in partnership with Juan Katindig and later as sole proprietor, has continuously used "Ang Tibay," both as a trade-mark and as a trade-name, in the manufacture and sale of slippers, shoes, and indoor baseballs since 1910. He formally registered it as trade-mark on September 29, 1915, and as trade-name on January 3, 1933. The growth of his business is a thrilling epic of Filipino industry and business capacity. Starting in an obscure shop in 1910 with a modest capital of P210 but with tireless industry and unlimited perseverance, Toribio Teodoro, then an unknown young man making slippers with his own hands but now a prominent business magnate and manufacturer with a large factory operated with modern machinery by a great number of employees, has steadily grown with his business to which he has dedicated the best years of his life and which he has expanded to such proportions that his gross sales from 1918 to 1938 aggregated P8,787,025.65. His sales in 1937 amounted to P1,299,343.10 and in 1938, P1,133,165.77. His expenses for advertisement from 1919 to 1938 aggregated P210,641.56. Petitioner (defendant below) registered the same trade-mark "Ang Tibay" for pants and shirts on April 11, 1932, and established a factory for the manufacture of said articles in the year 1937. In the following year (1938) her gross sales amounted to P422,682.09. Neither the decision of the trial court nor that of the Court of Appeals shows how much petitioner has spent or advertisement. But respondent in his brief says that petitioner "was unable to prove that she had spent a single centavo advertising "Ang Tibay" shirts and pants prior to 1938. In that year she advertised the factory which she had just built and it was when this was brought to the attention of the appellee that he consulted his attorneys and eventually brought the present suit." The trial court (Judge Quirico Abeto) presiding absolved the defendant from the complaint, with costs against the plaintiff, on the grounds that the two trademarks are dissimilar and are used on different and non-competing goods; that there had been no exclusive use of the trade-mark by the plaintiff; and that there had been no fraud in the use of the said trade-mark by the defendant because the goods on which it is used are essentially different from those of the plaintiff. The second division of the Court of Appeals, composed of Justices Bengson, Padilla, Lopez Vito, Tuason, and Alex Reyes, with Justice Padilla as ponente, reversed that judgment, holding that by uninterrupted an exclusive use since 191 in the manufacture of slippers and shoes, respondent's trade-mark has acquired a secondary meaning; that the goods or articles on which the two trade-marks are used are similar or belong to the same class; and that the use by petitioner of said trade-mark constitutes a violation of sections 3 and 7 of Act No. 666. The defendant Director of Commerce did not appeal from the decision of the Court of Appeals. First. Counsel for the petitioner, in a well-written brief, makes a frontal sledge-hammer attack on the validity of respondent's trade-mark "Ang Tibay." He contends that the phrase "Ang Tibay" as employed by the respondent on the articles manufactured by him is a descriptive term because, "freely translate in English," it means "strong, durable, lasting." He invokes section 2 of Act No. 666, which provides that words or devices which related only to the name, quality, or description of the merchandise cannot be the subject of a trade-mark. He cites among others the case of Baxter vs. Zuazua (5 Phil., 16), which involved the trade-mark "Agua de Kananga" used on toilet water, and in

which this Court held that the word "Kananga," which is the name of a well-known Philippine tree or its flower, could not be appropriated as a trade-mark any more than could the words "sugar," "tobacco," or "coffee." On the other hand, counsel for the respondent, in an equally well-prepared and exhaustive brief, contend that the words "Ang Tibay" are not descriptive but merely suggestive and may properly be regarded as fanciful or arbitrary in the legal sense. The cite several cases in which similar words have been sustained as valid trade-marks, such as "Holeproof" for hosiery, 1 "ideal for tooth brushes, 2 and "Fashionknit" for neckties and sweaters. 3 We find it necessary to go into the etymology and meaning of the Tagalog words "Ang Tibay" to determine whether they are a descriptive term, i.e., whether they relate to the quality or description of the merchandise to which respondent has applied them as a trade-mark. The word "ang" is a definite article meaning "the" in English. It is also used as an adverb, a contraction of the word "anong" (what or how). For instance, instead of saying, "Anong ganda!" ("How beautiful!"), we ordinarily say, "Ang ganda!" Tibay is a root word from which are derived the verb magpatibay (to strenghten; the nouns pagkamatibay (strength, durability), katibayan (proof, support, strength), katibay-tibayan (superior strength); and the adjectives matibay (strong, durable, lasting), napakatibay (very strong), kasintibay or magkasintibay (as strong as, or of equal strength). The phrase "Ang Tibay" is an exclamation denoting administration of strength or durability. For instance, one who tries hard but fails to break an object exclaims, "Ang tibay!" (How strong!") It may also be used in a sentence thus, "Ang tibay ng sapatos mo!" (How durable your shoes are!") The phrase "ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" is never used adjectively to define or describe an object. One does not say, "ang tibay sapatos" or "sapatos ang tibay" to mean "durable shoes," but "matibay na sapatos" or "sapatos na matibay." From all of this we deduce that "Ang Tibay" is not a descriptive term within the meaning of the TradeMark Law but rather a fanciful or coined phrase which may properly and legally be appropriated as a trade-mark or trade-name. In this connection we do not fail to note that when the petitioner herself took the trouble and expense of securing the registration of these same words as a trademark of her products she or her attorney as well as the Director of Commerce was undoubtedly convinced that said words (Ang Tibay) were not a descriptive term and hence could be legally used and validly registered as a trade-mark. It seems stultifying and puerile for her now to contend otherwise, suggestive of the story of sour grapes. Counsel for the petitioner says that the function of a trademark is to point distinctively, either by its own meaning or by association, to the origin or ownership of the wares to which it is applied. That is correct, and we find that "Ang Tibay," as used by the respondent to designate his wares, had exactly performed that function for twenty-two years before the petitioner adopted it as a trade-mark in her own business. Ang Tibay shoes and slippers are, by association, known throughout the Philippines as products of the Ang Tibay factory owned and operated by the respondent Toribio Teodoro. Second. In her second assignment of error petitioner contends that the Court of Appeals erred in holding that the words "Ang Tibay" had acquired a secondary meaning. In view of the conclusion we have reached upon the first assignment of error, it is unnecessary to apply here the doctrine of "secondary meaning" in trade-mark parlance. This doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article of the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. (G. & C. Merriam Co. vs. Salfield, 198 F., 369, 373.) We have said that the phrase "Ang Tibay," being neither geographic nor descriptive, was originally capable of exclusive appropriation as a trade-mark. But were it not so, the application of the doctrine of secondary meaning made by the Court of Appeals could nevertheless be fully sustained because, in any event, by respondent's long and exclusive use of said phrase with reference to his products and his business, it has acquired a proprietary connotation. (Landers, Frary, and Clark vs. Universal Cooler Corporation, 85 F. [2d], 46.) Third. Petitioner's third assignment of error is, that the Court of Appeals erred in holding that pants and shirts are goods similar to shoes and slippers within the meaning of sections 3 and 7 of Act No. 666. She also contends under her fourth assignment of error (which we deem convenient to pass upon together with the third) that there can neither be infringement of trade-mark under section 3 nor unfair competition under section 7 through her use of the words "Ang Tibay" in connection with pants and shirts, because those articles do not belong to the same class of merchandise as shoes and slippers.

The question raised by petitioner involve the scope and application of sections 3,7, 11, 13, and 20 of the Trade-Mark Law (Act No. 666.) Section 3 provides that "any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in, may recover damages in a civil actions from any person who has sold goods of a similar kind, bearing such trademark . . . The complaining party . . . may have a preliminary injunction, . . . and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause." Section 7 provides that any person who, in selling his goods, shall give them the general appearance of the goods of another either in the wrapping of the packages, or in 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 the complai nant, shall be guilty of unfair competition, and shall be liable to an action for damages and to an injunction, as in the cases of trade-mark infringement under section 3. Section 11 requires the applicant for registration of a trade-mark to state, among others, "the general class of merchandise to which the trade-mark claimed has been appropriated." Section 13 provides that no alleged trade-mark or trade name shall be registered which is identical with a registered or known trade-mark owned by another and appropriate to the same class of merchandise, or which to nearly resembles another person's lawful trade-mark or trade-name as to be likely to cause confusion or mistake in the mind of the public, or to deceive purchasers. And section 2 authorizes the Director of Commerce to establish classes of merchandise for the purpose of the registration of trade-marks and to determine the particular description of articles included in each class; it also provides that "an application for registration of a trade-mark shall be registered only for one class of articles and only for the particular description of articles mentioned in said application." We have underlined the key words used in the statute: "goods of a similar kin," "general class of merchandise," "same class of merchandise," "classes of merchandise," and "class of articles," because it is upon their implications that the result of the case hinges. These phrases, which refer to the same thing, have the same meaning as the phrase "merchandise of the same descr iptive properties" used in the statutes and jurisprudence of other jurisdictions. The burden of petitioner's argument is that under sections 11 and 20 the registration by respondent of the trade-mark "Ang Tibay" for shoes and slippers is no safe-guard against its being used by petitioner for pants and shirts because the latter do not belong to the same class of merchandise or articles as the former; that she cannot be held guilty of infringement of trade-mark under section 3 because respondent's mark is not a valid trade-mark, nor has it acquired a secondary meaning; that pants and shirts do not possess the same descriptive properties as shoes and slippers; that neither can she be held guilty of unfair competition under section 7 because the use by her of the trade-mark "Ang Tibay" upon pants and shirts is not likely to mislead the general public as to their origin or ownership; and that there is now showing that she in unfairly or fraudulently using that mark "Ang Tibay" against the respondent. If we were interpreting the statute for the first time and in the first decade of the twentieth century, when it was enacted, and were to construe it strictly and literally, we might uphold petitioner's contentions. But law and jurisprudence must keep abreast with the progress of mankind, and the courts must breathe life into the statutes if they are to serve their purpose. Our Trade-mark Law, enacted nearly forty years ago, has grown in its implications and practical application, like a constitution, in virtue of the life continually breathed into it. It is not of merely local application; it has its counterpart in other jurisdictions of the civilized world from whose jurisprudence it has also received vitalizing nourishment. We have to apply this law as it has grown and not as it was born. Its growth or development abreast with that of sister statutes and jurisprudence in other jurisdictions is reflected in the following observation of a well-known author: This fundamental change in attitude first manifested itself in the year 1915-1917. Until about then, the courts had proceeded on the theory that the same trade-mark, used on un-like goods, could not cause confusion in trade and that, therefore, there could be no objection to the use and registration of a well-known mark by a third party for a different class of goods. Since 1916 however, a growing sentiment began to arise that in the selection of a famous mark by a third party, there was generally the hidden intention to "have a free ride" on the trade-mark owner's reputation and good will. (Derenberg, Trade-Mark Protection & Unfair Trading, 1936 edition, p. 409.) In the present state of development of the law on Trade-Marks, Unfair Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or are not of the same class is confusion as to the origin of the goods of the second user. Although two

noncompeting articles may be classified under two different classes by the Patent Office because they are deemed not to possess the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the simultaneous use on them of identical or closely similar trade-marks would be likely to cause confusion as to the origin, or personal source, of the second user's goods. They would be considered as not falling under the same class only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first user made the second user's goods. Such construction of the law is induced by cogent reasons of equity and fair dealing. The courts have come to realize that there can be unfair competition or unfair trading even if the goods are noncompeting, and that such unfair trading can cause injury or damage to the first user of a given trademark, first, by prevention of the natural expansion of his business and, second, by having his business reputation confused with and put at the mercy of the second user. Then noncompetitive products are sold under the same mark, the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark created by its first user, inevitably results. The original owner is entitled to the preservation of the valuable link between him and the public that has been created by his ingenuity and the merit of his wares or services. Experience has demonstrated that when a wellknown trade-mark is adopted by another even for a totally different class of goods, it is done to get the benefit of the reputation and advertisements of the originator of said mark, to convey to the public a false impression of some supposed connection between the manufacturer of the article sold under the original mark and the new articles being tendered to the public under the same or similar mark. As trade has developed and commercial changes have come about, the law of unfair competition has expanded to keep pace with the times and the element of strict competition in itself has ceased to be the determining factor. The owner of a trade-mark or trade-name has a property right in which he is entitled to protection, since there is damage to him from confusion of reputation or goodwill in the mind of the public as well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify and treat the issue as a fraud. A few of the numerous cases in which the foregoing doctrines have been laid down in one form or another will now be cited: (1) In Teodoro Kalaw Ng Khe vs. Level Brothers Company (G.R. No. 46817), decided by this Court on April 18, 1941, the respondent company (plaintiff below) was granted injunctive relief against the use by the petitioner of the trade-mark "Lux" and "Lifebuoy" for hair pomade, they having been originally used by the respondent for soap; The Court held in effect that although said articles are noncompetitive, they are similar or belong to the same class. (2) In Lincoln Motor Co. vs. Lincoln Automobile Co. (44 F. [2d], 812), the manufacturer of the well-known Lincoln automobile was granted injunctive relief against the use of the word "Lincoln" by another company as part of its firm name. (3) The case of Aunt Jemima Mills Co. vs. Rigney & Co. (247 F., 407), involved the trade-mark "Aunt Jemima," originally used on flour, which the defendant attempted to use on syrup, and there the court held that the goods, though different, are so related as to fall within the mischief which equity should prevent. (4) In Tiffany & Co., vs. Tiffany Productions, Inc. (264 N.Y.S., 459; 23 Trade-mark Reporter, 183), the plaintiff, a jewelry concern, was granted injunctive relief against the defendant, a manufacturer of motion pictures, from using the name "Tiffany." Other famous cases cited on the margin, wherein the courts granted injunctive relief, involved the following trade-marks or trade-names: "Kodak," for cameras and photographic supplies, against its use for bicycles. 4 "Penslar," for medicines and toilet articles, against its use for cigars; 5 "Rolls-Royce," for automobiles. against its use for radio tubes; 6 "Vogue," as the name of a magazine, against its use for hats; 7 "Kotex," for sanitary napkins, against the use of "Rotex" for vaginal syringes; 8 "Sun-Maid," for raisins, against its use for flour; 9 "Yale," for locks and keys, against its use for electric flashlights; 10 and "Waterman," for fountain pens, against its use for razor blades. 11lawphil.net Against this array of famous cases, the industry of counsel for the petitioner has enabled him to cite on this point only the following cases: (1) Mohawk Milk Products vs. General Distilleries Corporation (95 F. [2d], 334), wherein the court held that gin and canned milk and cream do not belong to the same class; (2) Fawcett Publications, Inc. vs. Popular Mechanics Co. (80 F. [2d], 194), wherein the court held that the words "Popular Mechanics" used as the title of a magazine and duly registered as a trade-mark were not infringed by defendant's use of the words "Modern Mechanics and Inventions" on a competitive magazine, because the word "mechanics" is merely a descriptive name; and (3) Oxford Book Co. vs. College Entrance Book Co. (98 F. [2d], 688), wherein the plaintiff unsuccessfully attempted to enjoin the defendant from using the word "Visualized" in connection with history books, the court holding that said word is merely descriptive. These cases cites and relied upon by petitioner are obviously of no decisive application to the case at bar.

We think reasonable men may not disagree that shoes and shirts are not as unrelated as fountain pens and razor blades, for instance. The mere relation or association of the articles is not controlling. As may readily be noted from what we have heretofore said, the proprietary connotation that a trademark or trade-name has acquired is of more paramount consideration. The Court of Appeals found in this case that by uninterrupted and exclusive use since 1910 of respondent's registered trade-mark on slippers and shoes manufactured by him, it has come to indicate the origin and ownership of said goods. It is certainly not farfetched to surmise that the selection by petitioner of the same trade-mark for pants and shirts was motivated by a desire to get a free ride on the reputation and selling power it has acquired at the hands of the respondent. As observed in another case, 12 the field from which a person may select a trade-mark is practically unlimited, and hence there is no excuse for impinging upon or even closely approaching the mark of a business rival. In the unlimited field of choice, what could have been petitioner's purpose in selecting "Ang Tibay" if not for its fame? Lastly, in her fifth assignment of error petitioner seems to make a frantic effort to retain the use of the mark "Ang Tibay." Her counsel suggests that instead of enjoining her from using it, she may be required to state in her labels affixed to her products the inscription: "Not manufactured by Toribio Teodoro." We think such practice would be unethical and unworthy of a reputable businessman. To the suggestion of petitioner, respondent may say, not without justice though with a tinge of bitterness: "Why offer a perpetual apology or explanation as to the origin of your products in order to use my trade-mark instead of creating one of your own?" On our part may we add, without meaning to be harsh, that a self-respecting person does not remain in the shelter of another but builds one of his own. The judgment of the Court of Appeals is affirmed, with costs against the petitioner in the three instances. So ordered. Yulo, C.J., Moran, Paras and Bocobo, JJ., concur.

G.R. No. 91385 January 4, 1994 HEIRS OF CRISANTA Y. GABRIEL-ALMORADIE, herein represented by the special administrator LORENZO B. ALMORADIE of the Intestate Estate of the Late Crisanta Y. GabrielAlmoradie and LORENZO B. ALMORADIE, petitioners, vs. COURT OF APPEALS and EMILIA M. SUMERA, herein sued in her capacity as special administratrix of the Testate Estate of the late DR. JOSE R. PEREZ, respondents. Romeo Lagman, Valdecantos, Evangelista Law Offices for petitioners. Jesus I. Santos Law Office for private respondent.

NOCON, J.: Just for the record, the present case, involving the same parties and the same trademark has been twice before the Director of Patents, twice before the trial courts, four times before the Court of Appeals and twice before this Court. On review before us is the decision of the Court of Appeals in the case entitled "Emilia M. Sumera v. Crisanta Y. Gabriel, CA-G.R. CV No. 12866" 1 which reversed and set aside the order of the Regional Trial Court in Civil Case No. C-8147, 2 dismissing the complaint filed by private respondent, Emilia M. Sumera against Crisanta Y. Gabriel for Infringement of Trademarks and Damages with Prayer for Issuance of a Writ of Preliminary Injunction. Historical antecedents of the case at bar relate as far back as 1953 when the late Dr. Jose Perez discovered a beauty soap for bleaching, which whitens or sometimes softens the skin. A certificate of label approval was issued in his name by the Bureau of Health on J une 6, 1958 for the said product with the label reading "Dr. Perez' Wonder Beauty Soap." Not surprisingly, he later developed an improved formula for his soap after continued laboratory experimentation, for which he obtained another certificate of label approval from the Bureau of Health on August 10, 1959, also describing the product as "Dr. Perez Wonder Beauty Soap (Improved Formula)." 3 Needing a marketing firm for wider distribution of his soap, he entered into an agreement on January 1959 with a certain company named "Manserco," owned and managed by Mariano S. Yangga, for the distribution of his soap. This venture, however, did not last long, as the corporation allegedly went bankrupt. He then terminated his agreement with Manserco and forged an "Exclusive Distributorship Agreement" with Crisanta Y. Gabriel, who happened to be the sister of Mariano S. Yangga. What could have been a good business relation turned sour; instead a series of legal battles transpired thereafter between them in the Patent and Trademark Office, the trial court, the Court of Appeals and this Court. I. On October 3, 1960, Gabriel filed an application with the Patent Office to register the trademark "WONDER." Said application was denied on November 18, 1960 on the ground that Gabriel was not the owner of the trademark sought to be registered and that as shown in the labels submitted, it appeared that Dr. Jose R. Perez is the owner of the said mark. On the other hand, on May 11, 1961, Perez obtained in his name a certificate of registration No. SR-389 covering the same trademark "WONDER" for beauty soap. 4 II. Thereafter, Perez filed a complaint for Unfair Competition with Injunction and Damages, dated August 8, 1961, docketed as Civil Case No. 2422, against Gabriel. In the said complaint, Perez alleged that Gabriel, without just cause and in violation of the terms of the distributorship agreement, stopped selling and distributing "WONDER" soap, and instead on October 3, 1960 Gabriel tried to register the trademark "WONDER" in her name. On September 7, 1961, a writ of preliminary injunction was issued against Gabriel, restraining her "from making, manufacturing, and producing 'Wonder Bleaching Beauty Soap' with the same labels and chemical ingredients as those of the plaintiff, and from advertising, selling and distributing the

same products." 5 As to what happened to this civil suit, or whether the case was ever terminated remains unknown and is not on record. III. Meanwhile, on October 19, 1962, Gabriel, in Inter Partes Case No. 280, filed a Petition to Cancel Certificate of Registration No. SR-389 covering the trademark "WONDER" for beauty soap in the name of Dr. Perez. On July 15, 1964, a decision was rendered by Director of Patents Tiburcio S. Evalle denying said petition. Her motion for reconsideration thereof having been denied, Gabriel filed a petition for review before this Court, entitled "Crisanta Y. Gabriel v. Dr. Jose R. Perez and Hon. Tiburcio Evalle as Director of Patents," G.R. No. L-24075. 6 The above case was decided in favor of Perez since the court found out that: . . . the trademark "WONDER" has long been identified and associated with the product manufactured and produced by the Dr. Jose R. Perez Cosmetic Laboratory. It would thus appear that the decision under review is but in consonance with the sound purposes or objects of a trademark. Indeed, a contrary ruling would have resulted in the cancellation of the trademark in question and in granting the pending application of herein petitioner to register the same trademark in her favor to be used on her bleaching soap, which is of the same class as that of respondent. And the effect on the public as well as on respondent Dr. Jose R. Perez would have been disastrous. Such a situation would sanction a false implication that the product to be sold by her (Gabriel) is still that manufactured by respondent 7 xxx xxx xxx On the claim of Gabriel that the exclusive ownership of the trademark "WONDER" is vested in her by virtue of her agreement with Perez, the court further said: The fact that paragraph 6 (Exh. "F-2") of the (Distributorship) agreement provides that the petitioner 'has the exclusive right of ownership of the packages and that said party is responsible for the costs as well as the design and manner of packaging the same' did not necessarily grant her the right to the exclusive use of the trademark; because the agreement never mentioned transfer of ownership of the trademark. It merely empowers the petitioner as exclusive distributor to own the package and to create a design at her pleasure, but not the right to appropriate unto herself the sole ownership of the trademark so as to entitle her to registration in the Patent Office. . . . (emphasis supplied) The exclusive distributor does not acquire any proprietary interest in the principal's trademark. 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 interest in the mark which will extinguish the rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate, before application for registration is filed. (87 CJS 258-259, citing cases.) 8 IV. The issue of ownership of the trademark "WONDER" having been settled as pronounced in the above decision, Emilia M. Sumera, in her capacity as special administratrix of the estate of Dr. Jose R. Perez, who died on October 9, 1971, filed on January 31, 1975, with the Philippine Patent Office an application for registration of the trademark "WONDER" for beauty soap in the Principal Register. The application was later amended to change the name of the applicant to "The Testate of the late Dr. Jose R. Perez, represented by Emilia Sumera as Special Administratrix." Gabriel opposed anew the application alleging among others that 1) she is the owner of the trademark "WONDER" used for beauty soap and had been using it prior to the alleged date of first use of applicant (Sumera); 2) that the trademark "WONDER" which she created and adopted is well known throughout the Philippines and even abroad, that the use thereof by the applicant (Sumera) would result in confusion in her business to her damage and prejudice. 9 The Director of Patents dismissed the opposition on the ground of res judicata, the issues having been resolved in G.R. No. L-24075. The application was approved and Certificate of Registration No.

25610 in the Principal Register was issued for the trademark "WONDER" in the name of "The Testate Estate of Dr. Jose R. Perez." 10 The foregoing decision of the Director of Patents was appealed before the Court of Appeals and the appellate court in CA-G.R. SP-07446-R 11 said: Appellant Gabriel's insistence that there is no identity of parties between G.R. No. L24075 and the case at bar is untenable. The fact that Emilia Sumera was not a party in the first case is of no moment, inasmuch as her participation in the case at bar is merely as representative of the estate of the late Dr. Perez, being the Special Administratrix. It should be noted that the application for registration of the trademark filed by Emilia Sumera was amended and the name of the applicant was changed to the Testate Estate of the late Dr. Jose R. Perez, who is deemed the owner of the trademark. xxx xxx xxx It should be noted that appellant Gabriel's petition for cancellation of the trademark in the supplemental register in the name of Dr. Perez was based on her claim of ownership of said trademark. The decision in said case, (G.R. No. L-24075) shows that both parties endevored to prove their rights of ownership of the trademark "Wonder". In the case at bar, the same parties again assert their rights of ownership of the same trademark. It is clear, therefore, that between the two suits, there is identity of cause of action, i.e., the same parties' claim of ownership of the trademark "Wonder." What is different here only is the form of action. But the employment of two different forms of action does not enable one to escape the operation of the principle that one and the same cause of action shall not be twice litigated. (Yusingco v. Ong Hing Lian, G.R. No. L-26523, Dec. 24, 1971, 42 SCRA 589, 605). 12 V. Despite the foregoing, Gabriel continued distributing and selling beauty soap products using the mark "Wonder." Thus, on December 18, 1979, Sumera filed an action against Gabriel for Infringement of Trademark with Damages and a Prayer for a Writ of Preliminary Injunction before the Regional Trial Court (Civil Case No. C-8147, case at bar under our review). The trial court granted a temporary restraining order and in the Order of February 28, 1980, Gabriel was enjoined from using the trademark "Wonder." 13 Subsequently, Gabriel filed a motion to quash the temporary restraining order invoking as a ground res judicata, alleging the pendency of Civil Case No. 2422, filed before the Court of First Instance of Bulacan, Branch III, involving the same parties and trademark. Perhaps unaware of the events prior to the filing of the present complaint, 14 or so we would like to think, the court, on March 17, 1980, ordered the lifting of the temporary restraining order issued on February 28, 1980. As a consequence, on March 28, 1980, Sumera filed a motion to reinstate the restraining order issued on February 28, 1980, while Gabriel filed a reply to the opposition on April 15, 1980 and on April 25, 1980, she filed her answer with counterclaim and a prayer for the issuance of a writ of preliminary injunction. In her answer, she again alleged that 1) the registrations of the trademark "WONDER" (SR-2138 and Reg. No. 25610) in the name of Dr. Perez were unlawfully, irregularly and fraudulently procured; 2) that the trademark "WONDER" has been registered with the Patents Office in the name of a certain Go hay as early as 1959, which registration was assigned to her and as successor-in-interest, her right to the trademark dates back from 1959; 3) and that she created and developed the package bearing the trademark "WONDER" and is the true and lawful owner thereof. In an order dated September 15, 1980, the trial court issued a writ of preliminary injunction against Sumera and the estate of Dr. Jose R. Perez. 15 This prompted Sumera to elevate the matter to the Court of Appeals in a petition for certiorari questioning the court's order. Initially, the appellate court sustained the order of the trial court. Nevertheless, upon motion for reconsideration of Sumera, the appellate court on September 8, 1961 16 modified its earlier decision of February 24, 1981 and said: While it is true that it is not Our role in this present posture of the case to decide who of the parties is entitled (to) the use of the trademark "Wonder" for that has to be decided by respondent Court on the merits of the case before it, the fact remains that the Patent Office had issued in favor of petitioner a certificate of registration for the use of the trademark "Wonder" for the manufacture, sale, etc. of bleaching and beauty soap in the same way that the Patent Office had also issued a certificate of registration in favor of

Go Hay, private respondents' assignor, for the use of the trademark "Wonder" in the manufacture, sale, etc. of laundry soap in bars and cakes. Private respondents, however, claimed that they are entitled to the use of said trademark not only on laundry soaps in cakes and bars but to all goods falling under Classification No. 3 which includes 'bleaching preparations and other substances for laundry use; cleaning, polishing, scouring abrasive preparations; soap, perfumery, essential oils, cosmetics, hair lotions, dentifrices which, according to private respondents, includes bleaching and beauty soap and, therefore, under the patent which was issued on June 30, 1959 prior to one issued to Dr. Perez on May 11, 1961, private respondents were entitled to the exclusive use of said trademark and to restrain petitioner from the use of said trademark even on bleaching soap. (emphasis ours). On the other hand, petitioner claimed that the right of the Estate of Dr. Perez to use the said trademark, especially as against private respondents, had been sustained by the Supreme Court in its decision in Gabriel vs. Perez, 55 SCRA 406. While We maintain Our original position that We should not decide in the case bef ore Us who is better entitled to the use of said trademark, We are bound to accord prima facie validity to the certificates of registration issued to both petitioner and private respondents until the certificates of registration issued by the Patent Office in favor of petitioner or to private respondents as assignee of Go Hay are annulled or set aside in a proper proceedings. Accordingly, We find it necessary to reconsider Our decision sustaining the order of respondent Court issuing a preliminary injunction against petitioner, for an injunction against petitioner preventing her to avail of the right to the use of the trademark "Wonder" under the certificate of registration issued by the Patent Office in favor of Dr. Perez which until now remained valid as it had not been set aside by competent authority, would be clearly iniquitous and unjust. In the same manner, private respondents should not be restrained from availing of their rights to the use of the trademark "Wonder." The end result would be, during the pendency of the case before the lower Court, both petitioner and private respondents should be permitted to manufacture and distribute articles which are covered by their respective trademarks. IN VIEW OF THE FOREGOING, Our decision of February 24, 1981 is hereby MODIFIED in the sense that the order of respondent Court of September 15, 1980 to the extent that it granted the issuance of a preliminary injunction restraining petitioner from using the trademark "Wonder" in the manufacture, advertisement, packing, marketing, distribution and sale of beauty soap is hereby SET ASIDE and the preliminary injunction issued pursuant to said order declared NULL and VOID. 17 VI. While Civil Case No. C-8147 was still pending, Luis M. Duka, Jr., Assistant to the Director, Philippine Patent Office, in an order dated November 16, 1984, cancelled Certificate of Registration No. SR-2138 in the Supplemental Registrar and No. 25610 in the Principal Registrar, of the trademark "WONDER" both in the name of the "Testate Estate of Dr. Jose R. Perez," for failure to file the required Fifth Anniversary Affidavit of Use/Non Use. 18 Gabriel then, alleging the above cancellation, filed an "Omnibus Motion" on December 19, 1984, for the issuance of a restraining order, 19 which was granted by the trial court on January 4, 1985. 20 However, on June 5, 1985, upon motion for reconsideration of Sumera, the court lifted its order of January 4, 1985 and ordered the Sheriff to return to respondent the equipment, machineries and products seized. 21 Nevertheless, on July 17, 1985, the trial court, upon motion for reconsideration of Gabriel and despite the opposition of Sumera to said motion, lifted its Order of June 5, 1985, reinstated its Order of January 4, 1985, and ordered anew the seizing of res pondent's equipment, machineries and products. 22 Hence, Sumera sought again the intervention of the Court of Appeals and filed a petition for review on certiorari. On July 25, 1986, the appellate court in AC-G.R. SP No. 06915 23 granted the petition of Sumera and said: The only issue this Court has to resolve is whether or not the respondent Judge acted with grave abuse of discretion amounting to want or absence of jurisdiction in issuing the questioned order dated January 4, 1985, ordering the confiscation of the

equipments of the petitioners and the Order dated July 17, 1985, ordering the reinstatement of his Order of January 4, 1985, after it was recalled in his Order of June 5, 1985. In fact, the issue raised in the instant case, appears to be the same as the issue raised in the above quoted decision of the Court of Appeals in CA-G.R. SP 07446-R, where the trademark already registered already registered in the name of Dr. Jose R. Perez was also cancelled for failure to file an affidavit of use within one year following the fifth anniversary of the date of issue of the certificate of registration, as required under Section 12 of Republic Act No. 166. The petition for registration of Emilia M. Sumera, in her capacity as Special Administratrix of the estate of Dr. Jose R. Perez, was also opposed by Crisanta Y. Gabriel. And in said case, the Court of Appeals decided against the opposition of Crisanta Gabriel of the registration of the application filed by Emilia M. Sumera, in representation of the testate estate of Dr. Jose R. Perez, for the registration of the trademark "WONDER" for beauty soap, granted by the Director of Patents. The Court of Appeals, and as already above quoted, held that the question of ownership of the trademark "WONDER" having been decided in G.R. No. L-24075, the employment of two different forms of action shall not be twice litigated. Furthermore, the Former Third Division of the Appellate Court (in CA-G.R. No SP-1167R 24 [sic]) in its decision dated February 4, 1981, as amended by its Resolution dated September 8, 1981, declared null and void the Order of the same respondent Judge ordering a preliminary injunction, restraining Sumera from using the trademark "WONDER" in the manufacture, advertisements, packaging, marketing, distribution and sale of beauty soap. 25 xxx xxx xxx We find merit in the petition. Considering the previous decisions not only of the former Court of Appeals but of the Supreme Court, the questioned Order in effect pre-judged the very issues raised in the pleadings of the parties, without the benefit of a full blown trial or hearing as required by the Rules. The sole justification of the respondent Judge in issuing the Order of July 17, 1985 reinstating its Order of January 4, 1985 is the alleged cancellation of the trademark of petitioner by the Bureau of Patents on November 16, 1984. Such, however, is without legal basis, as the cancellation Order was not yet final, considering the filing of a motion to set aside the order of cancellation based on the ground that the period for filing of the affidavit of use had not yet expired. Until such time that the motion to set aside the order of cancellation is final, trademark of petitioners was prematurely deemed or non-existent. The only effect of said cancellation, assuming it to be valid, is that it would deprive the registrant of the protection afforded him by law, which is the protection from infringement of trademark, and it was erroneous and a grave abuse of discretion for the respondent Judge to assume that when the registration of petitioner was cancelled, private respondent became exclusive owner of the exclusion of plaintiff Sumera, of the trademark 'WONDER' and thus, plaintiff Sumera in pending case Civil Case No. C-8147 should, during the pendency of said case, be preliminary enjoined, as provided in the questioned order of July 17, 1985 in relation to the Order of January 4, 1985. Private respondents (sic) claim that, "(p)petitioner's invocation of the decision in G.R. No. L-24075 (Crisanta Y. Gabriel v. Dr. Jose R. Perez, et al) wherein she alleged that the ownership of the trademark "WONDER" for beauty soap in favor of petitioner was upheld," as well as the decision of the hen Court of Appeals in CA-G.R. No. SP No. 07746-R is now of no moment because after the promulgation of the decisions in said cases the circumstances between the parties (petitioner and private respondents herein) have changed materially with the private respondent Gabriel's acquisition of Go Hay's prior trademark "Wonder." Thus under existing jurisprudence, the said decisions could not be enforced or made applicable as this would produce inequity and injustice to private respondent Gabriel." . . . is without merit, considering that she merely stepped into the shoes of Go Hay, and thus, could have no better right than Go Hay as against Emilia Sumera (in her capacity as Special Administratrix of the Estate of the late Dr. Jose R. Perez). 26

VII. Unfortunately, even before the foregoing decision was rendered, petitioner Gabriel on August 13, 1985, filed with the Court a Manifestation and Motion to Dismiss Plaintiff's Complaint for having been Rendered Moot and Academic. 27 In the said motion, petitioner reiterated that since Certificate No. SR-2138 and Certificate No. 25610 both of the registration of the trademark "WONDER" in the name of the Estate of Dr. Jose R. Perez, had been cancelled in Cancellation Order No. 143, dated November 16, 1984, respondent Sumera's cause of action had become non-existent, as she no longer had rights to protect and interest to pursue. Thus, finally, on December 24, 1985, the court without waiting for the resolution of the Court of Appeals in AC-G.R. SP No. 06915, resolved to dismiss the case. 28 Once more respondent Sumera pleaded before the Court of Appeals to review and set aside the order of the trial court dismissing Civil Case No. C-8147. The Court of Appeals granted the petition and in its considered opinion, said: The court a quo in dismissing the complaint for "Infringement of Trademark, Damages and with a prayer for Issuance of a Writ of Preliminary Injunction," only considered the injunctive relief which was issued to protect the present right of the defendants confining as basis for dismissal the second paragraph of Section 23 of RA 166, as amended, providing that "the complaining party upon proper showing may also be granted injunction," but it failed to consider the main paragraph of Section 23, supra, providing that any person entitled to the exclusive use of a trademark "may recover damages in a civil action from any person who infringes his right . . . ." This section is clear. It allows a party to file "actions; and damages and injunction for infringement." 29 xxx xxx xxx The order is half-baked because the court a quo failed to make a definite ruling on the pivotal question of whether or not plaintiff is entitled to damages as a consequence of the infringement of the trademark which she claims to be the registered owner at the very least from the time the (trademark) was registered in her (predecessor's) name up to the time that it was cancelled on November 19, 1984. Indeed, this Court already interdicted to the same presiding judge in Emilia M. Sumera, etc. vs. Hon. Alfredo M. Gorgonio etc., Et Al., AC-G.R. SP No. 06915, July 25, 1986, of the necessity of a "full blown trial" or hearing of the issues raised in the pleadings as required by the Rules to avoid any conception of judgment without hearing of full examination. 30 Petitioner now comes to us arguing that our decision in the case of Gabriel v. Perez, supra, has become functus officio on account of the prior registration of the trademark "WONDER" by Go Hay and its subsequent assignment to petitioner's predecessors; and that the Cancellation No. 143, dated November 16, 1984 involving private respondent's trademark rendered the Civil Case No. C-8147 moot and academic. We are not convinced. Suffice it to say that these issues herein raised have been squarely met in the decisions (CA-G.R. SP-07446-R; CA-G.R. No. SP-11670-R; AC-G.R. SP No. 06915 and CA-G.R.R. CV No. 12886) rendered by the appellate court, all of which we agree with. We find that the trial court erred in dismissing the complaint of private respondent, Sumera, without determining whether there was indeed infringement. Because, contrary to the presumption of the trial court, the complaint in Civil Case No. C-8147 is not merely for preliminary injunction, but for infringement of trademark and for damages. In the interest of the public and for the expeditious administration of justice the issue on infringement shall be resolved by the court considering that this case has dragged on for years and has gone from one forum to another. It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will be served if the case or the determination of an issue in a case is remanded to the trial court only to have its decision raised again to the Court of Appeals and from there to the Supreme Court. 31

We laid down the rule that the remand of the case or of an issue to the lower court for further reception of evidence is not necessary where the Court is in position to resolve the dispute based on the records before it and particularly where the ends of justice would not be subserved by the remand thereof. 32 Moreover, the Supreme Court is clothed with ample authority to review matters, even though those not raised on appeal if it finds that their consideration is necessary in arriving at a just disposition of the case. 33 R.A. 166 describes what constitutes infringement: 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 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. The law also provides that any person whose trademark or trade name is infringed may recover damages in a civil action, and upon proper showing, may also be granted injunction. 34 We cannot help but note Gabriel's propensity to infringe Dr. Perez' trademark, an act which she has been doing since 1960. Assuming arguendo that she was able to obtain a valid assignment of the trademark "Wonder GH" from Go Hay, still there is no reason to believe that Gabriel, or her assigns, has been infringing respondent's trademark since 1960, when she violated the distributorship agreement and appropriated the mark as her own and went on, even when the trademark "Wonder GH" was allegedly assigned to her. The records at hand, show the two marks as registered in the Patents Office as follows: DRAWING Glaring is the fact that the only difference in the above figures is the "supposed origin" of the product ("Dr. Perez" as against "C.Y. Gabriel") which are not even as eye catching as the word "WONDER" itself. Apparently, Gabriel never used or adopted the trademark of Go Hay in her products, instead she has all along been using the trademark registered in the name of Perez. Petitioner's continued use of respondent's trademark on her product, instead of the assigned mark "WONDER GH" is a clear act of abandonment due to non-use, which is in fact a ground for cancellation of registration under Sec. 17 (b) of R.A. 166. What is worse is that there is obvious bad faith on the part of Gabriel in acquiring the mark "Wonder GH." Undoubtedly her intent in having the mark assigned to her is merely to give color to the use of the mark "WONDER" on her products. Particularly so since the Director of Patents in October 1960, denied the registration to Gabriel of the trademark "WONDER" because it was found that the mark was already in use and is owned by Dr. Jose Perez. And then again i 1978, petitioner failed to convince the Director of Patents and the Court of Appeals that she has a right over the same trademark. Petitioner's argument that the word "Wonder" could not be appropriated exclusively as a trademark by private respondent has no leg to stand on. The matter restricting the exclusive use of a trademark is only true over unrelated goods. The law requires that in the adoption of a mark there should not be any likelihood of confusion, mistake or deception to the consumer. 35 Records show that the trademark Gabriel claims to own, through assignment from Go Hay, with certificate of registration no. 33957 in the Principal Register and registration no. SR-4217 in the Supplemental Register is principally for laundry soap in bars and cakes. 36 On the other hand, the mark "WONDER" registered to the testate estate of Jose R. Perez was registered principally for beauty soap. 37 This fact would not have been relevant if no confusion results thereby. In the case at bar, although the presentation of the marks as registered appears to be different, still confusion is bound to result, since the marks are used on related goods (bleaching beauty soap as against laundry soap).

There is likewise no merit in petitioner's assertion that Cancellation Order No. 143, dated November 16, 1984, rendered Civil Case No. C-8147 moot and academic. We reiterate the findings of the Court of Appeals in AC G.R. Sp. 06915, supra. The cancellation order was issued allegedly due to respondent's failure to file the affidavit of use as required by Sec. 12 of R.A. 166. It is not, however, clear whether such order has become final as respondent filed a motion to set aside the order, alleging that it was issued prematurely. Even assuming that the order has become final, still petitioner could not have acquired an exclusive right over the mark "WONDER" as a matter of course. The only effect of cancellation is that it would deprive the registrant protection from infringement. Sec. 22 of R.A. 166, states that only a registrant of a mark can file a case for infringement. On the other hand, Sec. 19 states that any right conferred upon the registrant under the provisions of R.A. 166 terminates/only when judgment or order of cancellation has become final. The present complaint was filed sometime in December 1979, almost 5 years prior to the alleged cancellation order. Thus, until the time that the right is finally terminated, respondent still has a cause of action against petitioners. Ultimately, what draws the axe against petitioners is the principle of "first to use" on which our Trademark Law is based. We have said and reiterated in the case of La Chemise Lacoste v. Fernandez, that: The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin of ownership of the article to which it is affixed, to secure to him, who has been instrumental in bringing into market a superior article of merchandise, the fruit of his industry and skill, and to prevent fraud and imposition. 38 (emphasis ours) Sec. 2 of R.A. 166 states that as a condition precedent to registration the trademark, trade name or service marks should have been in actual use in commerce in the Philippines before the time of the filing of the application. A careful perusal of the record shows that although Go Hay, assignor of Gabriel, first registered the trademark "Wonder GH" on October 17, 1958 39 while the registration of the trademark "WONDER" in the name of Dr. Perez was registered in the Supplemental Register on May 11, 1961 and then the Principal Register on January 3, 1978, the certificate of registration issued to Go Hay showed that the mark "Wonder GH" was first used on July 1, 1958, 40 while that of the mark "WONDER" in favor of Dr. Perez was recorded to have been in use since March 3, 1953, 41 or five (5) years prior to Go Hay's use. Thus, all things being equal, it is then safe to conclude that Dr. Perez had a better right to the mark "WONDER." The registration of the mark "Wonder GH" should have been cancelled in the first place because its use in commerce was much later and its existence would likely cause confusion to the consumer being attached on the product of the same class as that of the mark "WONDER." Considering the foregoing, we find that petitioners have been infringing the trademark "WONDER" which rightfully belongs to respondent. However since the original complaint calls for a determination of damages as a result of the infringement, the trial court is ordered to receive evidence to ascertain the amount thereof. As an incident thereto, the trial court will also have to find out whether the cancellation order has become final and if it did, when it became final. On the other hand the registration of the trademark "Wonder G.H." assigned to C.Y. Gabriel should be and is hereby ordered cancelled since we found that: a) its procurement was tainted with bad faith; b) its continued existence would cause confusion to the consumers; and c) it is not being used by the assignees. 42 WHEREFORE, the petition is hereby DISMISSED for lack of merit. Petitioners, having been found to be infringing the mark "WONDER", are permanently enjoined from using the mark. This case is hereby REMANDED to the trial court only for the purpose of determining the amount of damages due to the respondent. Finally, the registration of the trademark "Wonder G.H." is hereby ORDERED cancelled. Let a certification of this case be issued to the Director of Patents for appropriate action. SO ORDERED.

G.R. No. L-32747 November 29, 1984 FRUIT OF THE LOOM, INC., petitioner, vs. COURT OF APPEALS and GENERAL GARMENTS CORPORATION, respondents. Lichauco, Picazo & Agcaoli Law Office for petitioner.

MAKASIAR, J.: This is a petition for review on certiorari of the decision dated October 8, 1970 of the former Court of Appeals reversing the decision of the defunct Court of First Instance of Manila, Branch XIV, ordering the cancellation of private respondent's registration of the trademark FRUIT FOR EVE, enjoining it permanently from using trademark and ordering it to pay herein petitioner P10,000.00 as attorney's fees. Petitioner, a corporation duly organized and existing under the laws of the State of Rhode Island, United States of America, is the registrant of a trademark, FRUIT OF THE LOOM, in the Philippines Patent Office and was issued two Certificates of Registration Nos. 6227 and 6680, on November 29, 1957 and July 26, 1958, respectively. The classes of merchandise covered by Registration Certif icate No. 6227 are, among others, men's, women's and children's underwear, which includes women's panties and which fall under class 40 in the Philippine Patent Office's classification of goods. Registration Certificate No. 6680 covers knitted, netted and textile fabrics. Private respondent, a domestic corporation, is the registrant of a trademark FRUIT FOR EVE in the Philippine Patent Office and was issued a Certificate of Registration No. 10160, on January 10, 1963 covering garments similar to petitioner's products like women's panties and pajamas. On March 31, 1965 petitioner filed before the lower court, a complaint for infringement of trademark and unfair competition against the herein private respondent. Petitioner principally alleged in the complaint that private respondent's trademark FRUIT FOR EVE is confusingly similar to its trademark FRUIT OF THE LOOM used also on women's panties and other textile products. Furthermore, it was also alleged therein that the color get-up and general appearance of private respondent's hang tag consisting of a big red apple is a colorable imitation to the hang tag of petitioner. On April 19, 1965, private respondent filed an answer invoking the special defense that its registered trademark is not confusingly similar to that of petitioner as the latter alleged. Likewise, private respondent stated that the trademark FRUIT FOR EVE is being used on ladies' panties and pajamas only whereas petitioner's trademark is used even on men's underwear and pajamas. At the pre-trial on May 5, 1965, the following admissions were made: (1) That the trademark FRUIT OF THE LOOM has been registered with the Bureau of Patents and it does not bear the notice 'Reg. Phil. Patent Off.', and (2) That the trademark FRUIT FOR EVE has been registered with the Bureau of Patents and it bears the notice "Reg. Phil. Patent Off." and (3) That at the time of its registration, plaintiff filed no opposition thereto. After trial, judgment was rendered by the lower court in favor of herein petitioner, the dispositive portion of which reads as follows: Judgment is, therefore, rendered ordering the Bureau of Patents to cancel the registration of the Trademark "Fruit for Eve", permanently enjoining Defendant from using the trademark "Fruit for Eve", ordering Defendant to pay plaintiff the sum of P10,000.00 as attorney's fees and to pay the costs. Both parties appealed to the former Court of Appeals, herein petitioner's appeal being centered on the failure of the trial court to award damages in its favor. Private respondent, on the other hand, sought the reversal of the lower court's decision.

On October 8, 1970, the former Court of Appeals, as already stated, rendered its questioned decision reversing the judgment of the lower court and dismissing herein petitioner's complaint. Petitioner's motion for reconsideration having been denied, the present petition was filed before this Court. The first and second arguments advanced by petitioner are that the respondent court committed an error in holding that the word FRUIT, being a generic word, is not capable of exclusive appropriation by petitioner and that the registrant of a trademark is not entitled to the exclusive use of every word of his mark. Otherwise stated, petitioner argues that the respondent court committed an error in ruling that petitioner cannot appropriate exclusively the word FRUIT in its trademark FRUIT OF THE LOOM. The third and fourth arguments submitted by petitioner which We believe is the core of the present controversy, are that the respondent court erred in holding that there is no confusing similarity in sound and appearance between the two trademarks in question. According to petitioner, the prominent and dominant features in both of petitioner's and private respondent's trademark are the word FRUIT and the big red apple design; that ordinary or average purchasers upon seeing the word FRUIT and the big red apple in private respondent's label or hang tag would be led to believe that the latter's products are those of the petitioner, The resolution of these two assigned errors in the negative will lay to rest the matter in litigation and there is no need to touch on the other issues raised by petitioner. Should the said questions be resolved in favor of petitioner, then the other matters may be considered. Petitioner, on its fifth assigned error, blames the former Court of Appeals for not touching the question of the fraudulent registration of private respondent's trademark FRUIT FOR EVE. As may be gleaned from the questioned decision, respondent court did not pass upon the argument of petitioner that private respondent obtained the registration of its trademark thru fraud or misrepresentation because of the said court's findings that there is no confusing similarity between the two trademarks in question. Hence, said court has allegedly nothing to determine as to who has the right to registration because both parties have the right to have their respective trademarks registered. Lastly, petitioner asserts that respondent court should have awarded damages in its favor because private respondent had clearly profited from the infringement of the former's trademark. The main issue involved in this case is whether or not private respondent's trademark FRUIT FOR EVE and its hang tag are confusingly similar to petitioner's trademark FRUIT OF THE LOOM and its hang tag so as to constitute an infringement of the latter's trademark rights and justify the cancellation of the former. In cases involving infringement of trademark brought before this Court it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity (Co Tiong Sa vs. Director of Patents, 95 Phil. 1; Alhambra Cigar & Cigarette Co. vs. Mojica, 27 Phil. 266; Sapolin Co. vs. Balmaceda, 67 Phil. 705; La Insular vs. Jao Oge, 47 Phil. 75). In cases of this nature, there can be no better evidence as to whether there is a confusing similarity in the contesting trademarks than the labels or hang tags themselves. A visual presentation of the labels or hang tags is the best argument for one or the other, hence, We are reproducing hereunder pictures of the hang tags of the products of the parties to the case. The pictures below are part of the documentary evidence appearing on page 124 of the original records. Petitioner asseverates in the third and fourth assignment of errors, which, as We have said, constitute the main argument, that the dominant features of both trademarks is the word FRUIT. In determining whether the trademarks are confusingly similar, a comparison of the words is not the only determinant factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other (Bristol Myers Co. vs. Director of Patents, 17 SCRA 131). In the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE, the lone similar word is FRUIT. WE agree with the respondent court that by mere pronouncing the two marks, it could hardly be said that

it will provoke a confusion, as to mistake one for the other. Standing by itself, FRUIT OF THE LOOM is wholly different from FRUIT FOR EVE. WE do not agree with petitioner that the dominant feature of both trademarks is the word FRUIT for even in the printing of the trademark in both hang tags, the word FRUIT is not at all made dominant over the other words. As to the design and coloring scheme of the hang tags, We believe that while there are similarities in the two marks like the red apple at the center of each mark, We also find differences or dissimilarities which are glaring and striking to the eye such as: 1. The shape of petitioner's hang tag is round with a base that looks like a paper rolled a few inches in both ends; while that of private respondent is plain rectangle without any base. 2. The designs differ. Petitioner's trademark is written in almost semi-circle while that of private respondent is written in straight line in bigger letters than petitioner's. Private respondent's tag has only an apple in its center but that of petitioner has also clusters of grapes that surround the apple in the center. 3. The colors of the hang tag are also very distinct from each other. Petitioner's hang tag is fight brown while that of respondent is pink with a white colored center piece. The apples which are the only similarities in the hang tag are differently colored. Petitioner's apple is colored dark red, while that of private respondent is light red. The similarities of the competing trademarks in this case are completely lost in the substantial differences in the design and general appearance of their respective hang tags. WE have examined the two trademarks as they appear in the hang tags submitted by the parties and We are impressed more by the dissimilarities than by the similarities appearing therein. WE hold that the trademarks FRUIT OF THE LOOM and FRUIT FOR EVE do not resemble each other as to confuse or deceive an ordinary purchaser. The ordinary purchaser must be thought of as having, and credited with, at least a modicum of intelligence (Carnation Co. vs. California Growers Wineries, 97 F. 2d 80; Hyram Walke and Sons vs. Penn-Maryland Corp., 79 F. 2d 836) to be able to see the obvious differences between the two trademarks in question. Furthermore, We believe that a person who buys petitioner's products and starts to have a liking for it, will not get confused and reach out for private respondent's products when she goes to a garment store. These findings in effect render immaterial the other errors assigned by petitioner which are premised on the assumption that private respondent's trademark FRUIT FOR EVE had infringed petitioner's trademark FRUIT OF THE LOOM. WHEREFORE, THE DECISION APPEALED FROM IS AFFIRMED. COSTS AGAINST PETITIONER. SO ORDERED.

246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTRES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the November 28, 2002 Decision 19[1] of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well as the Resolution 20[2] dated February 13, 2003 denying its motion for reconsideration. The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction 21[3] before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark “Rolex” in its business name “Rolex Music Lounge” as well as in its newspaper advertisements as – “Rolex Music Lounge, KTV, Disco & Party Club.” In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark “Rolex” considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not authorized to represent respondents. 22[4] On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative defenses. 23[5] Subsequently, on motion of petitioner, the trial court issued a subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary hearing. 24[6] Respondents, in the meantime, filed a Comment and Opposition 25[7] to the motion for preliminary hearing and a motion to quash the subpoena ad testificandum. In an Order dated October 27, 2000, the trial court quashed the subpoena ad testificandum and denied petitioner’s motion for preliminary hearing on affirmative defenses with motion to dismiss. 26[8] With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders. On November 28, 2002, the Court of Appeals dismissed the petition. The motion for reconsideration filed by petitioner was denied. Hence, the instant petition anchored on the following grounds: I

IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER. II IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED IN PETITIONER’S CERTIORARI PETITION ARE QUESTIONS OF FACT, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE RESPONDENTS’ PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS’ LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER. III THE HONORABLE COURT OF APPEALS VIOLATED PETITIONER’S RIGHT TO SUBSTANTIVE DUE PROCESS WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONER’S MOTION FOR PRELIMINARY HEARING ON DEFENDANT’S AFFIRMATIVE DEFENSES AND NOT PETITIONER’S MOTION TO DISMISS PER SE CONSIDERING THAT: A. THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER 20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE RESOLUTION OF PETITIONER’S MOTION TO DISMISS PER SE WAS HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL ON THE MERITS OF PETITIONER’S MOTION TO DISMISS PER SE AND NOT MERELY OF PETITIONER’S MOTION FOR PRELIMINARY HEARING THEREON. B. PRIVATE RESPONDENTS’ COMMENT AND OPPOSITION DATED 11 AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR PETITIONER’S MOTION TO DISMISS PER SE. HENCE, THE SAID 20 OCTOBER 2000 ORDER’S DENIAL OF PETITIONER’S MOTION IS NOT LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO CONSTITUTES A DENIAL OF PETITIONER’S MOTION TO DISMISS PER SE. IV IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS’ COMPLAINT A QUO, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONER’S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE RESPONDENTS. V IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGE’S QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED AGAINST ATTY. ALONZO

ANCHETA, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONER’S SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132 AND SECTION 7 RULE 133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA. 27[9] Simply put, the issues are as follows – (1) whether the trial court denied not only petitioner’s motion for preliminary hearing on its affirmative defenses but its motion to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court gravely abused its discretion in denying said motions; and (3) whether the trial court gravely abused its discretion in quashing the subpoena ad testificandum issued against Atty. Ancheta. Anent the first issue, we find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court neither qualified its denial nor held in abeyance the ruling on petitioner’s motion to dismiss thus – IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad Testificandum is granted; and the aforecited Motion For Preliminary Hearing On Defendant’s Affirmative Defenses With Motion To dismiss The Instant Complaint Based On Said Affirmative Defenses is denied.28[10] (Emphasis supplied) In issuing the assailed order, the trial court ruled on the merits of petitioner’s Motion to Dismiss vis-à-vis respondents’ Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner, to wit: After carefully going over the pleadings, this Court finds, on the first motion that the arguments raised in the said motion and the reply filed in connection thereto appear to be meritorious; and on the second motion, that the arguments raised in the comments and opposition and the rejoinder filed by the plaintiffs likewise appear to be meritorious. 29[11] Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly. 30[12] In Municipality of Biñan Laguna v. Court of Appeals, 31[13] decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court, thus – SEC. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this Rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied) The use of the word "may" in the aforequoted provision shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. “May” is an auxiliary verb indicating liberty, opportunity, permission and possibility. 32[14] Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court, to wit – SEC. 6. Pleading grounds as affirmative defenses.— If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied)

In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial court’s denial of petitioner’s motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. Under the old Trademark Law 33[15] where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods. 34[16] This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads: Sec. 123. Registrability. – 123.1. A mark cannot be registered if it: xxx

xxx

xxx

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided, further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied) A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the wellknown mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit: 1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, 35[17] 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 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 the 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;

(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 of 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. 2.

The use of the well-known mark on the entirely unrelated goods or services would

indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the mark. 3. The interests of the owner of the well-known mark are likely to be damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user. 36[18] Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents’ business involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same. The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioner’s motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition. WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner are AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Panganiban, Carpio and Azcuna, JJ., concur.

G.R. No. L-78325 January 25, 1990 DEL MONTE CORPORATION and PHILIPPINE PACKING CORPORATION, petitioners, vs. COURT OF APPEALS and SUNSHINE SAUCE MANUFACTURING INDUSTRIES, respondents. Bito, Misa & Lozada for petitioners. Reynaldo F. Singson for private respondent.

CRUZ, J.: The petitioners are questioning the decision of the respondent court upholding the dismissal by the trial court of their complaint against the private respondent for infringement of trademark and unfair competition. Petitioner Del Monte Corporation is a foreign company organized under the laws of the United States and not engaged in business in the Philippines. Both the Philippines and the United States are signatories to the Convention of Paris of September 27, 1965, which grants to the nationals of the parties rights and advantages which their own nationals enjoy for the repression of acts of infringement and unfair competition. Petitioner Philippine Packing Corporation (Philpack) is a domestic corporation duly organized under the laws of the Philippines. On April 11, 1969, Del Monte granted Philpack the right to manufacture, distribute and sell in the Philippines various agricultural products, including catsup, under the Del Monte trademark and logo. On October 27,1965, Del Monte authorized Philpack to register with the Philippine Patent Office the Del Monte catsup bottle configuration, for which it was granted Certificate of Trademark Registration No. SR-913 by the Philippine Patent Office under the Supplemental Register. 1 On November 20, 1972, Del Monte also obtained two registration certificates for its trademark "DEL MONTE" and its logo. 2 Respondent Sunshine Sauce Manufacturing Industries was issued a Certificate of Registration by the Bureau of Domestic Trade on April 17,1980, to engage in the manufacture, packing, distribution and sale of various kinds of sauce, identified by the logo Sunshine Fruit Catsup. 3 This logo was registered in the Supplemental Register on September 20, 1983. 4 The product itself was contained in various kinds of bottles, including the Del Monte bottle, which the private respondent bought from the junk shops for recycling. Having received reports that the private respondent was using its exclusively designed bottles and a logo confusingly similar to Del Monte's, Philpack warned it to desist from doing so on pain of legal action. Thereafter, claiming that the demand had been ignored, Philpac k and Del Monte filed a complaint against the private respondent for infringement of trademark and unfair competition, with a prayer for damages and the issuance of a writ of preliminary injunction. 5 In its answer, Sunshine alleged that it had long ceased to use the Del Monte bottle and that its logo was substantially different from the Del Monte logo and would not confuse the buying public to the detriment of the petitioners. 6 After trial, the Regional Trial Court of Makati dismissed the complaint. It held that there were substantial differences between the logos or trademarks of the parties; that the defendant had ceased using the petitioners' bottles; and that in any case the defendant became the owner of the said bottles upon its purchase thereof from the junk yards. Furthermore, the complainants had failed to establish the defendant's malice or bad faith, which was an essential element of infringement of trademark or unfair competition. 7

This decision was affirmed in toto by the respondent court, which is now faulted in this petition for certiorari under Rule 45 of the Rules of Court. Section 22 of R.A. No. 166, otherwise known as the Trademark Law, provides in part 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 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. Sec. 29 of the same law states as follows: Sec. 29. Unfair competition, rights and remedies. — A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a mark or tradename is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights. Such a person shall have the remedies provided in section twenty- three, Chapter V hereof. Any person who shall 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 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, 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; (b) Any person who by any artifice, or device, or who employs ally other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (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. To arrive at a proper resolution of this case, it is important to bear in mind the following distinctions between infringement of trademark and unfair competition. (1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of one's goods as those of another.

(2) In infringement of trademark fraudulent intent is unnecessary whereas in unfair competition fraudulent intent is essential. (3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in unfair competition registration is not necessary. 8 In the challenged decision, the respondent court cited the following test laid down by this Court in a number of cases: In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predorninant words but also on the other features appearing on both labels. 9

and applying the same, held that there was no colorable imitation of the petitioners' trademark and logo by the private respondent. The respondent court agreed with the findings of the trial court that: In order to resolve the said issue, the Court now attempts to make a comparison of the two products, to wit: 1. As to the shape of label or make: Del Monte: Semi-rectangular with a crown or tomato shape design on top of the rectangle. Sunshine: Regular rectangle. 2. As to brand printed on label: Del Monte: Tomato catsup mark. Sunshine: Fruit catsup. 3. As to the words or lettering on label or mark: Del Monte: Clearly indicated words packed by Sysu International, Inc., Q.C., Philippines. Sunshine: Sunshine fruit catsup is clearly indicated "made in the Philippines by Sunshine Sauce Manufacturing Industries" No. 1 Del Monte Avenue, Malabon, Metro Manila. 4. As to color of logo: Del Monte: Combination of yellow and dark red, with words "Del Monte Quality" in white. Sunshine: White, light green and light red, with words "Sunshine Brand" in yellow. 5. As to shape of logo: Del Monte: In the shape of a tomato. Sunshine: Entirely different in shape. 6. As to label below the cap: Del Monte: Seal covering the cap down to the neck of the bottle, with picture of tomatoes with words "made from real tomatoes."

Sunshine: There is a label below the cap which says "Sunshine Brand." 7. As to the color of the products: Del Monte: Darker red. Sunshine: Lighter than Del Monte. While the Court does recognize these distinctions, it does not agree with the conclusion that there was no infringement or unfair competition. It seems to us that the lower courts have been so preoccupied with the details that they have not seen the total picture. It has been correctly held that side-by-side comparison is not the final test of similarity. 10 Such comparison requires a careful scrutiny to determine in what points the labels of the products differ, as was done by the trial judge. The ordinary buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library. Where the housewife has to return home as soon as possible to her baby or the working woman has to make quick purchases during her off hours, she is apt to be confused by similar labels even if they do have minute differences. The male shopper is worse as he usually does not bother about such distinctions. 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. 11 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. 12 It has been held that in making purchases, the consumer must depend upon his recollection of the appearance of the product which he intends to purchase. 13 The buyer having in mind the mark/label of the respondent must rely upon his memory of the petitioner's mark. 14 Unlike the judge who has ample time to minutely examine the labels in question in the comfort of his sala, the ordinary shopper does not enjoy the same opportunity. A number of courts have held that to determine whether a trademark has been infringed, we must consider the mark as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it. 15 The court therefore should be guided by its first impression, 16 for a buyer acts quickly and is governed by a casual glance, the value of which may be dissipated as soon as the court assumes to analyze carefully the respective features of the mark. 17 It has also been held that it is not the function of the court in cases of infringement and unfair competition to educate purchasers but rather to take their carelessness for granted, and to be ever conscious of the fact that marks need not be identical. A confusing similarity will justify the intervention of equity. 18 The judge must also be aware of the fact that usually a defendant in cases of infringement does not normally copy but makes only colorable changes. 19 Well has it been said that 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. 20 We also note that the 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 conditions under which it is usually purchased . 21 Among these, 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. 22 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. 23 In this latter category is catsup. At that, even if the labels were analyzed together it is not difficult to see that the Sunshine label is a colorable imitation of the Del Monte trademark. The predominant colors used in the Del Monte label

are green and red-orange, the same with Sunshine. The word "catsup" in both bottles is printed in white and the style of the print/letter is the same. Although the logo of Sunshine is not a tomato, the figure nevertheless approximates that of a tomato. As previously stated, the person who infringes a trade mark does not normally copy out but only makes colorable changes, employing enough points of similarity to confuse the public with enough points of differences to confuse the courts. What is undeniable is the fact that when a manufacturer prepares to package his product, he has before him a boundless choice of words, phrases, colors and symbols sufficient to distinguish his product from the others. When as in this case, Sunshine chose, without a reasonable explanation, to use the same colors and letters as those used by Del Monte though the field of its selection was so broad, the inevitable conclusion is that it was done deliberately to deceive . 24 It has been aptly observed that the ultimate ratio in cases of grave doubt is the rule that as between a newcomer who by the confusion has nothing to lose and everything to gain and one who by honest dealing has already achieved favor with the public, any doubt should be resolved against the newcomer inasmuch as the field from which he can select a desirable trademark to indicate the origin of his product is obviously a large one. 25 Coming now to the second issue, we find that the private respondent is not guilty of infringement for having used the Del Monte bottle. The reason is that the configuration of the said bottle was merely registered in the Supplemental Register. In the case of Lorenzana v. Macagba, 26 we declared that: (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. There is no such presumption in the registration in the Supplemental Register. (2) Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein on the issue of ownership which may be contested through opposition or interference proceedings or, after registration, in a petition for cancellation. Registration in the Principal Register is constructive notice of the registrant's claim of ownership, while registration in the Supplemental Register is merely proof of actual use of the trademark and notice that the registrant has used or appropriated it. It is not subject to opposition although it may be cancelled after the issuance. Corollarily, registration in the Principal Register is a basis for an action for infringement while registration in the Supplemental Register is not. (3) In applications for registration in the Principal Register, publication of the application is necessary. This is not so in applications for registrations in the Supplemental Register. It can be inferred from the foregoing that although Del Monte has actual use of the bottle's configuration, the petitioners cannot claim exclusive use thereof because it has not been registered in the Principal Register. However, we find that Sunshine, despite the many choices available to it and notwithstanding that the caution "Del Monte Corporation, Not to be Refilled" was embossed on the bottle, still opted to use the petitioners' bottle to market a product which Philpack also produces. This clearly shows the private respondent's bad faith and its intention to capitalize on the latter's reputation and goodwill and pass off its own product as that of Del Monte. The Court observes that the reasons given by the respondent court in resolving the case in favor of Sunshine are untenable. First, it declared that the registration of the Sunshine label belied the company's malicious intent to imitate petitioner's product. Second, it held that the Sunshine label was not improper because the Bureau of Patent presumably considered other trademarks before approving it. Third, it cited the case of Shell Co. v. Insular Petroleum, 27 where this Court declared that selling oil in containers of another with markings erased, without intent to deceive, was not unfair competition.

Regarding the fact of registration, it is to be noted that the Sunshine label was registered not in the Principal Register but only in the Supplemental Register where the presumption of the validity of the trademark, the registrant's ownership of the mark and his right to its exclusive use are all absent. Anent the assumption that the Bureau of Patent had considered other existing patents, it is reiterated that since registration was only in the Supplemental Register, this did not vest the registrant with the exclusive right to use the label nor did it give rise to the presumption of the validity of the registration. On the argument that no unfair competition was committed, the Shell Case is not on all fours with the case at bar because: (1) In Shell, the absence of intent to deceive was supported by the fact that the respondent therein, before marketing its product, totally obliterated and erased the brands/mark of the different companies stenciled on the containers thereof, except for a single isolated transaction. The respondent in the present case made no similar effort. (2) In Shell, what was involved was a single isolated transaction. Of the many drums used, there was only one container where the Shell label was not erased, while in the case at hand, the respondent admitted that it made use of several Del Monte bottles and without obliterating the embossed warning. (3) In Shell, the product of respondent was sold to dealers, not to ultimate consumers. As a general rule, dealers are well acquainted with the manufacturer from whom they make their purchases and since they are more experienced, they cannot be so easily deceived like the inexperienced public. There may well be similarities and imitations which deceive all, but generally the interests of the dealers are not regarded with the same solicitude as are the interests of the ordinary consumer. For it is the form in which the wares come to the final buyer that is of significance. 28 As Sunshine's label is an infringement of the Del Monte's trademark, law and equity call for the cancellation of the private respondent's registration and withdrawal of all its products bearing the questioned label from the market. With regard to the use of Del Monte's bottle, the same constitutes unfair competition; hence, the respondent should be permanently enjoined from the use of such bottles. The court must rule, however, that the damage prayed for cannot be granted because the petitioner has not presented evidence to prove the amount thereof. Section 23 of R.A. No. 166 provides: Sec. 23. Actions and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or trade name may recover damages in a civil action from any person who infringes his rights, 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 said 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 the court may award as damages 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 cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing may also be granted injunction. Fortunately for the petitioners, they may still find some small comfort in Art. 2222 of the Civil Code, which provides: Art. 2222. The court may award nominal damages in every obligation arising from any source enumerated in Art. 1157, or in every case where any property right has been invaded. Accordingly, the Court can only award to the petitioners, as it hereby does award, nominal damages in the amount of Pl,000.00.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 24, 1986 and the Resolution dated April 27,1987, are REVERSED and SET ASIDE and a new judgment is hereby rendered: (1) Canceling the private respondent's Certificate of Register No. SR-6310 and permanently enjoining the private respondent from using a label similar to that of the petitioners. (2) Prohibiting the private respondent from using the empty bottles of the petitioners as containers for its own products. (3) Ordering the private respondent to pay the petitioners nominal damages in the amount of Pl,000.00, and the costs of the suit. SO ORDERED. Narvasa Gancayco, Griño-Aquino and Medialdea, JJ., concur.

G.R. No. L-23035 July 31, 1975 PHILIPPINE NUT INDUSTRY, INC., petitioner, vs. STANDARD BRANDS INCORPORATED and TIBURCIO S. EVALLE as Director of Patents, respondents. Perfecta E. De Vera for petitioner. Paredes, Poblador, Cruz and Nazareno for private respondent. Office of the Solicitor General Arturo A. Alafriz, Acting Assistant Solicitor General Isidro C. Borromeo and Solicitor Francisco J. Bautista for respondent Director.

MUNOZ PALMA, J.: Challenged in this petition for review is the decision of respondent Director of Patents which orders the cancellation of Certificate of Registration No. SR-416 issued in favor of herein petitioner Philippine Nut Industry, Inc. (hereinafter called Philippine Nut) for the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," upon complaint of Standard Brands Inc. (hereinafter to be called Standard Brands). The records of the case show the following incidents: Philippine Nut, a domestic corporation, obtained from the Patent Office on August 10, 1961, Certificate of Registration No. SR-416 covering the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS," the label used on its product of salted peanuts. On May 14, 1962, Standard Brands a foreign corporation, 1 filed with the Director of Patents Inter Partes Case No. 268 asking for the cancellation of Philippine Nut's certificate of registration on the ground that "the registrant was not entitled to register the mark at the time of its application for registration thereof" for the reason that it (Standard Brands) is the owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172, issued by the Patent Office on July 28, 1958. Standard Brands alleged in its petition that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" closely resembles and is confusingly similar to its trademark "PLANTERS COCKTAIL PEANUTS" used also on salted peanuts, and that the registration of the former is likely to deceive the buying public and cause damage to it. On June 1, 1962, Philippine Nut filed its answer invoking the special defense that its registered label is not confusingly similar to that of Standard Brands as the latter alleges. At the hearing of October 4, 1962, the parties submitted a partial stipulation of facts. On December 12, 1962, an amended partial stipulation of facts was submitted, the pertinent agreements contained in which are: (1) that Standard Brands is the present owner of the trademark "PLANTERS COCKTAIL PEANUTS" covered by Certificate of Registration No. SR-172 issued on July 28, 1958; (2) that Standard Brands trademark was first used in commerce in the Philippines in December, 1938 and (3) that Philippine Nut's trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" was first used in the Philippines on December 20, 1958 and registered with the Patent Office on August 10, 1961. On December 10, 1963, after the presentation of oral and documentary evidence and the filing by the parties of their memoranda, respondent Director of Patents rendered Decision No. 281 giving due course to Standard Brand's petition and ordering the cancellation of Philippine Nut's Certificate of Registration No. SR-416. The Director of Patents found and held that in the labels using the two trademarks in question, the dominant part is the word "Planters", displayed "in a very similar manner" so much so that "as to appearance and general impression" there is "a very confusing similarity," and he concluded that Philippine Nut "was not entitled to register the mark at the time of its filing the application for registration" as Standard Brands will be damaged by the registration of the same. Its

motion for reconsideration having been denied, Philippine Nut came up to this Court for a review of said decision. In seeking a reversal of the decision of respondent Director of Patents, petitioner brings forth eleven assigned errors all of which revolve around one main issue: is the trademark "PHILIPPINE PLANTERS CORDIAL PEANUTS" used by Philippine Nut on its label for salted peanuts confusingly similar to the trademark "PLANTERS COCKTAIL PEANUTS" used by Standard Brands on its product so as to constitute an infringement of the latter's trademark rights and justify its cancellation? 2 The applicable law to the case is found in Republic Act 166 otherwise known as the Trade-Mark Law from which We quote the following pertinent provisions: Chapter II-A. — Sec. 4. Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trademark, 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: (d) Consists of or comprises a mark or trade-name which so resembles a mark or tradename 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; ... (emphasis Ours) Sec. 17. Grounds for cancellation — Any person, who believes that he is or will be damaged by the registration of a mark or trade-name, may, upon the payment of the prescribed fee, apply to cancel said registration upon any of the following grounds: (c) That the registration was obtained fraudulently or contrary to the provisions of section four, Chapter II hereof; .... 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 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). In the cases involving infringement of trademark brought before the Court it has been consistently held that there is infringement of trademark when the use of the mark involved would be likely to cause confusion or mistake in the mind of the public or to deceive purchasers as to the origin or source of the commodity; that whether or not a trademark causes confusion and is likely to deceive the public is a question of fact which is to be resolved by applying the "test of dominancy", meaning, if the competing trademark contains the main or essential or dominant features of another by reason of which confusion and deception are likely to result, then infringement takes pIace; that duplication or imitation is not necessary, a similarity in the dominant features of the trademarks would be sufficient. 3 1. The first argument advanced by petitioner which We believe goes to the core of the matter in litigation is that the Director of Patents erred in holding that the dominant portion of the label of Standard Brands in its cans of salted peanuts consists of the word PLANTERS which has been used in the label of Philippine Nut for its own product. According to petitioner, PLANTERS cannot be considered as the dominant feature of the trademarks in question because it is a mere descriptive term, an ordinary word which is defined in Webster International Dictionary as "one who or that which plants or sows, a farmer or an agriculturist." (pp. 10-11, petitioner's brief)

We find the argument without merit. While it is true that PLANTERS is an ordinary word, nevertheless it is used in the labels not to describe the nature of the product, but to project the source or origin of the salted peanuts contained in the cans. The word PLANTERS printed across the upper portion of the label in bold letters easily attracts and catches the eye of the ordinary consumer and it is that word and none other that sticks in his mind when he thinks of salted peanuts. In cases of this nature there can be no better evidence as to what is the dominant feature of a label and as to whether there is a confusing similarity in the contesting trademarks than the labels themselves. A visual and graphic presentation of the labels will constitute the best argument for one or the other, hence, we are reproducing hereunder a picture of the cans of salted peanuts of the parties to the case. The picture below is part of the documentary evidence appearing in the original records, and it clearly demonstrates the correctness of the finding of respondent Director that the word PLANTERS is the dominant, striking mark of the labels in question. It is true that there are other words used such as "Cordial" in petitioner's can and "Cocktail" in Standard Brands', which are also prominently displayed, but these words are mere adjectives describing the type of peanuts in the labeled containers and are not sufficient to warn the unwary customer that the two products come form distinct sources. As a whole it is the word PLANTERS which draws the attention of the buyer and leads him to conclude that the salted peanuts contained in the two cans originate from one and the same manufacturer. In fact, when a housewife sends her housemaid to the market to buy canned salted peanuts, she will describe the brand she wants by using the word PLANTERS and not "Cordial" nor "Cocktail". 2. The next argument of petitioner is that respondent Director should not have based his decision simply on the use of the term PLANTERS, and that what he should have resolved is whether there is a confusing similarity in the trademarks of the parties. It is quite obvious from the record, that respondent Director's decision is based not only on the fact that petitioner herein adopted the same dominant mark of Standard Brands, that is, the word PLANTERS, but that it also used in its label the same coloring scheme of gold, blue, and white, and basically the same lay-out of words such as "salted peanuts" and "vacuum packed" with similar type and size of lettering as appearing in Standard Brands' own trademark, all of which result in a confusing similarity between the two labels. 4 Thus, the decision states: "Furthermore, as to appearance and general impression of the two trademarks, I find a very confusing similarity." (Emphasis supplied) 5 Referring again to the picture We have reproduced, the striking similarity between the two labels is quite evident not only in the common use of PLANTERS but also in the other words employed. As a matter of fact, the capital letter "C" of petitioner's "Cordial" is alike to the capital "C" of Standard's "Cocktail", with both words ending with an "1". Admittedly, no producer or manufacturer may have a monopoly of any color scheme or form of words in a label. But when a competitor adopts a distinctive or dominant mark or feature of another's trademark and with it makes use of the same color ensemble, employs similar words written in a style, type and size of lettering almost identical with those found in the other trademark, the intent to pass to the public his product as that of the other is quite obvious. Hence, there is good reason for Standard Brands' to ask why did petitioner herein use the word PLANTERS, the same coloring scheme, even almost identical size and contour of the cans, the same lay-out of words on its label when there is a myriad of other words, colors, phrases, symbols, and arrangements to choose from to distinguish its product from Standard Brands, if petitioner was not motivated to simulate the label of the latter for its own can of salted peanuts, and thereby deceive the public? A similar question was asked by this Court in Clarke vs. Manila Candy Co., 36 Phil. 100, when it resolved in favor of plaintiff a case of unfair competition based on an imitation of Clarke's packages and wrappers of its candies the main feature of which was one rooster. The Court queried thus: "... why, with all the birds in the air, and all the fishes in the sea, and all the animals on the face of the earth to choose from, the defendant company (Manila Candy Co.) selected two roosters as its trademark, although its directors and managers must have been well aware of the long-continued use of a rooster by the plaintiff with the sale and advertisement of its goods? ... A cat, a dog, a carabao, a shark or an eagle stamped upon the container in which candies are sold would serve as well as a

rooster for purposes of identification as the product of defendant's factory. Why did defendant s elect two roosters as its trademark ?" (p.109, supra) Petitioner contends, however, that there are differences between the two trademarks, such as, the presence of the word "Philippine" above PLANTERS on its label, and other phrases, to wit: "For Quality and Price, Its Your Outstanding Buy", the address of the manufacturer in Quezon City, etc., plus a pictorial representation of peanuts overflowing from a tin can, while in the label of Standard Brands it is stated that the product is manufactured in San Francisco, California, and on top of the tin can is printed "Mr. Peanut" and the representation of a "humanized peanut". (pp. 30-33, petitioner's brief) We have taken note of those alleged differences but We find them insignificant in the sense that they are not sufficient to call the attention of the ordinary buyer that the labeled cans come from distinct and separate sources. The word "Philippine" printed in small type in petitioner's label may simply give to the purchaser the impression that that particular can of PLANTERS salted peanuts is locally produced or canned but that what he is buying is still PLANTERS canned salted peanuts and nothing else. As regards "Mr. Peanut" on Standard Brands' label, the same appears on the top cover and is not visible when the cans are displayed on the shelves, aside from the fact that the figure of "Mr. Peanut" is printed on the tin cover which is thrown away after opening the can, leaving no lasting impression on the consumer. It is also for this reason that We do not agree with petitioner that it is "Mr. Peanut and the Humanized Peanut" which is the trademark of Standard Brands salted peanuts, it being a mere descriptive pictorial representation of a peanut not prominently displayed on the very body of the label covering the can, unlike the term PLANTERS which dominates the label. It is correctly observed by respondent Director that the merchandize or goods being sold by the parties herein are very ordinary commodities purchased by the average person and many times by the ignorant and unlettered 6 and these are the persons who will not as a rule examine the printed small letterings on the container but will simply be guided by the presence of the striking mark PLANTERS on the label. Differences there will always be, but whatever differences exist, these pale into insignificance in the face of an evident similarity in the dominant feature and overall appearance of the labels of the parties. It is not necessary, to constitute trademark "infringement", that every word of a trademark should be appropriated, but it is sufficient that enough be taken to deceive the public in the purchase of a protected article. (Bunte Bros. v. Standard Chocolates, D.C. Mass., 45 F. Supp. 478, 481) A trade-name in order to be an `infringement' upon another need not be exactly like it in form and sound, but it is enough if the one so resembles another as to deceive or mislead persons of ordinary caution into the belief that they are dealing with the one concern when in fact they are dealing with the other. (Foss v. Culbertson, 136 P. 2d 711, 718, 17 Wash. 2d 610) Where a trade-mark contains a dominating or distinguishing word, and purchasing public has come to know and designate the article by such dominating word, the use of such word by another in marking similar goods may constitute Infringement though the marks aside from such dominating word may be dissimilar. (Queen Mfg. Co. v. lsaac Ginsberg & Bros., C.C.A. Mon., 25 F. 2d 284, 287) (d) "Infringement" of trade-mark does not depend on the use of identical words, nor on the question whether they are so similar that a person looking at one would be deceived into the belief that it was the other; it being sufficient if one mark is so like another in form, spelling, or sound that one with not a very definite or clear recollection as to the real mark is likely to be confused or misled. (Northam Warren Corporation v. Universal Cosmetic Co., C. C. A; III., 18 F. 2d 774, 775) 3. What is next submitted by petitioner is that it was error for respondent Director to have enjoined it from using PLANTERS in the absence of evidence showing that the term has acquired secondary meaning. Petitioner, invoking American jurisprudence, asserts that the first user of a tradename composed of common words is given no special preference unless it is shown that such words have acquired secondary meaning, and this, respondent Standard Brands failed to do when no evidence was presented to establish that fact. (pp. 14-16, petitioner's brief)

The doctrine of secondary meaning is found in Sec. 4 (f), Chapter II-A of the Trade-Mark Law, viz: Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section, nothing herein shall prevent the registration of a mark or trade-name used by the applicant which has become distinctive of the applicant's goods, business or services. The Director may accept as prima facie evidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant's goods, business or services, proof of substantially exclusive and continuous use thereof as a mark or tradename by the applicant in connection with the sale of goods, business or services for the five years next preceding the date of the filing of the application for its registration. (As amended by Sec. 3, Rep. Act No. 638.) This Court held that the doctrine is to the effect that a word or phrase originally incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his product. 7 By way of illustration, is the word "Selecta" which according to this Court is a common ordinary term in the sense that it may be used or employed by any one in promoting his business or enterprise, but which once adopted or coined in connection with one's business as an emblem, sign or device to characterize its products, or as a badge of authenticity, may acquire a secondary meaning as to be exclusively associated with its products and business, so that its use by another may lead to confusion in trade and cause damage to its business. 8 The applicability of the doctrine of secondary meaning to the situation now before Us is appropriate because there is oral and documentary evidence showing that the word PLANTERS has been used by and closely associated with Standard Brands for its canned salted peanuts since 1938 in this country. Not only is that fact admitted by petitioner in the amended stipulation of facts (see p. 2 of this Decision), but the matter has been established by testimonial (tsn October 4, 1962, pp. 2-8) and documentary evidence consisting of invoices covering the sale of "PLANTERS cocktail peanuts". (Exhibits C to C-4; D to D-10; E to E-10; F to F-2) In other words, there is evidence to show that the term PLANTERS has become a distinctive mark or symbol insofar as salted peanuts are concerned, and by priority of use dating as far back as 1938, respondent Standard Brands has acquired a preferential right to its adoption as its trademark warranting protection against its usurpation by another. Ubi jus ibi remedium. Where there is a right there is a remedy. Standard Brands has shown the existence of a property right(Arce Sons & Co. vs. Selecta Biscuit Co., Inc., supra, pp. 262-263) and respondent Director, has afforded the remedy. Still on this point, petitioner contends that Standard Brands' use of the trademark PLANTERS was interrupted during the Japanese occupation and in fact was discontinued when the importation of peanuts was prohibited by Central Bank regulations effective July 1, 1953, hence it cannot be presumed that it has acquired a secondary meaning. We hold otherwise. Respondent Director correctly applied the rule that non-use of a trademark on an article of merchandize due to legal restrictions or circumstances beyond one's control is not to be considered as an abandonment. In the case of Andres Romero vs. Maiden Form Brassiere Co., Inc., L-18289, March 31, 1964, 10 SCRA 556, the same question was raised by petitioner Romero when he filed with the Bureau of Patents a petition to cancel the registration of the trademark "Adagio" for brassieres manufactured by Maiden Form Brassiere Co., Inc. His petition having been dismissed by the Director of Patents, Romero appealed to this Court and one of the issues posed by him was that when the Government imposed restrictions on importations of brassieres bearing that particular trademark, there was abandonment of the same by respondent company which entitled petitioner to adopt it for his own use and which in fact he had been using for a number of years. That argument was met by the Court in the words of Justice Jesus Barrera thus: ... The evidence on record shows, on the other hand, that the trademark "Adagio" was first used exlusively in the Philippines by appellee in the year 1932. There being no evidence of use of the mark by others before 1932, or that appellee abandoned use thereof, the registration of the mark was made in accordance with the Trademark Law. Granting that appellant used the mark when appellee stopped using it during the period of time that the Government imposed restrictions on importation of respondent's

brassiere being the trademark, such temporary non-use did not affect the rights of appellee because it was occasioned by government restrictions and was not permanent, intentional, and voluntary. To work an abandonment, the disuse must be permanent and not ephemeral; it must, be intentional and voluntary, and not involuntary or even compulsory. There must be a thoroughgoing discontinuance of any trade-mark use of the mark in question (Callman, Unfair Competition and Trademark, 2nd Ed., p. 1341).1äwphï1.ñët The use of the trademark by other manufacturers did not indicate an intention on the part of appellee to abandon it. The instances of the use by others of the term Budweiser, cited by the defendant, fail, even when liberally construed, to indicate an intention upon the part of the complainant to abandon its rights to that name. "To establish the defense of abandonment, it is necessary to show not only acts indicating a practical abandonment, but an actual intention to abandon." Sanlehner v. Eisener & Mendelson Co., 179 U.S. 19, 21 S. Ct. 7 (45 L. Ed. 6.0).(Anheuser-Busch, Inc, v. Budweiser Malt Products Corp., 287 F. 245.) xxx xxx xxx Non-use because of legal restrictions is not evidence of an intent to abandon. Non-use of their ancient trade-mark and the adoption of new marks by the Carthusian Monks after they had been compelled to leave France was consistent with an intention to retain their right to use their old mark. Abandonment will not be inferred from a disuse over a period of years occasioned by statutory restrictions on the name of liquor. (Nims, Unfair Competition and Trade-Mark, p. 1269.) (pp. 562-564, supra) (emphasis Ours) Applying the words of Justice Roman Ozaeta in the "Ang Tibay" case (Ang vs. Toribio Teodoro, p. 56, supra) to the case now before Us, petitioner herein must not be allowed to get a free ride on the reputation and selling power of Standard Brands PLANTERS salted peanuts, for a self-respecting person, or a reputable business concern as is the case here, does not remain in the shelter of another's popularity and goodwill but builds one of his own. 4. Findings of fact by the Director of Patents are conclusive and binding on this Court provided they are supported by substantial evidence. 9 The testimonial and documentary evidence in addition to the stipulation of facts submitted by the parties fully support the findings of respondent Director that(1) there is a confusing similarity between the labels or trademarks of Philippine Nut and Standard Brands used in their respective canned salted peanuts; (2) respondent Standard Brands has priority of adoption and use of the label with PLANTERS as the dominant feature and the same has acquired secondary meaning in relation to salted peanuts; and (3) there has been no abandonment or non-use of said trademark by Standard Brands which would justify its adoption by petitioner or any other competitor for the sale of salted peanuts in the market. PREMISES CONSIDERED, We AFFIRM the decision of respondent Director of Patents with costs against petitioner. So Ordered.