Category: Intellectual Property Law

Navigating the Complexities of Unfair Competition in the Philippines: A Comprehensive Guide
Understanding Unfair Competition as a Continuing Offense: Insights from Recent Jurisprudence

Petron Corporation and People of the Philippines v. William Yao, Sr., et al., G.R. No. 243328, March 18, 2021

In the bustling markets of the Philippines, where competition is fierce and the line between innovation and imitation often blurs, understanding the legal boundaries of business practices is crucial. This case delves into the intricate legal concept of unfair competition, a topic that resonates deeply with businesses striving to protect their intellectual property and maintain a fair playing field. At the heart of this case is the question of whether the act of selling counterfeit goods in different locations constitutes a single crime or multiple offenses.

The case revolves around Petron Corporation, a major supplier of Liquefied Petroleum Gas (LPG), and its battle against Masagana Gas Corp., accused of refilling and selling Petron’s Gasul LPG cylinders without authorization. The central legal issue is whether these acts, occurring in different locations, should be treated as a continuing offense or separate crimes, a determination that has significant implications for jurisdiction and prosecution.

Legal Context: Defining Unfair Competition and Continuing Offenses

Unfair competition, as defined under Section 168 of the Intellectual Property Code of the Philippines (Republic Act No. 8293), involves the act of passing off one’s goods as those of another, thereby deceiving the public and defrauding the rightful owner of their trade. This legal principle is designed to protect the goodwill and reputation of businesses from deceptive practices.

A continuing offense, or transitory offense, is a crime where some essential elements occur in different jurisdictions. According to the Revised Rules of Criminal Procedure, such offenses can be tried in any court where any of its essential ingredients occurred. This concept is crucial in determining the jurisdiction of courts over cases like that of Petron versus Masagana.

Consider a scenario where a company in Manila produces counterfeit products and sells them in Cebu. The act of production and sale, though occurring in different places, could be considered a continuing offense, allowing the case to be tried in either jurisdiction.

Section 168.3(a) of the Intellectual Property Code states: “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… shall be guilty of unfair competition.”

Case Breakdown: The Journey from Cavite to Makati

The saga began when Petron discovered that Masagana Gas Corp. was allegedly refilling and selling its Gasul LPG cylinders without permission. Investigations by Petron and the National Bureau of Investigation (NBI) led to test-buys at Masagana’s refilling plant in Trece Martires, Cavite, where they witnessed the unauthorized refilling and sale of Petron’s cylinders.

Subsequent surveillance revealed that Masagana was also distributing these cylinders in Makati City. This led to the filing of two separate informations for unfair competition against Masagana’s directors and officers in both Trece Martires and Makati City.

The respondents argued that the crime of unfair competition is a transitory or continuing offense, and since the case was first filed in Trece Martires, the Makati court lacked jurisdiction. The Makati Regional Trial Court (RTC) initially denied the motion to quash the information but later reversed its decision upon reconsideration, quashing the information on the grounds that the crime was a continuing offense.

The Court of Appeals affirmed the Makati RTC’s decision, stating: “The alleged selling of LPG steel cylinder purportedly containing the appearance of Petron Gasul LPG products is the means to carry out their primary intention to deceive the consuming public. The series of acts of selling is but mere instrument in allegedly violating Petron’s intellectual property rights.”

On appeal to the Supreme Court, Petron argued that unfair competition should not be considered a continuing crime, as each act of selling counterfeit goods constitutes a separate offense. However, the Supreme Court upheld the lower courts’ rulings, emphasizing that the acts in Cavite and Makati were part of a continuing violation of the law.

The Court clarified: “Unfair competition is a continuing offense because of the very nature of the crime… the sales made in Cavite and Makati City cannot be considered as separate offenses of unfair competition as they merely constitute the ingredients of the crime.”

Practical Implications: Navigating Unfair Competition Claims

This ruling underscores the importance of understanding the nuances of continuing offenses in unfair competition cases. Businesses must be vigilant in monitoring and protecting their intellectual property across different jurisdictions, as the same act of selling counterfeit goods can be prosecuted in any location where it occurs.

For companies facing similar issues, it is crucial to file complaints promptly in the jurisdiction where the offense was first committed to establish priority in legal proceedings. Additionally, businesses should consider the broader implications of their distribution strategies to avoid inadvertently engaging in practices that could be deemed unfair competition.

Key Lessons:
- Monitor the distribution of your products to prevent unauthorized use or sale.
- Understand the legal concept of continuing offenses to effectively manage jurisdiction in legal disputes.
- Seek legal advice promptly upon discovering potential unfair competition to ensure proper filing of complaints.
Frequently Asked Questions

What is unfair competition under Philippine law?

Unfair competition involves passing off one’s goods as those of another, deceiving the public and defrauding the rightful owner of their trade, as defined by the Intellectual Property Code.

How is a continuing offense different from a separate offense?

A continuing offense involves a series of acts that are part of the same criminal intent, while separate offenses are distinct acts with different criminal impulses.

Can a business file a complaint for unfair competition in multiple jurisdictions?

Yes, if the acts constituting unfair competition occur in different jurisdictions, the business can file complaints in any of those jurisdictions, but the court first acquiring jurisdiction will typically handle the case.

What should a business do if it suspects unfair competition?

Gather evidence of the alleged unfair competition and consult with a legal expert to file a complaint in the appropriate jurisdiction promptly.

How can a business protect itself from unfair competition?

Register trademarks, monitor the market for counterfeit products, and educate consumers about the authenticity of their products.

What are the potential penalties for unfair competition?

Penalties can include fines, imprisonment, and damages, depending on the severity of the offense and the harm caused to the affected business.

ASG Law specializes in intellectual property law. Contact us or email hello@asglawpartners.com to schedule a consultation.
March 18, 2021
Navigating Trademark Infringement in the Philippines: Lessons from the CEEGEEFER vs. CHERIFER Case
Understanding Trademark Infringement: The Importance of Distinctiveness and Consumer Confusion

Prosel Pharmaceuticals & Distributors, Inc. v. Tynor Drug House, Inc., G.R. No. 248021, September 30, 2020

In the bustling aisles of pharmacies across the Philippines, consumers often rely on brand names and packaging to make quick, informed decisions about their purchases. When two products look strikingly similar, it can lead to confusion and potentially harm a company’s reputation and sales. This was the crux of the legal battle between Prosel Pharmaceuticals & Distributors, Inc. and Tynor Drug House, Inc., where the Supreme Court had to determine if the brand name CEEGEEFER infringed on the trademark of CHERIFER. The central question was whether the similarities between the two products could mislead consumers, highlighting the importance of trademark law in protecting both businesses and consumers.

Legal Context: Trademark Law and the Concept of Likelihood of Confusion

Trademark law in the Philippines is governed by the Intellectual Property Code (Republic Act No. 8293), which aims to protect marks that distinguish goods or services. A key element in trademark infringement cases is the “likelihood of confusion,” which occurs when consumers might mistakenly believe that goods or services from one source are actually from another. This principle is crucial because it safeguards the public from deception and protects a business’s goodwill.

The idem sonans rule, which means “sounds the same,” is often used in trademark cases to determine if two marks are phonetically similar enough to cause confusion. Additionally, the Dominancy Test focuses on the dominant features of the competing trademarks, while the Holistic Test considers the overall impression created by the marks. These tests are essential tools in assessing whether a trademark infringement has occurred.

For example, if a new brand of coffee named “Coffix” were to be introduced in the market alongside the well-known “Coffee Mate,” the similarity in names could potentially confuse consumers, leading to a possible infringement claim.

Case Breakdown: The Journey of CEEGEEFER and CHERIFER Through the Courts

The conflict began when Tynor Drug House, Inc., the manufacturer of CHERIFER, a popular multivitamin product, discovered that Prosel Pharmaceuticals & Distributors, Inc. was marketing a new product called CEEGEEFER. Tynor claimed that CEEGEEFER’s name and packaging were too similar to CHERIFER, potentially confusing consumers.

Initially, the Regional Trial Court (RTC) dismissed Tynor’s complaint, finding no confusing similarity between the two products. However, upon appeal, the Court of Appeals (CA) reversed this decision, ruling in favor of Tynor and finding Prosel liable for trademark infringement. The CA noted that both names were phonetically similar and that the packaging of the products bore striking resemblances, including the use of similar colors and images of a boy playing basketball.

Prosel then escalated the case to the Supreme Court, arguing that the differences in the products’ ingredients and target markets should negate any claims of infringement. The Supreme Court, however, upheld the CA’s decision, emphasizing the likelihood of confusion due to the similarities in the products’ names and packaging.

The Supreme Court’s decision included critical reasoning, such as:

“The fact that CEEGEEFER is idem sonans for CHERIFER is enough to violate respondent’s right to protect its trademark, CHERIFER.”

“Given the phonetic and visual similarities between the two products (i.e., how the product names are spelled, the sound of both product names, and the colors and shapes combination of the products’ respective packaging), it is obvious that petitioner attempted to pass CEEGEEFER as a colorable imitation of CHERIFER.”

Practical Implications: Navigating Trademark Infringement in Business

This ruling underscores the importance of ensuring that new products do not infringe on existing trademarks. Businesses must conduct thorough trademark searches and consider the potential for consumer confusion when developing new brands. The decision also highlights the need for clear and distinct branding to avoid legal disputes and protect consumer trust.

Key Lessons:
- Conduct comprehensive trademark searches before launching new products to avoid infringement.
- Ensure that product names and packaging are distinct enough to prevent consumer confusion.
- Understand the legal tests used to determine trademark infringement, such as idem sonans, Dominancy, and Holistic Tests.
Frequently Asked Questions

What is trademark infringement?

Trademark infringement occurs when a party uses a mark that is identical or confusingly similar to a registered trademark without permission, leading to a likelihood of confusion among consumers.

How is the likelihood of confusion determined?

The likelihood of confusion is assessed using various tests, including the idem sonans rule, which looks at phonetic similarities, and the Dominancy and Holistic Tests, which consider the overall impression and dominant features of the marks.

What steps should a business take to avoid trademark infringement?

Businesses should conduct thorough trademark searches, consult with legal experts, and ensure that their branding is distinct and does not resemble existing trademarks.

Can packaging design contribute to trademark infringement?

Yes, if the packaging design of a product is too similar to that of another product, it can contribute to consumer confusion and lead to a finding of trademark infringement.

What are the potential consequences of trademark infringement?

Consequences can include monetary damages, injunctions against the use of the infringing mark, and potential harm to the business’s reputation.

How can a business protect its trademarks?

Businesses can protect their trademarks by registering them with the Intellectual Property Office, monitoring the market for potential infringements, and taking legal action when necessary.

ASG Law specializes in Intellectual Property Law. Contact us or email hello@asglawpartners.com to schedule a consultation.
September 30, 2020

Trademark Ownership: Registration Trumps Prior Use Under the Intellectual Property Code

In a trademark dispute between Zuneca Pharmaceutical and Natrapharm, Inc., the Supreme Court affirmed that under the Intellectual Property Code (IP Code), trademark ownership is acquired through registration, not prior use. This means that the first party to register a trademark in good faith generally has superior rights, even if another party used the mark earlier. However, the Court also held that a prior user in good faith may continue using their mark even after another party registers it, but this right is tied to their existing business.

Whose Brand Is It Anyway? Zuneca vs. Natrapharm’s Trademark Showdown

Zuneca Pharmaceutical, engaged in importing and selling medicines since 1999, used the brand name “ZYNAPS” for its carbamazepine drug. Natrapharm, on the other hand, registered the trademark “ZYNAPSE” in 2007 for its citicoline product. Natrapharm then sued Zuneca for trademark infringement, arguing that “ZYNAPS” was confusingly similar to its registered mark. Zuneca countered that it had been using “ZYNAPS” since 2004, predating Natrapharm’s registration, and that Natrapharm acted in bad faith by registering a confusingly similar mark despite knowing of Zuneca’s prior use. The central legal question before the Supreme Court was: In a trademark dispute, does prior registration trump prior use?

The Supreme Court held that under the IP Code, ownership of a trademark is acquired through registration, provided the registration is made in good faith. This principle is enshrined in Section 122 of the IP Code, which states, “The rights in a mark shall be acquired through registration made validly in accordance with the provisions of this law.” This marked a shift from the previous Trademark Law, which prioritized prior use in determining trademark ownership. The Court emphasized that the intent of the lawmakers was to abandon the rule that ownership of a mark is acquired through use, as evidenced by the legislative history of the IP Code.

The Court found that Natrapharm had registered its trademark in good faith, as there was no evidence that it knew of Zuneca’s prior use of “ZYNAPS” at the time of registration. Consequently, Natrapharm, as the registered owner of “ZYNAPSE,” had the right to prevent others from using confusingly similar marks for related goods or services. However, the Court also recognized an exception: Section 159.1 of the IP Code states that a registered mark has no effect against any person who, in good faith, before the filing date, was using the mark for the purposes of his business or enterprise.

In effect, this exception protects prior users who, in good faith, had already been using a mark before someone else registered it. To clarify, Section 159.1 of the IP Code states:

SECTION 159. Limitations to Actions for Infringement. – Notwithstanding any other provision of this Act, the remedies given to the owner of a right infringed under this Act shall be limited as follows:

159.1. Notwithstanding the provisions of Section 155 hereof, a registered mark shall have no effect against any person who, in good faith, before the filing date or the priority date, was using the mark for the purposes of his business or enterprise: Provided, That his right may only be transferred or assigned together with his enterprise or business or with that part of his enterprise or business in which the mark is used.

This section serves as a limitation on the rights conferred by trademark registration, acknowledging the equities of prior users who have built goodwill around a mark before registration occurs. As the Court elaborated, this section should not be interpreted as merely exempting prior use before the registration date but as protecting the prior user’s right to continue using the mark, as long as it remains connected to their original business.

Building on this principle, the Court ruled that Zuneca, as a prior user in good faith of the “ZYNAPS” mark, was protected from liability for trademark infringement. This protection, however, was not without limits. Zuneca’s right to use “ZYNAPS” was tied to its existing business, and it could not transfer or assign the mark independently of that business. The decision acknowledged the potential for confusion arising from the concurrent use of similar marks for pharmaceutical products but emphasized the importance of adhering to the provisions of the IP Code while also ordering the parties to prominently display information about their products’ uses on their packaging to mitigate confusion.

The Supreme Court underscored the importance of complying with the Generics Act of 1988, as amended, which mandates the use of generic names in prescriptions. The intent is to help protect the public even where brand names may cause confusion. The Court further directed the Food and Drug Administration to monitor and regulate drug names to prevent the concurrent use of confusingly similar names for medicines. This part of the decision recognized the state’s duty to “protect and promote the right to health of the people and instill health consciousness among them.”

In effect, the Zuneca v. Natrapharm ruling clarifies the interplay between registration and use in Philippine trademark law, affirming the primacy of registration while carving out protections for prior users who have acted in good faith. While a registrant has rights to a mark, a good faith prior user of a confusingly similar mark is given some leeway. This is a carefully balanced approach intended to protect the rights of legitimate businesses while also acknowledging prior investments made in building brand recognition.

FAQs

What was the key issue in this case?	The key issue was to determine the prevailing party in a trademark dispute and whether trademark infringement existed, necessitating a ruling on the acquisition of ownership of marks by both parties.
How does the Intellectual Property Code define trademark ownership?	Under the IP Code, trademark ownership is primarily acquired through registration made validly in accordance with the provisions of the law, not through prior use.
What is the “first-to-file” rule?	The “first-to-file” rule means that the first party to register a trademark generally has superior rights, even if another party used the mark earlier.
Does prior use have any relevance under the IP Code?	Yes, Section 159.1 of the IP Code protects a prior user in good faith, allowing them to continue using their mark even after another party registers it, provided the use is tied to their existing business.
What is bad faith in trademark registration?	Bad faith in trademark registration means that the applicant knew of a prior creation, use, or registration by another of an identical or similar trademark.
What was the outcome for Zuneca Pharmaceutical?	Zuneca was declared a prior user in good faith and was protected from liability for trademark infringement, but it could not transfer or assign the mark independently of its business.
What was the outcome for Natrapharm, Inc.?	Natrapharm was affirmed as the lawful registrant of the “ZYNAPSE” mark under the IP Code, solidifying its rights as the registered trademark owner.
What steps were ordered to prevent confusion between the two medicines?	Both companies were ordered to indicate on their packaging, in plain language, the medical conditions that their respective drugs treat and a warning indicating what each drug is not supposed to treat.
What future action was required of the Food and Drug Administration?	The Food and Drug Administration was directed to monitor the parties’ compliance with the labeling directives and to take action toward better regulation of pharmaceutical brands.

This case highlights the importance of trademark registration under the IP Code while also protecting businesses that have previously and in good faith, been using the disputed trademark. It is a balancing act intended to promote both the protection of IP rights and fair competition. This decision underscores the need for businesses to register their trademarks to secure their rights, but it also ensures that prior good-faith users are not unfairly penalized.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ZUNECA PHARMACEUTICAL v. NATRAPHARM, INC., G.R. No. 211850, September 08, 2020

September 8, 2020

Understanding Transferee Pendente Lite: Implications for Trademark Assignments in the Philippines
The Importance of Timing in Trademark Assignments: Lessons from a Supreme Court Ruling

Sunfire Trading, Inc. v. Geraldine Guy, G.R. No. 235279, March 02, 2020, 872 Phil. 142

Imagine a scenario where a business owner, after years of building a brand, suddenly faces the risk of losing their trademark due to legal battles and untimely assignments. This is not just a hypothetical situation but a real case that reached the Supreme Court of the Philippines, highlighting the critical importance of understanding the concept of transferee pendente lite in trademark law.

In the case of Sunfire Trading, Inc. versus Geraldine Guy, the central issue revolved around the timing of a trademark assignment during ongoing legal proceedings. Sunfire Trading, Inc. sought to overturn a decision that canceled its trademark registration, arguing it was a bona fide purchaser. However, the Supreme Court upheld the lower court’s ruling, emphasizing that the assignment occurred during the execution stage of a related case, making Sunfire a transferee pendente lite.

Legal Context: Understanding Transferee Pendente Lite and Trademark Law

The concept of transferee pendente lite refers to a person or entity who acquires an interest in a property while a case involving that property is still pending. In the context of trademark law, this principle becomes crucial when a trademark is assigned during litigation.

Under the Intellectual Property Code of the Philippines, trademarks are considered personal property that can be transferred. However, the transfer must comply with legal requirements and cannot be used to circumvent existing judgments. The Supreme Court has consistently held that a transferee pendente lite steps into the shoes of the transferor, bound by the same legal obligations and proceedings.

A key provision relevant to this case is Rule 3, Section 19 of the 1997 Rules of Civil Procedure, which states: “In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.” This provision gives the court discretion over whether to allow substitution or joinder of the transferee in the ongoing case.

In everyday terms, this means if you buy a trademark while it’s involved in a lawsuit, you might inherit all the legal baggage associated with it. For example, if a company is facing a lawsuit for trademark infringement and sells the trademark to another party, the new owner could still be held accountable for the infringement if the sale happened during the lawsuit.

Case Breakdown: The Journey of Sunfire Trading, Inc. and Geraldine Guy

The case began with a civil lawsuit filed by Northern Islands Company Inc. (NICI) against 3D Industries, Inc. (3D) for breach of contract, trademark infringement, and unfair competition. NICI won the case, and during the execution stage, 3D assigned the trademark to Sunfire Trading, Inc., owned by the same individual who controlled 3D.

Despite the assignment, the trademark was auctioned off to satisfy the judgment in favor of NICI, with Geraldine Guy emerging as the highest bidder. The trial court then ordered the Intellectual Property Office (IPO) to cancel Sunfire’s registration and issue a new one to Guy. Sunfire contested this, arguing it was a purchaser in good faith and not a party to the original case.

The Court of Appeals upheld the trial court’s decision, and the Supreme Court affirmed, stating, “The legal interest of the petitioner over the trademark 3D and Device springs from the sale of the subject trademark by 3D in favor of the petitioner during the pendency of the execution of the judgment in Civil Case No. 70359.”

The Supreme Court further clarified, “We held that a transferee stands exactly in the shoes of his predecessor-in-interest, bound by the proceedings and judgment in the case before the rights were assigned to him.”

The procedural steps that led to this outcome were as follows:
- NICI filed a civil case against 3D for trademark-related issues.
- 3D lost the case, and during the execution stage, assigned the trademark to Sunfire.
- The trademark was auctioned off, with Guy winning the bid.
- The trial court ordered the IPO to cancel Sunfire’s registration and issue a new one to Guy.
- Sunfire appealed, but the Court of Appeals and Supreme Court upheld the trial court’s decision.
Practical Implications: Navigating Trademark Assignments

This ruling has significant implications for businesses and individuals involved in trademark assignments. It underscores the need to carefully consider the timing of any trademark transfer, especially when litigation is ongoing or imminent.

For businesses, this case serves as a reminder to conduct thorough due diligence before acquiring a trademark. It’s crucial to understand the legal status of the trademark and any pending litigation that could affect its value or enforceability.

Individuals and companies should also be aware that purchasing a trademark during a lawsuit does not shield them from the legal consequences faced by the original owner. It’s advisable to consult with legal experts to assess the risks and potential outcomes of such transactions.

Key Lessons:
- Conduct thorough due diligence before acquiring a trademark, especially if litigation is involved.
- Understand the legal concept of transferee pendente lite and its implications for trademark assignments.
- Seek legal advice to navigate the complexities of trademark law and protect your interests.
Frequently Asked Questions

What is a transferee pendente lite?

A transferee pendente lite is someone who acquires an interest in a property while a case involving that property is still pending. They are bound by the same legal obligations as the original owner.

Can a trademark be transferred during a lawsuit?

Yes, a trademark can be transferred during a lawsuit, but the transferee may inherit the legal issues associated with the trademark, as seen in the Sunfire Trading case.

What should I do before buying a trademark?

Conduct a thorough investigation into the trademark’s legal status, including any ongoing litigation. Consult with a legal expert to understand the risks involved.

How can I protect my trademark from being affected by legal disputes?

Regularly monitor the legal status of your trademark and be proactive in addressing any potential legal issues. Legal counsel can help you develop a strategy to protect your trademark.

What are the implications of this ruling for future trademark assignments?

This ruling emphasizes that timing is critical in trademark assignments. Assignments made during ongoing litigation can result in the transferee being bound by the outcomes of the case.

ASG Law specializes in Intellectual Property Law. Contact us or email hello@asglawpartners.com to schedule a consultation.
March 2, 2020

Protecting Brand Identity: Unfair Competition and Priority Rights in Trade Names

The Supreme Court ruled in favor of Asia Pacific Resources International Holdings, Ltd. (APRIL), reinforcing the protection against unfair competition by Paperone, Inc. The Court emphasized that using a similar trade name, even without direct trademark infringement, can constitute unfair competition if it deceives the public or exploits the goodwill of a prior user. This decision safeguards the rights of businesses with established brand recognition, preventing others from unfairly benefiting from their reputation.

Paper Wars: When a Corporate Name Confuses the Public

This case revolves around a dispute between Asia Pacific Resources International Holdings, Ltd. (APRIL), the producer of PAPER ONE paper products, and Paperone, Inc., a company engaged in paper conversion. APRIL claimed that Paperone, Inc.’s use of the name “PAPERONE” in its corporate identity constituted unfair competition. The central legal question is whether Paperone, Inc.’s use of a similar trade name, despite not directly infringing on APRIL’s trademark, unfairly exploits APRIL’s established goodwill and deceives the public. The Intellectual Property Office (IPO) initially ruled in favor of APRIL, but the Court of Appeals (CA) reversed this decision, leading to the present Supreme Court review.

At the heart of the matter is Section 168 of the Intellectual Property Code, which addresses unfair competition. This provision protects businesses that have established goodwill in the market, regardless of whether they possess a registered mark. It states:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. –

168.1. 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 registered mark 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.

168.2. 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.

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.

The Supreme Court underscored that an action for unfair competition hinges on two key elements: (1) **confusing similarity in the general appearance of the goods** and (2) **intent to deceive the public and defraud a competitor**. These elements ensure that businesses are protected from practices designed to unfairly capitalize on their established reputation and goodwill. The Court, in its analysis, emphasized that unfair competition is a factual matter, and the findings of the IPO, a specialized agency, should be given significant weight.

In examining the first element, the Court acknowledged that confusing similarity extends beyond mere trademark similarity. It encompasses external factors like packaging and presentation that might mislead consumers. The Court noted that both APRIL and Paperone, Inc. used similar names, creating a potential for confusion, especially considering that Paperone, Inc. initially used “Paper One, Inc.” before revising it to “Paperone, Inc.” The Court recognized two types of confusion: **confusion of goods (product confusion)** and **confusion of business (source or origin confusion)**. In this instance, the Court found that the case fell under the second type, where consumers might mistakenly believe that Paperone, Inc.’s products originate from or are affiliated with APRIL.

The IPO’s Bureau of Legal Affairs (BLA) had astutely observed that allowing Paperone, Inc. to use the same or identical name in the same line of business would inevitably lead to confusion regarding the source of goods and a diversion of sales. This observation aligns with the principle that priority rights play a crucial role in unfair competition cases. As the Court emphasized, it gives credence to the findings of the IPO, which possesses expertise in this area and supports its conclusions with substantial evidence. In the case of *Berris Agricultural Co., Inc. v. Abyadang*, the Supreme Court explicitly recognized the specialized functions of administrative agencies like the IPO, stating:

Verily, 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. On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.

The BLA Director’s findings, affirmed by the IPO Director General, established APRIL’s priority rights over the PAPER ONE mark. This determination was based on evidence demonstrating APRIL’s prior use of the mark for paper products in the Philippines. Further, the Court emphasized that the intent to deceive can be inferred from the similarity of the goods offered for sale. Contrary to the CA’s ruling, it is not necessary to prove actual fraudulent intent. The very act of choosing a name so closely similar to an existing trademark suggests an intent to capitalize on the goodwill associated with that mark.

While the Court agreed with the IPO’s finding of unfair competition, it also upheld the denial of actual damages due to insufficient evidence to substantiate the claimed amount. This highlights the importance of providing concrete evidence when seeking compensation for damages resulting from unfair competition. In conclusion, the Supreme Court’s decision reinforces the protection of intellectual property rights and clarifies the scope of unfair competition. It emphasizes the importance of prior use and the potential for consumer confusion as key factors in determining liability.

FAQs

What was the key issue in this case?	The key issue was whether Paperone, Inc.’s use of a similar trade name to Asia Pacific Resources International Holdings, Ltd. (APRIL) constituted unfair competition under the Intellectual Property Code. The Court assessed if Paperone, Inc. unfairly benefited from APRIL’s established goodwill and brand recognition.
What are the elements of unfair competition?	The essential elements of unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Both elements must be present to establish a claim of unfair competition.
What is “confusion of business”?	Confusion of business (or source/origin confusion) occurs when consumers mistakenly believe that the products of one company originate from or are affiliated with another company. This type of confusion can arise even when the products are not directly competing.
Why did the Supreme Court favor the IPO’s findings?	The Supreme Court gave credence to the findings of the Intellectual Property Office (IPO) because it is a specialized agency with expertise in intellectual property matters. The Court recognized that the IPO’s findings of fact, when supported by substantial evidence, should be given great weight.
Is it necessary to prove fraudulent intent in unfair competition cases?	No, it is not necessary to prove actual fraudulent intent to establish unfair competition. The intent to deceive can be inferred from the similarity of the goods or services offered for sale, especially when a party knowingly adopts a similar mark or name.
What is the significance of “priority rights” in this case?	Priority rights refer to the principle that the first party to use a particular mark or name in commerce has a superior right to it. In this case, the Court found that APRIL had priority rights over the PAPER ONE mark because they used it before Paperone, Inc.
Why were actual damages not awarded in this case?	Actual damages were not awarded because Asia Pacific Resources International Holdings, Ltd. (APRIL) did not present sufficient evidence to prove the amount claimed and the basis for measuring actual damages. This highlights the need for concrete evidence when seeking monetary compensation.
What was the main reason for the Supreme Court’s decision?	The Supreme Court ruled in favor of Asia Pacific Resources International Holdings, Ltd. (APRIL) primarily because Paperone, Inc.’s use of a similar trade name created a likelihood of confusion among consumers, potentially leading them to believe that Paperone, Inc.’s products were associated with APRIL.

This ruling underscores the importance of conducting thorough trademark searches and avoiding the adoption of names or marks that are confusingly similar to existing ones. Businesses should take proactive measures to protect their brand identity and goodwill by registering their trademarks and trade names. By doing so, they can safeguard their market position and prevent others from unfairly capitalizing on their success.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Asia Pacific Resources International Holdings, Ltd. vs. Paperone, Inc., G.R. Nos. 213365-66, December 10, 2018

December 2, 2019

Trademark Registration: Likelihood of Confusion and Timely Appeals

The Supreme Court affirmed the denial of ABS-CBN Publishing, Inc.’s trademark application for “METRO” due to its similarity to existing registered marks, emphasizing the importance of timely filing of appeals. The Court underscored that failing to meet deadlines for appeals results in the finality of the original decision. This ruling serves as a reminder that neglecting procedural rules, such as filing appeals within the prescribed period, can have significant consequences in intellectual property disputes.

Trademark Tango: When ‘Metro’ Means More Than Meets the Eye

This case revolves around ABS-CBN Publishing, Inc.’s attempt to register the trademark “METRO” for its magazines. The Intellectual Property Office (IPO) rejected the application, citing its similarity to already registered marks. This decision hinged on Section 123.1(d) of the Intellectual Property Code of the Philippines (IPC), which prohibits the registration of a mark that is identical or confusingly similar to an existing registered mark.

The core legal question is twofold: first, whether the Court of Appeals erred in dismissing ABS-CBN’s petition for review due to a late filing; and second, whether the IPO correctly refused to register the “METRO” trademark because of its similarity to other registered marks. This delves into the procedural requirements for appeals and the substantive criteria for trademark registration, specifically focusing on the likelihood of confusion among consumers.

The procedural aspect of the case highlights the importance of adhering to deadlines. ABS-CBN sought extensions to file its petition for review with the Court of Appeals but failed to meet the extended deadline. The Court emphasized that an appeal is a statutory privilege, not a constitutional right, and strict compliance with procedural rules is mandatory. In Bañez vs. Social Security System, the Court reiterated that failure to perfect an appeal within the reglementary period makes the judgment final and executory, depriving the appellate court of jurisdiction.

Perfection of an appeal within the statutory or reglementary period is not only mandatory but also jurisdictional; failure to do so renders the questioned decision/resolution final and executory, and deprives the appellate court of jurisdiction to alter the decision/resolution, much less to entertain the appeal.

The Court acknowledged that exceptions exist, but only in meritorious cases where barring the appeal would be inequitable. However, ABS-CBN’s reasons for the delay—heavy workload and attendance at an international conference—were deemed insufficient. The Court stressed that lawyers have a responsibility to manage their workload and meet deadlines, and that failing to do so constitutes inexcusable negligence, as articulated in Hernandez vs. Agoncillo:

Failure of a lawyer to seasonably file a pleading constitutes inexcusable negligence on his part.

Turning to the substantive issue, the Court upheld the IPO’s decision to deny the trademark registration based on the likelihood of confusion. Section 123.1(d) of the IPC states that a mark cannot be registered if it is identical or confusingly similar to a registered mark. The Court employs two tests to determine this: the dominancy test and the holistic test. The dominancy test, now explicitly incorporated into law in Section 155.1 of the IPC, focuses on the dominant features of the marks in question. Section 155.1 defines infringement as the “colorable imitation of a registered mark x x x or a dominant feature thereof.”

SECTION 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 x x x.

In this case, the Court found that the dominant feature of ABS-CBN’s mark, “METRO,” was identical to the registered marks. The Court further explained that the test is not about identifying minor differences, but about the overall impression and potential for confusion. As the Court stated in Co Tiong Sa vs. Director of Patents:

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.

The Court also addressed ABS-CBN’s argument that it had a vested right to the trademark because its predecessor had used it under the old Trademark Law. However, the Court noted that ABS-CBN’s previous application for the trademark had been abandoned. Once a trademark is abandoned, the protection it once held is withdrawn. The Court cited Birkenstock Orthopaedie GMBH and Co. KG. vs. Philippine Shoe Expo Marketing Corporation, where no rights were accorded to a trademark owner whose trademark was abandoned for failure to file the declaration of actual use.

ABS-CBN also argued that confusion was unlikely because its magazines were sold in retail outlets, while the registered “METRO” mark was used online. However, the Court pointed to Section 3, Rule 18 of the Rules of Procedure for Intellectual Property Cases, which presumes likelihood of confusion when an identical mark is used for identical goods. In this case, both ABS-CBN’s mark and the registered marks were used for magazines.

The Supreme Court upheld the earlier findings by the IPO, emphasizing the expertise of the agency in examining trademark applications. The Court found no compelling reason to overturn these findings. However, the Court noted that should the cited marks be de-registered and cancelled, ABS-CBN could reapply for registration of the “METRO” trademark.

FAQs

What was the key issue in this case?	The main issue was whether ABS-CBN Publishing could register the trademark “METRO” for magazines, given its similarity to existing registered marks, and whether its appeal was properly dismissed for being filed late.
Why was ABS-CBN’s trademark application rejected?	The application was rejected because the Intellectual Property Office (IPO) determined that “METRO” was confusingly similar to existing registered trademarks, violating Section 123.1(d) of the Intellectual Property Code.
What is the dominancy test in trademark cases?	The dominancy test focuses on the dominant features of the marks to determine if there is a likelihood of confusion among consumers. If the dominant feature is similar, infringement is likely.
What happens if a trademark is abandoned?	If a trademark is abandoned, the legal protection afforded to it is withdrawn, and the owner loses the exclusive rights to use that mark.
Why was ABS-CBN’s appeal dismissed by the Court of Appeals?	The Court of Appeals dismissed the appeal because ABS-CBN failed to file its petition for review within the extended deadline granted by the court.
What does the Intellectual Property Code say about similar trademarks?	The Intellectual Property Code (specifically Section 123.1(d)) prohibits the registration of a mark that is identical or confusingly similar to a registered mark for the same or related goods or services.
What are the potential consequences of missing a deadline to appeal?	Missing a deadline to appeal can result in the original decision becoming final and unappealable, depriving the appellate court of jurisdiction to review the case.
Can ABS-CBN reapply for the trademark if the existing marks are de-registered?	Yes, the Supreme Court stated that ABS-CBN can reapply for the registration of the trademark “METRO” if the cited marks used as the basis for the initial rejection are de-registered or cancelled.

In conclusion, this case underscores the importance of both procedural compliance and substantive trademark law principles. Businesses must be vigilant in meeting deadlines for appeals and in ensuring that their trademarks do not infringe upon existing registered marks. It is a reminder that while trademark rights are valuable, they must be actively protected and defended within the bounds of the law.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ABS-CBN Publishing, Inc. vs. Director of the Bureau of Trademarks, G.R. No. 217916, June 20, 2018

February 18, 2019

Corporate Name Disputes: Priority Rights and Confusing Similarity in Trademark Law

In a dispute over corporate naming rights, the Supreme Court of the Philippines affirmed that prior registration grants superior rights to a corporate name. The Court emphasized that a junior entity cannot use a name so similar to that of a senior entity as to cause confusion among the public. This decision reinforces the importance of due diligence in trademark registration to avoid infringing on existing protected names, especially in closely related industries like education.

De La Salle vs. De La Salle Montessori: Can a Name Cause Confusion in Education?

This case revolves around a legal battle between De La Salle Brothers, Inc., and its affiliated educational institutions (collectively, “De La Salle”) and De La Salle Montessori International of Malolos, Inc. (“De La Salle Montessori”). The central issue is whether De La Salle Montessori’s use of the phrase “De La Salle” in its corporate name infringes on the prior rights of De La Salle, creating a confusing similarity that violates the Corporation Code of the Philippines. The Securities and Exchange Commission (SEC) initially ordered De La Salle Montessori to change its name, a decision upheld by the Court of Appeals, leading to this appeal before the Supreme Court.

The Supreme Court anchored its decision on the principle that a corporation’s right to use its corporate name is a valuable property right. This right, according to Western Equipment and Supply Co. v. Reyes, is a right in rem, enforceable against the world, much like tangible property. This protection prevents subsequent corporations from appropriating a similar name in the same field, thus safeguarding the original corporation’s identity and goodwill. As the Court stated in Philips Export B.V. v. Court of Appeals:

A name is peculiarly important as necessary to the very existence of a corporation x x x. Its name is one of its attributes, an element of its existence, and essential to its identity x x x; and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted x x x.

The Corporation Code of the Philippines, particularly Section 18, reinforces this protection by prohibiting the SEC from allowing corporate names that are “identical or deceptively or confusingly similar” to existing ones. This provision aims to prevent public confusion, fraud, and the evasion of legal obligations, thereby streamlining corporate oversight. Furthermore, it compels new corporations to choose names carefully, as prior rights can lead to injunctions against misleadingly similar names.

To determine if a violation of Section 18 exists, the Court in Philips Export B.V. v. Court of Appeals established a two-pronged test. First, the complainant must demonstrate a prior right to the corporate name. Second, the proposed name must be either identical, deceptively similar, or patently deceptive, confusing, or contrary to existing law. The pivotal factor in establishing prior rights is the date of registration; in this case, De La Salle’s various institutions were registered significantly earlier than De La Salle Montessori.

The Court found that, although not identical, the names were confusingly similar. The phrase “De La Salle” served as the dominant element in both names. De La Salle Montessori argued that the additional words “Montessori International of Malolos, Inc.” distinguished its name sufficiently. However, the Court, aligning with the SEC OGC’s perspective, found that these additions were insufficient to dispel potential confusion. The public might reasonably assume that De La Salle Montessori was an affiliate or branch of the established De La Salle institutions.

De La Salle Montessori attempted to draw a parallel with the Lyceum of the Philippines, Inc. v. Court of Appeals case, where the Court held that the word “Lyceum” was generic and could not be exclusively appropriated. They argued that “De La Salle” similarly lacked distinctiveness and referred merely to a classroom (“la salle” in French). The Court rejected this argument, noting that unlike “Lyceum,” which directly describes an educational institution, “De La Salle” is suggestive rather than descriptive. The SEC En Banc aptly observed that the association of “La Salle” with education is the result of De La Salle’s long-standing efforts, transforming a generic term into a recognizable and protectable brand.

The Court emphasized that the nature of the business played a crucial role in its decision. Both parties operated educational institutions offering similar courses, increasing the likelihood of confusion. The Court reaffirmed that proof of actual confusion is not necessary; a likelihood of confusion suffices to warrant legal intervention. The role of the SEC in protecting corporate names is paramount, and as such, its findings are generally respected, especially when upheld by the appellate court.

Ultimately, the Supreme Court’s decision in favor of De La Salle underscores the importance of securing a distinct corporate identity and avoiding names that could mislead the public. This ruling not only protects established brands but also ensures that consumers can confidently associate specific institutions with their reputations and standards.

FAQs

What was the key issue in this case?	The key issue was whether De La Salle Montessori’s corporate name was deceptively similar to the names of De La Salle institutions, thus infringing on their prior rights under the Corporation Code.
What is the significance of prior registration in corporate name disputes?	Prior registration establishes a superior right to use a corporate name. This means that a company registered earlier has a stronger claim against later-registered companies using similar names that could cause confusion.
What is the legal test for determining confusing similarity in corporate names?	The test is whether the similarity would mislead a person using ordinary care and discrimination. The court considers the names themselves and the nature of the businesses involved.
*Why did the Court reject De La Salle Montessori’s reliance on the Lyceum of the Philippines* case?**	The Court distinguished the cases by noting that “Lyceum” is a generic term for an educational institution, while “De La Salle” is suggestive and has acquired distinctiveness through long-standing use by the De La Salle group.
Does actual confusion need to be proven for a corporate name infringement claim to succeed?	No, actual confusion does not need to be proven. It is sufficient to demonstrate that there is a likelihood or probability of confusion among the public.
What is the role of the SEC in corporate name disputes?	The SEC has exclusive jurisdiction to enforce the protection of corporate names under the Corporation Code. It can de-register corporate names that are likely to cause confusion to protect both corporations and the public.
What was the outcome of the case?	The Supreme Court denied De La Salle Montessori’s petition and affirmed the Court of Appeals’ decision, ordering De La Salle Montessori to change its corporate name.
What is the practical implication of this ruling for businesses?	Businesses must conduct thorough trademark searches before registering a corporate name to avoid infringing on existing rights. They should also choose distinctive names that are not deceptively similar to those of competitors in the same industry.

This case serves as a critical reminder of the importance of due diligence in corporate naming and trademark registration. By prioritizing distinctiveness and conducting thorough searches, businesses can avoid costly legal battles and protect their brand identity effectively.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: DE LA SALLE MONTESSORI INTERNATIONAL OF MALOLOS, INC. vs. DE LA SALLE BROTHERS, INC., G.R. No. 205548, February 07, 2018

December 17, 2018

Trademark Use in the Digital Age: Website Activity as Proof of Commercial Activity

In a landmark decision, the Supreme Court of the Philippines has affirmed that the use of a registered trademark on an interactive website can constitute sufficient proof of actual commercial use to maintain its registration, even without a physical establishment in the country. This ruling recognizes the evolving nature of commerce in the digital age, where online presence and transactions significantly impact brand recognition and consumer engagement. The decision reinforces the importance of protecting intellectual property rights in the online sphere and sets a precedent for evaluating trademark usage in the context of e-commerce.

Brand ‘W’ Goes Global: Can a Website Prove Trademark Use in the Philippines?

The case of W Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide, Inc. centered on W Land’s petition to cancel Starwood’s registration of the trademark “W” in the Philippines, arguing that Starwood had not used the mark within the country. Starwood countered that its interactive website, which allowed Philippine residents to make reservations and bookings at its hotels worldwide, constituted sufficient use of the mark. The Intellectual Property Office (IPO) Director General (DG) sided with Starwood, a decision upheld by the Court of Appeals (CA). W Land then elevated the case to the Supreme Court, questioning whether the CA correctly affirmed the IPO DG’s dismissal of its petition.

At the heart of the dispute was Section 151.1(c) of the Intellectual Property Code of the Philippines (IP Code), which allows for the cancellation of a registered mark if the owner fails to use it within the Philippines for an uninterrupted period of three years or longer. The IP Code defines a mark as “any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise.” The Supreme Court emphasized that trademarks serve to indicate origin, guarantee quality, and advertise products, thus protecting both the business’s goodwill and the public from confusion. Central to the Court’s analysis was interpreting what constitutes “use” of a trademark within the Philippines, particularly in the context of online commerce.

The Supreme Court turned to the concept of “genuine use,” explaining that the use required to maintain a trademark registration must be bona fide and result in a commercial interaction in the ordinary course of trade. The Court referenced Rule 205 of the Trademark Regulations, as amended by IPO Office Order No. 056-13, which specifies acceptable proof of actual use. This amendment acknowledges the significance of the internet in modern commerce.

Office Order No. 056-13 explicitly includes “downloaded pages from the website of the applicant or registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines” and “receipts of sale of the goods or services rendered or other similar evidence of use, showing that the goods are placed on the market or the services are available in the Philippines or that the transaction took place in the Philippines” as acceptable proof of actual use. The Court emphasized that these amendments reflect the realities of modern commerce, where advertising and acquisition have permeated virtual zones over cyberspace.

The Supreme Court quoted Mirpuri v. CA, stating that, “Advertising on the Net and cybershopping are turning the Internet into a commercial marketplace.”

The decision recognized that the concept of commercial goodwill has evolved, extending to regions where the owner does not physically manufacture or sell the product. Goodwill now extends to zones where the marked article has been fixed in the public mind through advertising, particularly on the internet. This reflects the understanding that the internet has transformed the world into one vast marketplace.

However, the Court clarified that mere exhibition of goods or services on the internet is insufficient to constitute actual use. To be considered genuine use, it must be shown that the owner has actually transacted with or intentionally targeted customers within a particular jurisdiction.

The Court underscored the importance of establishing a commercial link to the country, stating that, “it must be shown that the owner has actually transacted, or at the very least, intentionally targeted customers of a particular jurisdiction in order to be considered as having used the trade mark in the ordinary course of his trade in that country. A showing of an actual commercial link to the country is therefore imperative.”

Specifically, the Court noted that the use of a mark on an interactive website may target local customers when it contains specific details pertaining to the target state, such as a local contact phone number, references available to local customers, a local webpage, the use of domestic language and currency, and the acceptance of domestic payment methods. The court also pointed out that it is a practice that has been adopted by a lot of jurisdictions like the European Union, Hong Kong, Singapore, Malaysia, Japan, Australia, Germany, France, Russia, and the United Kingdom.

In Starwood’s case, the Court found sufficient evidence to demonstrate its intent to target Philippine customers. Starwood owned Philippine registered domain names (www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservation.ph), its website was readily accessible to Philippine citizens, and it provided a phone number specifically for Philippine consumers. The website used the English language, considered an official language in the Philippines, and prices for accommodations could be converted into Philippine pesos. The Court also noted the growing number of internet users in the Philippines visiting Starwood’s website.

Considering these factors, the Court concluded that Starwood’s use of its “W” mark through its interactive website was intended to produce a discernable commercial effect within the Philippines, establishing commercial interaction with local consumers. The Court also emphasized that Starwood’s “W” mark is registered for hotel reservation services, and under Section 152.3 of the IP Code, the use of a mark in connection with one or more of the goods or services belonging to the class in respect of which the mark is registered shall prevent its cancellation or removal in respect of all other goods or services of the same class.

The Court also noted that the IPO had previously accepted Starwood’s Declaration of Actual Use (DAU) with evidence of use, and the Court found no reason to disturb this recognition. This underscored the deference given to administrative agencies like the IPO, which are in a better position to judge matters within their expertise.

FAQs

What was the key issue in this case?	The key issue was whether Starwood’s use of its “W” trademark on its interactive website constituted sufficient use within the Philippines to maintain its trademark registration, despite not having a physical hotel establishment in the country. The court had to determine if online activities qualified as legitimate commercial use.
What is the significance of Section 151.1(c) of the IP Code?	Section 151.1(c) of the IP Code allows for the cancellation of a registered trademark if the owner fails to use it within the Philippines for an uninterrupted period of three years or longer, absent any legitimate reason. This provision aims to ensure that trademarks are actively used in commerce and not merely registered for speculative purposes.
What constitutes “genuine use” of a trademark?	“Genuine use” of a trademark refers to a bona fide use that results in a commercial interaction in the ordinary course of trade, not merely token use to reserve the mark. This means there must be actual commercial activity or a clear intent to target customers within the specific jurisdiction.
How did the IPO Office Order No. 056-13 affect the case?	IPO Office Order No. 056-13, which amended the Trademark Regulations, recognized that downloaded pages from the website of the applicant or registrant clearly showing that the goods are being sold or the services are being rendered in the Philippines can be an acceptable proof of actual use. This acknowledgement of the role of digital activity allowed the court to consider Starwood’s website as evidence of commercial activity within the Philippines.
What evidence did Starwood present to prove its use of the mark in the Philippines?	Starwood presented evidence of its Philippine registered domain names, the accessibility of its website to Philippine citizens, a phone number for Philippine consumers, the use of the English language on its website, the ability to convert prices into Philippine pesos, and the growing number of internet users in the Philippines visiting its website.
What is the significance of Starwood owning Philippine registered domain names?	Owning Philippine registered domain names such as www.whotels.ph, www.wreservations.ph, www.whotel.ph, www.wreservation.ph demonstrated Starwood’s intention to target Philippine customers specifically. It also indicated the intent for the brand to connect with its consumers in the Philippines.
Why was the use of English on Starwood’s website relevant?	The use of the English language on Starwood’s website was relevant because English is considered an official language in the Philippines and is widely understood and used in daily affairs. This allowed Starwood to reach a broad segment of the Philippine market and demonstrate its intent to communicate with local consumers.
What is the impact of this decision on businesses with online presence?	This decision affirms that businesses with online presences can establish trademark use within a jurisdiction even without a physical establishment, if they can demonstrate commercial activity or a clear intent to target customers within that jurisdiction. This is especially relevant for businesses engaging in e-commerce and online services.
How does this ruling align with international trends in trademark law?	This ruling aligns with international trends in trademark law that recognize the evolving nature of commerce in the digital age and the importance of protecting intellectual property rights in the online sphere. Jurisdictions such as the European Union, Hong Kong, Singapore, Malaysia, Japan, Australia, Germany, France, Russia, and the United Kingdom have all adopted similar paradigms.
What is the effect of use of a trademark on one or more of the goods or services in a particular class?	Under Section 152.3 of the IP Code, the use of a mark in connection with one or more of the goods or services belonging to the class in respect of which the mark is registered shall prevent its cancellation or removal in respect of all other goods or services of the same class. Thus, Starwood’s use of the “W” mark for reservation services through its website constitutes use of the mark which is already sufficient to protect its registration under the entire subject classification from non-use cancellation.

The Supreme Court’s decision in W Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide, Inc. signifies a crucial adaptation of trademark law to the realities of the digital age. By recognizing website activity as valid proof of commercial use, the Court has provided businesses with greater clarity and protection for their trademarks in the online sphere. The decision highlights the importance of establishing a clear commercial link to the Philippines through targeted marketing and commercial transactions, ensuring that trademark rights are actively used and protected.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: W LAND HOLDINGS, INC. V. STARWOOD HOTELS AND RESORTS WORLDWIDE, INC., G.R. No. 222366, December 04, 2017

September 10, 2018

Unfair Competition: Similarity in Packaging and Intent to Deceive

In San Miguel Pure Foods Company, Inc. v. Foodsphere, Inc., the Supreme Court addressed whether Foodsphere, Inc. engaged in unfair competition by marketing its “PISTA” ham in packaging similar to San Miguel Pure Foods Company, Inc.’s (“SMPFCI”) “FIESTA HAM.” The Court ruled in favor of SMPFCI, finding that Foodsphere’s packaging and marketing tactics created a confusing similarity between the products and demonstrated an intent to deceive consumers. This decision underscores the importance of protecting intellectual property rights and preventing businesses from unfairly capitalizing on the goodwill and established reputation of others.

Hamming It Up: When Packaging Mimicry Leads to Unfair Competition

The dispute began when SMPFCI, the maker of “PUREFOODS FIESTA HAM,” filed a complaint against Foodsphere, alleging trademark infringement and unfair competition. SMPFCI contended that Foodsphere’s “PISTA” ham, particularly its packaging and promotional materials, too closely resembled its own, leading to consumer confusion. SMPFCI claimed that Foodsphere’s actions were a deliberate attempt to capitalize on the goodwill it had established over decades. In response, Foodsphere denied these allegations, arguing that its products were clearly marked with its own brand, “CDO,” and that SMPFCI could not claim exclusive rights to elements such as red color schemes or images of sliced ham with fruit. The central legal question was whether Foodsphere’s actions constituted unfair competition under the Intellectual Property Code, specifically Section 168.

The Intellectual Property Code (IP Code) provides legal recourse against unfair competition. Section 168.2 states:

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.

The case made its way through the Intellectual Property Office (IPO), the Court of Appeals (CA), and ultimately to the Supreme Court (SC), with varying results. The Bureau of Legal Affairs (BLA) of the IPO initially dismissed SMPFCI’s complaint. However, the Office of the Director General reversed in part, finding Foodsphere liable for unfair competition but not trademark infringement. Both parties appealed to the CA, which affirmed the Director General’s finding of unfair competition. The CA initially awarded exemplary damages but later deleted this award, prompting SMPFCI to question the deletion before the SC.

The Supreme Court analyzed the elements of unfair competition, particularly the confusing similarity in the general appearance of the goods and the intent to deceive the public. The Court emphasized that unfair competition involves passing off one’s goods as those of another, thereby deceiving consumers. It cited the case of Shang Properties Realty Corporation, et al. v. St. Francis Development Corporation, which highlighted that unfair competition consists of “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 Court highlighted that 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 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.

In its analysis, the Supreme Court underscored the importance of examining the overall presentation of the products, including packaging. The Court took note of several factors. Firstly, both products utilized paper ham bags as containers. Secondly, both bags prominently featured the color red. Finally, both had a similar layout design displaying sliced ham and fruits on the front, and other ham varieties on the back. The Court agreed with the CA and Director General that this created a likelihood of consumers believing that the products were the same, thus pointing towards unfair competition.

The Court further emphasized that it is not enough that the products bear their brand names, as the intent to copy the packaging can still mislead consumers. The court stated that:

…why, of the millions of terms and combinations of letters, designs, and packaging available, Foodsphere had to choose those so closely similar to SMPFCI’s if there was no intent to pass off upon the public the ham of SMPFCI as its own with the end and probable effect of deceiving the public.

The Court found that Foodsphere’s change from a paper box to a paper ham bag—similar to SMPFCI’s—along with the consistent use of the same layout design, indicated an intention to deceive the public and capitalize on SMPFCI’s goodwill. The Court found Foodsphere’s intent to deceive, to defraud its competitor, and to ride on the goodwill of SMPFCI’s products, is evidenced by the fact that not only did Foodsphere switch from its old box packaging to the same paper ham bag packaging as that used by SMPFCI, it also used the same layout design printed on the same.

Regarding SMPFCI’s claim for exemplary damages, the Supreme Court upheld the CA’s decision to remove the award, stating that SMPFCI had failed to sufficiently prove its entitlement to such damages. The Court referenced Article 2234 of the Civil Code, noting that while the amount of exemplary damages need not be proven, the plaintiff must demonstrate entitlement to moral, temperate, or compensatory damages before exemplary damages can be considered. In this instance, SMPFCI’s claims of lost income and sales were not supported by sufficient evidence, leading to the denial of exemplary damages.

FAQs

What was the key issue in this case?	The key issue was whether Foodsphere engaged in unfair competition by marketing its “PISTA” ham in packaging similar to SMPFCI’s “FIESTA HAM,” leading to consumer confusion. The Court ultimately ruled in favor of SMPFCI.
What is unfair competition under the Intellectual Property Code?	Unfair competition involves employing deception or bad faith to pass off one’s goods as those of another, thereby harming the goodwill of the other’s business. This includes giving one’s goods a general appearance that is likely to mislead purchasers into believing they are buying the goods of another manufacturer.
What are the essential elements of unfair competition?	The essential elements are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.
How did the Court determine that there was a confusing similarity in this case?	The Court focused on the packaging of the products, noting that both used paper ham bags, the color red, and a similar layout design featuring sliced ham and fruits.
What evidence did the Court use to infer Foodsphere’s intent to deceive?	The Court noted that Foodsphere switched from its original box packaging to a paper ham bag similar to SMPFCI’s and used the same layout design, suggesting a deliberate effort to mimic SMPFCI’s product.
Why was the award for exemplary damages removed?	The award was removed because SMPFCI failed to provide sufficient evidence to prove its entitlement to moral, temperate, or compensatory damages, which are prerequisites for awarding exemplary damages.
What is the significance of the packaging in determining unfair competition?	The packaging plays a crucial role in determining unfair competition because it contributes to the overall appearance of the product. If the packaging is designed to mimic another product, it can mislead consumers and harm the goodwill of the original manufacturer.
Can a company claim exclusive rights to certain colors or images in its packaging?	While a company cannot claim exclusive rights to general elements like colors or images of common items, using similar elements to create a confusingly similar overall appearance can be a factor in determining unfair competition.

The Supreme Court’s decision in San Miguel Pure Foods Company, Inc. v. Foodsphere, Inc. serves as a reminder of the importance of respecting intellectual property rights and avoiding deceptive marketing practices. Businesses must ensure that their products are packaged and presented in a way that does not mislead consumers into believing they are buying a competitor’s goods. This case demonstrates that the courts will scrutinize not only the trademarks used but also the overall appearance and presentation of products when determining whether unfair competition has occurred.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: SAN MIGUEL PURE FOODS COMPANY, INC. VS. FOODSPHERE, INC., G.R. Nos. 217781 and 217788, June 20, 2018

June 20, 2018

Trademark Law: Distinctiveness Prevails Over Similarity in ATM Service Branding

In a trademark dispute between Citigroup, Inc. and Citystate Savings Bank, Inc., the Supreme Court ruled in favor of Citystate, allowing the registration of its trademark “CITY CASH WITH GOLDEN LION’S HEAD” for ATM services. The Court found that the golden lion’s head device, along with the overall context of ATM service usage, sufficiently distinguished Citystate’s mark from Citigroup’s “CITI” family of marks, minimizing the likelihood of consumer confusion. This decision underscores the importance of considering the entirety of a trademark and the specific market context when assessing potential infringement.

Lion’s Head Versus Citi: Differentiating Financial Brands in the Marketplace

The case originated from Citystate’s application to register its trademark “CITY CASH WITH GOLDEN LION’S HEAD” with the Intellectual Property Office (IPO). Citigroup opposed this registration, arguing that Citystate’s mark was confusingly similar to its own registered trademarks, particularly those containing the prefix “CITI”. The IPO’s Bureau of Legal Affairs initially sided with Citigroup, but this decision was overturned by the Director-General of the IPO, Adrian S. Cristobal, Jr., who found that the golden lion head device was the dominant feature of Citystate’s mark and not likely to cause confusion. This ruling was subsequently upheld by the Court of Appeals, leading Citigroup to escalate the matter to the Supreme Court. The central legal question was whether the Court of Appeals erred in determining that no confusing similarity existed between the trademarks of Citigroup and Citystate.

The Supreme Court approached the issue by emphasizing the purpose of trademark law, which is to protect the distinctiveness of brands and prevent consumer confusion. As the Court stated,

“The purpose of the law protecting a trademark cannot be overemphasized. They are to point out distinctly the origin or 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.”

The Court noted the importance of maintaining a fair and competitive marketplace, where businesses can build their brand reputation without undue interference. The Court also cited Mirpuri v. Court of Appeals, tracing the historical development of trademark law and its evolution to protect business integrity.

To assess the likelihood of confusion, the Supreme Court employed two established 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. In contrast, the holistic test considers the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. These tests are not mutually exclusive but rather complementary tools to evaluate the overall impression created by the marks on consumers.

In applying the dominancy test, the Court identified the golden lion’s head device as the most noticeable feature of Citystate’s mark, setting it apart from Citigroup’s marks. The Court also noted that while Citigroup’s marks often included a red arc device, or consisted of the prefix “CITI” added to other words, these elements were absent in Citystate’s mark. The presence of the lion’s head in Citystate’s design significantly lessened the chance that consumers would mistake it for a Citigroup product, even though the word “CITY” may have some phonetic similarity to “CITI”. The Court agreed with the Court of Appeals’ finding that the dissimilarities between the marks were noticeable and substantial.

Building on this finding, the Court considered the context in which Citystate’s mark would be used, specifically for ATM services. The Court highlighted that ATM services are not marketed as independent products but are usually adjunct to the main deposit service provided by a bank. Before customers can use ATM services, they must first open an account with the bank, which means they already have a relationship with that specific bank, further lessening the likelihood of confusion. In this context, the Court reasoned that the specific location and branding of ATMs would further minimize potential consumer confusion. As such, the Court cited Emerald Garment Manufacturing Corp. vs. Court of Appeals, emphasizing the importance of considering the “ordinary purchaser” as an “ordinarily intelligent buyer”.

Citigroup argued that in advertisements outside the bank premises, the absence of the golden lion’s head might lead to confusion. The Supreme Court rejected this argument, stating that any effective marketing campaign for Citystate’s ATM service would still emphasize the distinct elements of its brand. The Court clarified that since ATM services must be secured and contracted for at the bank’s premises, advertisements would focus primarily on the offering bank, thus reducing potential consumer confusion. Even if there was phonetic similarity in radio ads, it was not enough to cause trademark infringement. The court stated that

“a mark is a question of visuals, by statutory definition…the similarity between the sounds of “CITI” and “CITY” in a radio advertisement alone neither is sufficient for this Court to conclude that there is a likelihood that a customer would be confused nor can operate to bar respondent from registering its mark.”

This approach contrasts with cases where products are sold in an open market, where the risk of confusion is much higher. By considering the specific circumstances of how ATM services are obtained and used, the Court provided a balanced and practical assessment of the likelihood of confusion. The Court also addressed Citigroup’s concern that it was not claiming a monopoly over all marks prefixed by words sounding like “city.” The Court agreed, noting that Director General Cristobal correctly considered Citystate’s history and name. Ultimately, the Supreme Court affirmed the Court of Appeals’ finding that the Director General of the Intellectual Property Office did not commit any grave abuse of discretion in allowing the registration of Citystate’s trademark.

FAQs

What was the key issue in this case?	The key issue was whether the trademark “CITY CASH WITH GOLDEN LION’S HEAD” was confusingly similar to Citigroup’s “CITI” family of marks, preventing its registration. The court had to determine if consumers were likely to confuse the ATM services offered by Citystate with those associated with Citigroup due to the trademark similarities.
What is the dominancy test in trademark law?	The dominancy test focuses on the similarity of the main, essential, and dominant features of competing trademarks. If these features are similar enough to cause confusion or deception, trademark infringement is likely to occur, even without exact duplication.
How did the Court apply the holistic test?	The holistic test requires a consideration of the entirety of the marks as applied to the products, including labels and packaging. The observer must focus not only on the predominant words but also on the other features appearing on both marks to determine if one is confusingly similar to the other.
What role did the golden lion’s head play in the Court’s decision?	The golden lion’s head device was crucial in differentiating Citystate’s mark from Citigroup’s marks. The Court recognized that this distinct visual element was a prevalent feature that would likely be noticed by consumers, reducing the potential for confusion.
Why was the context of ATM services important?	The context of ATM services was important because it showed that customers must first open an account with a specific bank to use its ATMs. This pre-existing relationship with the bank, along with the bank’s name being displayed at the ATM, reduces the likelihood of confusing the service with another brand.
What is the significance of the “ordinary purchaser” in this case?	The “ordinary purchaser” is considered an “ordinarily intelligent buyer” who is familiar with the products in question. The Court gave credit to the ordinary purchaser’s ability to differentiate between the marks, especially given that banking services require more informed decisions than ordinary household purchases.
How does this ruling affect trademark registration for financial institutions?	This ruling emphasizes that trademarks for financial services must be evaluated in the context of how those services are typically obtained and used. It suggests that distinct visual elements and branding within the specific service environment can help differentiate trademarks, even with some phonetic similarities.
What was Citigroup’s main argument in opposing the trademark registration?	Citigroup argued that the “CITY CASH” portion of Citystate’s trademark was confusingly similar to its “CITI” family of marks. They claimed that consumers might mistakenly believe that Citystate’s ATM services were associated with or endorsed by Citigroup, leading to potential consumer confusion and infringement.

In conclusion, the Supreme Court’s decision in Citigroup, Inc. v. Citystate Savings Bank, Inc. provides valuable insights into the application of trademark law in the context of financial services. The Court’s emphasis on the distinctiveness of the golden lion’s head device and the specific circumstances of ATM service usage underscores the importance of considering the totality of a trademark and its market context when assessing the likelihood of consumer confusion.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: CITIGROUP, INC. VS. CITYSTATE SAVINGS BANK, INC., G.R. No. 205409, June 13, 2018

June 13, 2018

Category: Intellectual Property Law

Understanding Unfair Competition as a Continuing Offense: Insights from Recent Jurisprudence

Petron Corporation and People of the Philippines v. William Yao, Sr., et al., G.R. No. 243328, March 18, 2021

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Case Breakdown: The Journey from Cavite to Makati

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Frequently Asked Questions

Understanding Trademark Infringement: The Importance of Distinctiveness and Consumer Confusion

Prosel Pharmaceuticals & Distributors, Inc. v. Tynor Drug House, Inc., G.R. No. 248021, September 30, 2020

Legal Context: Trademark Law and the Concept of Likelihood of Confusion

Case Breakdown: The Journey of CEEGEEFER and CHERIFER Through the Courts

Practical Implications: Navigating Trademark Infringement in Business

Frequently Asked Questions

Whose Brand Is It Anyway? Zuneca vs. Natrapharm’s Trademark Showdown

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The Importance of Timing in Trademark Assignments: Lessons from a Supreme Court Ruling

Sunfire Trading, Inc. v. Geraldine Guy, G.R. No. 235279, March 02, 2020, 872 Phil. 142

Legal Context: Understanding Transferee Pendente Lite and Trademark Law

Case Breakdown: The Journey of Sunfire Trading, Inc. and Geraldine Guy

Practical Implications: Navigating Trademark Assignments

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Paper Wars: When a Corporate Name Confuses the Public

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Trademark Tango: When ‘Metro’ Means More Than Meets the Eye

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De La Salle vs. De La Salle Montessori: Can a Name Cause Confusion in Education?

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Brand ‘W’ Goes Global: Can a Website Prove Trademark Use in the Philippines?

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Hamming It Up: When Packaging Mimicry Leads to Unfair Competition

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Lion’s Head Versus Citi: Differentiating Financial Brands in the Marketplace

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