for the briefs it manufactures because as aptly remarked by Justice Sanchez in Sterling Products International Inc. vs.

Farbenfabriken Bayer (27 SCRA 1214 [1969]): "Really, if the certificate of registration were to be deemed as including goods not specified therein, then a situation may arise whereby an applicant may be tempted to register a trademark on any and all goods which his mind may conceive even if he had never intended to use the trademark for the said goods. We believe that such omnibus registration is not contemplated by our Trademark Law." (1226). NO LIKELIHOOD OF CONFUSION, MISTAKE OR DECEIT AS TO THE IDENTITY OR SOURCE OF PETITIONERS AND RESPONDENTS GOODS OR BUSINESS A crucial issue in any trademark infringement case is the likelihood of confusion, mistake or deceit as to the identity, source or origin of the goods or identity of the business as a consequence of using a certain mark. Likelihood of confusion is admittedly a relative term, to be determined rigidly according to the particular (and sometimes peculiar) circumstances of each case. Thus, in trademark cases, more than in other kinds of litigation, precedents must be studied in the light of each particular case. 65 There are two types of confusion in trademark infringement. The first is "confusion of goods" when an otherwise prudent purchaser is induced to purchase one product in the belief that he is purchasing another, in which case defendants goods are then bought as the plaintiffs and its poor quality reflects badly on the plaintiffs reputation. The other is "confusion of business" wherein the goods of the parties are different but the defendants product can reasonably (though mistakenly) be assumed to originate from the plaintiff, thus deceiving the public into believing that there is some connection between the plaintiff and defendant which, in fact, does not exist.66 In determining the likelihood of confusion, the Court must consider: [a] the resemblance between the trademarks; [b] the similarity of the goods to which the trademarks are attached; [c] the likely effect on the purchaser and [d] the registrants express or implied consent and other fair and equitable considerations. Petitioners and respondents both use "GALLO" in the labels of their respective cigarette and wine products. But, as held in the following cases, the use of an identical mark does not, by itself, lead to a legal conclusion that there is trademark infringement: (a) in Acoje Mining Co., Inc. vs. Director of Patent,67 we ordered the approval of Acoje Minings application for registration of the trademark LOTUS for its soy sauce even though Philippine Refining Company had prior registration and use of such identical mark for its edible oil which, like soy sauce, also belonged to Class 47; (b) in Philippine Refining Co., Inc. vs. Ng Sam and Director of Patents,68 we upheld the Patent Directors registration of the same trademark CAMIA for Ng Sams ham under Class 47, despite Philippine Refining Companys prior trademark registration and actual use of such mark on its lard, butter, cooking oil (all of which belonged to Class 47), abrasive detergents, polishing materials and soaps; (c) in Hickok Manufacturing Co., Inc. vs. Court of Appeals and Santos Lim Bun Liong,69 we dismissed Hickoks petition to cancel private respondents HICKOK trademark registration for its Marikina shoes as against petitioners earlier registration of the same trademark for handkerchiefs, briefs, belts and wallets; (d) in Shell Company of the Philippines vs. Court of Appeals,70 in a minute resolution, we dismissed the petition for review for lack of merit and

affirmed the Patent Offices registration of the trademark SHELL used in the cigarettes manufactured by respondent Fortune Tobacco Corporation, notwithstanding Shell Companys opposition as the prior registrant of the same trademark for its gasoline and other petroleum products; (e) in Esso Standard Eastern, Inc. vs. Court of Appeals,71 we dismissed ESSOs complaint for trademark infringement against United Cigarette Corporation and allowed the latter to use the trademark ESSO for its cigarettes, the same trademark used by ESSO for its petroleum products, and (f) in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,72 we affirmed the rulings of the Patent Office and the CA that NSR Rubber Corporation could use the trademark CANON for its sandals (Class 25) despite Canon Kabushiki Kaishas prior registration and use of the same trademark for its paints, chemical products, toner and dyestuff (Class 2). Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable imitation"73 which has been defined as "such similarity in form, content, words, sound, meaning, special arrangement or general appearance of the trademark or tradename in their overall presentation or in their essential and substantive and distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the genuine article."74 Jurisprudence has developed two tests in determining similarity and likelihood of confusion in trademark resemblance:75 (a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals76 and other cases,77 and (b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals78 and its preceding cases.79 The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or deceive purchasers.80 On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as they appear in their respective labels or hang tags must also be considered in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other.81 In comparing the resemblance or colorable imitation of marks, various factors have been considered, such as the dominant color, style, size, form, meaning of letters, words, designs and emblems used, the likelihood of deception of the mark or name's tendency to confuse82 and the commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties.83 Applying the Dominancy and Holistic Tests, we find that the dominant feature of the GALLO cigarette trademark is the device of a large rooster facing left, outlined in black against a gold background. The roosters color is either green or red green for GALLO menthols and red for GALLO filters. Directly below the large rooster device is the word GALLO. The rooster device is given prominence in the GALLO cigarette packs in terms of size and location on the labels.84 The GALLO mark appears to be a fanciful and arbitrary mark for the cigarettes as it has no relation at all to the product but was chosen merely as a trademark due to the 1

fondness for fighting cocks of the son of petitioners president. Furthermore, petitioners adopted GALLO, the Spanish word for rooster, as a cigarette trademark to appeal to one of their target markets, the sabungeros (cockfight aficionados).85 Also, as admitted by respondents themselves,86 on the side of the GALLO cigarette packs are the words "MADE BY MIGHTY CORPORATION," thus clearly informing the public as to the identity of the manufacturer of the cigarettes. On the other hand, GALLO Winerys wine and brandy labels are diverse. In many of them, the labels are embellished with sketches of buildings and trees, vineyards or a bunch of grapes while in a few, one or two small roosters facing right or facing each other (atop the EJG crest, surrounded by leaves or ribbons), with additional designs in green, red and yellow colors, appear as minor features thereof.87 Directly below or above these sketches is the entire printed name of the founder-owners, "ERNEST & JULIO GALLO" or just their surname "GALLO,"88 which appears in different fonts, sizes, styles and labels, unlike petitioners uniform casque-font bold-lettered GALLO mark. Moreover, on the labels of Gallo Winerys wines are printed the words "VINTED AND BOTTLED BY ERNEST & JULIO GALLO, MODESTO, CALIFORNIA."89 The many different features like color schemes, art works and other markings of both products drown out the similarity between them the use of the word GALLO a family surname for the Gallo Winerys wines and a Spanish word for rooster for petitioners cigarettes. WINES AND CIGARETTES ARE NOT IDENTICAL, SIMILAR, COMPETING OR RELATED GOODS Confusion of goods is evident where the litigants are actually in competition; but confusion of business may arise between non-competing interests as well.90 Thus, apart from the strict application of Section 20 of the Trademark Law and Article 6bis of the Paris Convention which proscribe trademark infringement not only of goods specified in the certificate of registration but also of identical or similar goods, we have also uniformly recognized and applied the modern concept of "related goods."91 Simply stated, when goods are so related that the public may be, or is actually, deceived and misled that they come from the same maker or manufacturer, trademark infringement occurs.92 Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks.93 They may also be those which, being entirely unrelated, cannot be assumed to have a common source; hence, there is no confusion of business, even though similar marks are used.94 Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell the same class of goods as those made or sold by the defendant.95 In resolving whether goods are related,96 several factors come into play: (a) the business (and its location) to which the goods belong (b) the class of product to which the goods belong (c) the product's quality, quantity, or size, including the nature of the package, wrapper or container 97 (d) the nature and cost of the articles98 (e) the descriptive properties, physical attributes or essential characteristics with reference to their form, composition, texture or quality (f) the purpose of the goods99 (g) whether the article is bought for immediate consumption,100 that is, day-to-day household items101 (h) the fields of manufacture102 (i) the conditions under which the article is usually purchased103 and (j) the channels of trade through which the goods flow,104 how they are distributed, marketed, displayed and sold.105

The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.106 It is a weighing and balancing process. With reference to this ultimate question, and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the parties have a right to the relief sought.107 A very important circumstance though is whether there exists a likelihood that an appreciable number of ordinarily prudent purchasers will be misled, or simply confused, as to the source of the goods in question.108 The "purchaser" is not the "completely unwary consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.109 He is "accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated. The test is not found in the deception, or the possibility of deception, of the person who knows nothing about the design which has been counterfeited, and who must be indifferent between that and the other. The simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he seeks to purchase."110 Hence, in the adjudication of trademark infringement, we give due regard to the goods usual purchasers character, attitude, habits, age, training and education. 111 Applying these legal precepts to the present case, petitioners use of the GALLO cigarette trademark is not likely to cause confusion or mistake, or to deceive the "ordinarily intelligent buyer" of either wines or cigarettes or both as to the identity of the goods, their source and origin, or identity of the business of petitioners and respondents. Obviously, wines and cigarettes are not identical or competing products. Neither do they belong to the same class of goods. Respondents GALLO wines belong to Class 33 under Rule 84[a] Chapter III, Part II of the Rules of Practice in Trademark Cases while petitioners GALLO cigarettes fall under Class 34. We are mindful that product classification alone cannot serve as the decisive factor in the resolution of whether or not wines and cigarettes are related goods. Emphasis should be on the similarity of the products involved and not on the arbitrary classification or general description of their properties or characteristics. But the mere fact that one person has adopted and used a particular trademark for his goods does not prevent the adoption and use of the same trademark by others on articles of a different description. 112 Both the Makati RTC and the CA held that wines and cigarettes are related products because: (1) "they are related forms of vice, harmful when taken in excess, and used for pleasure and relaxation" and (2) "they are grouped or classified in the same section of supermarkets and groceries." We find these premises patently insufficient and too arbitrary to support the legal conclusion that wines and cigarettes are related products within the contemplation of the Trademark Law and the Paris Convention. First, anything - not only wines and cigarettes can be used for pleasure and relaxation and can be harmful when taken in excess. Indeed, it would be a grave abuse of discretion to treat wines and cigarettes as similar or related products likely to cause confusion just because they are pleasure-giving, relaxing or potentially harmful. Such reasoning makes no sense. Second, it is common knowledge that supermarkets sell an infinite variety of wholly unrelated products and the goods here involved, wines and cigarettes, have nothing 2

whatsoever in common with respect to their essential characteristics, quality, quantity, size, including the nature of their packages, wrappers or containers.113 Accordingly, the U.S. patent office and courts have consistently held that the mere fact that goods are sold in one store under the same roof does not automatically mean that buyers are likely to be confused as to the goods respective sources, connections or sponsorships. The fact that different products are available in the same store is an insufficient standard, in and of itself, to warrant a finding of likelihood of confusion.114 In this regard, we adopted the Director of Patents finding in Philippine Refining Co., Inc. vs. Ng Sam and the Director of Patents:115 In his decision, the Director of Patents enumerated the factors that set respondents products apart from the goods of petitioner. He opined and we quote: "I have taken into account such factors as probable purchaser attitude and habits, marketing activities, retail outlets, and commercial impression likely to be conveyed by the trademarks if used in conjunction with the respective goods of the parties, I believe that ham on one hand, and lard, butter, oil, and soap on the other are products that would not move in the same manner through the same channels of trade. They pertain to unrelated fields of manufacture, might be distributed and marketed under dissimilar conditions, and are displayed separately even though they frequently may be sold through the same retail food establishments. Opposers products are ordinary day-to-day household items whereas ham is not necessarily so. Thus, the goods of the parties are not of a character which purchasers would likely attribute to a common origin. The observations and conclusion of the Director of Patents are correct. The particular goods of the parties are so unrelated that consumers, would not, in any probability mistake one as the source of origin of the product of the other. (Emphasis supplied). The same is true in the present case. Wines and cigarettes are non-competing and are totally unrelated products not likely to cause confusion vis--vis the goods or the business of the petitioners and respondents. Wines are bottled and consumed by drinking while cigarettes are packed in cartons or packages and smoked. There is a whale of a difference between their descriptive properties, physical attributes or essential characteristics like form, composition, texture and quality. GALLO cigarettes are inexpensive items while GALLO wines are not. GALLO wines are patronized by middle-to-high-income earners while GALLO cigarettes appeal only to simple folks like farmers, fishermen, laborers and other low-income workers.116 Indeed, the big price difference of these two products is an important factor in proving that they are in fact unrelated and that they travel in different channels of trade. There is a distinct price segmentation based on vastly different social classes of purchasers.117 GALLO cigarettes and GALLO wines are not sold through the same channels of trade. GALLO cigarettes are Philippine-made and petitioners neither claim nor pass off their goods as imported or emanating from Gallo Winery. GALLO cigarettes are distributed, marketed and sold through ambulant and sidewalk vendors, small local sari-sari stores and grocery stores in Philippine rural areas, mainly in Misamis Oriental, Pangasinan, Bohol, and Cebu.118 On the other hand, GALLO wines are imported, distributed and sold in the Philippines through Gallo Winerys exclusive contracts with a domestic entity, which is currently Andresons. By respondents own testimonial evidence, GALLO wines are sold in hotels, expensive bars and restaurants, and high-

end grocery stores and supermarkets, not through sari-sari stores or ambulant vendors.119 Furthermore, the Makati RTC and the CA erred in relying on Carling Brewing Company vs. Philip Morris, Inc.120 to support its finding that GALLO wines and GALLO cigarettes are related goods. The courts a quo should have taken into consideration the subsequent case of IDV North America, Inc. and R & A Bailey Co. Limited vs. S & M Brands, Inc.:121 IDV correctly acknowledges, however, that there is no per se rule that the use of the same mark on alcohol and tobacco products always will result in a likelihood of confusion. Nonetheless, IDV relies heavily on the decision in John Walker & Sons, Ltd. vs. Tampa Cigar Co., 124 F. Supp. 254, 256 (S.D. Fla. 1954), affd, 222 F. 2d 460 (5th Cir. 1955), wherein the court enjoined the use of the mark "JOHNNIE WALKER" on cigars because the fame of the plaintiffs mark for scotch whiskey and because the plaintiff advertised its scotch whiskey on, or in connection with tobacco products. The court, in John Walker & Sons, placed great significance on the finding that the infringers use was a deliberate attempt to capitalize on the senior marks fame. Id. At 256. IDV also relies on Carling Brewing Co. v. Philip Morris, Inc., 297 F. Supp. 1330, 1338 (N.D. Ga. 1968), in which the court enjoined the defendants use of the mark "BLACK LABEL" for cigarettes because it was likely to cause confusion with the plaintiffs well-known mark "BLACK LABEL" for beer. xxx xxx xxx Those decisions, however, must be considered in perspective of the principle that tobacco products and alcohol products should be considered related only in cases involving special circumstances. Schenley Distillers, Inc. v. General Cigar Co., 57C.C.P.A. 1213, 427 F. 2d 783, 785 (1970). The presence of special circumstances has been found to exist where there is a finding of unfair competition or where a famous or well-known mark is involved and there is a demonstrated intent to capitalize on that mark. For example, in John Walker & Sons, the court was persuaded to find a relationship between products, and hence a likelihood of confusion, because of the plaintiffs long use and extensive advertising of its mark and placed great emphasis on the fact that the defendant used the trademark Johnnie Walker with full knowledge of its fame and reputation and with the intention of taking advantage thereof. John Walker & Sons, 124 F. Supp. At 256; see Mckesson & Robbins, Inc. v. P. Lorillard Co., 1959 WL 5894, 120 U.S.P.Q. 306, 307 (1959) (holding that the decision in John Walker & Sons was merely the law on the particular case based upon its own peculiar facts); see also Alfred Dunhill, 350 F. Supp. At 1363 (defendants adoption of Dunhill mark was not innocent). However, in Schenley, the court noted that the relation between tobacco and whiskey products is significant where a widely known arbitrary mark has long been used for diversified products emanating from a single source and a newcomer seeks to use the same mark on unrelated goods. Schenley, 427 F.2d. at 785. Significantly, in Schenley, the court looked at the industry practice and the facts of the case in order to determine the nature and extent of the relationship between the mark on the tobacco product and the mark on the alcohol product. The record here establishes conclusively that IDV has never advertised BAILEYS liqueurs in conjunction with tobacco or tobacco accessory products and that IDV has no intent to do so. And, unlike the defendant in Dunhill, S & M Brands does not market bar accessories, or liqueur related products, with its cigarettes. The advertising and promotional materials presented a trial in this action demonstrate a complete lack of affiliation between the tobacco and liqueur products bearing the marks here at issue. 3

xxx xxx xxx Of equal significance, it is undisputed that S & M Brands had no intent, by adopting the family name Baileys as the mark for its cigarettes, to capitalize upon the fame of the BAILEYS mark for liqueurs. See Schenley, 427 F. 2d at 785. Moreover, as will be discussed below, and as found in Mckesson & Robbins, the survey evidence refutes the contention that cigarettes and alcoholic beverages are so intimately associated in the public mind that they cannot under any circumstances be sold under the same mark without causing confusion. See Mckesson & Robbins, 120 U.S.P.Q. at 308. Taken as a whole, the evidence here demonstrates the absence of the special circumstances in which courts have found a relationship between tobacco and alcohol products sufficient to tip the similarity of goods analysis in favor of the protected mark and against the allegedly infringing mark. It is true that BAILEYS liqueur, the worlds best selling liqueur and the second best selling in the United States, is a well-known product. That fact alone, however, is insufficient to invoke the special circumstances connection here where so much other evidence and so many other factors disprove a likelihood of confusion. The similarity of products analysis, therefore, augers against finding that there is a likelihood of confusion. (Emphasis supplied). In short, tobacco and alcohol products may be considered related only in cases involving special circumstances which exist only if a famous mark is involved and there is a demonstrated intent to capitalize on it. Both of these are absent in the present case. THE GALLO WINE TRADEMARK IS NOT A WELL-KNOWN MARK IN THE CONTEXT OF THE PARIS CONVENTION IN THIS CASE SINCE WINES AND CIGARETTES ARE NOT IDENTICAL OR SIMILAR GOODS First, the records bear out that most of the trademark registrations took place in the late 1980s and the 1990s, that is, after Tobacco Industries use of the GALLO cigarette trademark in 1973 and petitioners use of the same mark in 1984. GALLO wines and GALLO cigarettes are neither the same, identical, similar nor related goods, a requisite element under both the Trademark Law and the Paris Convention. Second, the GALLO trademark cannot be considered a strong and distinct mark in the Philippines. Respondents do not dispute the documentary evidence that aside from Gallo Winerys GALLO trademark registration, the Bureau of Patents, Trademarks and Technology Transfer also issued on September 4, 1992 Certificate of Registration No. 53356 under the Principal Register approving Productos Alimenticios Gallo, S.As April 19, 1990 application for GALLO trademark registration and use for its "noodles, prepared food or canned noodles, ready or canned sauces for noodles, semolina, wheat flour and bread crumbs, pastry, confectionery, ice cream, honey, molasses syrup, yeast, baking powder, salt, mustard, vinegar, species and ice."122 Third and most important, pursuant to our ruling in Canon Kabushiki Kaisha vs. Court of Appeals and NSR Rubber Corporation,123 "GALLO" cannot be considered a "wellknown" mark within the contemplation and protection of the Paris Convention in this case since wines and cigarettes are not identical or similar goods: We agree with public respondents that the controlling doctrine with respect to the applicability of Article 8 of the Paris Convention is that established in Kabushi Kaisha Isetan vs. Intermediate Appellate Court (203 SCRA 59 [1991]). As pointed out by the BPTTT: "Regarding the applicability of Article 8 of the Paris Convention, this Office believes that there is no automatic

Consent Other Considerations Each trademark infringement case presents a unique problem which must be answered by weighing the conflicting interests of the litigants.124 Respondents claim that GALLO wines and GALLO cigarettes flow through the same channels of trade, that is, retail trade. If respondents assertion is true, then both goods co-existed peacefully for a considerable period of time. It took respondents almost 20 years to know about the existence of GALLO cigarettes and sue petitioners for trademark infringement. Given, on one hand, the long period of time that petitioners were engaged in the manufacture, marketing, distribution and sale of 4

protection afforded an entity whose tradename is alleged to have been infringed through the use of that name as a trademark by a local entity. In Kabushiki Kaisha Isetan vs. The Intermediate Appellate Court, et. al., G.R. No. 75420, 15 November 1991, the Honorable Supreme Court held that: The Paris Convention for the Protection of Industrial Property does not automatically exclude all countries of the world which have signed it from using a tradename which happens to be used in one country. To illustrate if a taxicab or bus company in a town in the United Kingdom or India happens to use the tradename Rapid Transportation, it does not necessarily follow that Rapid can no longer be registered in Uganda, Fiji, or the Philippines. This office is not unmindful that in (sic) the Treaty of Paris for the Protection of Intellectual Property regarding well-known marks and possible application thereof in this case. Petitioner, as this office sees it, is trying to seek refuge under its protective mantle, claiming that the subject mark is well known in this country at the time the then application of NSR Rubber was filed. However, the then Minister of Trade and Industry, the Hon. Roberto V. Ongpin, issued a memorandum dated 25 October 1983 to the Director of Patents, a set of guidelines in the implementation of Article 6bis of the Treaty of Paris. These conditions are: a) the mark must be internationally known; b) the subject of the right must be a trademark, not a patent or copyright or anything else; c) the mark must be for use in the same or similar kinds of goods; and d) the person claiming must be the owner of the mark (The Parties Convention Commentary on the Paris Convention. Article by Dr. Bogsch, Director General of the World Intellectual Property Organization, Geneva, Switzerland, 1985) From the set of facts found in the records, it is ruled that the Petitioner failed to comply with the third requirement of the said memorandum that is the mark must be for use in the same or similar kinds of goods. The Petitioner is using the mark "CANON" for products belonging to class 2 (paints, chemical products) while the Respondent is using the same mark for sandals (class 25). Hence, Petitioner's contention that its mark is well-known at the time the Respondent filed its application for the same mark should fail." (Emphasis supplied.) of the Registrant and air, Just and Equitable

GALLO cigarettes and, on the other, respondents delay in enforcing their rights (not to mention implied consent, acquiescence or negligence) we hold that equity, justice and fairness require us to rule in favor of petitioners. The scales of conscience and reason tip far more readily in favor of petitioners than respondents. Moreover, there exists no evidence that petitioners employed malice, bad faith or fraud, or that they intended to capitalize on respondents goodwill in adopting the GALLO mark for their cigarettes which are totally unrelated to respondents GALLO wines. Thus, we rule out trademark infringement on the part of petitioners. PETITIONERS ARE ALSO NOT LIABLE FOR UNFAIR COMPETITION Under Section 29 of the Trademark Law, any person who employs deception or any other means contrary to good faith by which he passes 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 commits any acts calculated to produce said result, is guilty of unfair competition. It includes the following acts: (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. The universal test question is whether the public is likely to be deceived. Nothing less than conduct tending to pass off one mans goods or business as that of another constitutes unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendants practices must always appear.125 On this score, we find that petitioners never attempted to pass off their cigarettes as those of respondents. There is no evidence of bad faith or fraud imputable to petitioners in using their GALLO cigarette mark. All told, after applying all the tests provided by the governing laws as well as those recognized by jurisprudence, we conclude that petitioners are not liable for trademark infringement, unfair competition or damages. WHEREFORE, finding the petition for review meritorious, the same is hereby GRANTED. The questioned decision and resolution of the Court of Appeals in CA-G.R. CV No. 65175 and the November 26, 1998 decision and the June 24, 1999 order of the Regional Trial Court of Makati, Branch 57 in Civil Case No. 93-850 are hereby REVERSED and SET ASIDE and the complaint against petitioners DISMISSED. Costs against respondents. SO ORDERED. Vitug, (Chairman), and Sandoval-Gutierrez, JJ., concur. Carpio-Morales, J., no part.. IN-N-OUT BURGER, INC, Petitioner, G.R. No. 179127 Present: YNARES-SANTIAGO, J.,

- versus -

SEHWANI, INCORPORATED AND/OR BENITAS FRITES, INC., Respondents.

Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated:

December 24, 2008 x---------------------------- ---------------------x DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse the Decision1[1] dated 18 July 2006 rendered by the Court of Appeals in CA-G.R. SP No. 92785, which reversed the Decision2[2] dated 23 December 2005 of the Director General of the Intellectual Property Office (IPO) in Appeal No. 10-05-01. The Court of Appeals, in its assailed Decision, decreed that the IPO Director of Legal Affairs and the IPO Director General do not have jurisdiction over cases involving unfair competition. Petitioner IN-N-OUT BURGER, INC., a business entity incorporated under the laws of California, United States (US) of America, which is a signatory to the Convention of Paris on Protection of Industrial Property and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Petitioner is engaged mainly in the restaurant business, but it has never engaged in business in the Philippines. 3 [3] Respondents Sehwani, Incorporated and Benita Frites, Inc. are corporations organized in the Philippines.4[4] On 2 June 1997, petitioner filed trademark and service mark applications with the Bureau of Trademarks (BOT) of the IPO for IN-N-OUT and IN-N-OUT Burger & Arrow Design. Petitioner later found out, through the Official Action Papers issued by the IPO on 31 May 2000, that respondent Sehwani, Incorporated had already obtained Trademark Registration for the mark IN N OUT (the inside of the letter O formed like a star).5[5] By virtue of a licensing agreement, Benita Frites, Inc. was able to use the registered mark of respondent Sehwani, Incorporated.

1 2 3 4 5
5

Petitioner eventually filed on 4 June 2001 before the Bureau of Legal Affairs (BLA) of the IPO an administrative complaint against respondents for unfair competition and cancellation of trademark registration. Petitioner averred in its complaint that it is the owner of the trade name IN-N-OUT and the following trademarks: (1) IN-N-OUT; (2) IN-N-OUT Burger & Arrow Design; and (3) IN-NOUT Burger Logo. These trademarks are registered with the Trademark Office of the US and in various parts of the world, are internationally well-known, and have become distinctive of its business and goods through its long and exclusive commercial use.6[6] Petitioner pointed out that its internationally well-known trademarks and the mark of the respondents are all registered for the restaurant business and are clearly identical and confusingly similar. Petitioner claimed that respondents are making it appear that their goods and services are those of the petitioner, thus, misleading ordinary and unsuspecting consumers that they are purchasing petitioners products.7[7] Following the filing of its complaint, petitioner sent on 18 October 2000 a demand letter directing respondent Sehwani, Incorporated to cease and desist from claiming ownership of the mark IN-N-OUT and to voluntarily cancel its trademark registration. In a letter-reply dated 23 October 2000, respondents refused to accede to petitioner demand, but expressed willingness to surrender the registration of respondent Sehwani, Incorporated of the IN N OUT trademark for a fair and reasonable consideration. 8[8] Petitioner was able to register the mark Double Double on 4 July 2002, based on their application filed on 2 June 1997.9[9] It alleged that respondents also used this mark, as well as the menu color scheme. Petitioners also averred that respondent Benitas receipts bore the phrase, representing IN-N-OUT Burger.10[10] It should be noted that that although respondent Sehwahi, Incorporated registered a mark which appeared as IN N OUT (the inside of the letter O formed like a star), respondents used the mark IN-N-OUT.11[11] To counter petitioners complaint, respondents filed before the BLA-IPO an Answer with Counterclaim. Respondents asserted therein that they had been using the mark IN N OUT in the Philippines since 15 October 1982. On 15 November 1991, respondent Sehwani, Incorporated filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTTT) an application for the registration of the mark IN N OUT (the inside of the letter O formed like a star). Upon approval of its application, a certificate of registration of the said mark was issued in the name of respondent Sehwani, Incorporated on 17 December 1993. On 30 August 2000,

respondents Sehwani, Incorporated and Benita Frites, Inc. entered into a Licensing Agreement, wherein the former entitled the latter to use its registered mark, IN N OUT. Respondents asserted that respondent Sehwani, Incorporated, being the registered owner of the mark IN N OUT, should be accorded the presumption of a valid registration of its mark with the exclusive right to use the same. Respondents argued that none of the grounds provided under the Intellectual Property Code for the cancellation of a certificate of registration are present in this case. Additionally, respondents maintained that petitioner had no legal capacity to sue as it had never operated in the Philippines.12[12] Subsequently, the IPO Director of Legal Affairs, Estrellita Beltran-Abelardo, rendered a Decision dated 22 December 2003, 13[13] in favor of petitioner. According to said Decision, petitioner had the legal capacity to sue in the Philippines, since its country of origin or domicile was a member of and a signatory to the Convention of Paris on Protection of Industrial Property. And although petitioner had never done business in the Philippines, it was widely known in this country through the use herein of products bearing its corporate and trade name. Petitioners marks are internationally well-known, given the world-wide registration of the mark IN-N-OUT, and its numerous advertisements in various publications and in the Internet. Moreover, the IPO had already declared in a previous inter partes case that In-N-Out Burger and Arrow Design was an internationally well-known mark. Given these circumstances, the IPO Director for Legal Affairs pronounced in her Decision that petitioner had the right to use its tradename and mark IN-N-OUT in the Philippines to the exclusion of others, including the respondents. However, respondents used the mark IN N OUT in good faith and were not guilty of unfair competition, since respondent Sehwani, Incorporated did not evince any intent to ride upon petitioners goodwill by copying the mark IN-N-OUT Burger exactly. The inside of the letter O in the mark used by respondents formed a star. In addition, the simple act of respondent Sehwani, Incorporated of inquiring into the existence of a pending application for registration of the IN-N-OUT mark was not deemed fraudulent. The dispositive part of the Decision of the IPO Director for Legal Affairs reads: With the foregoing disquisition, Certificate of Registration No. 56666 dated 17 December 1993 for the mark IN-N-OUT (the inside of the letter O formed like a star) issued in favor of Sehwani, Incorporated is hereby CANCELLED. Consequently, respondents Sehwani, Inc. and Benitas Frites are hereby ordered to permanently cease and desist from using the mark IN-N-OUT and IN-N-OUT BURGER LOGO on its goods and in its business. With regards the mark Double-Double, considering that as earlier discussed, the mark has been approved by this Office for publication and that as shown by evidence, Complainant is the owner of the said mark, Respondents are so hereby ordered to permanently cease and desist from using the mark Double-Double. NO COSTS. 14[14]

6 7 8 9 10 11 12 13 14

Both parties filed their respective Motions for Reconsideration of the aforementioned Decision. Respondents Motion for Reconsideration15[15] and petitioners Motion for Partial Reconsideration16[16] were denied by the IPO Director for Legal Affairs in Resolution No. 2004-1817[17] dated 28 October 2004 and Resolution No. 2005-05 dated 25 April 2005,18[18] respectively. Subsequent events would give rise to two cases before this Court, G.R. No. 171053 and G.R. No. 179127, the case at bar. G.R. No. 171053 On 29 October 2004, respondents received a copy of Resolution No. 2004-18 dated 28 October 2004 denying their Motion for Reconsideration. Thus, on 18 November 2004, respondents filed an Appeal Memorandum with IPO Director General Emma Francisco (Director General Francisco). However, in an Order dated 7 December 2004, the appeal was dismissed by the IPO Director General for being filed beyond the 15-day reglementary period to appeal. Respondents appealed to the Court of Appeals via a Petition for Review under Rule 43 of the Rules of Court, filed on 20 December 2004 and docketed as CAG.R. SP No. 88004, challenging the dismissal of their appeal by the IPO Director General, which effectively affirmed the Decision dated 22 December 2003 of the IPO Director for Legal Affairs ordering the cancellation of the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and enjoining respondents from using the same. In particular, respondents based their Petition on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN DISMISSING APPEAL NO. 14-2004-00004 ON A MERE TECHNICALITY THE BUREAU OF LEGAL AFFAIRS (SIC) DECISION AND RESOLUTION (1) CANCELLING RESPONDENTS CERTIFICATE OF REGISTRATION FOR THE MARK IN-N-OUT, AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS ARE CONTRARY TO LAW AND/OR IS NOT SUPPORTED BY EVIDENCE. Respondents thus prayed: WHEREFORE, petitioners respectfully pray that this Honorable Court give due course to this petition, and thereafter order the Office of the Director General of the Intellectual Property Office to reinstate and give due course to [respondent]s Appeal No. 14-2004-00004.

Other reliefs, just and equitable under the premises, are likewise prayed for. On 21 October 2005, the Court of Appeals rendered a Decision denying respondents Petition in CA-G.R SP No. 88004 and affirming the Order dated 7 December 2004 of the IPO Director General. The appellate court confirmed that respondents appeal before the IPO Director General was filed out of time and that it was only proper to cancel the registration of the disputed trademark in the name of respondent Sehwani, Incorporated and to permanently enjoin respondents from using the same. Effectively, the 22 December 2003 Decision of IPO Director of Legal Affairs was likewise affirmed. On 10 November 2005, respondents moved for the reconsideration of the said Decision. On 16 January 2006, the Court of Appeals denied their motion for reconsideration. Dismayed with the outcome of their petition before the Court of Appeals, respondents raised the matter to the Supreme Court in a Petition for Review under Rule 45 of the Rules of Court, filed on 30 January 2006, bearing the title Sehwani, Incorporated v. In-N-Out Burger and docketed as G.R. No. 171053.19[19] This Court promulgated a Decision in G.R. No. 171053 on 15 October 2007,20 [20] finding that herein respondents failed to file their Appeal Memorandum before the IPO Director General within the period prescribed by law and, consequently, they lost their right to appeal. The Court further affirmed the Decision dated 22 December 2003 of the IPO Director of Legal Affairs holding that herein petitioner had the legal capacity to sue for the protection of its trademarks, even though it was not doing business in the Philippines, and ordering the cancellation of the registration obtained by herein respondent Sehwani, Incorporated of the internationally well-known marks of petitioner, and directing respondents to stop using the said marks. Respondents filed a Motion for Reconsideration of the Decision of this Court in G.R. No. 171053, but it was denied with finality in a Resolution dated 21 January 2008. G.R. No. 179127 Upon the denial of its Partial Motion for Reconsideration of the Decision dated 22 December 2003 of the IPO Director for Legal Affairs, petitioner was able to file a timely appeal before the IPO Director General on 27 May 2005. During the pendency of petitioners appeal before the IPO Director General, the Court of Appeals already rendered on 21 October 2005 its Decision dismissing respondents Petition in CA-G.R. SP No. 88004. In a Decision dated 23 December 2005, IPO Director General Adrian Cristobal, Jr. found petitioners appeal meritorious and modified the Decision dated 22 December 2003 of the IPO Director of Legal Affairs. The IPO Director General declared that respondents were guilty of unfair competition. Despite respondents claims that they had been using the mark since 1982, they only started constructing their restaurant sometime in 2000, after petitioner had already demanded that they desist from claiming ownership of the mark IN-N-OUT. Moreover, the sole distinction of the mark registered in the name of respondent Sehwani, Incorporated, from those of the petitioner was the star inside the letter O, a minor difference

15 16 17 18

19 20
7

which still deceived purchasers. Respondents were not even actually using the star in their mark because it was allegedly difficult to print. The IPO Director General expressed his disbelief over the respondents reasoning for the non-use of the star symbol. The IPO Director General also considered respondents use of petitioners registered mark Double-Double as a sign of bad faith and an intent to mislead the public. Thus, the IPO Director General ruled that petitioner was entitled to an award for the actual damages it suffered by reason of respondents acts of unfair competition, exemplary damages, and attorneys fees.21[21] The fallo of the Decision reads: WHEREFORE, premises considered, the [herein respondents] are held guilty of unfair competition. Accordingly, Decision No. 2003-02 dated 22 December 2003 is hereby MODIFIED as follows: [Herein Respondents] are hereby ordered to jointly and severally pay [herein petitioner]: 1. Damages in the amount of TWO HUNDRED TWELVE THOUSAND FIVE HUNDRED SEVENTY FOUR AND 28/100(P212,574.28); 2. Exemplary damages in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00); 3. Attorneys fees and expenses of litigation in the amount of FIVE HUNDRED THOUSAND PESOS (P500,000.00). All products of [herein respondents] including the labels, signs, prints, packages, wrappers, receptacles and materials used by them in committing unfair competition should be without compensation of any sort be seized and disposed of outside the channels of commerce. Let a copy of this Decision be furnished the Director of Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. Further, let a copy of this Decision be furnished the Documentation, Information and Technology Transfer Bureau for their information and records purposes.22[22] Aggrieved, respondents were thus constrained to file on 11 January 2006 before the Court of Appeals another Petition for Review under Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 92785. Respondents based their second Petition before the appellate court on the following grounds: THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN HOLDING PETITIONERS LIABLE FOR UNFAIR COMPETITION AND IN

ORDERING THEM TO PAY DAMAGES AND ATTORNEYS FEES TO RESPONDENTS THE IPO DIRECTOR GENERAL COMMITTED GRAVE ERROR IN AFFIRMING THE BUREAU OF LEGAL AFFAIRS DECISION (1) CANCELLING PETITIONERS CERTIFICATE OF REGISTRATION FOR THE MARK IN-N-OUT, AND (2) ORDERING PETITIONERS TO PERMANENTLY CEASE AND DESIST FROM USING THE SUBJECT MARK ON ITS GOODS AND BUSINESS Respondents assailed before the appellate court the foregoing 23 December 2005 Decision of the IPO Director General, alleging that their use of the disputed mark was not tainted with fraudulent intent; hence, they should not be held liable for damages. They argued that petitioner had never entered into any transaction involving its goods and services in the Philippines and, therefore, could not claim that its goods and services had already been identified in the mind of the public. Respondents added that the disputed mark was not well-known. Finally, they maintained that petitioners complaint was already barred by laches.23[23] At the end of their Petition in CA-G.R. SP No. 92785, respondents presented the following prayer: WHEREFORE, [respondents herein] respectfully pray that this Honorable Court: (a) upon the filing of this petition, issue a temporary restraining order enjoining the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the IPO Director Generals Decision dated 23 December 2005, which modified the Decision No. 2003-02 dated 22 December 2003 of the BLA, until further orders from this Honorable Court. after notice and hearing, enjoin the IPO and [petitioner], their agents, successors and assigns, from executing, enforcing and implementing the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 and to maintain the status quo ante pending the resolution of the merits of this petition; and after giving due course to this petition: (i) reverse and set aside the Decision dated 23 December 2005 of the Director General of the IPO in IPV No. 10-2001-00004 finding the [respondents] guilty of unfair competition and awarding damages and attorneys fees to the respondent in lieu thereof, affirm Decision No. 2003-02 of the BLA dated 22 December 2003 and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it finds [respondents] not guilty of

(b)

(c)

(ii)

21 22 23

unfair competition and hence not liable to the [petitioner] for damages and attorneys fees; (iii) reverse Decision No. 2003-02 of the BLA dated 22 December 2003, and Resolution No. 2005-05 of the BLA dated 25 April 2005, insofar as it upheld [petitioner]s legal capacity to sue; that [petitioner]s trademarks are well-known; and that respondent has the exclusive right to use the same; and make the injunction permanent.

01 is REVERSED and SET ASIDE. Insofar as they pertain to acts governed by Article 168 of R.A. 8293 and other sections enumerated in Section 163 of the same Code, respondents claims in its Complaint docketed as IPV No. 10-2001-00004 are hereby DISMISSED.26[26] The Court of Appeals, in a Resolution dated 31 July 2007,27[27] denied petitioners Motion for Reconsideration of its aforementioned Decision. Hence, the present Petition, where petitioner raises the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT THE IPO HAS NO JURISDICTION OVER ADMINISTRATIVE COMPLAINTS FOR INTELLECTUAL PROPERTY RIGHTS VIOLATIONS; II WHETHER OR NOT DEFECTIVE; AND THE INSTANT PETITION IS FORMALLY

(iv)

[Respondents] also pray for other reliefs, as may deemed just or equitable.24[24] On 18 July 2006, the Court of Appeals promulgated a Decision25[25] in CAG.R. SP No. 92785 reversing the Decision dated 23 December 2005 of the IPO Director General. The Court of Appeals, in its Decision, initially addressed petitioners assertion that respondents had committed forum shopping by the institution of CAG.R. SP No. 88004 and CA-G.R. SP No. 92785. It ruled that respondents were not guilty of forum shopping, distinguishing between the respondents two Petitions. The subject of Respondents Petition in CA-G.R SP No. 88004 was the 7 December 2004 Decision of the IPO Director General dismissing respondents appeal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents questioned therein the cancellation of the trademark registration of respondent Sehwani, Incorporated and the order permanently enjoining respondents from using the disputed trademark. Respondents Petition in CA-G.R. SP No. 92785 sought the review of the 23 December 2005 Decision of the IPO Director General partially modifying the 22 December 2003 Decision of the IPO Director of Legal Affairs. Respondents raised different issues in their second petition before the appellate court, mainly concerning the finding of the IPO Director General that respondents were guilty of unfair competition and the awarding of actual and exemplary damages, as well as attorneys fees, to petitioner. The Court of Appeals then proceeded to resolve CA-G.R. SP No. 92785 on jurisdictional grounds not raised by the parties. The appellate court declared that Section 163 of the Intellectual Property Code specifically confers upon the regular courts, and not the BLA-IPO, sole jurisdiction to hear and decide cases involving provisions of the Intellectual Property Code, particularly trademarks. Consequently, the IPO Director General had no jurisdiction to rule in its Decision dated 23 December 2005 on supposed violations of these provisions of the Intellectual Property Code. In the end, the Court of Appeals decreed: WHEREFORE, the Petition is GRANTED. The Decision dated 23 December 2005 rendered by the Director General of the Intellectual Property Office of the Philippines in Appeal No. 10-05-

III WHETHER OR NOT THE COURT OF APPEALS ERRED IN ISSUING THE QUESTIONED DECISION DATED 18 JULY 2006 AND RESOLUTION DATED 31 JULY 2007 DECLARING THAT SEHWANI AND BENITA ARE NOT GUILTY OF: (A) SUBMITTING A PATENTLY FALSE CERTIFICATION OF NON-FORUM SHOPPING; AND (B) FORUM SHOPPING PROPER. 28 [28] As previously narrated herein, on 15 October 2007, during the pendency of the present Petition, this Court already promulgated its Decision29[29] in G.R. No. 171053 on 15 October 2007, which affirmed the IPO Director Generals dismissal of respondents appeal for being filed beyond the reglementary period, and left the 22 December 2003 Decision of the IPO Director for Legal Affairs, canceling the trademark registration of respondent Sehwani, Incorporated and enjoining respondents from using the disputed marks. Before discussing the merits of this case, this Court must first rule on the procedural flaws that each party has attributed to the other.

26 27 28 29
9

24 25

Formal Defects of the Petition Respondents contend that the Verification/Certification executed by Atty. Edmund Jason Barranda of Villaraza and Angangco, which petitioner attached to the present Petition, is defective and should result in the dismissal of the said Petition. Respondents point out that the Secretarys Certificate executed by Arnold M. Wensinger on 20 August 2007, stating that petitioner had authorized the lawyers of Villaraza and Angangco to represent it in the present Petition and to sign the Verification and Certification against Forum Shopping, among other acts, was not properly notarized. The jurat of the aforementioned Secretarys Certificate reads: Subscribed and sworn to me this 20th day of August 2007 in Irving California. Blake (Sgd.) Public30[30] Rachel A. Notary

declares to the notary that the executor of a document has attested to the notary that the same is his/her own free act and deed.33[33] A Secretarys Certificate, as that executed by petitioner in favor of the lawyers of the Angangco and Villaraza law office, only requires a jurat.34[34] Even assuming that the Secretarys Certificate was flawed, Atty. Barranda may still sign the Verification attached to the Petition at bar. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. 35[35] The party itself need not sign the verification. A partys representative, lawyer or any other person who personally knows the truth of the facts alleged in the pleading may sign the verification.36[36] Atty. Barranda, as petitioners counsel, was in the position to verify the truth and correctness of the allegations of the present Petition. Hence, the Verification signed by Atty. Barranda substantially complies with the formal requirements for such. Moreover, the Court deems it proper not to focus on the supposed technical infirmities of Atty. Barandas Verification. It must be borne in mind that the purpose of requiring a verification is to secure an assurance that the allegations of the petition has been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. In the interest of substantial justice, strict observance of procedural rules may be dispensed with for compelling reasons.37[37] The vital issues raised in the instant Petition on the jurisdiction of the IPO Director for Legal Affairs and the IPO Director General over trademark cases justify the liberal application of the rules, so that the Court may give the said Petition due course and resolve the same on the merits. This Court agrees, nevertheless, that the notaries public, Rachel A. Blake and Aldrich Fitz B. Uy, were less than careful with their jurats or notarial certificates. Parties and their counsel should take care not to abuse the Courts zeal to resolve cases on their merits. Notaries public in the Philippines are reminded to exert utmost care and effort in complying with the 2004 Rules on Notarial Practice. Parties and their counsel are further charged with the responsibility of ensuring that documents notarized abroad be in their proper form before presenting said documents before Philippine courts. Forum Shopping Petitioner next avers that respondents are guilty of forum shopping in filing the Petition in CA-G.R. SP No. 92785, following their earlier filing of the Petition in CAG.R SP No. 88004. Petitioner also asserts that respondents were guilty of submitting

Respondents aver that the said Secretarys Certificate cannot properly authorize Atty. Barranda to sign the Verification/Certification on behalf of petitioner because the notary public Rachel A. Blake failed to state that: (1) petitioners Corporate Secretary, Mr. Wensinger, was known to her; (2) he was the same person who acknowledged the instrument; and (3) he acknowledged the same to be his free act and deed, as required under Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines.31[31] Respondents likewise impugn the validity of the notarial certificate of Atty. Aldrich Fitz B. Uy, on Atty. Barandas Verification/Certification attached to the instant Petition, noting the absence of (1) the serial number of the commission of the notary public; (2) the office address of the notary public; (3) the roll of attorneys number and the IBP membership number; and (4) a statement that the Verification/Certification was notarized within the notary publics territorial jurisdiction, as required under the 2004 Rules on Notarial Practice. 32[32] Section 2 of Act No. 2103 and Landingin v. Republic of the Philippines are not applicable to the present case. The requirements enumerated therein refer to documents which require an acknowledgement, and not a mere jurat. A jurat is that part of an affidavit in which the notary certifies that before him/her, the document was subscribed and sworn to by the executor. Ordinarily, the language of the jurat should avow that the document was subscribed and sworn to before the notary public. In contrast, an acknowledgment is the act of one who has executed a deed in going before some competent officer or court and declaring it to be his act or deed. It involves an extra step undertaken whereby the signor actually

33 34 35 36 37
10

30 31 32

to the Court of Appeals a patently false Certification of Non-forum Shopping in CAG.R. SP No. 92785, when they failed to mention therein the pendency of CA-G.R SP No. 88004. Forum shopping is the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other court would make a favorable disposition. It is an act of malpractice and is prohibited and condemned as trifling with courts and abusing their processes. In determining whether or not there is forum shopping, what is important is the vexation caused the courts and parties-litigants by a party who asks different courts and/or administrative bodies to rule on the same or related causes and/or grant the same or substantially the same reliefs and in the process creates the possibility of conflicting decisions being rendered by the different bodies upon the same issues.38[38] Forum shopping is present when, in two or more cases pending, there is identity of (1) parties (2) rights or causes of action and reliefs prayed for, and (3) the identity of the two preceding particulars is such that any judgment rendered in the other action, will, regardless of which party is successful, amount to res judicata in the action under consideration.39[39] After a cursory look into the two Petitions in CA-G.R. SP No. 88004 and CAG.R. SP No. 92785, it would at first seem that respondents are guilty of forum shopping. There is no question that both Petitions involved identical parties, and raised at least one similar ground for which they sought the same relief. Among the grounds stated by the respondents for their Petition in CA-G.R SP No. 88004 was that [T]he Bureau of Legal Affairs (sic) Decision and Resolution (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-NOUT and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business are contrary to law and/or is (sic) not supported by evidence.40[40] The same ground was again invoked by respondents in their Petition in CA-G.R. SP No. 92785, rephrased as follows: The IPO Director General committed grave error in affirming the Bureau of Legal Affairs (sic) Decision (1) canceling [herein respondent Sehwani, Incorporated]s certificate of registration for the mark IN-N-OUT, and (2) ordering [herein respondents] to permanently cease and desist from using the subject mark on its goods and business.41[41] Both Petitions, in effect, seek the reversal of the 22 December 2003 Decision of the IPO Director of Legal Affairs. Undoubtedly, a judgment in either one of these Petitions affirming or reversing the said Decision of the IPO Director of Legal Affairs based on the merits thereof would bar the Court of Appeals from making a contrary ruling in the other Petition, under the principle of res judicata. Upon a closer scrutiny of the two Petitions, however, the Court takes notice of one issue which respondents did not raise in CA-G.R. SP No. 88004, but can be found in CA-G.R. SP No. 92785, i.e., whether respondents are liable for unfair

competition. Hence, respondents seek additional reliefs in CA-G.R. SP No. 92785, seeking the reversal of the finding of the IPO Director General that they are guilty of unfair competition, and the nullification of the award of damages in favor of petitioner resulting from said finding. Undoubtedly, respondents could not have raised the issue of unfair competition in CA-G.R. SP No. 88004 because at the time they filed their Petition therein on 28 December 2004, the IPO Director General had not yet rendered its Decision dated 23 December 2005 wherein it ruled that respondents were guilty thereof and awarded damages to petitioner. In arguing in their Petition in CA-G.R. SP No. 92785 that they are not liable for unfair competition, it is only predictable, although not necessarily legally tenable, for respondents to reassert their right to register, own, and use the disputed mark. Respondents again raise the issue of who has the better right to the disputed mark, because their defense from the award of damages for unfair competition depends on the resolution of said issue in their favor. While this reasoning may be legally unsound, this Court cannot readily presume bad faith on the part of respondents in filing their Petition in CA-G.R. SP No. 92785; or hold that respondents breached the rule on forum shopping by the mere filing of the second petition before the Court of Appeals. True, respondents should have referred to CA-G.R. SP No. 88004 in the Certification of Non-Forum Shopping, which they attached to their Petition in CA-G.R. SP No. 92785. Nonetheless, the factual background of this case and the importance of resolving the jurisdictional and substantive issues raised herein, justify the relaxation of another procedural rule. Although the submission of a certificate against forum shopping is deemed obligatory, it is not jurisdictional.42[42] Hence, in this case in which such a certification was in fact submitted, only it was defective, the Court may still refuse to dismiss and, instead, give due course to the Petition in light of attendant exceptional circumstances. The parties and their counsel, however, are once again warned against taking procedural rules lightly. It will do them well to remember that the Courts have taken a stricter stance against the disregard of procedural rules, especially in connection with the submission of the certificate against forum shopping, and it will not hesitate to dismiss a Petition for non-compliance therewith in the absence of justifiable circumstances. The Jurisdiction of the IPO The Court now proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-G.R. SP No. 92785. In the aforestated Decision, the Court of Appeals adjudged that the IPO Director for Legal Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular provisions in the law on trademarks on regular courts exclusively. According to the said provision: Section 163. Jurisdiction of Court.All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws. The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on Infringement; Section 164 on Notice of Filing

38 39 40 41

42
11

Suit Given to the Director; Section 166 on Goods Bearing Infringing Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and Remedies; and Section 169 on False Designations of Origin, False Description or Representation. The Court disagrees with the Court of Appeals. Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus: Section 10. The Bureau of Legal Affairs.The Bureau of Legal Affairs shall have the following functions: 10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for compulsory licensing of patents; 10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for contempt all those who disregard orders or writs issued in the course of the proceedings. (b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative penalties: (i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order; (ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary assurance may include one or more of the following: (1) An assurance comply with the provisions of intellectual property law violated; to the

money value of defective distributed in commerce; and

goods

(4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the Bureau of Legal Affairs. The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to guarantee compliance of his undertaking. (iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale, donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods, or any combination thereof, under such guidelines as he may provide; (iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of the offense; (v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs, which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos (P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each day of continuing violation; (vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable which shall not exceed one (1) year; (vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from the Office; (viii) (ix) (x) sanctions. The assessment of damages; Censure; and Other analogous penalties or

(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation (3) An assurance to recall, replace, repair, or refund the

12

10.3 The Director General may by Regulations establish the procedure to govern the implementation of this Section.43[43] (Emphasis provided.) Unquestionably, petitioners complaint, which seeks the cancellation of the disputed mark in the name of respondent Sehwani, Incorporated, and damages for violation of petitioners intellectual property rights, falls within the jurisdiction of the IPO Director of Legal Affairs. The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over the decisions of the IPO Director of Legal Affairs, to wit: Section 7. The Director General and Deputies Director General. 7.1 Fuctions.The Director General shall exercise the following powers and functions: xxxx b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry; The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision, over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts. Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary, Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read: Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action.Any foreign national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in the Philippines

may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair competition, or false designation of origin and false description, whether or not it is licensed to do business in the Philippines under existing laws. xxxx Section 170. Penalties.Independent of the civil and administrative sanctions imposed by law, a criminal penalty of imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155, Section168, and Subsection169.1. Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioners administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of the judgment of the IPO Director of Legal Affairs. Unfair Competition The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani, Incorporated for the mark IN-N-OUT and (2) ordered respondents to permanently cease and desist from using the disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out Burger,44[44] ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the superior right to own and use the IN-N-OUT trademarks vis--vis respondents is a finding which this Court may no longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the two actions are the same.45[45] Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found respondents guilty of unfair competition for which he awarded damages to petitioner. The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The intent to deceive and defraud may be inferred from

44 45
13

43

the similarity of the appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown.46[46] In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the existence of unfair competition in this case, viz: The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the [petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of the Letter O Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the [petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel their trademark registration. Moreover, [respondents] are also using [petitioners] registered mark DoubleDouble for use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are using do not bear the mark registered by the [respondent], but the [petitioners] IN-N-OUT Burgers name and trademark IN-N-OUT with Arrow design. There is no evidence that the [respondents] were authorized by the [petitioner] to use the latters marks in the business. [Respondents] explanation that they are not using their own registered trademark due to the difficulty in printing the star does not justify the unauthorized use of the [petitioners] trademark instead. Further, [respondents] are giving their products the general appearance that would likely influence purchasers to believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x. xxxx [Respondents] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers. Exhibit GG, which shows the business establishment of [respondents] illustrates the imitation of [petitioners] corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held: We also note that In-N-Out Burger is likewise, [petitioners] corporate name. It has used the IN-N-OUT Burger name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has the exclusive right to use the tradenems InN-Out Burger in the Philippines and the

respondents are unlawfully appropriating the same.

using

and

The Office cannot give credence to the [respondents] claim of good faith and that they have openly and continuously used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by reason of respondents practices must always appear, and in the present case, the BLA has found none. This Office finds the arguments untenable. In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their registered trademark, which they claimed to be using as early as 1982, but did not. [Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants] marks of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued by the [respondents] even indicate representing IN-N-OUT. These acts cannot be considered acts in good faith. 47[47] Administrative proceedings are governed by the substantial evidence rule. A finding of guilt in an administrative case would have to be sustained for as long as it is supported by substantial evidence that the respondent has committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.48[48] As recounted by the IPO Director General in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of unfair competition. With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4 of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to damages, to be computed in the following manner:

47 48
14

46

Section 156. Actions, and Damages and Injunction for Infringement.156.1 The owner of a registered mark may recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or trade name was used in the infringement of the rights of the complaining party. In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to petitioner by applying the reasonable percentage of 30% to the respondents gross sales, and then doubling the amount thereof on account of respondents actual intent to mislead the public or defraud the petitioner,49[49] thus, arriving at the amount of actual damages of P212,574.28. Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to curb socially deleterious action.50[50] While there is no hard and fast rule in determining the fair amount of exemplary damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered.51[51] Thus, exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual damages awarded. In accordance with Article 2208(1) of the Civil Code, attorneys fees may likewise be awarded to petitioner since exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven years, despite the respondents failure to present countervailing evidence. Considering moreover the reputation of petitioners counsel, the actual attorneys fees paid by petitioner would far exceed the amount that was awarded to it.52[52] IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 92785, promulgated on 18 July 2006, is REVERSED. The Decision of the IPO Director General, dated 23

December 2005, is hereby REINSTATED IN PART, with the modification that the amount of exemplary damages awarded be reduced to P250,000.00. SO ORDERED.

MINITA V. CHICO-NAZARIO Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

ANTONIO EDUARDO B. NAC Associate Justice

RUBEN T. REYES Associate Justice

ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

49 50

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division

CERTIFICATION

51 52

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above 15

Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice

G.R. No. 166115 February 2, 2007 McDONALDS CORPORATION, Petitioner, vs. MACJOY FASTFOOD CORPORATION, Respondent. DECISION GARCIA, J.: In this petition for review on certiorari under Rule 45 of the Rules of Court, herein petitioner McDonalds Corporation seeks the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 57247, to wit: 1. Decision dated 29 July 20041 reversing an earlier decision of the Intellectual Property Office (IPO) which rejected herein respondent MacJoy FastFood Corporations application for registration of the trademark "MACJOY & DEVICE"; and 2. Resolution dated 12 November 20042 denying the petitioners motion for reconsideration. As culled from the record, the facts are as follows: On 14 March 1991, respondent MacJoy Fastfood Corporation, a domestic corporation engaged in the sale of fast food products in Cebu City, filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTT), now the Intellectual Property Office (IPO), an application, thereat identified as Application Serial No. 75274, for the registration of the trademark "MACJOY & DEVICE" for fried chicken, chicken barbeque, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo and steaks under classes 29 and 30 of the International Classification of Goods. Petitioner McDonalds Corporation, a corporation duly organized and existing under the laws of the State of Delaware, USA, filed a verified Notice of Opposition3 against the respondents application claiming that the trademark "MACJOY & DEVICE" so resembles its corporate logo, otherwise known as the Golden Arches or "M" design, and its marks "McDonalds," McChicken," "MacFries," "BigMac," "McDo," "McSpaghetti," "McSnack," and "Mc," (hereinafter collectively known as the MCDONALDS marks) such that when used on identical or related goods, the trademark applied for would confuse or deceive purchasers into believing that the goods originate from the same source or origin. Likewise, the petitioner alleged that the respondents use and adoption in bad faith of the "MACJOY & DEVICE" mark would falsely tend to suggest a connection or affiliation with petitioners restaurant services and food products, thus, constituting a fraud upon the general public and further cause the dilution of the distinctiveness of petitioners registered and internationally recognized MCDONALDS marks to its prejudice and irreparable damage. The application and the opposition thereto was docketed as Inter Partes Case No. 3861. Respondent denied the aforementioned allegations of the petitioner and averred that it has used the mark "MACJOY" for the past many years in good faith and has spent considerable sums of money for said marks extensive promotion in tri-media, especially in Cebu City where it has been doing business long before the petitioner opened its outlet thereat sometime in 1992; and that its use of said mark would not confuse affiliation with the petitioners restaurant services and food products because of the differences in the design and detail of the two (2) marks.

In a decision4 dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter "M," and the prefixes "Mac/Mc" in both the "MACJOY" and the "MCDONALDS" marks lead to the conclusion that there is confusing similarity between them especially since both are used on almost the same products falling under classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food, sustained the petitioners opposition and rejected the respondents application, viz: WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried chicken and chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and steaks is, as it is hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein Respondent-Applicant is REJECTED. Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial and Human Resources Development Bureau for appropriate action in accordance with this Decision, with a copy to be furnished the Bureau of Trademarks for information and to update its record. SO ORDERED. In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order5 of January 14, 2000. Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary Injunction6 under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-G.R. SP No. 57247. Finding no confusing similarity between the marks "MACJOY" and "MCDONALDS," the CA, in its herein assailed Decision7 dated July 29, 2004, reversed and set aside the appealed IPO decision and order, thus: WHEREFORE, in view of the foregoing, judgment is hereby rendered by us REVERSING and SETTING ASIDE the Decision of the IPO dated 28 December 1998 and its Order dated 14 January 2000 and ORDERING the IPO to give due course to petitioners Application Serial No. 75274. SO ORDERED. Explains the CA in its decision: xxx, it is clear that the IPO brushed aside and rendered useless the glaring and drastic differences and variations in style of the two trademarks and even decreed that these pronounced differences are "miniscule" and considered them to have been "overshadowed by the appearance of the predominant features" such as "M," "Mc," and "Mac" appearing in both MCDONALDS and MACJOY marks. Instead of taking into account these differences, the IPO unreasonably shrugged off these differences in the device, letters and marks in the trademark sought to be registered. The IPO brushed aside and ignored the following irrefutable facts and circumstances showing differences between the marks of MACJOY and MCDONALDS. They are, as averred by the petitioner [now respondent]: 1. The word "MacJoy" is written in round script while the word "McDonalds" is written in single stroke gothic; 2. The word "MacJoy" comes with the picture of a chicken head with cap and bowtie and wings sprouting on both sides, while the word "McDonalds" comes with an arches "M" in gold colors, and absolutely without any picture of a chicken; 3. The word "MacJoy" is set in deep pink and white color scheme while "McDonalds" is written in red, yellow and black color combination; 4. The faade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A, show that [respondents] restaurant is set also in the same bold, brilliant and noticeable color scheme as that of its wrappers, containers, cups, etc., while [petitioners] restaurant is in yellow and red colors, and with the mascot of "Ronald McDonald" being prominently displayed therein." (Words in brackets supplied.)

16

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged Resolution8 of November 12, 2004, the CA denied the motion, as it further held: Whether a mark or label of a competitor resembles another is to be determined by an inspection of the points of difference and resemblance as a whole, and not merely the points of resemblance. The articles and trademarks employed and used by the [respondent] Macjoy Fastfood Corporation are so different and distinct as to preclude any probability or likelihood of confusion or deception on the part of the public to the injury of the trade or business of the [petitioner] McDonalds Corporation. The "Macjoy & Device" mark is dissimilar in color, design, spelling, size, concept and appearance to the McDonalds marks. (Words in brackets supplied.) Hence, the petitioners present recourse on the following grounds: I. THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS "MACJOY & DEVICE" MARK IS NOT CONFUSINGLY SIMILAR TO PETITIONERS "McDONALDS MARKS." IT FAILED TO CORRECTLY APPLY THE DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED BY THIS HONORABLE COURT IN DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY BETWEEN COMPETING MARKS. A. The McDonalds Marks belong to a well-known and established "family of marks" distinguished by the use of the prefix "Mc" and/or "Mac" and the corporate "M" logo design. B. The prefix "Mc" and/or "Mac" is the dominant portion of both Petitioners McDonalds Marks and the Respondents "Macjoy & Device" mark. As such, the marks are confusingly similar under the Dominancy Test. C. Petitioners McDonalds Marks are well-known and world-famous marks which must be protected under the Paris Convention. II. THE COURT OF APPEALS ERRED IN RULING THAT THE DECISION OF THE IPO DATED 28 DECEMBER 1998 AND ITS ORDER DATED 14 JANUARY 2000 WERE NOT BASED ON SUBSTANTIAL EVIDENCE. In its Comment,9 the respondent asserts that the petition should be dismissed outright for being procedurally defective: first, because the person who signed the certification against forum shopping in behalf of the petitioner was not specifically authorized to do so, and second, because the petition does not present a reviewable issue as what it challenges are the factual findings of the CA. In any event, the respondent insists that the CA committed no reversible error in finding no confusing similarity between the trademarks in question. The petition is impressed with merit. Contrary to respondents claim, the petitioners Managing Counsel, Sheila Lehr, was specifically authorized to sign on behalf of the petitioner the Verification and Certification10 attached to the petition. As can be gleaned from the petitioners Board of Directors Resolution dated December 5, 2002, as embodied in the Certificate of the Assistant Secretary dated December 21, 2004,11 Sheila Lehr was one of those authorized and empowered "to execute and deliver for and on behalf of [the petitioner] all documents as may be required in connection with x x x the protection and maintenance of any foreign patents, trademarks, trade-names, and copyrights owned now or hereafter by [the petitioner], including, but not limited to, x x x documents required to institute opposition or cancellation proceedings against conflicting trademarks, and to do such other acts and things and to execute such other documents as may be necessary and appropriate to effect and carry out the intent of this resolution." Indeed, the afore-stated authority given to Lehr necessarily includes the authority to execute and sign the mandatorily required certification of non-forum shopping to support the instant petition for review which stemmed from the "opposition proceedings" lodged by the petitioner before the IPO. Considering

that the person who executed and signed the certification against forum shopping has the authority to do so, the petition, therefore, is not procedurally defective. As regards the respondents argument that the petition raises only questions of fact which are not proper in a petition for review, suffice it to say that the contradictory findings of the IPO and the CA constrain us to give due course to the petition, this being one of the recognized exceptions to Section 1, Rule 45 of the Rules of Court. True, this Court is not the proper venue to consider factual issues as it is not a trier of facts.12 Nevertheless, when the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,13 as here, this Court will review them. The old Trademark Law, Republic Act (R.A.) No. 166, as amended, defines a "trademark" as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by others.14 Under the same law, the registration of a trademark is subject to the provisions of Section 4 thereof, paragraph (d) of which is pertinent to this case. The provision reads: Section 4. Registration of trademarks, trade-names and service-marks on the principal register. There is hereby established a register of trademarks, tradenames and service-marks which shall be known as the principal register. The owner of the trade-mark, trade-name or service-mark used to distinguish his goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx xxx xxx (d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; xxx xxx xxx Essentially, the issue here is whether there is a confusing similarity between the MCDONALDS marks of the petitioner and the respondents "MACJOY & DEVICE" trademark when applied to Classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food. In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.15 The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception.16 In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.17 Under the latter test, a comparison of the words is not the only determinant factor.18 1awphi1.net Here, the IPO used the dominancy test in concluding that there was confusing similarity between the two (2) trademarks in question as it took note of the appearance of the predominant features "M", "Mc" and/or "Mac" in both the marks. In reversing the conclusion reached by the IPO, the CA, while seemingly applying the dominancy test, in fact actually applied the holistic test. The appellate court ruled in this wise: Applying the Dominancy test to the present case, the IPO should have taken into consideration the entirety of the two marks instead of simply fixing its gaze on the single letter "M" or on the combinations "Mc" or "Mac". A mere cursory look of the subject marks will reveal that, save for the letters "M" and "c", no other similarity exists in the subject marks. We agree with the [respondent] that it is entirely unwarranted for the IPO to consider the prefix "Mac" as the predominant feature and the rest of the designs in 17

[respondents] mark as details. Taking into account such paramount factors as color, designs, spelling, sound, concept, sizes and audio and visual effects, the prefix "Mc" will appear to be the only similarity in the two completely different marks; and it is the prefix "Mc" that would thus appear as the miniscule detail. When pitted against each other, the two marks reflect a distinct and disparate visual impression that negates any possible confusing similarity in the mind of the buying public. (Words in brackets supplied.) Petitioner now vigorously points out that the dominancy test should be the one applied in this case. We agree. In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must be decided on its merits.19 In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case.20 That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.21 While we agree with the CAs detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks.22 Notably, in McDonalds Corp. v. LC Big Mak Burger, Inc.,23 a case where the trademark "Big Mak" was found to be confusingly similar with the "Big Mac" mark of the herein the petitioner, the Court explicitly held: This Court, xxx, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual impressions created by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and market segments. Moreover, in Societe Des Produits Nestle, S.A. v. CA24 the Court, applying the dominancy test, concluded that the use by the respondent therein of the word "MASTER" for its coffee product "FLAVOR MASTER" was likely to cause confusion with therein petitioners coffee products "MASTER ROAST" and "MASTER BLEND" and further ruled: xxx, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the marketplace. The totality or holistic test only relies on visual comparisons between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. Applying the dominancy test to the instant case, the Court finds that herein petitioners "MCDONALDS" and respondents "MACJOY" marks are confusingly similar with each other such that an ordinary purchaser can conclude an association or relation between the marks. To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as dominant features. The first letter "M" in both marks puts emphasis on the prefixes "Mc" and/or "Mac" by the similar way in which they are depicted i.e. in an arch-like, capitalized and stylized manner.25 For sure, it is the prefix "Mc," an abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did "McDonalds," "MacFries," "McSpaghetti," "McDo," "Big

Mac" and the rest of the MCDONALDS marks which all use the prefixes Mc and/or Mac. Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondents trademark application for the "MACJOY & DEVICE" trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioners trademark registration for the MCDONALDS marks in the Philippines covers goods which are similar if not identical to those covered by the respondents application. Thus, we concur with the IPOs findings that: In the case at bar, the predominant features such as the "M," "Mc," and "Mac" appearing in both McDonalds marks and the MACJOY & DEVICE" easily attract the attention of would-be customers. Even non-regular customers of their fastfood restaurants would readily notice the predominance of the "M" design, "Mc/Mac" prefixes shown in both marks. Such that the common awareness or perception of customers that the trademarks McDonalds mark and MACJOY & DEVICE are one and the same, or an affiliate, or under the sponsorship of the other is not far-fetched. The differences and variations in styles as the device depicting a head of chicken with cap and bowtie and wings sprouting on both sides of the chicken head, the heart-shaped "M," and the stylistic letters in "MACJOY & DEVICE;" in contrast to the arch-like "M" and the one-styled gothic letters in McDonalds marks are of no moment. These minuscule variations are overshadowed by the appearance of the predominant features mentioned hereinabove. Thus, with the predominance of the letter "M," and prefixes "Mac/Mc" found in both marks, the inevitable conclusion is there is confusing similarity between the trademarks Mc Donalds marks and "MACJOY AND DEVICE" especially considering the fact that both marks are being used on almost the same products falling under Classes 29 and 30 of the International Classification of Goods i.e. Food and ingredients of food. With the existence of confusing similarity between the subject trademarks, the resulting issue to be resolved is who, as between the parties, has the rightful claim of ownership over the said marks. We rule for the petitioner. A mark is valid if it is distinctive and hence not barred from registration under the Trademark Law. However, once registered, not only the marks validity but also the registrants ownership thereof is prima facie presumed.26 Pursuant to Section 3727 of R.A. No. 166, as amended, as well as the provision regarding the protection of industrial property of foreign nationals in this country as embodied in the Paris Convention28 under which the Philippines and the petitioners domicile, the United States, are adherent-members, the petitioner was able to register its MCDONALDS marks successively, i.e., "McDonalds" in 04 October, 197129 ; the corporate logo which is the "M" or the golden arches design and the "McDonalds" with the "M" or golden arches design both in 30 June 197730 ; and so on and so forth.31 On the other hand, it is not disputed that the respondents application for registration of its trademark "MACJOY & DEVICE" was filed only on March 14, 1991 albeit the date of first use in the Philippines was December 7, 1987.32 Hence, from the evidence on record, it is clear that the petitioner has duly established its ownership of the mark/s. Respondents contention that it was the first user of the mark in the Philippines having used "MACJOY & DEVICE" on its restaurant business and food products since December, 1987 at Cebu City while the first McDonalds outlet of the petitioner thereat was opened only in 1992, is downright unmeritorious. For the requirement of "actual use in commerce x x x in the Philippines" before one may register a trademark, trade-name and service mark under the Trademark Law33 pertains to the 18

territorial jurisdiction of the Philippines and is not only confined to a certain region, province, city or barangay. Likewise wanting in merit is the respondents claim that the petitioner cannot acquire ownership of the word "Mac" because it is a personal name which may not be monopolized as a trademark as against others of the same name or surname. As stated earlier, once a trademark has been registered, the validity of the mark is prima facie presumed. In this case, the respondent failed to overcome such presumption. We agree with the observations of the petitioner regarding the respondents explanation that the word "MACJOY" is based on the name of its presidents niece, Scarlett Yu Carcell. In the words of the petitioner: First of all, Respondent failed to present evidence to support the foregoing claim which, at best, is a mere self-serving assertion. Secondly, it cannot be denied that there is absolutely no connection between the name "Scarlett Yu Carcel" and "MacJoy" to merit the coinage of the latter word. Even assuming that the word "MacJoy" was chosen as a term of endearment, fondness and affection for a certain Scarlett Yu Carcel, allegedly the niece of Respondents president, as well as to supposedly bring good luck to Respondents business, one cannot help but wonder why out of all the possible letters or combinations of letters available to Respondent, its president had to choose and adopt a mark with the prefix "Mac" as the dominant feature thereof. A more plausible explanation perhaps is that the niece of Respondents president was fond of the food products and services of the Respondent, but that is beside the point." 34 By reason of the respondents implausible and insufficient explanation as to how and why out of the many choices of words it could have used for its trade-name and/or trademark, it chose the word "MACJOY," the only logical conclusion deducible therefrom is that the respondent would want to ride high on the established reputation and goodwill of the MCDONALDs marks, which, as applied to petitioners restaurant business and food products, is undoubtedly beyond question. Thus, the IPO was correct in rejecting and denying the respondents application for registration of the trademark "MACJOY & DEVICE." As this Court ruled in Faberge Inc. v. IAC,35 citing Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapanta:36 When one applies for the registration of a trademark or label which is almost the same or very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark, this not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill. WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the Decision of the Intellectual Property Office in Inter Partes Case No. 3861 is REINSTATED. No pronouncement as to costs. SO ORDERED. CANCIO C. GARCIA Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA Associate Justice Asscociate Justice ADOLFO S. AZCUNA Associate Justice CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice LEVI STRAUSS (PHILS.), INC., Petitioner, G.R. No. 162311 Present: YNARES-SANTIAGO,

J., Chairperson, - versus -

AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: December 4, 2008

TONY LIM, Respondent.

x--------------------------------------------------x DECISION REYES, R.T., J.: THE remedy of a party desiring to elevate to the appellate court an adverse resolution of the Secretary of Justice is a petition for certiorari under Rule 65. A Rule 43 petition for review is a wrong mode of appeal.53[1] During preliminary investigation, the prosecutor is vested with authority and discretion to determine if there is sufficient evidence to justify the filing of an information. If he finds probable cause to indict the respondent for a criminal offense, it is his duty to file the corresponding information in court. However, it is equally his duty not to prosecute when after an investigation, the evidence adduced is not sufficient to establish a prima facie case.54[2] Before the Court is a petition for review on certiorari55[3] of the Decision56[4] and Resolution57[5] of the Court of Appeals (CA), affirming the resolutions of the Department of Justice (DOJ) finding that there is no probable cause to indict

53 54 55 56
19

respondent Tony Lim, a.k.a. Antonio Guevarra, for unfair competition. The Facts Petitioner Levi Strauss (Phils.), Inc. is a duly-registered domestic corporation. It is a wholly-owned subsidiary of Levi Strauss & Co. (LS & Co.) a Delaware, USA company. In 1972, LS & Co. granted petitioner a non-exclusive license to use its registered trademarks and trade names58[6] for the manufacture and sale of various garment products, primarily pants, jackets, and shirts, in the Philippines.59[7] Presently, it is the only company that has authority to manufacture, distribute, and sell products bearing the LEVIS trademarks or to use such trademarks in the Philippines. These trademarks are registered

57 58 59
20

in over 130 countries, including the Philippines,60[8] and were first used in commerce in the Philippines in 1946.61[9] Sometime in 1995, petitioner lodged a complaint62[10] before the InterAgency Committee on Intellectual Property Rights, alleging that a certain establishment in Metro Manila was manufacturing garments using colorable imitations of the LEVIS trademarks.63[11] Thus, surveillance was conducted on the premises of respondent Tony Lim, doing business under the name Vogue Traders Clothing Company.64[12] The investigation revealed that respondent was engaged in the manufacture, sale, and distribution of products similar to those of petitioner and under the brand name LIVES.65[13] On December 13, 1995, operatives of the Philippine National Police (PNP) Criminal Investigation Unit66[14] served search warrants67[15] on respondents premises at 1042 and 1082 Carmen Planas Street, Tondo, Manila. As a result, several items68[16] were seized from the premises.69[17] The PNP Criminal Investigation Command (PNP CIC) then filed a complaint70[18] against respondent before the DOJ for unfair competition 71[19] under the old Article 189 of the Revised Penal Code, prior to its repeal by Section 239 of Republic Act (RA) No. 8293.72[20] The PNP CIC claimed that a confusing similarity

could be noted between petitioners LEVIs jeans and respondents LIVES denim jeans and pants. In his counter-affidavit,73[21] respondent alleged, among others, that (1) his products bearing the LIVES brand name are not fake LEVIS garments; (2) LIVES is a registered trademark,74[22] while the patch pocket design for LIVES pants has copyright registration,75[23] thus conferring legal protection on his own intellectual property rights, which stand on equal footing as LEVIS; (3) confusing similarity, the central issue in the trademark cancellation proceedings76[24] lodged by petitioner, is a prejudicial question that complainant, the police, and the court that issued the search warrants cannot determine without denial of due process or encroachment on the jurisdiction of the agencies concerned; and (4) his goods are not clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary care.77[25] In its reply-affidavit, petitioner maintained that there is likelihood of confusion between the competing products because: (1) a slavish imitation of petitioners arcuate trademark has been stitched on the backpocket of LIVES jeans; (2) the appearance of the mark 105 on respondents product is obviously a play on petitioners 501 trademark; (3) the appearance of the word/phrase LIVES and LIVES ORIGINAL JEANS is confusingly similar to petitioners LEVIS trademark; (4) a red tab, made of fabric, attached at the left seam of the right backpocket of petitioners standard five-pocket jeans, also appears at the same place on LIVES jeans; (5) the patch used on LIVES jeans (depicting three men on each side attempting to pull apart a pair of jeans) obviously thrives on petitioners own patch showing two horses being whipped by two men in an attempt to tear apart a pair of jeans; and (6) LEVIS jeans are packaged and sold with carton tickets, which are slavishly copied by respondent in his own carton ticket bearing the marks LIVES, 105, the horse mark, and basic features of petitioners ticket designs, such as two red arrows curving and pointing outward, the arcuate stitching pattern, and a rectangular portion with intricate border orientation.78[26] DOJ Rulings On October 8, 1996, Prosecution Attorney Florencio D. Dela Cruz recommended the dismissal79[27] of the complaint. The prosecutor agreed with respondent that his products are not clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary care. The recommendation was

60 61 62 63 64 65 66 67 68 69 70 71 72

73 74 75 76 77 78 79
21

approved by Assistant Chief State Prosecutor Lualhati R. Buenafe. On appeal, then DOJ Secretary Teofisto Guingona affirmed the prosecutors dismissal of the complaint on January 9, 1998.80[28] Prescinding from the basic rule that to be found guilty of unfair competition, a person shall, by imitation or any unfair device, induce the public to believe that his goods are those of another, Secretary Guingona stated:

as amended, exact similarity of the competing products is not required. However, Justice Guingonas resolution incorrectly dwelt on the specific differences in the details of the products.85[33] Secretary Bellos own factual findings revealed: x x x [I]t is not difficult to discern that respondent gave his products the general appearance as that of the product of the complainant. This was established by the respondents use of the complainants arcuate backpocket design trademark; the 105 mark which apparently is a spin-off of the 501 mark of the complainant; the patch which was clearly patterned after that of the complainants two horse patch design trademark; the red tab on the right backpocket; the wordings which were crafted to look similar with the Levis trademark of the complainant; and even the packaging. In appropriating himself the general appearance of the product of the complainant, the respondent clearly intended to deceive the buying public. Verily, any person who shall employ deception or any other means contrary to good faith by which he shall pass of the goods manufactured by him or in which he deals, or his business, or services for those of the one having established good will shall guilty of unfair competition. Respondents registration of his trademark can not afford him any remedy. Unfair competition may still be prosecuted despite such registration.86[34] (Citation omitted) Respondent then filed his own motion for reconsideration of the Bello resolution. On May 7, 1999, new DOJ Secretary Serafin Cuevas granted respondents motion and ordered the dismissal of the charges against him.87[35] CA Disposition Dissatisfied with the DOJ rulings, petitioner sought recourse with the CA via a petition for review under Rule 43 of the 1997 Rules of Civil Procedure. On October 17, 2003, the appellate court affirmed the dismissal of the unfair competition complaint. WHEREFORE, premises considered, the petition for review is DENIED and is accordingly DISMISSED for lack of merit. SO ORDERED.88[36] The CA pointed out that to determine the likelihood of confusion, mistake or deception, all relevant factors and circumstances should be taken into consideration, such as the circumstances under which the goods are

In the case at bar, complainant has not shown that anyone was actually deceived by respondent. Respondents product, which bears the trademark LIVEs, has an entirely different spelling and meaning with the trademark owned by complainant which is LEVIs. Complainants trademark comes from a Jewish name while that of respondent is merely an adjective word. Both, when read and pronounced, would resonate different sounds. While respondents LIVEs trademark may appear similar, such could not have been intended by the respondent to deceive since he had the same registered with the appropriate government agencies. Granting arguendo, that respondents trademark or products possessed similar characteristics with the trademark and products of complainant, on that score alone, without evidence or proof that such was a device of respondent to deceive the public to the damage of complainant no unfair competition is committed.81[29] On February 13, 1998, petitioner filed a motion for reconsideration of Secretary Guingonas resolution, alleging, among others, that only a likelihood of confusion is required to sustain a charge of unfair competition. It also submitted the results of a consumer survey82[30] involving a comparison of petitioners and respondents products. On June 5, 1998, Justice Secretary Silvestre Bello III, Guingonas successor, granted petitioners motion and directed the filing of an information against respondent.83[31] WHEREFORE, our resolution dated 9 January 1998 is hereby reversed and set aside. You are directed to file an information for unfair competition under Article 189 of the Revised Penal Code, as amended, against respondent Tony Lim. Report the action taken thereon within ten (10) days from receipt hereof.84[32] Secretary Bello reasoned that under Article 189 of the Revised Penal Code,

80 81 82 83 84

85 86 87 88
22

sold, the class of purchasers, and the actual occurrence or absence of confusion.89[37] Thus, the existence of some similarities between LIVES jeans and LEVIS garments would not ipso facto equate to fraudulent intent on the part of respondent. The CA noted that respondent used affirmative and precautionary distinguishing features in his products for differentiation. The appellate court considered the spelling and pronunciation of the marks; the difference in the designs of the back pockets; the dissimilarity between the carton tickets; and the pricing and sale of petitioners products in upscale exclusive specialty shops. The CA also disregarded the theory of post-sale confusion propounded by petitioner, relying instead on the view that the probability of deception must be determined at the point of sale.90[38] Issues Petitioner submits that the CA committed the following errors: I. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT ACTUAL CONFUSION IS NECESSARY TO SUSTAIN A CHARGE OF UNFAIR COMPETITION, AND THAT THERE MUST BE DIRECT EVIDENCE OR PROOF OF INTENT TO DECEIVE THE PUBLIC. II. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT RESPONDENTS LIVES JEANS DO NOT UNFAIRLY COMPETE WITH LEVIS JEANS AND/OR THAT THERE IS NO POSSIBILITY THAT THE FORMER WILL BE CONFUSED FOR THE LATTER, CONSIDERING THAT RESPONDENTS LIVES JEANS BLATANTLY COPY OR COLORABLY IMITATE NO LESS THAN SIX (6) TRADEMARKS OF LEVIS JEANS. III. THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE EVIDENCE ON RECORD, CONSISTING OF THE SCIENTIFICALLY CONDUCTED MARKET SURVEY AND THE AFFIDAVIT OF THE EXPERT WITNESS ON THE RESULTS THEREOF, WHICH SHOW THAT RESPONDENTS LIVES JEANS ARE, IN FACT, BEING CONFUSED FOR LEVIS JEANS. IV. THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE ISSUE OF CONFUSION SHOULD ONLY BE DETERMINED AT THE POINT OF SALE. V. THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO DIRECT THE SECRETARY OF JUSTICE TO CAUSE THE FILING OF THE APPROPRIATE INFORMATION IN COURT AGAINST THE RESPONDENT.91[39] (Underscoring supplied) Our Ruling

In essence, petitioner asks this Court to determine if probable cause exists to charge respondent with the crime of unfair competition under Article 189(1) of the Revised Penal Code, prior to its repeal by Section 239 of RA No. 8293. However, that is a factual issue92[40] the resolution of which is improper in a Rule 45 petition.93[41] The only legal issue left for the Court to determine is whether the issue of confusion should be determined only at the point of sale. Nonetheless, there is sufficient reason for this Court to dismiss this petition merely by looking at the procedural avenue petitioner used to have the DOJ resolutions reviewed by the CA. Petitioner filed with the CA a petition for review under Rule 43 of the 1997 Rules of Civil Procedure.94[42] Rule 43 governs all appeals from [the Court of Tax Appeals and] quasi-judicial bodies to the CA. Its Section 1 provides:

Section 1. Scope. This Rule shall apply to appeals from [judgments or final orders of the Court of Tax Appeals and from] awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities and Exchange Commission, Office of the President, Land Registration Authority, Social Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and Technology Transfer, National Electrification Administration, Energy Regulatory Board, National Telecommunications Commission, Department of Agrarian Reform under Republic Act No. 6657, Government Service Insurance System, Employees Compensation Commission, Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission, Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators authorized by law.95[43] Clearly, the DOJ is not one of the agencies enumerated in Section 1 of Rule 43 whose awards, judgments, final orders, or resolutions may be appealed to the CA. The Court has consistently ruled that the filing with the CA of a petition for review under Rule 43 to question the Justice Secretarys resolution regarding

91 92 93 94 95
23

89 90

the determination of probable cause is an improper remedy.96[44] Under the 1993 Revised Rules on Appeals from Resolutions in Preliminary Investigations or Reinvestigations,97[45] the resolution of the investigating prosecutor is subject to appeal to the Justice Secretary 98[46] who, under the Revised Administrative Code, exercises the power of control and supervision over said Investigating Prosecutor; and who may affirm, nullify, reverse, or modify the ruling of such prosecutor.99[47] If the appeal is dismissed, and after the subsequent motion for reconsideration is resolved, a party has no more appeal or other remedy available in the ordinary course of law.100[48] Thus, the Resolution of the Justice Secretary affirming, modifying or reversing the resolution of the Investigating Prosecutor is final.101[49] There being no more appeal or other remedy available in the ordinary course of law, the remedy of the aggrieved party is to file a petition for certiorari under Rule 65. Thus, while the CA may review the resolution of the Justice Secretary, it may do so only in a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, solely on the ground that the Secretary of Justice committed grave abuse of discretion amounting to excess or lack of jurisdiction. 102 [50] Verily, when respondent filed a petition for review under Rule 43 instead of a petition for certiorari under Rule 65, the CA should have dismissed it outright. However, the appellate court chose to determine if DOJ Secretaries Guingona and Cuevas correctly determined the absence of probable cause. Now, even if We brush aside technicalities and consider the petition for review filed with the CA as one under Rule 65, the petition must fail just the same. While the resolution of the Justice Secretary may be reviewed by the Court, it is not empowered to substitute its judgment for that of the executive branch when there is no grave abuse of discretion.103[51] Courts are without power to directly decide matters over which full discretionary authority has been delegated to the legislative or executive branch of

the government.104[52] The determination of probable cause is one

96 97 98 99 100 101 102 103 104

24

such matter because that authority has been given to the executive branch, through the DOJ.105[53] It bears stressing that the main function of a government prosecutor is to determine the existence of probable cause and to file the corresponding information should he find it to be so. 106[54] Thus, the decision whether or not to dismiss the criminal complaint against respondent is necessarily dependent on the sound discretion of the investigating prosecutor and ultimately, that of the Secretary of Justice.107[55] A prosecutor, by the nature of his office, is under no compulsion to file a particular criminal information where he is not convinced that he has evidence to prop up its averments, or that the evidence at hand points to a different conclusion. This is not to discount the possibility of the commission of abuses on the part of the prosecutor. But this Court must recognize that a prosecutor should not be unduly compelled to work against his conviction. Although the power and prerogative of the prosecutor to determine whether or not the evidence at hand is sufficient to form a reasonable belief that a person committed an offense is not absolute but subject to judicial review, it would be embarrassing for him to be compelled to prosecute a case when he is in no position to do so, because in his opinion he does not have the necessary evidence to secure a conviction, or he is not convinced of the merits of the case.108[56] In finding that respondents goods were not clothed with an appearance which is likely to deceive the ordinary purchaser exercising ordinary care, the investigating prosecutor exercised the discretion lodged in him by law. He found that: First, the LIVES mark of the respondents goods is spelled and pronounced differently from the LEVIS mark of the complainant. Second, the backpocket design allegedly copied by the respondent from the registered arcuate design of the complainant, appears to be different in view of the longer curved arms that stretch deep downward to a point of convergence where the stitches form a rectangle. The arcuate design for complainant LEVIs jeans form a diamond instead. And assuming arguendo that there is similarity in the design of backpockets between the respondents goods and that of the complainant, this alone does not establish that respondents jeans were intended to copy the complainants goods and pass them off as the latters products as this design is simple and may not be said to be strikingly distinct absent the other LEVIS trademark such as the prints on the button, rivets, tags and the like. x x x Further, the presence of accessories

bearing Levis trademark was not established as there were no such accessories seized from the respondent and instead genuine LIVES hangtags, button and patches were confiscated during the search of latters premises. Second, the design of the patches attached to the backpockets of the respondents goods depicts three men on either side of a pair of jeans attempting to pull apart said jeans, while the goods manufactured by complainant with patches also attached at the right backpockets depicts two horses being whipped by two men in an attempt to tear apart a pair of jeans. It is very clear therefore that the design of the backpocket patches by the respondent is different from that of the complainant, in the former the men were trying to pull apart the pants while in the latter horses are the ones doing the job. Obviously, there is a great difference between a man and a horse and this will naturally not escape the eyes of an ordinary purchaser. Third, the manner by which Levis jeans are packed and sold with carton tickets attached to the products cannot be appropriated solely by complainant to the exclusion of all other manufacturers of same class. It frequently happens that goods of a particular class are labeled by all manufacturer[s] in a common manner. In cases of that sort, no manufacturer may appropriate for himself the method of labeling or packaging [of] his merchandise and then enjoin other merchants from using it. x x x. Fourth, evidence shows that there is a copyright registration issued by the National Library over the backpocket design of the respondent. And this copyright registration gives the respondent the right to use the same in his goods x x x.109[57] The determination of probable cause is part of the discretion granted to the investigating prosecutor and ultimately, the Secretary of Justice. Courts are not empowered to substitute their own judgment for that of the executive branch.110[58] The courts duty in an appropriate case is confined to a determination of whether the assailed executive or judicial determination of probable cause was done without or in excess of jurisdiction or with grave abuse of discretion amounting to want of jurisdiction.111[59] For grave abuse of discretion to prosper as a ground for certiorari, it must be demonstrated that the lower court or tribunal has exercised its power in an arbitrary and despotic manner, by reason of passion or personal hostility, and it must be patent and gross as would amount to an evasion or to a unilateral refusal to perform the duty enjoined or to act in contemplation of law.112[60]

105 106 107 108

109 110 111 112

25

In the case at bar, no grave abuse of discretion on the part of the DOJ was shown. Petitioner merely harps on the error committed by the DOJ and the CA in arriving at their factual finding that there is no confusing similarity between petitioners and respondents products. While it is possible that the investigating prosecutor and Secretaries Guingona and Cuevas erroneously exercised their discretion when they found that unfair competition was not committed, this by itself does not render their acts amenable to correction and annulment by the extraordinary remedy of certiorari. There must be a showing of grave abuse of discretion amounting to lack or excess of jurisdiction.113[61] We are disinclined to find that grave of abuse of discretion was committed when records show that the finding of no probable cause is supported by the evidence, law, and jurisprudence. Generally, unfair competition consists in employing deception or any other means contrary to good faith by which any person shall pass off the goods manufactured by him or in which he deals, or his business, or services

113
26

for those of the one having established goodwill, or committing any acts calculated to produce such result.114[62] The elements of unfair competition under Article 189(1)115[63] of the Revised Penal Code are: (a) (b) That the offender gives his goods the general appearance of the goods of another manufacturer or dealer; That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of their packages, or in the (3) device or words therein, or in (4) any other feature of their appearance; That the offender offers to sell or sells those goods or gives other persons a chance or opportunity to do the same with a like purpose; and That there is actual intent to deceive the public or defraud a competitor.116[64]

v. Court of Appeals.121[69] In Emerald, the Court explained that since maong pants or jeans are not inexpensive, the casual buyer is more cautious and discerning and would prefer to mull over his purchase, making confusion and deception less likely. We cannot subscribe to petitioners stance that Emerald Garment cannot apply because there was only one point of comparison, i.e., LEE as it appears in Emerald Garments STYLISTIC MR. LEE. Emerald Garment is instructive in explaining the attitude of the buyer when it comes to products that are not inexpensive, such as jeans. In fact, the Emerald Garment rationale is supported by Del Monte Corporation v. Court of Appeals,122[70] where the Court explained that the attitude of the purchaser is determined by the cost of the goods. There is no reason not to apply the rationale in those cases here even if only by analogy. The rule laid down in Emerald Garment and Del Monte is consistent with Asia Brewery, Inc. v. Court of Appeals,123[71] where the Court held that in resolving cases of infringement and unfair competition, the courts should take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased.124[72] Petitioner argues that the element of intent to deceive may be inferred from the similarity of the goods or their appearance.125[73] The argument is specious on two fronts. First, where the similarity in the appearance of the goods as packed and offered for sale is so striking, intent to deceive may be inferred.126[74] However, as found by the investigating prosecutor and the DOJ Secretaries, striking similarity between the competing goods is not present. Second, the confusing similarity of the goods was precisely in issue during the preliminary investigation. As such, the element of intent to deceive could not arise without the investigating prosecutors or the DOJ Secretarys finding that such confusing similarity exists. Since confusing similarity was not found, the element of fraud or deception could not be inferred. We cannot sustain Secretary Bellos opinion that to establish probable cause, it is enough that the respondent gave to his product the general appearance of the product127[75] of petitioner. It bears stressing that that is only one element of unfair competition. All others must be shown to exist. More importantly, the

(c) (d)

All these elements must be proven.117[65] In finding that probable cause for unfair competition does not exist, the investigating prosecutor and Secretaries Guingona and Cuevas arrived at the same conclusion that there is insufficient evidence to prove all the elements of the crime that would allow them to secure a conviction. Secretary Guingona discounted the element of actual intent to deceive by taking into consideration the differences in spelling, meaning, and phonetics between LIVES and LEVIS, as well as the fact that respondent had registered his own mark.118[66] While it is true that there may be unfair competition even if the competing mark is registered in the Intellectual Property Office, it is equally true that the same may show prima facie good faith.119[67] Indeed, registration does not negate unfair competition where the goods are packed or offered for sale and passed off as those of complainant.120[68] However, the marks registration, coupled with the stark differences between the competing marks, negate the existence of actual intent to deceive, in this particular case. For his part, Justice Cuevas failed to find the possibility of confusion and of intent to deceive the public, relying on Emerald Garment Manufacturing Corporation

114 115 116 117 118 119 120

121 122 123 124 125 126 127

27

likelihood of confusion exists not only if there is confusing similarity. It should also be likely to cause confusion or mistake or deceive purchasers.128[76] Thus, the CA correctly ruled that the mere fact that some resemblance can be pointed out between the marks used does not in itself prove unfair competition. 129[77] To reiterate, the resemblance must be such as is likely to deceive the ordinary purchaser exercising ordinary care.130[78] The consumer survey alone does not equate to actual confusion. We note that the survey was made by showing the interviewees actual samples of petitioners and respondents respective products, approximately five feet away from them. From that distance, they were asked to identify the jeans brand and state the reasons for thinking so.131[79] This method discounted the possibility that the ordinary intelligent buyer would be able to closely scrutinize, and even fit, the jeans to determine if they were LEVIS or not. It also ignored that a consumer would consider the price of the competing goods when choosing a brand of jeans. It is undisputed that LIVES jeans are priced much lower than LEVIS. The Courts observations in Emerald Garment are illuminating on this score: First, the products involved in the case at bar are, in the main, various kinds of jeans. x x x Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, we noted that: Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care.132[80] (Emphasis supplied)

We find no reason to go beyond the point of sale to determine if there is probable cause for unfair competition. The CA observations along this line are worth restating: We also find no basis to give weight to petitioners contention that the post sale confusion that might be triggered by the perceived similarities between the two products must be considered in the action for unfair competition against respondent. No inflexible rule can be laid down as to what will constitute unfair competition. Each case is, in the measure, a law unto itself. Unfair competition is always a question of fact. The question to be determined in every case is whether or not, as a matter of fact, the name or mark used by the defendant has previously come to indicate and designate plaintiffs goods, or, to state it in another way, whether defendant, as a matter of fact, is, by his conduct, passing off defendants goods as plaintiffs goods or his business as plaintiffs business. The universal test question is whether the public is likely to be deceived. In the case before us, we are of the view that the probability of deception must be tested at the point of sale since it is at this point that the ordinary purchaser mulls upon the product and is likely to buy the same under the belief that he is buying another. The test of fraudulent simulation is to be found in the likelihood of deception, or the possibility of deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated.133[81] In sum, absent a grave abuse of discretion on the part of the executive branch tasked with the determination of probable cause during preliminary investigation, We cannot nullify acts done in the exercise of the executive officers discretion. Otherwise, We shall violate the principle that the purpose of a preliminary investigation is to secure the innocent against hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial, and also to protect the State from useless and expensive trials.134[82] WHEREFORE, the petition is DENIED and the appealed Decision of the Court of Appeals AFFIRMED. SO ORDERED.

128 129 130 131 132 133 134

28 WE CONCUR: RUBEN T. REYES Associate Justice

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD., SHANGRI-LA PROPERTIES, INC., MAKATI SHANGRILA HOTEL & RESORT, INC., AND KUOK PHILIPPINES PROPERTIES, INC., Petitioners ,

G.R. No. 159938 Present: PUNO, J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ.

MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice

- versus Promulgated: March 31, 2006

ANTONIO EDUARDO B. NACHURA Associate Justice

DEVELOPERS GROUP OF COMPANIES, INC., Respondent.

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. x-----------------------------------------------------------------------------------x CONSUELO YNARES-SANTIAGO Associate Justice Chairperson DECISION GARCIA, J.: In this petition for review under Rule 45 of the Rules of Court, petitioners Shangri-La International Hotel Management, Ltd. (SLIHM), et al. assail and seek to set aside the Decision dated May 15, 2003135[1] of the Court of Appeals (CA) in CA-G.R. CV No. 53351 and its Resolution136[2] of September 15, 2003 which effectively affirmed with modification an earlier decision of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-91-8476, an action for infringement and damages, thereat commenced by respondent Developers Group of Companies, Inc. (DGCI) against the herein petitioners. The facts: At the core of the controversy are the Shangri-La mark and S logo. Respondent DGCI claims ownership of said mark and logo in the Philippines on the strength of its prior use thereof within the country. As DGCI stresses at every turn, it filed on October 18, 1982 with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) pursuant to Sections 2 and 4 of Republic Act (RA) No. 166, 137[3] as amended, an application for registration covering the subject mark and logo. On May 31, 1983, the BPTTT issued in favor of DGCI the corresponding certificate of

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice Republic of the Philippines Supreme Court Manila SECOND DIVISION

135 136
29

registration therefor, i.e., Registration No. 31904. Since then, DGCI started using the Shangri-La mark and S logo in its restaurant business. On the other hand, the Kuok family owns and operates a chain of hotels with interest in hotels and hotel-related transactions since 1969. As far back as 1962, it adopted the name Shangri-La as part of the corporate names of all companies organized under the aegis of the Kuok Group of Companies (the Kuok Group). The Kuok Group has used the name Shangri-La in all Shangri-La hotels and hotelrelated establishments around the world which the Kuok Family owned. To centralize the operations of all Shangri-la hotels and the ownership of the Shangri-La mark and S logo, the Kuok Group had incorporated in Hong Kong and Singapore, among other places, several companies that form part of the ShangriLa International Hotel Management Ltd. Group of Companies. EDSA Shangri-La Hotel and Resort, Inc., and Makati Shangri-La Hotel and Resort, Inc. were incorporated in the Philippines beginning 1987 to own and operate the two (2) hotels put up by the Kuok Group in Mandaluyong and Makati, Metro Manila. All hotels owned, operated and managed by the aforesaid SLIHM Group of Companies adopted and used the distinctive lettering of the name Shangri-La as part of their trade names. From the records, it appears that Shangri-La Hotel Singapore commissioned a Singaporean design artist, a certain Mr. William Lee, to conceptualize and design the logo of the Shangri-La hotels. During the launching of the stylized S Logo in February 1975, Mr. Lee gave the following explanation for the logo, to wit: The logo which is shaped like a S represents the uniquely Asean architectural structures as well as keep to the legendary Shangri-la theme with the mountains on top being reflected on waters below and the connecting centre [sic] line serving as the horizon. This logo, which is a bold, striking definitive design, embodies both modernity and sophistication in balance and thought. Since 1975 and up to the present, the Shangri-La mark and S logo have been used consistently and continuously by all Shangri-La hotels and companies in their paraphernalia, such as stationeries, envelopes, business forms, menus, displays and receipts. The Kuok Group and/or petitioner SLIHM caused the registration of, and in fact registered, the Shangri-La mark and S logo in the patent offices in different countries around the world. On June 21, 1988, the petitioners filed with the BPTTT a petition, docketed as Inter Partes Case No. 3145, praying for the cancellation of the registration of the Shangri-La mark and S logo issued to respondent DGCI on the ground that the same were illegally and fraudulently obtained and appropriated for the latter's restaurant business. They also filed in the same office Inter Partes Case No. 3529, praying for the registration of the same mark and logo in their own names. Until 1987 or 1988, the petitioners did not operate any establishment in the Philippines, albeit they advertised their hotels abroad since 1972 in numerous

business, news, and/or travel magazines widely circulated around the world, all readily available in Philippine magazines and newsstands. They, too, maintained reservations and booking agents in airline companies, hotel organizations, tour operators, tour promotion organizations, and in other allied fields in the Philippines. It is principally upon the foregoing factual backdrop that respondent DGCI filed a complaint for Infringement and Damages with the RTC of Quezon City against the herein petitioners SLIHM, Shangri-La Properties, Inc., Makati Shangri-La Hotel & Resort, Inc., and Kuok Philippine Properties, Inc., docketed as Civil Case No. Q-918476 and eventually raffled to Branch 99 of said court. The complaint with prayer for injunctive relief and damages alleged that DGCI has, for the last eight (8) years, been the prior exclusive user in the Philippines of the mark and logo in question and the registered owner thereof for its restaurant and allied services. As DGCI alleged in its complaint, SLIHM, et al., in promoting and advertising their hotel and other allied projects then under construction in the country, had been using a mark and logo confusingly similar, if not identical, with its mark and S logo. Accordingly, DGCI sought to prohibit the petitioners, as defendants a quo, from using the Shangri-La mark and S logo in their hotels in the Philippines. In their Answer with Counterclaim, the petitioners accused DGCI of appropriating and illegally using the Shangri-La mark and S logo, adding that the legal and beneficial ownership thereof pertained to SLIHM and that the Kuok Group and its related companies had been using this mark and logo since March 1962 for all their corporate names and affairs. In this regard, they point to the Paris Convention for the Protection of Industrial Property as affording security and protection to SLIHMs exclusive right to said mark and logo. They further claimed having used, since late 1975, the internationally-known and specially-designed Shangri-La mark and S logo for all the hotels in their hotel chain. Pending trial on the merits of Civil Case No. Q-91-8476, the trial court issued a Writ of Preliminary Injunction enjoining the petitioners from using the subject mark and logo. The preliminary injunction issue ultimately reached the Court in G.R. No. 104583 entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. In a decision138[4] dated March 8, 1993, the Court nullified the writ of preliminary injunction issued by the trial court and directed it to proceed with the main case and decide it with deliberate dispatch. While trial was in progress, the petitioners filed with the court a motion to suspend proceedings on account of the pendency before the BPTTT of Inter Partes Case No. 3145 for the cancellation of DGCIs certificate of registration. For its part, respondent DGCI filed a similar motion in that case, invoking in this respect the pendency of its infringement case before the trial court. The parties respective motions to suspend proceedings also reached the Court via their respective petitions in G.R. No. 114802, entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. and G.R. No. 111580, entitled Shangri-La International Hotel Management LTD., et al. vs. Court of Appeals, et al., which were accordingly consolidated. In a consolidated decision139[5] dated June 21, 2001, the Court, limiting itself to the core issue of whether, despite the petitioners institution of Inter Partes Case No. 3145 before the BPTTT, herein respondent DGCI can file a subsequent action for

138 139
30

137

infringement with the regular courts of justice in connection with the same registered mark, ruled in the affirmative, but nonetheless ordered the BPTTT to suspend further proceedings in said inter partes case and to await the final outcome of the main case. Meanwhile, trial on the merits of the infringement case proceeded. Presented as DGCIs lone witness was Ramon Syhunliong, President and Chairman of DGCIs Board of Directors. Among other things, this witness testified that: 1. He is a businessman, with interest in lumber, hotel, hospital, trading and restaurant businesses but only the restaurant business bears the name Shangri-La and uses the same and the S-logo as service marks. The restaurant now known as Shangri-La Finest Chinese Cuisine was formerly known as the Carvajal Restaurant until December 1982, when respondent took over said restaurant business. He had traveled widely around Asia prior to 1982, and admitted knowing the Shangri-La Hotel in Hong Kong as early as August 1982. The S-logo was one of two (2) designs given to him in December 1982, scribbled on a piece of paper by a jeepney signboard artist with an office somewhere in Balintawak. The unnamed artist supposedly produced the two designs after about two or three days from the time he (Syhunliong) gave the idea of the design he had in mind. On October 15, 1982, or before the unknown signboard artist supposedly created the Shangri-La and S designs, DGCI was incorporated with the primary purpose of owning or operating, or both, of hotels and restaurants. On October 18, 1982, again prior to the alleged creation date of the mark and logo, DGCI filed an application for trademark registration of the mark SHANGRI-LA FINEST CHINESE CUISINE & S. Logo with the BPTTT. On said date, respondent DGCI amended its Articles of Incorporation to reflect the name of its restaurant, known and operating under the style and name of SHANGRI-LA FINEST CHINESE CUISINE. Respondent DGCI obtained Certificate of Registration No. 31904 for the Shangri-La mark and S logo.

WHEREFORE, judgment is hereby rendered in favor of [respondent DGCI] and against [SLIHM, et al.] a) Upholding the validity of the registration of the service mark Shangri-la and S-Logo in the name of [respondent]; b) Declaring [petitioners] use of said mark and logo as infringement of [respondents] right thereto; c) Ordering [petitioners], their representatives, agents, licensees, assignees and other persons acting under their authority and with their permission, to permanently cease and desist from using and/or continuing to use said mark and logo, or any copy, reproduction or colorable imitation thereof, in the promotion, advertisement, rendition of their hotel and allied projects and services or in any other manner whatsoever; d) Ordering [petitioners] to remove said mark and logo from any premises, objects, materials and paraphernalia used by them and/or destroy any and all prints, signs, advertisements or other materials bearing said mark and logo in their possession and/or under their control; and e) Ordering [petitioners], jointly and severally, to indemnify [respondent] in the amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as attorneys fee and expenses of litigation. Let a copy of this Decision be certified to the Director, Bureau of Patents, Trademarks and Technology Transfer for his information and appropriate action in accordance with the provisions of Section 25, Republic Act No. 166 Costs against [petitioners]. SO ORDERED. [Words in brackets added.] Therefrom, the petitioners went on appeal to the CA whereat their recourse was docketed as CA G.R. SP No. 53351. As stated at the threshold hereof, the CA, in its assailed Decision of May 15, 2003,141[7] affirmed that of the lower court with the modification of deleting the award of attorneys fees. The appellate court predicated its affirmatory action on the strength or interplay of the following premises: 1. Albeit the Kuok Group used the mark and logo since 1962, the evidence presented shows that the bulk use of the tradename was abroad and not in the Philippines (until 1987). Since the Kuok Group does not have proof of actual use in commerce in the Philippines (in accordance with Section 2 of R.A. No. 166), it cannot claim ownership of the mark and logo in accordance

2.

3.

4.

5.

Eventually, the trial court, on the postulate that petitioners, more particularly petitioner SLIHMs, use of the mark and logo in dispute constitutes an infringement of DGCIs right thereto, came out with its decision140[6] on March 8, 1996 rendering judgment for DGCI, as follows:

140

141
31

with the holding in Kabushi Kaisha Isetan v. IAC142[8], as reiterated in Philip Morris, Inc. v. Court of Appeals.143[9] 2. On the other hand, respondent has a right to the mark and logo by virtue of its prior use in the Philippines and the issuance of Certificate of Registration No. 31904. The use of the mark or logo in commerce through the bookings made by travel agencies is unavailing since the Kuok Group did not establish any branch or regional office in the Philippines. As it were, the Kuok Group was not engaged in commerce in the Philippines inasmuch as the bookings were made through travel agents not owned, controlled or managed by the Kuok Group. While the Paris Convention protects internationally known marks, R.A. No. 166 still requires use in commerce in the Philippines. Accordingly, and on the premise that international agreements, such as Paris Convention, must yield to a municipal law, the question on the exclusive right over the mark and logo would still depend on actual use in commerce in the Philippines. 5.

No. 166, the old trademark law, and the Paris Convention for the Protection of Industrial Property; Whether the CA erred in holding that SLIHM did not have the right to legally own the Shangri-La mark and S logo by virtue of and despite their ownership by the Kuok Group; Whether the CA erred in ruling that petitioners' use of the mark and logo constitutes actionable infringement; Whether the CA erred in awarding damages in favor of respondent despite the absence of any evidence to support the same, and in failing to award relief in favor of the petitioners; and Whether petitioners should be prohibited from continuing their use of the mark and logo in question.

3.

6.

7.

4.

8.

There are two preliminary issues, however, that respondent DGCI calls our attention to, namely: 1. 2. Whether the certification against forum-shopping submitted on behalf of the petitioners is sufficient; Whether the issues posed by petitioners are purely factual in nature hence improper for resolution in the instant petition for review on certiorari.

Petitioners then moved for a reconsideration, which motion was denied by the CA in its equally assailed Resolution of September 15, 2003.144[10] As formulated by the petitioners, the issues upon which this case hinges are: 1. Whether the CA erred in finding that respondent had the right to file an application for registration of the Shangri-La mark and S logo although respondent never had any prior actual commercial use thereof; Whether the CA erred in finding that respondent's supposed use of the identical Shangri-La mark and S logo of the petitioners was not evident bad faith and can actually ripen into ownership, much less registration; Whether the CA erred in overlooking petitioners' widespread prior use of the Shangri-La mark and S logo in their operations; Whether the CA erred in refusing to consider that petitioners are entitled to protection under both R.A.

DGCI claims that the present petition for review should be dismissed outright for certain procedural defects, to wit: an insufficient certification against forum shopping and raising pure questions of fact. On both counts, we find the instant petition formally and substantially sound. In its Comment, respondent alleged that the certification against forum shopping signed by Atty. Lee Benjamin Z. Lerma on behalf and as counsel of the petitioners was insufficient, and that he was not duly authorized to execute such document. Respondent further alleged that since petitioner SLIHM is a foreign entity based in Hong Kong, the Director's Certificate executed by Mr. Madhu Rama Chandra Rao, embodying the board resolution which authorizes Atty. Lerma to act for SLIHM and execute the certification against forum shopping, should contain the authentication by a consular officer of the Philippines in Hong Kong. In National Steel Corporation v. CA,145[11] the Court has ruled that the certification on non-forum shopping may be signed, for and in behalf of a corporation, by a specifically authorized lawyer who has personal knowledge of the facts required to be disclosed in such document. The reason for this is that a corporation can only exercise its powers through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose.146[12]

2.

3.

4.

142 143 144 145 146

32

Moreover, Rule 7, Section 5 of the Rules of Court concerning the certification against forum shopping does not require any consular certification if the petitioner is a foreign entity. Nonetheless, to banish any lingering doubt, petitioner SLIHM furnished this Court with a consular certification dated October 29, 2003 authenticating the Director's Certificate authorizing Atty. Lerma to execute the certification against forum shopping, together with petitioners manifestation of February 9, 2004. Respondent also attacks the present petition as one that raises pure questions of fact. It points out that in a petition for review under Rule 45 of the Rules of Court, the questions that may properly be inquired into are strictly circumscribed by the express limitation that the petition shall raise only questions of law which must be distinctly set forth.147[13] We do not, however, find that the issues involved in this petition consist purely of questions of fact. These issues will be dealt with as we go through the questions raised by the petitioners one by one. Petitioners' first argument is that the respondent had no right to file an application for registration of the Shangri-La mark and S logo because it did not have prior actual commercial use thereof. To respondent, such an argument raises a question of fact that was already resolved by the RTC and concurred in by the CA. First off, all that the RTC found was that respondent was the prior user and registrant of the subject mark and logo in the Philippines. Taken in proper context, the trial courts finding on prior use can only be interpreted to mean that respondent used the subject mark and logo in the country before the petitioners did. It cannot be construed as being a factual finding that there was prior use of the mark and logo before registration. Secondly, the question raised is not purely factual in nature. In the context of this case, it involves resolving whether a certificate of registration of a mark, and the presumption of regularity in the performance of official functions in the issuance thereof, are sufficient to establish prior actual use by the registrant. It further entails answering the question of whether prior actual use is required before there may be a valid registration of a mark. Under the provisions of the former trademark law, R.A. No. 166, as amended, which was in effect up to December 31, 1997, hence, the law in force at the time of respondent's application for registration of trademark, the root of ownership of a trademark is actual use in commerce. Section 2 of said law requires that before a trademark can be registered, it must have been actually used in commerce and service for not less than two months in the Philippines prior to the filing of an application for its registration. Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case.148[14] Among the effects of registration of a mark, as catalogued by the Court in Lorenzana v. Macagba,149[15] are:

1.

Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof. x xx Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or, after registration, in a petition for cancellation. xxx [Emphasis supplied]

2.

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof, the former prevails over the latter. For a rule widely accepted and firmly entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of ownership.150[16] While the present law on trademarks 151[17] has dispensed with the requirement of prior actual use at the time of registration, the law in force at the time of registration must be applied, and thereunder it was held that as a condition precedent to registration of trademark, trade name or service mark, the same must have been in actual use in the Philippines before the filing of the application for registration.152[18] Trademark is a creation of use and therefore actual use is a prerequisite to exclusive ownership and its registration with the Philippine Patent Office is a mere administrative confirmation of the existence of such right.153[19] By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for registration of the same. Registration merely creates a prima facie presumption of the validity of the registration, of the registrant's ownership of the trademark and of the exclusive right to the use thereof.154[20] Such presumption, just like the presumptive regularity in the performance of official functions, is rebuttable and must give way to evidence to the contrary.

149 150 151 152 153 154

33

147 148

Here, respondent's own witness, Ramon Syhunliong, testified that a jeepney signboard artist allegedly commissioned to create the mark and logo submitted his designs only in December 1982.155[21] This was two-and-a-half months after the filing of the respondents trademark application on October 18, 1982 with the BPTTT. It was also only in December 1982 when the respondent's restaurant was opened for business.156[22] Respondent cannot now claim before the Court that the certificate of registration itself is proof that the two-month prior use requirement was complied with, what with the fact that its very own witness testified otherwise in the trial court. And because at the time (October 18, 1982) the respondent filed its application for trademark registration of the Shangri-La mark and S logo, respondent was not using these in the Philippines commercially, the registration is void. Petitioners also argue that the respondent's use of the Shangri-La mark and S logo was in evident bad faith and cannot therefore ripen into ownership, much less registration. While the respondent is correct in saying that a finding of bad faith is factual, not legal,157[23] hence beyond the scope of a petition for review, there are, however, noted exceptions thereto. Among these exceptions are: 1. 2. 3. 4. 5. When the inference made is manifestly mistaken, absurd or impossible;158[24] When there is grave abuse of discretion;159[25] When the judgment is based on a misapprehension of facts;160 [26] When the findings of fact are conflicting;161[27] and When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent.162[28]

Did Mr. Ramon Syhunliong, [respondent's] President copy the mark and devise from one of [petitioners] hotel (Kowloon Shangri-la) abroad? The mere fact that he was a visitor of [petitioners] hotel abroad at one time (September 27, 1982) establishes [petitioners] allegation that he got the idea there. 163 [29] Yet, in the very next paragraph, despite the preceding admission that the mark and logo must have been copied, the CA tries to make it appear that the adoption of the same mark and logo could have been coincidental: The word or name Shangri-la and the S-logo, are not uncommon. The word Shangri-la refers to a (a) remote beautiful imaginary place where life approaches perfection or (b) imaginary mountain land depicted as a utopia in the novel Lost Horizon by James Hilton. The Lost Horizon was a well-read and popular novel written in 1976. It is not impossible that the parties, inspired by the novel, both adopted the mark for their business to conjure [a] place of beauty and pleasure. The S-logo is, likewise, not unusual. The devise looks like a modified Old English print.164[30] To jump from a recognition of the fact that the mark and logo must have been copied to a rationalization for the possibility that both the petitioners and the respondent coincidentally chose the same name and logo is not only contradictory, but also manifestly mistaken or absurd. Furthermore, the S logo appears nothing like the Old English print that the CA makes it out to be, but is obviously a symbol with oriental or Asian overtones. At any rate, it is ludicrous to believe that the parties would come up with the exact same lettering for the word Shangri-La and the exact same logo to boot. As correctly observed by the petitioners, to which we are in full accord: x x x When a trademark copycat adopts the word portion of another's trademark as his own, there may still be some doubt that the adoption is intentional. But if he copies not only the word but also the word's exact font and lettering style and in addition, he copies also the logo portion of the trademark, the slightest doubt vanishes. It is then replaced by the certainty that the adoption was deliberate, malicious and in bad faith.165[31] It is truly difficult to understand why, of the millions of terms and combination of letters and designs available, the respondent had to choose exactly the same mark and logo as that of the petitioners, if there was no intent to take advantage of the goodwill of petitioners' mark and logo.166[32]

And these are naming but a few of the recognized exceptions to the rule. The CA itself, in its Decision of May 15, 2003, found that the respondents president and chairman of the board, Ramon Syhunliong, had been a guest at the petitioners' hotel before he caused the registration of the mark and logo, and surmised that he must have copied the idea there:

155 156 157 158 159 160 161 162

163 164 165

34

One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands.167[33] Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the goodwill established by the true owner. This point is further bolstered by the fact that under either Section 17 of R.A. No. 166, or Section 151 of R.A. No. 8293, or Article 6bis(3) of the Paris Convention, no time limit is fixed for the cancellation of marks registered or used in bad faith.168[34] This is precisely why petitioners had filed an inter partes case before the BPTTT for the cancellation of respondent's registration, the proceedings on which were suspended pending resolution of the instant case. Respondent DGCI also rebukes the next issue raised by the petitioners as being purely factual in nature, namely, whether the CA erred in overlooking petitioners' widespread prior use of the Shangri-La mark and S logo in their operations. The question, however, is not whether there had been widespread prior use, which would have been factual, but whether that prior use entitles the petitioners to use the mark and logo in the Philippines. This is clearly a question which is legal in nature. It has already been established in the two courts below, and admitted by the respondents president himself, that petitioners had prior widespread use of the mark and logo abroad: There is, to be sure, an impressive mass of proof that petitioner SLIHM and its related companies abroad used the name and logo for one purpose or another x x x.169[35] [Emphasis supplied] In respondent's own words, [T]he Court of Appeals did note petitioners' use of the mark and logo but held that such use did not confer to them ownership or exclusive right to use them in the Philippines.170[36] To petitioners' mind, it was error for the CA to rule that their worldwide use of the mark and logo in dispute could not have conferred upon them any right thereto. Again, this is a legal question which is well worth delving into. R.A. No. 166, as amended, under which this case was heard and decided provides: Section 2. What are registrable. - Trademarks, trade names and service marks owned by persons, corporations, partnerships or associations domiciled in the Philippines and by

persons, corporations, partnerships or associations domiciled in any foreign country may be registered in accordance with the provisions of this Act: Provided, That said trademarks trade names, or service marks are actually in use in commerce and services not less than two months in the Philippines before the time the applications for registration are filed: And provided, further, That the country of which the applicant for registration is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is officially certified, with a certified true copy of the foreign law translated into the English language, by the government of the foreign country to the Government of the Republic of the Philippines. Section 2-A. Ownership of trademarks, trade names and service marks; how acquired. - Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a trade name, or a servicemark not so appropriated by another, to distinguish his merchandise, business or service from the merchandise, business or services of others. The ownership or possession of a trademark, trade name, service mark, heretofore or hereafter appropriated, as in this section provided, shall be recognized and protected in the same manner and to the same extent as are other property rights known to this law. [Emphasis supplied] Admittedly, the CA was not amiss in saying that the law requires the actual use in commerce of the said trade name and S logo in the Philippines. Hence, consistent with its finding that the bulk of the petitioners' evidence shows that the alleged use of the Shangri-La trade name was done abroad and not in the Philippines, it is understandable for that court to rule in respondents favor. Unfortunately, however, what the CA failed to perceive is that there is a crucial difference between the aforequoted Section 2 and Section 2-A of R.A. No. 166. For, while Section 2 provides for what is registrable, Section 2-A, on the other hand, sets out how ownership is acquired. These are two distinct concepts. Under Section 2, in order to register a trademark, one must be the owner thereof and must have actually used the mark in commerce in the Philippines for 2 months prior to the application for registration. Since ownership of the trademark is required for registration, Section 2-A of the same law sets out to define how one goes about acquiring ownership thereof. Under Section 2-A, it is clear that actual use in commerce is also the test of ownership but the provision went further by saying that the mark must not have been so appropriated by another. Additionally, it is significant to note that Section 2-A does not require that the actual use of a trademark must be within the Philippines. Hence, under R.A. No. 166, as amended, one may be an owner of a mark due to actual use thereof but not yet have the right to register such ownership here due to failure to use it within the Philippines for two months. While the petitioners may not have qualified under Section 2 of R.A. No. 166 as a registrant, neither did respondent DGCI, since the latter also failed to fulfill the 2-month actual use requirement. What is worse, DGCI was not even the owner of the mark. For it to have been the owner, the mark must not have been already appropriated (i.e., used) by someone else. At the time of respondent DGCI's 35

166 167 168 169 170

registration of the mark, the same was already being used by the petitioners, albeit abroad, of which DGCIs president was fully aware. It is respondent's contention that since the petitioners adopted the Shangri-La mark and S logo as a mere corporate name or as the name of their hotels, instead of using them as a trademark or service mark, then such name and logo are not trademarks. The two concepts of corporate name or business name and trademark or service mark, are not mutually exclusive. It is common, indeed likely, that the name of a corporation or business is also a trade name, trademark or service mark. Section 38 of R.A. No. 166 defines the terms as follows: Sec. 38. Words and terms defined and construed In the construction of this Act, unless the contrary is plainly apparent from the context The term trade name includes individual names and surnames, firm names, trade names, devices or words used by manufacturers, industrialists, merchants, agriculturists, and others to identify their business, vocations or occupations; the names or titles lawfully adopted and used by natural or juridical persons, unions, and any manufacturing, industrial, commercial, agricultural or other organizations engaged in trade or commerce. The term trade mark includes any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others. The term service mark means a mark used in the sale or advertising of services to identify the services of one person and distinguish them from the services of others and includes without limitation the marks, names, symbols, titles, designations, slogans, character names, and distinctive features of radio or other advertising. [Emphasis supplied] Clearly, from the broad definitions quoted above, the petitioners can be considered as having used the Shangri-La name and S logo as a tradename and service mark. The new Intellectual Property Code (IPC), Republic Act No. 8293, undoubtedly shows the firm resolve of the Philippines to observe and follow the Paris Convention by incorporating the relevant portions of the Convention such that persons who may question a mark (that is, oppose registration, petition for the cancellation thereof, sue for unfair competition) include persons whose internationally well-known mark, whether or not registered, is

36

identical with or confusingly similar to or constitutes a translation of a mark that is sought to be registered or is actually registered.171[37] However, while the Philippines was already a signatory to the Paris Convention, the IPC only took effect on January 1, 1988, and in the absence of a retroactivity clause, R.A. No. 166 still applies.172[38] Under the prevailing law and jurisprudence at the time, the CA had not erred in ruling that:

Nor can the petitioners' separate personalities from their mother corporation be an obstacle in the enforcement of their rights as part of the Kuok Group of Companies and as official repository, manager and operator of the subject mark and logo. Besides, R.A. No. 166 did not require the party seeking relief to be the owner of the mark but any person who believes that he is or will be damaged by the registration of a mark or trade name.174[40] WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals dated May 15, 2003 and September 15, 2003, respectively, and the Decision of the Regional Trial Court of Quezon City dated March 8, 1996 are hereby SET ASIDE. Accordingly, the complaint for infringement in Civil Case No. Q-91-8476 is ordered DISMISSED. SO ORDERED.

The Paris Convention mandates that protection should be afforded to internationally known marks as signatory to the Paris Convention, without regard as to whether the foreign corporation is registered, licensed or doing business in the Philippines. It goes without saying that the same runs afoul to Republic Act No. 166, which requires the actual use in commerce in the Philippines of the subject mark or devise. The apparent conflict between the two (2) was settled by the Supreme Court in this wise Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16).173[39] [Emphasis supplied] Consequently, the petitioners cannot claim protection under the Paris Convention. Nevertheless, with the double infirmity of lack of two-month prior use, as well as bad faith in the respondent's registration of the mark, it is evident that the petitioners cannot be guilty of infringement. It would be a great injustice to adjudge the petitioners guilty of infringing a mark when they are actually the originator and creator thereof.

CANCIO C. GARCIA Associate Justice WE CONCUR:

REYNATO S. PUNO Associate Justice Chairperson

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Associate Justice

ADOLFO S. AZCUNA Associate Justice ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Associate Justice Chairperson, Second Division

171 172 173 174

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CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ARTEMIO V. PANGANIBAN Chief Justice COFFEE PARTNERS, INC., Petitioner, G.R. No. 169504 Present: CARPIO, VELASCO, JR.,* DEL CASTILLO, ABAD, and PEREZ, JJ. J.,

and reinstated the 14 August 2002 Decision179[5] of the Bureau of Legal AffairsIntellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration. The Facts Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement180[6] with Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as SAN FRANCISCO COFFEE. Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with the SEC in May 1995. It registered the business name SAN FRANCISCO COFFEE & ROASTERY, INC. with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willys, and other coffee companies. In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other commercial establishments in Metro Manila. In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name SAN FRANCISCO COFFEE in Libis, Quezon City. According to respondent, petitioners shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name SAN FRANCISCO COFFEE. Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages. In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for registration of the mark SAN FRANCISCO COFFEE & DEVICE for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused with respondents trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the trade name SAN FRANCISCO COFFEE when it formed a joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from respondent.

Chairperson, - versus -

SAN FRANCISCO COFFEE & Promulgated: ROASTERY, INC., Respondent. March 3, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION CARPIO, J.: The Case This is a petition for review175[1] of the 15 June 2005 Decision 176[2] and the 1 September 2005 Resolution177[3] of the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision178[4] of the Office of the Director General-Intellectual Property Office

* 175 176 177 178 179 180

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Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop SAN FRANCISCO COFFEE has branches in Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name SAN FRANCISCO COFFEE from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from. The Ruling of the Bureau of Legal Affairs-Intellectual Property Office In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark infringed on respondents trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected from infringement of its trade name. The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary. The BLA-IPO held that petitioners use of the trademark SAN FRANCISCO COFFEE will likely cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the words SAN FRANCISCO which is the dominant portion of respondents trade name and petitioners trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioner's trademark because greater weight is given to words the medium consumers use in ordering coffee products. On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark SAN FRANCISCO COFFEE because of the authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner. The BLA-IPO also dismissed respondents claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondents claim of moral damages, but granted its claim of attorneys fees. Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages. The BLA-IPO denied the parties partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-IPO). The Ruling of the Office of the Director General-

Intellectual Property Office In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioners use of the trademark SAN FRANCISCO COFFEE did not infringe on respondent's trade name. The ODG-IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter. The Ruling of the Court of Appeals In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondents claim for actual damages and retained the award of attorneys fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration. The Issue The sole issue is whether petitioners use of the trademark SAN FRANCISCO COFFEE constitutes infringement of respondents trade name SAN FRANCISCO COFFEE & ROASTERY, INC., even if the trade name is not registered with the Intellectual Property Office (IPO). The Courts Ruling The petition has no merit. Petitioner contends that when a trade name is not registered, a suit for infringement is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondents registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses respondents failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur between its trademark and respondents trade name because of a wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun San Francisco and the generic word coffee are not capable of exclusive appropriation. Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)181[7] dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges petitioners trademark is confusingly similar to respondents trade name. Respondent stresses ordinarily prudent

181
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consumers are likely to be misled about the source, affiliation, or sponsorship of petitioners coffee. As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found that while respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater force when both the quasijudicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court necessarily upholds such findings of fact.182[8] Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA,183[9] this Court laid down what constitutes infringement of an unregistered trade name, thus: The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; (2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services; (4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and (5) It is without the consent of the trademark or trade name owner or the assignee thereof.184[10] (Emphasis supplied) Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines.185[11] Section 22 of Republic Act No. 166,186[12] as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit: (1)

Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of any registered mark or trade name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied) HOWEVER, RA 8293, WHICH TOOK EFFECT ON 1 JANUARY 1998, HAS DISPENSED WITH THE REGISTRATION REQUIREMENT. SECTION 165.2 OF RA 8293 CATEGORICALLY STATES THAT TRADE NAMES SHALL BE PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION WITH THE IPO, AGAINST ANY UNLAWFUL ACT INCLUDING ANY SUBSEQUENT USE OF THE TRADE NAME BY A THIRD PARTY, WHETHER AS A TRADE NAME OR A TRADEMARK LIKELY TO MISLEAD THE PUBLIC. THUS: SEC. 165.2 (A) NOTWITHSTANDING ANY LAWS OR REGULATIONS PROVIDING FOR ANY OBLIGATION TO REGISTER TRADE NAMES, SUCH NAMES SHALL BE PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION, AGAINST ANY UNLAWFUL ACT COMMITTED BY THIRD PARTIES. (B) IN PARTICULAR, ANY SUBSEQUENT USE OF A TRADE NAME BY A THIRD PARTY, WHETHER AS A TRADE NAME OR A MARK OR COLLECTIVE MARK, OR ANY SUCH USE OF A SIMILAR TRADE NAME OR MARK, LIKELY TO MISLEAD THE PUBLIC, SHALL BE DEEMED UNLAWFUL. (EMPHASIS SUPPLIED) IT IS THE LIKELIHOOD OF CONFUSION THAT IS THE GRAVAMEN OF INFRINGEMENT. BUT THERE IS NO ABSOLUTE STANDARD FOR LIKELIHOOD OF CONFUSION. ONLY THE PARTICULAR, AND SOMETIMES PECULIAR, CIRCUMSTANCES OF EACH CASE CAN DETERMINE ITS EXISTENCE. THUS, IN INFRINGEMENT CASES, PRECEDENTS MUST BE EVALUATED IN THE LIGHT OF EACH PARTICULAR CASE.187[13] IN DETERMINING SIMILARITY AND LIKELIHOOD OF CONFUSION, OUR JURISPRUDENCE HAS DEVELOPED TWO TESTS: THE DOMINANCY TEST AND THE HOLISTIC TEST. THE DOMINANCY TEST FOCUSES ON THE SIMILARITY OF THE PREVALENT FEATURES OF THE COMPETING TRADEMARKS THAT MIGHT CAUSE CONFUSION AND DECEPTION, THUS CONSTITUTING INFRINGEMENT. IF THE COMPETING TRADEMARK CONTAINS THE MAIN, ESSENTIAL, AND DOMINANT FEATURES OF ANOTHER, AND CONFUSION OR DECEPTION IS LIKELY TO RESULT, INFRINGEMENT OCCURS. EXACT DUPLICATION OR IMITATION IS NOT REQUIRED. THE

182 183 184 185

186 187
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QUESTION IS WHETHER THE USE OF THE MARKS INVOLVED IS LIKELY TO CAUSE CONFUSION OR MISTAKE IN THE MIND OF THE PUBLIC OR TO DECEIVE CONSUMERS. 188[14] IN CONTRAST, THE HOLISTIC TEST ENTAILS A CONSIDERATION OF THE ENTIRETY OF THE MARKS AS APPLIED TO THE PRODUCTS, INCLUDING THE LABELS AND PACKAGING, IN DETERMINING CONFUSING SIMILARITY. 189[15] THE DISCERNING EYE OF THE OBSERVER MUST FOCUS NOT ONLY ON THE PREDOMINANT WORDS BUT ALSO ON THE OTHER FEATURES APPEARING ON BOTH MARKS IN ORDER THAT THE OBSERVER MAY DRAW HIS CONCLUSION WHETHER ONE IS CONFUSINGLY SIMILAR TO THE OTHER.190[16] APPLYING EITHER THE DOMINANCY TEST OR THE HOLISTIC TEST, PETITIONERS SAN FRANCISCO COFFEE TRADEMARK IS A CLEAR INFRINGEMENT OF RESPONDENTS SAN FRANCISCO COFFEE & ROASTERY, INC. TRADE NAME. THE DESCRIPTIVE WORDS SAN FRANCISCO COFFEE ARE PRECISELY THE DOMINANT FEATURES OF RESPONDENTS TRADE NAME. PETITIONER AND RESPONDENT ARE ENGAGED IN THE SAME BUSINESS OF SELLING COFFEE, WHETHER WHOLESALE OR RETAIL. THE LIKELIHOOD OF CONFUSION IS HIGHER IN CASES WHERE THE BUSINESS OF ONE CORPORATION IS THE SAME OR SUBSTANTIALLY THE SAME AS THAT OF ANOTHER CORPORATION. IN THIS CASE, THE CONSUMING PUBLIC WILL LIKELY BE CONFUSED AS TO THE SOURCE OF THE COFFEE BEING SOLD AT PETITIONERS COFFEE SHOPS. PETITIONERS ARGUMENT THAT SAN FRANCISCO IS JUST A PROPER NAME REFERRING TO THE FAMOUS CITY IN CALIFORNIA AND THAT COFFEE IS SIMPLY A GENERIC TERM, IS UNTENABLE. RESPONDENT HAS ACQUIRED AN EXCLUSIVE RIGHT TO THE USE OF THE TRADE NAME SAN FRANCISCO COFFEE & ROASTERY, INC. SINCE THE REGISTRATION OF THE BUSINESS NAME WITH THE DTI IN 1995. THUS, RESPONDENTS USE OF ITS TRADE NAME FROM THEN ON MUST BE FREE FROM ANY INFRINGEMENT BY SIMILARITY. OF COURSE, THIS DOES NOT MEAN THAT RESPONDENT HAS EXCLUSIVE USE OF THE GEOGRAPHIC WORD SAN FRANCISCO OR THE GENERIC WORD COFFEE. GEOGRAPHIC OR GENERIC WORDS ARE NOT, PER SE, SUBJECT TO EXCLUSIVE APPROPRIATION. IT IS ONLY THE COMBINATION OF THE WORDS SAN FRANCISCO COFFEE, WHICH IS RESPONDENTS TRADE NAME IN ITS COFFEE BUSINESS, THAT IS PROTECTED AGAINST INFRINGEMENT ON MATTERS RELATED TO THE COFFEE BUSINESS TO AVOID CONFUSING OR DECEIVING THE PUBLIC. IN PHILIPS EXPORT B.V. V. COURT OF APPEALS,191[17] THIS COURT HELD THAT A CORPORATION HAS AN EXCLUSIVE RIGHT TO THE USE OF ITS NAME. THE RIGHT PROCEEDS FROM THE THEORY THAT IT IS A FRAUD ON THE CORPORATION WHICH HAS ACQUIRED A RIGHT TO THAT NAME AND PERHAPS CARRIED ON ITS BUSINESS THEREUNDER, THAT ANOTHER SHOULD ATTEMPT TO USE THE SAME NAME, OR THE SAME NAME WITH A SLIGHT VARIATION IN SUCH A WAY AS TO INDUCE PERSONS TO DEAL WITH IT IN THE BELIEF THAT THEY ARE DEALING WITH THE CORPORATION WHICH HAS GIVEN A REPUTATION TO THE NAME.192[18]

THIS COURT IS NOT JUST A COURT OF LAW, BUT ALSO OF EQUITY. WE CANNOT ALLOW PETITIONER TO PROFIT BY THE NAME AND REPUTATION SO FAR BUILT BY RESPONDENT WITHOUT RUNNING AFOUL OF THE BASIC DEMANDS OF FAIR PLAY. NOT ONLY THE LAW BUT EQUITY CONSIDERATIONS HOLD PETITIONER LIABLE FOR INFRINGEMENT OF RESPONDENTS TRADE NAME. THE COURT OF APPEALS WAS CORRECT IN SETTING ASIDE THE 22 OCTOBER 2003 DECISION OF THE OFFICE OF THE DIRECTOR GENERAL-INTELLECTUAL PROPERTY OFFICE AND IN REINSTATING THE 14 AUGUST 2002 DECISION OF THE BUREAU OF LEGAL AFFAIRS-INTELLECTUAL PROPERTY OFFICE. WHEREFORE, WE DENY THE PETITION FOR REVIEW. WE AFFIRM THE 15 JUNE 2005 DECISION AND 1 SEPTEMBER 2005 RESOLUTION OF THE COURT OF APPEALS IN CA-G.R. SP NO. 80396. COSTS AGAINST PETITIONER. SO ORDERED. ANTONIO T.

CARPIO WE CONCUR:

Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

MARIANO C. DEL CASTILLO Associate Justice

ROBERTO A. ABAD Associate Justice

JOSE P. PEREZ Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO

188 189 190 191

192
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Associate Justice CHAIRPERSON CERTIFICATION PURSUANT TO SECTION 13, ARTICLE VIII OF THE CONSTITUTION, AND THE DIVISION CHAIRPERSONS ATTESTATION, I CERTIFY THAT THE CONCLUSIONS IN THE ABOVE DECISION HAD BEEN REACHED IN CONSULTATION BEFORE THE CASE WAS ASSIGNED TO THE WRITER OF THE OPINION OF THE COURTS DIVISION.

REYNATO S. PUNO Chief Justice

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