The Supreme Court has affirmed that to prove unfair competition, it is not enough to show a similarity between products; there must be evidence of actual intent to deceive the public. The Court emphasized that the remedy against a resolution of the Secretary of Justice is a petition for certiorari, not a Rule 43 petition for review. This ruling underscores the importance of demonstrating a deliberate effort to mislead consumers, rather than merely pointing out resemblances between products, to sustain a charge of unfair competition.

Brand Mimicry or Fair Play? Levi’s vs. Live’s in the Arena of Unfair Competition

Levi Strauss (Phils.), Inc., the local subsidiary of Levi Strauss & Co., filed a complaint against Tony Lim, who was doing business under the name Vogue Traders Clothing Company. Levi Strauss alleged that Lim was manufacturing garments under the brand name “LIVE’S,” which closely resembled their registered trademarks, particularly “LEVI’S.” This led to a search warrant being issued and the seizure of several items from Lim’s premises. The central question was whether Lim’s actions constituted unfair competition by creating a likelihood of confusion among consumers.

The case revolved around whether Tony Lim’s “LIVE’S” brand unfairly competed with Levi Strauss’s “LEVI’S” brand. Levi Strauss argued that Lim’s products imitated several of their trademarks, including the arcuate stitching design, the use of “105” as a play on “501,” and the red tab on the back pocket. However, Lim contended that “LIVE’S” was a registered trademark and that his products were not intended to deceive consumers. He pointed out differences in spelling, meaning, and design between the two brands. The Department of Justice (DOJ) initially dismissed the complaint, then reversed its decision before ultimately siding with Lim, leading Levi Strauss to seek recourse with the Court of Appeals (CA).

The CA affirmed the DOJ’s dismissal, emphasizing that proving unfair competition requires considering various factors, including the circumstances under which the goods are sold, the class of purchasers, and the actual occurrence or absence of confusion. The appellate court noted that Lim used distinguishing features in his products, such as the spelling and pronunciation of the marks, the designs of the back pockets, and the pricing and sale of the products. It also rejected the theory of post-sale confusion, focusing instead on the point of sale as the critical juncture for determining the likelihood of deception. The Supreme Court, in its review, had to consider both procedural and substantive issues.

The Supreme Court first addressed the procedural issue, noting that Levi Strauss had improperly filed a petition for review under Rule 43 of the 1997 Rules of Civil Procedure. The Court clarified that resolutions from the Secretary of Justice regarding probable cause should be challenged through a petition for certiorari under Rule 65, which focuses on grave abuse of discretion. This procedural misstep alone provided sufficient grounds for dismissal. However, the Court proceeded to address the substantive issues to provide further clarity on the matter of unfair competition.

Turning to the substantive aspects, the Court emphasized that it is not empowered to substitute its judgment for that of the executive branch unless there is a clear showing of grave abuse of discretion. The determination of probable cause is a matter delegated to the executive branch through the DOJ, and courts should not interfere unless the decision-making process is tainted by arbitrariness or a clear disregard for the law. In this case, the Court found no such grave abuse of discretion on the part of the DOJ.

The Court then delved into the elements of unfair competition under Article 189(1) of the Revised Penal Code, which include giving one’s goods the general appearance of another’s, doing so with the intent to deceive, and offering the goods for sale with a like purpose. All of these elements must be proven to establish unfair competition. The DOJ had concluded that there was insufficient evidence to prove all the elements, particularly the element of actual intent to deceive.

The Court acknowledged that while registration of a trademark does not negate the possibility of unfair competition, it can show prima facie good faith. Secretary Guingona’s consideration of the differences in spelling, meaning, and phonetics between “LIVE’S” and “LEVI’S,” coupled with Lim’s registration of the mark, supported the finding of no actual intent to deceive. Furthermore, Justice Cuevas relied on the principle established in Emerald Garment Manufacturing Corporation v. Court of Appeals, which posits that buyers of jeans are typically more cautious and discerning, reducing the likelihood of confusion and deception.

The Court also addressed Levi Strauss’s argument that the consumer survey demonstrated actual confusion. The Court found the survey methodology flawed because it did not accurately simulate the conditions under which consumers typically purchase jeans. Specifically, the survey failed to account for the opportunity for consumers to closely scrutinize and try on the jeans, as well as the price difference between the two brands.

Ultimately, the Supreme Court held that the CA had correctly affirmed the DOJ’s dismissal of the unfair competition complaint. The Court reiterated that absent a grave abuse of discretion, it would not nullify acts done in the exercise of executive officers’ discretion during a preliminary investigation. The Court’s decision underscores the high bar for proving unfair competition, requiring evidence of actual intent to deceive rather than merely demonstrating a similarity in appearance between competing products.

The ruling reinforces the principle that while trademark protection is crucial, it does not extend to preventing legitimate competition through distinguishable products. Companies must present compelling evidence of deceptive practices to succeed in unfair competition claims. The Court’s emphasis on the consumer’s perspective and the conditions of sale provides valuable guidance for future cases involving similar issues.

FAQs

What was the key issue in this case?	The key issue was whether Tony Lim’s “LIVE’S” brand constituted unfair competition against Levi Strauss’s “LEVI’S” brand under Article 189(1) of the Revised Penal Code. The central question was whether there was sufficient evidence to demonstrate an intent to deceive the public.
What is the difference between likelihood of confusion and actual deception?	Likelihood of confusion refers to the probability that consumers will be misled into thinking that the goods or services offered are from the same source. Actual deception requires evidence that consumers were actually deceived into purchasing the product believing it was from the original manufacturer.
What remedy should be used to appeal a resolution from the Secretary of Justice?	The proper remedy to appeal a resolution from the Secretary of Justice is a petition for certiorari under Rule 65 of the Rules of Court, which is based on the ground of grave abuse of discretion. A petition for review under Rule 43 is not the correct procedure.
What are the elements of unfair competition under Article 189(1) of the Revised Penal Code?	The elements are: (a) giving goods the general appearance of another’s; (b) showing the general appearance in the goods, packaging, or other features; (c) offering or selling the goods with a like purpose; and (d) having actual intent to deceive the public. All elements must be proven.
How did the Court view the consumer survey presented by Levi Strauss?	The Court viewed the consumer survey as flawed due to its methodology. It failed to simulate real-world purchasing conditions, such as the ability to closely examine the products and consider the price difference between the brands.
Can a registered trademark still be subject to a charge of unfair competition?	Yes, a registered trademark can still be subject to a charge of unfair competition if the goods are packed or offered for sale in a way that deceives the public. However, registration can also show prima facie good faith, making it harder to prove intent to deceive.
What factors are considered when determining the likelihood of confusion?	Factors include the circumstances under which goods are sold, the class of purchasers, and the occurrence or absence of actual confusion. The level of caution exercised by purchasers also depends on the cost of the goods.
Does the Court consider post-sale confusion in unfair competition cases?	The Court primarily focuses on the point of sale when determining the likelihood of deception. It tests whether an ordinary purchaser would be likely to be deceived at the time of purchase, rather than after the sale.

In conclusion, the Supreme Court’s decision in Levi Strauss (Phils.), Inc. v. Tony Lim highlights the stringent requirements for proving unfair competition. It underscores the need for tangible evidence of actual intent to deceive and the importance of adhering to proper legal procedures when seeking judicial review. This case serves as a reminder that trademark protection, while vital, does not grant a monopoly and that fair competition through distinguishable products is permissible.

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: Levi Strauss (Phils.), Inc. v. Tony Lim, G.R. No. 162311, December 04, 2008