Philip Morris Inc. v. Fortune Tobacco Corp. Case Digest

PHILIP MORRIS, INC. VS. FORTUNE TOBACCO CORPORATION (Equal Standing of International Law and Municipal Law) Penned by: GARCIA, J.: Petition for review under Rule 45 of the Rules of Court, 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: PETITION DENIED 1. Decision dated January 21, 20031 affirming an earlier decision of the Regional Trial Court of Pasig City, Branch 166, in its Civil Case No. 47374 • Dismissed the complaint for trademark infringement and damages thereat commenced by the petitioners against respondent Fortune Tobacco Corporation; and 2. Resolution dated May 30, 20032 denying petitioners’ motion for reconsideration. FACTS OF THE CASE: • Petitioner Philip Morris, Inc., a corporation (State of Virginia, U.S.A), is the registered owner of the trademark “MARK VII” for cigarettes. (per Certificate of Registration No. 18723 issued on April 26, 1973 by the Philippine Patents Office (PPO) • Similarly, petitioner Benson & Hedges (Canada), Inc., a subsidiary of Philip Morris, Inc., is the registered owner of the trademark “MARK TEN” for cigarettes (PPO Certificate of Registration No. 11147) • Fabriques de Tabac Reunies, S.A. (Swiss company), another subsidiary of Philip Morris, Inc., is the assignee of the trademark “LARK,” (Trademark Certificate of Registration No. 19053) (originally registered in 1964 by Ligget and Myers Tobacco Company) • Respondent Fortune Tobacco Corporation, a company organized in the Philippines, manufactures and sells cigarettes using the trademark “MARK.” •

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: o Prayer for the issuance of a preliminary injunction, [petitioners] alleged that they are foreign corporations not doing

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business in the Philippines and are suing on an isolated transaction. o Countries in which they are domiciled grant to corporate or juristic persons of the Philippines the privilege to bring action for infringement, 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” o registered the trademarks in their respective countries of origin  by virtue of the long and extensive usage of the same, these trademarks have already gained international fame and acceptance  [respondent], without any previous consent from any of the [petitioners], manufactured and sold cigarettes bearing the identical and/or confusingly similar trademark “MARK”  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. Invoked provisions of the Paris Convention for the Protection of Industrial and Intellectual Property (Paris Convention) o Philippines is a signatory, [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. 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 [and] the issuance of a writ of preliminary injunction which should be made permanent. [Respondent] filed its Answer denying [petitioners’] material allegations and averred [among other things] that “MARK” is a common word, which cannot particularly identify a product to be the product of the [petitioners] After the termination of the trial on the merits trial court rendered its Decision dated November 3, 1999 dismissing the complaint and counterclaim after making a finding that the [respondent] did not commit trademark infringement against the [petitioners]. The issue of whether or not there was infringement of the [petitioners’] trademarks by the [respondent] was likewise answered 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”.

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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. (Appellate recourse docket CA-G.R. CV No. 66619) o CA decision on January 21, 2003 (while ruling for petitioners on the matter of their legal capacity to sue in this country for trademark infringement) affirmed the trial court’s decision on the underlying issue of respondent’s liability for infringement. Motion for reconsideration denied by the CA (Resolution of May 30, 2003)

ISSUES • Petitioners seek petition for review (Court of Appeals): o (1) whether or not petitioners, as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country; o (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. • •

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Respondent: issue the propriety of the petition as it allegedly raises questions of fact. The petition is bereft of merit. Petition raises both questions of fact and law o question of law exists when the doubt or difference arises as to what the law is on a certain state of facts o question of fact when the doubt or difference arises as to the truth or falsity of alleged facts  Court is not the proper venue to consider factual issues as it is not a trier of facts  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, we will not disturb them Petitioners: contentions should be treated as purely legal since they are assailing erroneous conclusions deduced from a set of undisputed facts

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. o A trademark deserves protection.

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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. o Right and mechanism are accorded by  Section 21-A of Republic Act (R.A.) No. 166 or the Trademark Law, as amended  Article 2 of the Paris Convention for the Protection of Industrial Property, aka Paris Convention. Not doing business in the Philippines does not mean that cigarettes bearing their trademarks are not available and sold locally. Citing Converse Rubber Corporation v. Universal Rubber Products, Inc., such availability and sale may be effected through the acts of importers and distributors.

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Entitlement to protection even in the absence of actual use of trademarks in the country o Philippines’ adherence to the Trade Related Aspects of Intellectual Property Rights or the TRIPS Agreement o enactment of R.A. No. 8293, or the Intellectual Property Code (“IP Code”) o fame of a trademark may be acquired through promotion or advertising with no explicit requirement of actual use in local trade or commerce

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Before discussing petitioners’ claimed entitlement to enforce trademark rights in the Philippines, it must be emphasized that their standing to sue in Philippine courts had been recognized, and rightly so, by the CA o 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.

HELD/RATIO: As we ruled in G.R. No. 91332,18 : 1. RECIPROCITY REQUIREMENT • Registration of a trademark gives the registrant (petitioners) advantages denied nonregistrants or ordinary users (respondent) o validity of the registration o 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. o Petitioners: still foreign corporations o condition to availment of the rights and privileges & their trademarks in this country:  On top of Philippine registration, their country grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21A20 of R.A. No. 166. • In Leviton Industries v. Salvador o Court: reciprocity requirement is a condition sine qua non to filing a suit by a foreign corporation  Unless alleged in the complaint, would justify dismissal o 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  being considered part of Philippine municipal laws, can be taken judicial notice of in infringement suits.

2. REGISTRATION VERSUS ACUAL USE!! •

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.

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Philippines’ adherence to the Paris Convention effectively obligates the country to honor and enforce its provisions( as regards the protection of industrial property of foreign nationals in this country)

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However, any protection accorded has to be made subject to the limitations of Philippine laws. 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 national  (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

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foreign nationals must still observe and comply with the conditions imposed by Philippine law on its nationals.

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R.A. No. 166 (as amended, specifically Sections 228 and 2-A29), mandates actual use of the marks and/or emblems in local commerce and trade before they may be registered and ownership thereof acquired o the petitioners cannot, therefore, dispense with the element of actual use. o Their being nationals of member-countries of the Paris Union does not alter the legal situation.

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In Emerald Garment Mfg. Corporation v. Court of Appeals, the Court reiterated its rulings in Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, Kabushi Kaisha Isetan v. Intermediate Appellate Court, and Philip Morris v. Court of Appeals and

Fortune Tobacco Corporation on the importance of ACTUAL COMMERCIAL USE OF A TRADEMARK in the Philippines notwithstanding the Paris Convention: o 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:  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.  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.

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A foreign corporation) may have the capacity to sue for infringement … but 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

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protection due to absence of actual use of the emblem in the local market. •

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Registration of trademark cannot be deemed conclusive as to the actual use of such trademark in local commerce. o registration does not confer upon the registrant an absolute right to the registered mark. o merely constitutes prima facie evidence that the registrant is the owner of the registered mark. o Evidence of non-usage of the mark rebuts the presumption of trademark ownership We stress that registration in the Philippines of trademarks does not ipso facto convey an absolute right or exclusive ownership thereof. o Shangri-La International Hotel Management, Ltd. v. Development Group of Companies, Inc.  Trademark is a creation of use  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 • does not perfect such right; actual use thereof is the perfecting ingredient.

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Petitioners’ reliance on Converse Rubber Corporation is quite misplaced o different factual milieu o 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. o 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.

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This Court also finds the IP Code and the TRIPS Agreement to be inapplicable o the infringement complaint filed in August 1982 and tried under the aegis of R.A. No. 166, as amended. o The IP Code (January 1, 1998) no provision on retroactivity; TRIPS Agreement (December 16, 1994) 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.

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