Mercantile Cases

1. Nestle vs Puregold GR No 217194 September 6, 2017 (D)

2. UFC vs Barrio Fiesta GR No 198889 January 20, 2016
3. Seri Soomboonsakdikul GR No. 188996 February 1, 2017 (D)
4. Mang Inasal vs IFP Mfg Corp GR No 221717 June 19, 2017 (D)
5. Dy vs Kojinliike GR No 186088 March 22, 2017 (D)
6. Mcdonalds vs LC Big Mak 437 SCRA 10 (2004)
7. ABS CBN vs Gozon GR No 195956 March 11, 2015
8. Microsoft vs Manansala 773 SCRA 345 GR no 166391 October 21, 2015 (D)
9. Taiwan Kolin vs Kolin Electronics GR No 209843 March 25, 2015 (D)
10. Citigroup Inc vs City State Savings Bank GR No 204509 March 25, 2015
11. ABS CBN vs Director of Trader Marks GR No.217916 June 20, 2018 (D)
12. Kensonic vs Uniline Multi Gr No 211820-21 June 06, 2018 (D)
13. San Miguel Purefoods vs Foodspher GR no 217781 June 20, 2018 (D)
14. Olano et al vs Co GR No. 195835 March 14, 2016 (D)
15. Shang Properties Realt Corporation vs St Francis Devt Corporaiton GR No 190706 July 21, 2014
16. Republic Gas Corporation vsPetron Corporation Gr No 194602 June 17, 2013 (D)
17. Co vs Keng Huan Jerry Yeung GR No 212705  September 10, 2014
18. Skechers USA vs Inter Pacific Industrial GR No 164321 March 23, 2011
19. Birkenstock GMBH vs Phil Shoe Expo GR No 194307 November 20, 2013
20. Torres sv Perez et al GR No 188225 and 198728 November 28, 2012
21. Diaz vs PP GR No 180677  February 18, 2013
22. Du Pont vs Francisco GR No 174379 August 31, 2016
23. Coffee Partners vs San Francisco Coffee and Roastery GR No 169504 March 3, 2010

G.R. No. 217194

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

vs.
PUREGOLD PRICE CLUB, INC.,, Respondent

DECISION

CARPIO, Acting C.J.:

The Case

Before the Court is a petition for review on certiorari  assailing the 15 May 2014 Resolution  and the
1 2

14 October 2014 Resolution  of the Court of Appeals (CA) in CA-G.R. SP No. 134592.
3

The Facts
Petitioner Societe des Produits Nestle, S.A. (Nestle) is a corporation organized and existing under
the laws of Switzerland which is engaged in the business of marketing and selling of coffee, ice
cream, chocolates, cereals, sauces, soups, condiment mixes, dairy and non-dairy products,
etc.  Respondent Puregold Price Club, Inc. (Puregold) is a corporation organized under Philippine
4

law which is engaged in the business of trading goods such as consumer goods on wholesale or on
retail basis.
5

On 14 June 2007, Puregold filed an application  for the registration of the trademark "COFFEE
6

MATCH" with the lqtellectual Property Office (IPO). The registration was filed by Puregold for use on
coffee, tea, cocoa, sugar, artificial coffee, flour and preparations made from cereals, bread, pastry
and confectionery, and honey under Class 30 of the International Classification of Goods. 7

On 5 December 2008, Nestle filed an opposition  against Puregold's application for registration.
8

Nestle alleged that it is the exclusive owner of the "COFFEE-MATE" trademark and that there is
confusing similarity between the "COFFEE-MATE" trademark and Puregold's "COFFEE MATCH"
application.  Nestle alleged that "COFFEE-MATE" has been declared an internationally well-known
9

mark and Puregold's use of "COFFEE MATCH" would indicate a connection with the goods covered
in Nestle's "COFFEE-MATE" mark because of its distinct similarity. Nestle claimed that it would
suffer damages if the application were granted since Puregold's "COFFEE MATCH" would likely
mislead the public that the mark originated from Nestle. 10

The Decision of the Bureau of Legal Affairs-Intellectual Property Office

In a Decision  dated 16 April 2012, the Bureau of Legal Affairs Intellectual Property Office (BLA-IPO)
11

dismissed Nestle's opposition. The BLA-IPO ruled that Nestle's opposition was defective because
the verification and certification against forum shopping attached to Nestle's opposition did not
include a board of directors' resolution or secretary's certificate stating Mr. Dennis Jose R. Barot's
(Barot) authority to act on behalf of Nestle. The BLA-IPO ruled that the defect in Nestle's opposition
was sufficient ground to dismiss. 12

The BLA-IPO held that the word "COFFEE" as a mark, or as part of a trademark, which is used on
coffee and similar or closely related goods, is not unique or highly distinctive. Nestle combined the
word "COFFEE" with the word "-MATE," while Puregold combined the word "COFFEE" with the word
"MATCH." The BLA-IPO ruled that while both Nestle's "-MATE" and Puregold's "MATCH" contain the
same first three letters, the last two in Puregold's mark rendered a visual and aural character that
makes it easily distinguishable from Nestle's "COFFEE-MATE."  Also, the letter "M" in Puregold's
13

mark is written as an upper case character and the eyes of a consumer would not be confused or
deceived by Nestle's "COFFEEMATE" where the letter "M" is written in lower case. Consequently,
the BLA-IPO held that the consumer cannot mistake the mark and the products of Nestle as those of
Puregold's.14

The dispositive portion of the Decision states:

WHEREFORE, premises considered, the instant opposition is hereby DISMISSED. Let the
filewrapper of Trademark Application Serial No. 4-2007-006134 be returned, together with a copy of
this DECISION, to the Bureau of Trademarks for information and appropriate action.

SO ORDERED. 15

On 11 June 2012, Nestle filed an appeal  with the Office of the Director General of the Intellectual
16

Property Office (ODG-IPO).

 The Decision of the ODG-IPO

In a Decision  dated 7 February 2014, the Office of the ODG-IPO dismissed Nestle's appeal. The
17

ODG-IPO held that Barot's authority to sign the certification against forum shopping was not
sufficiently proven by Nestle. The ODG-IPO ruled that Barot's authority, which was contained in the
power of attorney executed, should not be given weight unless accompanied by proof or evidence of
his authority from Nestle.  The ODG-IPO held that the competing marks are not confusingly similar
18

and that consumers would unlikely be deceived or confused from Puregold's use of "COFFEE
MATCH." The ODG-IPO ruled that the common feature of "COFFEE" between the two marks cannot
be exclusively appropriated since it is generic or descriptive of the goods in question. The ODG-IPO
ruled that there is no visual, phonetic, or conceptual similarity between the two marks. Visual
similarity is not present in the two marks, as Nestle's mark consists of a hyphenated word with the
paired word being "MATE" while Puregold's mark consists of the paired word "MATCH." While it is
true that the first three letters "M," "A," and "T" are common in the two marks, Puregold's mark,
which are two separate words, with the capitalization of the letters "C" and "M," is readily apparent
when "COFFEE MATCH" and "COFFEE-MATE" are compared side by side. 19

The dispositive portion of the Decision states:

WHEREFORE, premises considered, the appeal is hereby DISMISSED. Let a copy of this Decision
and the records of this case be furnished and returned to the Director of Bureau of Legal Affairs for
appropriate action. Further, let also the Director of the Bureau of Trademarks and the library of the
Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision
for information, guidance, and records purposes.

SO ORDERED. 20

On 14 April 2014, Nestle filed a Petition for Review  with the Court of Appeals.
21

The Decision of the CA

In a Resolution dated 15 May 2014, the CA dismissed Nestle's petition for review on procedural
grounds.

The Resolution states:

A perusal of the Petition for Review shows that:

1. the title thereof does not bear the name of party respondent Puregold Price Club, Inc.

2. there is no board resolution and/or secretary's certificate to prove the authority of Dennis Jose R.
Barnt to file the petition and to sign the Verification/Certification of Non-Forum Shopping on behalf of
petitioner-corporation; and

3. certified true copies of material [portions] of the record which were mentioned therein were not
attached, such as respondent's trademark application (rollo, p. 12), petitioner's Opposition thereto,
Reply, the parties' respective position papers, petitioner's appeal, respondent's Comment, the
parties' respective memoranda, etc. The above considering, the Court RESOLVES to DISMISS the
petition outright.22
On 13 June 2014, Nestle filed a Motion for Reconsideration  which was denied by the CA on 14
23

October 2014.  The Resolution of the CA states: >>

24

We DENY the Motion for Reconsideration because it is without merit.

The petitioner filed the Petition beyond the 15-day reglementary period.

Under Rule 43, Section 4 of the Rules of Court, a party may file an appeal to this Court from quasi-
judicial bodies like the Intellectual Property Office, within 15 days from receipt of the assailed
judgment, order, or resolution.

Petitioner's counsel of record before the Intellectual Property Office ("IPO"), the Sapalo Velez
Bundang & Bulilan Law Offices ("SVBB Law Offices") received a copy of the assailed Decision on 19
February 2014. Thus, petitioner had until 7 March 2014 to appeal. While the Bengzon Negre &
Untalan Law Offices ("Bengzon Law Offices") entered its appearance before the IPO, no evidence
was submitted before this Court showing that the Bengzon Law Offices was properly substituted as
petitioner's counsel in place of SVBB Law Offices (petitioner's counsel of record). Thus, the 15-day
reglementary period started to run from the date SVBB Law Offices received a copy of the Decision.

Clearly, when petitioner filed the Motion for Extension on 27 March 2014, and the Petition on 14 April
2014, the reglementary period had already lapsed.

Further, the petitioner obstinately refuses to cure the procedural infirmities we observed in the
Resolution of 15 May 2014.

SO ORDERED. 25

The Issues

Nestle presented the following issues in this petition:

1. The Honorable Court of Appeals erred in dismissing petitioner's motion for reconsideration upon
an erroneous appreciation of certain antecedent facts, and similarly erred in dismissing the petition
for review onyrocedural grounds.

2. There is merit to the substantive issues raised by petitioner, which deserves to be given due
course and a final ruling.
26

The Ruling of this Court

We deny the petition.

Before discussing the substantive issues, we shall first discuss the procedural issues in this case.

Nestle filed its petition for review

within the period granted by the Court of Appeals.

The CA dismissed Nestle's petition for review on the ground that Nestle filed its petition for review
after the 15-day reglementary period required by Section 4, Rule 43 of the Rules of Court.
The CA is wrong.

Section 4, Rule 43 of the Rules of Court states:

Section 4. Period of appeal. - The appeal shall be taken within fifteen (15) days from notice of the
award, judgment, final order or resolution, or from the date of its last publication, if publication is
required by law for its effectivity, or of the denial of petitioner's motion for new trial or reconsideration
duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for
reconsideration shall be allowed. Upon proper motion and the payment of the full amount of the
docket fee before the expiration of the reglementary period, the Court of Appeals may grant an
additional period of fifteen (15) days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason and in no case to exceed fifteen
(15) days.

During the proceedings in the ODG-IPO, Nestle substituted its counsel, Sapalo, Velez, Bundang and
Bulilan Law Offices, with Bengzon, Negre and Untalan Law Offices (Nestle's substituted counsel).
On 20 September 2013, Nestle's substituted counsel entered its appearance in the ODG-IP0.  In an 27

Order  dated 1 October 2013, the ODG-IPO noted the appearance of Nestle's substituted counsel
28

and included their appearance in the records of the case, to wit:

Wherefore, the APPEARANCE is hereby noted and included in the records. Accordingly, let copies
of all pleadings, orders, notices and communications, be sent to the aforementioned address.

SO ORDERED. 29

The Decision of the ODG-IPO was received by Nestle's substituted counsel on 14 March 2014. On
27 March 2014, within the 15-day reglementary period provided for by Section 4 of Rule 43, Nestle
filed a Motion for Extension of Time to file Verified Petition for Review  (motion for extension) with
30

the CA. In a Resolution  dated 3 April 2014, the CA granted Nestle's motion for extension and gave
31

Nestle until 13 April 2014 to file its petition for review. The resolution states:

The Court GRANTS petitioner's Motion for Extension of Time to File Verified Petition for Review and
gives petitioner until April 13, 2014 within which to do so. 32

Since 13 April 2014 fell on a Sunday, Nestle had until 14 April 2014, which was the next working
day, within which to file the petition for review. Nestle did file the petition for review with the CA on 14
April 2014. Accordingly, the CA committed a grave error when it ruled that Nestle's petition for review
was filed beyond the prescribed period.

Nestle failed to properly execute a

certification against forum shopping
as required by Section 5, Rule 7
of the Rules of Court.

Section 5, Rule 7 of the Rules of Court provides:

Section 5. Certification against forum shopping. -The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and,
to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) ifhe should
thereafter learn that the same or similar action or claim has been filed or is pending, he shall report
that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment
of the complaint or other initiatory pleading but shall be cause for the dismissal of the case
without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a
false certification or non-compliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions. If the
acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same
shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as
a cause for administrative sanctions. (Emphasis supplied)

In Zulueta v. Asia Brewery, Inc.,  this Court ruled that the requirements under the Rules of Court
33

involving the certification against forum shopping apply both to natural and juridical persons, to wit:
"[t]he requirement that the petitioner should sign the certificate of non-forum shopping applies even
to corporations, considering that the mandatory directives of the Circular and the Rules of Court
make no distinction between natural and juridical persons." 34

In Fuentebella v. Castro,  this Court held that the certification against forum shopping must be
35

signed by the principal party. In case the principal party cannot sign, the one signing on his or her
behalf must have been duly authorized, to wit: "the petitioner or the principal party must execute the
certification against forum shopping. The reason for this is that the principal party has actual
knowledge whether a petition has previously been filed involving the same case or substantially the
same issues. If, for any reason, the principal party cannot sign the petition, the one signing on his
behalf must have been duly authorized." 36

Juridical persons, including corporations, that cannot personally sign the certification against forum
shopping, must act through an authorized representative.  The exercise of corporate powers
1âwphi1

including the power to sue is lodged with the board of directors which acts as a body representing
the stockholders. For corporations, the authorized representative to sign the certification against
forum shopping must be selected or authorized collectively by the board of directors.
In Eslaban, Jr. v. Vda. de Onorio,  this Court ruled that if the real party in interest is a corporation, an
37

officer of the corporation acting alone has no authority to sign the certification against forum
shopping. An officer of the corporation can only validly sign the certification against forum shopping if
he or she is authorized by the board of directors through a board resolution or secretary's certificate.
In Gonzales v. Climax Mining Ltd. ,  this Court ruled that a board resolution authorizing a corporate
38

officer to execute the certification against forum shopping is a necessary requirement under the
Rules. A certification signed by a person who was not duly authorized by the board of directors
renders the petition for review subject to dismissal. 39

The authority of the representative of a corporation to sign the certification against forum shopping
originates from the board of directors through either a board of directors' resolution or secretary's
certificate which must be submitted together with the certification against forum shopping. In Zulueta,
this Court declared invalid a petition for review with a certification against forum shopping signed by
the party's counsel which was not supported by a board resolution or secretary's certificate proving
the counsel's authority. This Court dismissed the case and held: "[t]he signatory in the Certification
of the Petition before the CA should not have been respondents' retained counsel, who would not
know whether there were other similar cases of the corporation. Otherwise, this requirement would
easily be circumvented by the signature of every counsel representing corporate parties."  Likewise,
40
in Eslaban, this Court held that a certification signed by counsel alone is defective and constitutes a
valid cause for the dismissal of the petition.
41

Nestle, itself, acknowledged in this petition the absence of a board resolution or secretary's
certificate issued by the board of directors of Nestle to prove the authority of Barot to sign the
certification against forum shopping on behalf of Nestle, to wit: "[t]hus, while there is no board
resolution and/or secretary's certificate to prove the authority of Dennis Jose R. Barot to file
the petition and Verification/Certification of NonForum Shopping on behalf of petitioner-
corporation, there is a Power of Attorney evidencing such authority."  The power of attorney
42

submitted by Nestle in favor of Barot was signed by Celine Jorge. However, the authority of Celine
Jorge to sign the power of attorney on behalf of Nestle, allowing Barot to represent Nestle, was not
accompanied by a board resolution or secretary's certificate from Nestle showing that Celine Jorge
was authorized by the board of directors of Nestle to execute the power of attorney in favor of Barot.
In Development Bank of the Philippines v. Court of Appeals,  this Court held that the failure to attach
43

a copy of a board resolution proving the authority of the representative to sign the certification
against forum shopping was fatal to its petition and was sufficient ground to dismiss since the courts
are not expected to take judicial notice of board resolutions or secretary's certificates issued by
corporations, to wit:

What petitioners failed to explain, however, is their failure to attach a certified true copy of Resolution
No. 0912 to their petition for certiorari in CA-G.R. SP No. 60838. Their omission is fatal to their
case. Courts are not, after all, expected to take judicial notice of corporate board resolutions
or a corporate officer's authority to represent a corporation. To be sure, petitioners' failure to
submit proof that Atty. Demecillo has been authorized by the DBP to file the petition is a "sufficient
ground for the dismissal thereof."  (Emphasis supplied)
44

Accordingly, the CA did not err in ruling that the petition for review should be dismissed due to the
failure of Nestle to comply with the proper execution of the certification against forum shopping
required by Section 5, Rule 7 of the Rules of Court.

Puregold's mark may be registered.

A trademark is any distinctive word, name~ symbol, emblem, sign, or device, or any combination
thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt by others.  Section 123 of Republic Act No. 8293  (RA
45 46

8293) provides for trademarks which cannot be registered, to wit:

Sec. 123. Registrability. -

123 .1 A mark  cannot be registered if it:

47

xxxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an
earlier filing or priority date, in respect of:

(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion;

(e) Is identical with, or confusingly similar to, or constitutes a translation of a mark which is
considered by the competent authority of the Philippines to be wellknown internationally and in the
Philippines, whether or not it is registered here, as being already the mark of a person other than the
applicant for registration, and used for identical or similar goods or services: Provided, That in
determining whether a mark is well-known, account shall be taken of the knowledge of the relevant
sector of the public, rather than of the public at large, including knowledge in the Philippines which
has been obtained as a result of the promotion of the mark;

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-
known in accordance with the preceding paragraph, which is registered in the Philippines with
respect to goods or services which are not similar to those with respect to which registration is
applied for: Provided, That use of the mark in relation to those goods or services would indicate a
connection between those goods or services, and the owner of the registered mark: Provided
further, That the interests of the owner of the registered mark are likely to be damaged by such use;

(g) Is likely to mislead the public, particularly as to the nature, quality, characteristics or geographical
origin of the goods or services;

(h) Consists exclusively of signs that are generic for the goods or services that they seek to identify;
x x x x (Emphasis supplied)

In Coffee Partners, Inc. v. San Francisco & Roastery, Inc.,  this Court held that the gravamen of
48

trademark infringement is the likelihood of confusion. There is no absolute standard for the 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. 49

In determining similarity or 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
50

features of the competing trademarks that might cause confusion and deception. If the competing
trademark contains the main, essential, and dominant features of another, and confusion or
deception is likely to result, likelihood of confusion exists. The question is whether the use of the
marks involved is likely to cause confusion or mistake in the mind of the public or to deceive
consumers.  In McDonald's Corporation v. L.C. Big Mak Burger, lnc.,  this Court gave greater weight
51 52

to the similarity of the appearance of the product arising from the adoption of the dominant features
of the registered mark, to wit: "[c]ourts 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."  The dominancy test is now incorporated into law in Section 155.1 of RA 8293
53

which states:

SECTION 155. Remedies; Infringement. - Any person who shall, without the consent of the owner of
the registered mark:

155.l Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; (Emphasis supplied)

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. 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.54

The word "COFFEE" is the common dominant feature between Nestle's mark "COFFEE-MATE" and
Puregold's mark "COFFEE MATCH." However, following Section 123, paragraph (h) of RA 8293
which prohibits exclusive registration of generic marks, the word "COFFEE" cannot be exclusively
appropriated by either Nestle or Puregold since it is generic or descriptive of the goods they seek to
identify. In Asia Brewery, Inc. v. Court of Appeals,  this Court held that generic or descriptive words
55

are not subject to registration and belong to the public domain. Consequently, we must look at the
word or words paired with the generic or descriptive word, in this particular case "-MATE" for
Nestle's mark and "MATCH" for Puregold's mark, to determine the distinctiveness and registrability
of Puregold's mark "COFFEE MATCH."

We agree with the findings of the BLA-IPO and ODG-IPO. The distinctive features of both marks are
sufficient to warn the purchasing public which are Nestle's products and which are Puregold's
products. While both "-MATE" and "MATCH" contain the same first three letters, the last two letters
in Puregold's mark, "C" and "H," rendered a visual and aural character that made it easily
distinguishable from Nestle's mark. Also, the distinctiveness of Puregold's mark with two separate
words with capital letters "C" and "M" made it distinguishable from Nestle's mark which is one word
with a hyphenated small letter "-m" in its mark. In addition, there is a phonetic difference in
pronunciation between Nestle's "-MATE" and Puregold's "MATCH." As a result, the eyes and ears of
the consumer would not mistake Nestle's product for Puregold's product. Accordingly, this Court
sustains the findings of the BLA-IPO and ODG-IPO that the likelihood of confusion between Nestle's
product and Puregold's product does not exist and upholds the registration of Puregold's mark.

WHEREFORE, we DENY the petition. We AFFIRM the 15 May 2014 Resolution and the 14 October
2014 Resolution of the Court of Appeals in CA-G.R. SP No. 134592.

G.R. No. 198889

UFC PHILIPPINES, INC. (now merged with NUTRI-ASIA, INC., with NUTRI-ASIA, INC. as the
surviving entity), Petitioner,
vs.
BARRIO FIESTA MANUFACTURING CORPORATION, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

For our disposition is a petition for review on certiorari under Rule 45 seeking to annul and set aside
the June 23, 2011 Decision  and the October 4, 2011 Resolution  of the Court of Appeals in CA-
1 2

G.R. SP No. 107570, which reversed and set aside the March 26, 2008 Decision  of the Bureau of
3

Legal Affairs of the Intellectual Property Office (IPO-BLA) and the January 29, 2009 Decision  of the
4

Director General of the IPO.

Petitioner Nutri-Asia, Inc. (petitioner) is a corporation duly organized and existing under Philippine
laws.  It is the emergent entity in a merger with UFC Philippines, Inc. that was completed on
5

February 11, 2009.  Respondent Barrio Fiesta Manufacturing Corporation (respondent) is likewise a
6

corporation organized and existing under Philippine laws.

On April 4, 2002, respondent filed Application No. 4-2002-002757 for the mark "PAPA BOY &
DEVICE" for goods under Class 30, specifically for "lechon sauce."  The Intellectual Property Office
7

(IPO) published said application for opposition in the IP Phil. e-Gazette released on September 8,
2006. The mark appears as follows:

On December 11, 2006, petitioner filed with the IPO-BLA a Verified Notice of Opposition to the
above-mentioned application and alleged that:

1. The mark "PAPA" for use on banana catsup and other similar goods was first used [in] 1954 by
Neri Papa, and thus, was taken from his surname;

2. After using the mark "PAP A" for about twenty-seven (27) years, Neri Papa subsequently
assigned the mark "PAPA" to Heman D. Reyes who, on September 17, 1981, filed an application to
register said mark "PAP A" for use on banana catsup, chili sauce, achara, banana chips, and instant
ube powder;

3. On August 14, 1983, Heman D. Reyes was issued Certificate of Registration No. 32416;

4. [Certificate of] Registration No. 32416 was subsequently assigned to the following in successive
fashion: Acres & Acres Food, Inc., Southeast Asia Food, Inc., Heinz-UFC Philippines, Inc., and
Opposer UFC Philippines, Inc.;

5. Last October 28, 2005, Heinz-UFC Philippines, Inc. filed Application Serial No. 4-2005-010788
which, in effect, is a re-registration of Registration No. 32416 which expired on August 11, 2003;

6. Heman D. Reyes also filed on March 04, 1982 an application to register in the Supplemental
Register the "PAPA BANANA CATSUP Label";

7. On August 11, 1983, Heman D. Reyes was issued Certificate of Registration No. SR-6282 which
was subsequently assigned to Acres & Acres Food, Inc., Southeast Asia Food, Inc., Heinz-UFC
Philippines, Inc.;

8. After its expiration, Opposer filed on November 15, 2006 Trademark Application Serial No. 4-
2006-012346 for the re-registration of the "PAP A Label Design";

9. The mark "PAP A KETSARAP" for use on banana sauce falling under Class 30 was also
registered in favor of Acres & Acres Food, Inc. under Registration No. 34681 issued on August 23,
1985 and renewed last August 23, 2005 by Heinz-UFC Philippines, Inc. for ten (10) years;

10. On November 07, 2006, Registration No. 34681 was assigned to Opposer;
11. Opposer has not abandoned the use of the mark "PAP A" and the variations thereof as Opposer
has continued their use up to the present;

12. The mark "PAPA BOY & DEVICE" is identical to the mark "PAPA" owned by Opposer and duly
registered in its favor, particularly the dominant feature thereof;

13. [With the] dominant feature of respondent-applicant's mark "PAPA BOY & DEVICE", which is
Opposer's "PAPA" and the variations thereof, confusion and deception is likely to result: The
consuming public, particularly the unwary customers, will be deceived, confused, and mistaken into
believing that respondent-applicant's goods come from Opposer or are authorized by Opposer to
Opposer's prejudice, which is particularly true considering that Opposer's sister company, Southeast
Asia Food, Inc., and its predecessors-in-interest have been major manufacturers and distributors of
lechon sauce and other table sauces since 1965 under its registered mark "Mang Tomas";

14. Respondent-applicant's mark "PAPA BOY & DEVICE" which nearly resembles Opposer's mark
"PAPA" and the variations thereof will impress upon the gullible or unsuspecting public that it is the
same or related to Opposer as to source because its dominant part is the same as Opposer's mark
and, thus, will likely be mistaken to be the mark, or related to, or a derivative or variation of,
Opposer's mark;

15. The goods covered by respondent-applicant's application fall under Class 30, the same Class
under which Opposer's goods enumerated in its earlier issued registrations;

16. The test of dominancy is now explicitly incorporated into law in Section 155 .1 of the IP Code
which defines infringement as the colorable imitation of a registered mark or a dominant feature
thereof, and is provided for by jurisprudence;

17. As a corporation also engaged in the food business, Respondent-applicant knew and/or ought to
know that Opposer and its predecessors-in-interest have been using the mark "PAPA" and the
variations thereof for the last fifty-two (52) years while its sister company is engaged in the business
of manufacturing and distributing "lechon sauce" and other table sauces for the last forty-one (41)
years;

18. The approval of the subject application will violate Opposer's right to the exclusive use of its
registered mark "PAPA" and the variations thereof per Section 138 of the IP Code;

19. The approval of the subject application has caused and will continue to cause great and
irreparable damage and injury to Opposer;

20. Respondent-applicant filed the subject application fraudulently and in bad faith; and

21. Respondent-applicant is not entitled to register the subject mark in its favor. 8

In its verified opposition before the IPO, petitioner contended that "PAPA BOY & DEVICE" is
confusingly similar with its "PAPA" marks inasmuch as the former incorporates the term "PAP A,"
which is the dominant feature of petitioner's "PAPA" marks. Petitioner averred that respondent's use
of "PAPA BOY & DEVICE" mark for its lechon sauce product, if allowed, would likely lead the
consuming public to believe that said lechon sauce product originates from or is authorized by
petitioner, and that the "PAPA BOY & DEVICE" mark is a variation or derivative of petitioner's
"PAPA" marks. Petitioner argued that this was especially true considering that petitioner's ketchup
product and respondent's lechon sauce product are related articles that fall under the same Class
30.9

Petitioner alleged that the registration of respondent's challenged mark was also likely to damage
the petitioner, considering that its former sister company, Southeast Asia Food, Inc., and the latter's
predecessors-in-interest, had been major manufacturers and distributors of lechon and other table
sauces since 1965, such as products employing the registered "Mang Tomas" mark.

In its Verified Answer, respondent argued that there is no likelihood of confusion between petitioner's
family of "PAPA" trademarks and respondent's "PAPA BOY & DEVICE" trademark. Respondent
raised affirmative defenses and we quote the relevant ones below:

3. Opposer cites several of its following marks in support of its opposition to the application but an
examination of said marks [reveals] that these have already expired and/or that no confusing
similarity exists x xx;

4. Assuming that the mark "PAPA KETSARAP" had been timely renewed on August 23, 2005 for
"banana sauce" under Class 30, the same is not a hindrance to the successful registration of the
mark "PAPA BOY & DEVICE": Jurisprudence provides that a certificate of registration confers upon
the trademark owner the exclusive right to use its own symbol only to those goods specified in the
certificate subject to the conditions and limitations stated therein;

5. As a result, Opposer's right to use the mark "PAPAKETSARAP" is limited to the products covered
by its certificate of registration which is Class 30 for banana sauce;

6. Contrary to Opposer's belief, the dominant features of Respondent-applicant's mark "PAPA BOY
& DEVICE" are the words "PAPA BOY" and the representation of a smiling hog-like character
gesturing the thumbs-up sign and wearing a traditional Filipino hat and scarf while the dominant
feature of Opposer's mark "PAPA KETSARAP" are the words "Papa" and "Ketsarap", not the word
"Papa"; and the word "Ketsarap " is more prominently printed and displayed in the foreground than
the word "Papa" for which reasons opposer's reference to the Dominancy Test fails;

7. Opposer's allegation that the registration of Respondent-applicant's mark "PAPA BOY & DEVICE"
will damage and prejudice the mark "MANG TOMAS" is irrelevant considering that Opposer's basis
for filing this opposition is the alleged confusing similarity between Respondent-applicant's mark and
Opposer's mark "PAPA KETSARAP", not the mark "MANG TOMAS";

8. Respondent-applicant's mark "PAPA BOY & DEVICE" is neither identical nor confusingly similar
to Opposer's mark "PAPA KETSARAP": Respondent-applicant's mark "PAPABOY & DEVICE" is an
arbitrary mark which differs in overall sound, spelling, meaning, style, configuration, presentation,
and appearance from Opposer's mark "PAPA KETSARAP";

9. The dissimilarities between the marks are so distinct, thus, confusion is very unlikely: While
Opposer's mark is a plain word mark, Respondent-applicant's mark "PAPA BOY & DEVICE" is much
more intricate and distinctive such as Opposer's mark not having the words "Lechon Sauce" printed
inside a blue ribbon-like device which is illustrated below the words "PAPA BOY", Opposer's mark
not having a prominent smiling hog-like character gesturing a thumbs-up sign and wearing a Filipino
hat and scarf stands beside the words "PAPA BOY", and Opposer's mark not having the words
"Barrio Fiesta" albeit conspicuously displayed above the mark, all which leave no doubt in the
consumer's mind on the product that he is purchasing;
10. Aside from the fact that Respondent-applicant's mark "PAPA BOY & DEVICE" is distinct and
different in appearance, spelling, sound, meaning, and style from Opposer's mark "PAPA
KETSARAP", the difference in the goods covered by both marks is obvious: Since the goods
covered by Respondent-applicant's mark is unrelated and non-competing to those covered by
Opposer's mark, the doctrine allowing the registrations of marks covering unrelated and non-
competing goods as enunciated by the Supreme Court is therefore applicable in this case;

11. Respondent-applicant's mark cannot be confusingly similar to Opposer's mark considering that
the products covered by these marks are different: While Respondent-applicant's mark "PAPA BOY
& DEVICE" covers lechon sauce under Class 30, Opposer's mark "PAPA KETSARAP" covers
banana sauce;

12. If a consumer is in the market for banana sauce, he will not buy lechon sauce and vice-versa
and as a result, the margin of error in the acquisition of one from the other is simply remote;

13. Respondent-applicant is the exclusive owner of the mark "PAPA BOY & DEVICE" for lechon
sauce under Class 30: The words "PAPA BOY" is a combination of the nickname of Bonifacio
Ongpauco who is one of Respondent-applicant's incorporators and founders" BOY"- and the word
"PAPA" as Bonifacio Ongpauco's mother, Sixta P. Evangelista, had been fondly known as "Mama
Chit", making Respondent-applicant the prior adopter, user, and applicant of the mark "PAPA BOY &
DEVICE" in the Philippines;

14. To protect its ownership over the mark "PAPA BOY & DEVICE" considering that it is the first to
adopt and use said mark, Respondent-applicant applied for its registration under Application Serial
No. 4-2002-002757 for Class 30, and said application was found registrable by the Examiner as. a
consequence of which the same was recommended for allowance after undergoing a thorough
process of examination, which recommendation was then approved by the Director of the Bureau of
Trademarks (BOT);

15. Respondent-applicant's mark "PAPA BOY & DEVICE" has been commercially used in the
Philippines;

16. Respondent-applicant's mark "PAPA BOY & DEVICE" has been promoted and advertised for a
considerable duration of time and over wide geographical areas: Respondent-applicant has invested
tremendous amount of resources in the promotion of its mark "PAPA BOY & DEVICE" through
various media including print publications and promotional materials;

17. The widespread local commercial use of the subject mark by Respondent-applicant to
distinguish and identify its various high-quality consumer products has earned Respondent-applicant
a well-deserved business reputation and goodwill;

18. Respondent-applicant's mark is distinctive and capable of identifying its goods and distinguishing
them from those offered for sale by others in the market including Opposer's goods for which reason
no confusion will result because Respondent-applicant's mark is for lechon sauce while Opposer's
mark is for banana sauce; and

19. The presence of a common prefix "PAPA" in the marks of both parties does not render said
marks identical or confusingly similar: Opposer cannot exclusively appropriate said prefix
considering that other marks such as "Papa Heinz Pizza", "Papa Heinz Sausage", "Papa Beaver",
"Papa Pop", "Pizza Papa John's & Design", "Papadoods", and "Papa in Wine and Device" are valid
and active.10
Petitioner's mark and its variations appear as follows:

1. "PAPA" under Registration No. 32416 for Class 29 goods; 11

2. The mark "PAPA" as it appeared upon re-registration of Certificate No. 32416, under Application
No. 4-2005-010788 for Classes 29 and 30 goods; 12

3. "PAPA LABEL DESIGN" under Registration No. 4-2006-012364·  and 13

4. "PAPA KETSARAP" under Certificate of Registration No. 34681, for banana sauce (Class 30). 14

PROCEEDINGS BEFORE THE INTELLECTUAL PROPERTY OFFICE

The case was referred to mediation but the parties failed to arrive at an amicable settlement. The
case was thus set for preliminary conference. Subsequently, the IPO-BLA directed the parties to file
their respective position papers and draft decisions.

The IPO-BLA rendered a Decision on March 26, 2008 sustaining petitioner's Opposition and
rejecting respondent's application for "PAPA BOY & DEVICE." The fallo of said decision reads as
follows:

WHEREFORE, the VERIFIED NOTICE OF OPPOSITION filed by UFC Philippines, Inc. is, as it is
hereby, SUSTAINED. Consequently, Application Serial No. 4-2002-002757 for the mark "PAPA BOY
& DEVICE" for lechon sauce under Class 30 filed on April 04, 2002 by Barrio Fiesta Manufacturing
Corporation, is, as it is hereby, REJECTED.

Let the file wrapper of PAPA BOY & Device subject matter of this case be forwarded to the Bureau
of Trademarks (BOT) for appropriate action in accordance with this Decision.15

Respondent filed an appeal before the IPO Director General, who found it unmeritorious, and
disposed of the case in the following manner:

WHEREFORE, the instant appeal is hereby DISMISSED. Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of the Bureau of Legal
Affairs for appropriate action. Further, let also the Director of the Bureau of Trademarks and the
library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of
this Decision for information, guidance, and records purposes."
16

DECISION OF THE COURT OF APPEALS

Respondent then filed a petition with the Court of Appeals, questioning the above decision of the
IPO Director General that affirmed the decision of the IPO Bureau of Legal Affairs Director, which
disallowed respondent's application for trademark registration. Respondent's arguments before the
Court of Appeals are quoted below:

A.

REGISTRATION NOS. 32416 AND 42005010788 ISSUED FOR THE "PAPA" MARK AND
REGISTRATION NOS. SR-6282 AND 42006012364 ISSUED FOR THE TRADEMARK "PAPA
BANANA CATSUP LABEL/PAPA LABEL DESIGN" SHOULD NOT BE USED AS BASIS IN
DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY.

B.

THERE IS NO CONFUSING SIMILARITY BETWEEN PETITIONER-APPLICANT'S "PAPA BOY &

DEVICE" AND RESPONDENT'S "PAPA KETSARAP" MARK.

C.

PETITIONER-APPLICANT IS ENTITLED TO THE REGISTRATION OF THE MARK "PAPA BOY &

DEVICE."

D.

THE OPPOSITION STATES NO CAUSE OF ACTION, AND HENCE, SHOULD BE DENIED

OUTRIGHT. 17

As regards the first ground, the Court of Appeals held:

Records show that respondent UFC has Certificates of Registration for the trademarks PAPA, PAPA
BANANA CATSUP label and PAPA KETSARAP. A closer look at the respective Certificate[ s] of
Registration of the aforementioned marks, however, reveals that at the time the trademark
application of petitioner was published in the IPO e-Gazette on September 8, 2006, the duration of
the trademark registration of respondent over the marks PAPA and PAPA BANANA CATSUP have
already expired. On the other hand, the mark PAPA KETSARAP was timely renewed by
respondent as shown by the Certificate of Renewal of Registration issued on September 1,
2006 by the Director of the Bureau of Trademarks.

Under R.A. No. 8293, as amended by R.A. No. 9150, the duration of a trademark registration is 10
years, renewable for periods of 10 years each renewal. The request for renewal must be made
within 6 months before or after the expiration of the registration. Respondent's PAPA mark was not
renewed within the period provided for under RA No. 8293. Its registered term ended on August 11,
2003 but was reapplied for registration only on April 4, 2005. Meanwhile, the mark PAPA BANANA
CATSUP was registered by respondent only in the Supplemental Register, hence, was not provided
any protection. x x x. It is noted that the PAPA BANANA CATSUP label was applied for registration
on November 15, 2006, over three years after the expiration of its registration in the Supplemental
Register of the Philippine Patent Office on August 11, 2003. Thus, while petitioner has a point
that the marks PAPA and PAPA BANANA CATSUP have already expired and the latter having
been afforded no protection at all and should not be juxtaposed with petitioner's trademark,
respondent can still use the marks PAPA KETSARAP and PAPA BANANA CATSUP, it
appearing that the Intellectual Property Office issued a Certificate of Registration No. 4-2006-
012364 for the latter on April 30, 2007, to bar the registration of petitioner's "PAPA BOY &
DEVICE" mark.  (Emphases supplied, citations omitted.)
18

Anent the second ground, the Court of Appeals ruled in the following manner:

After taking into account the aforementioned doctrines and the factual circumstances of the
case at bar, this Court, after considering the trademarks involved as a whole, is of the view
that petitioner's trademark "PAP A BOY & DEVICE" is not confusingly similar to respondent's
"PAPA KETSARAP" and "PAPA BANANA CATSUP" trademark. Petitioner's trademark is "PAPA
BOY" as a whole as opposed to respondent's "PAPA". Although on its label the word "PAPA" is
prominent, the trademark should be taken as a whole and not piecemeal. The difference between
the two marks are conspicuous and noticeable. While respondent's products are both labeled as
banana sauces, that of petitioner Barrio Fiesta is labeled as lechon sauce.

Moreover, it appears on the label of petitioner's product that the said lechon sauce is manufactured
by Barrio Fiesta thus, clearly informing the public [of] the identity of _the manufacturer of the lechon
sauce. As claimed by respondent, its products have been in commercial use for decades. It is safe
to assume then that the consumers are already aware that "PAPA KETSARAP" and "PAPA
BANANA CATSUP" are products of UFC and not of petitioner or the other way around. In addition,
as correctly pointed out by petitioner, if a consumer is in the market for banana sauce, he will not
buy lechon sauce and vice-versa because aside from the fact that the labels of both parties' products
contain the kind of sauce they are marketing, the color of the products is visibly different. An ordinary
consumer is familiar with the fact that the color of a banana sauce is red while a lechon sauce is
dark brown. There can be no deception as both products are marketed in bottles making the
distinction visible to the eye of the consumer and the likelihood of acquiring a wrong sauce, remote.
Even if the products are placed side by side, the dissimilarities between the two marks are
conspicuous, noticeable and substantial enough to matter especially in the light of the following
variables that must be factored in.

Lastly, respondent avers that the word "PAPA" was coined after the surname of the person who first
created and made use of the mark. Admittedly, while "PAPA" is a surname, it is more widely known
as a term of endearment for one's father. Respondent cannot, therefore, claim exclusive ownership
over and singular use of [the] term. Petitioner was able to explain that it adopted the word "PAPA" in
parallel to the nickname of the founder of Barrio fiesta which is "MAMA CHIT". "PAPA BOY" was
derived from the nickname of one of the incorporators of herein petitioner, a certain Bonifacio
Ongpauco, son of Mama Chit.  (Emphasis ours, citation omitted.)
19

THEORY OF PETITIONER

Thus, petitioner came to this Court, seeking the reversal of the questioned decision and resolution of
the Court of Appeals, and the reinstatement of the decision of the IPO Director General affirming the
decision of the IPO-BLA. Petitioner raises the following grounds:

I.

The court a quo erred in applying the "holistic test" to determine whether there is confusing similarity
between the contending marks, and in reversing the IPO-BLA and the Director General's application
of the "dominancy test."

II.

The court a quo erred in holding that there is no likelihood of confusion between the contending
marks given that the "PAPA BOY & DEVICE" mark is used on lechon sauce, as opposed to ketchup
products.

III.

The court a quo erred in holding that Petitioner cannot claim exclusive ownership and use of the
"PAP A" mark for its sauce products because "PAPA" is supposedly a common term of endearment
for one's father.
20

Under the first ground, petitioner submitted the following arguments:

1. The findings of administrative agencies, if supported by substantial evidence, are binding upon the
courts.21

Petitioner alleges that the Court of Appeals should have respected the ruling of the IPO Director
General, which was consistent with the ruling of the IPO-BLA and supported by substantial
evidence, instead of substituting its findings of fact for those of the Director General and the IPO-
BLA.

2. The dominancy test should have been applied to determine if there is confusing similarity between
the competing marks. 22

Petitioner points out that the Director General and the IPO-BLA found that the dominant feature of
the competing marks is the word "PAP A" and the minor additions to respondent's "PAPA BOY &
DEVICE" mark do not negate likelihood of confusion caused by the latter's use of the dominant word
"PAPA." Petitioner claims that even compared solely to petitioner's "PAPA KETSARAP" mark
(Registration No. 34681), which is conceded to have been timely renewed and to have never
expired, respondent's "PAPA BOY & DEVICE" would still create the likelihood of confusion. 23

According to petitioner, the Court of Appeals based its decision on Mead Johnson & Co. v. N.V.J.
Van Dorp, Ltd.,  a case decided almost five decades ago, long before Republic Act No. 8293 or the
24

1998 Intellectual Property Code was enforced. Thus, the Court of Appeals erroneously applied the
holistic test since given the nature of the products bearing the competing marks, the dominancy test
should have been applied.

Petitioner claims that "[k]etchup and lechon sauce are common and inexpensive household products
that are sold in groceries and regularly encountered by the ordinary or common purchaser who is not
expected to examine, scrutinize, and compare the details of the competing marks." 25

Petitioner distinguishes this case from Mead Johnson and claims that the ordinary purchaser of
ketchup or lechon sauce is not likely to closely scrutinize each mark as a whole, for the latter is
"undiscemingly rash" and usually in a hurry, and cannot be expected to take note of the smiling hog-
like character or the blue ribbon-like device with the words "Lechon Sauce." Petitioner argues that
under the Intellectual Property Code, it is not necessary for one to colorably imitate the competing
trademark as a whole. It is sufficient that one imitates a "dominant feature" of the mark to constitute
trademark infringement.

Petitioner asserts that as the IPO-BLA and the Director General observed that the ordinary
purchaser is most likely to notice the words "PAPA BOY," which, in turn, may lead him to believe that
there is a connection between respondent's lechon sauce and petitioner's ketchup products.

Under the second ground, petitioner argues that the Court of Appeals seemed to be unmindful that
two kinds of confusion may arise from the use of similar or colorable imitation marks, i.e., confusion
of goods (product confusion) and confusion of business (source or origin confusion). Petitioner
claims that it is reasonable to assume that it may expand its business to producing lechon sauce,
inasmuch as it already produces food sauce products and its Articles of Incorporation authorizes it to
do so.

Petitioner alleges that the IPO-BLA recognized that confusion of business may arise from
respondent's use of its "PAPA BOY & DEVICE" mark for lechon sauce products, and that the
Director-General agreed with the IPO-BLA's findings on this issue.

Petitioner asserts that ketchup and lechon sauce are undeniably related goods; that they belong to
the same class, i.e., Class 30 of the Nice Classifications; that they serve practically the same
purpose, i.e., to spice up dishes; and that they are sold in similar bottles in the same shelves in
grocery stores. Petitioner argues that the Court of Appeals had absolutely no basis for stating that a
person who is out to buy ketchup is not likely to buy lechon sauce by mistake, as this analysis
allegedly only applies to "product confusion" and does not consider confusion of business. Petitioner
alleges that "[t]here equally is actionable confusion when a buyer purchases Respondent's 'PAPA
BOY' lechon sauce believing that the said product is related to or associated with the famous 'PAPA
KETSUP' makers." Petitioner further alleges that "it is reasonable and likely for a consumer to
believe that Respondent's 'PAPA BOY' lechon sauce originated from or is otherwise connected with
Petitioner's line of sauces" and that this is "the precise evil that recognition of confusion of business
seeks to prevent."26

Petitioner avers that "PAPA" is a well-known mark and that it has been in commercial use as early
as 1954 on banana ketchup and similar goods. The "PAPA" mark is also registered as a trademark
and in commercial use in other parts of the world such as the United States of America and the
Middle East. Petitioner claims that "[b ]eing a trademark that is registered and well-known both
locally and internationally, Petitioner's 'PAPA' marks cannot be appropriated by another person or
entity not only with respect to goods similar to those with respect to which it is registered, but also
with respect to goods which are not similar to those for which the 'PAPA' marks are registered." 27
Under the third ground, petitioner claims that the fact that the word "PAPA" is a known term of
endearment for fathers does not preclude it from being used as a mark to identify goods. Petitioner
claims that their mark falls under a type of mark known as "arbitrary or fanciful marks," which are
"marks that bear no logical relation to the actual characteristics of the products they represent," are
"highly distinctive and valid," and "are entitled to the greatest protection."
28

Petitioner claims that the mark "PAPA" falls under this class of arbitrary marks, even if "PAPA" is
also a common term of endearment for one's father. Petitioner states that there is no logical
connection between one's father and food sauces, such as ketchup; thus, with respect to ketchup,
food sauces, and their related products, and for the purpose of identifying its products, petitioner
claims exclusive ownership of the term "PAPA" as an arbitrary mark.

Petitioner alleges that if respondent "has a good faith and proud desire to unmistakably and distinctly
identify its lechon sauce product out in the market, it should have coined a mark that departs from
and is distinguished from those of its competitors." Petitioner claims that respondent, with full
knowledge of the fame and the decades-long commercial use of petitioner's "PAPA" marks, opted
for "PAPA BOY & DEVICE," which obviously is just a "colorable imitation." 29

THEORY OF RESPONDENT

In its Comment,  respondent claims that petitioner's marks have either expired and/or "that no
30

confusing similarity exists between them and respondent's "PAPA BOY & DEVICE' mark."
Respondent alleges that under Section 15 of Republic Act No. 166, a renewal application should be
filed within six months before the expiration of the period or within three months after such
expiration. Respondent avers that the expiration of the 20-year term for the "PAPA" mark under
Registration No. 32416 issued on August 11, 1983 was August 11, 2003. The sixth month before
August 11, 2003 was February 11, 2003 and the third month after August 11, 2003 was November
11, 2003. Respondent claims that the application that petitioner filed on October 28, 2005 was
almost two years late. Thus, it was not a renewal application, but could only be considered a new
application under the new Trademark Law, with the filing date reckoned on October 28, 2005. The
registrability of the mark under the new application was examined again, and any certificate issued
for the registration of "PAPA" could not have been a renewal certificate.

As for petitioner's other mark "PAPA BANANA CATSUP LABEL," respondent claims that its 20-year
term also expired on August 11, 2003 and that petitioner only filed its application for the new "PAPA
LABEL DESIGN" on November 15, 2006. Having been filed three years beyond the renewal
application deadline, petitioner was not able to renew its application on time, and cannot claim a
"continuous existence of its rights over the 'PAPA BANANA CATSUP LABEL."' Respondent claims
that the two marks are different from each other and that the registration of one is independent of the
other. Respondent concludes that the certificate of registration issued for "PAPA LABEL DESIGN" is
"not and will never be a renewal certificate."
31

Respondent also avers as follows:

1.3. With regard to the two new registrations of petitioner namely: "PAPA" (Reg. No. 4-2005-010788)
and "PAPA LABEL DESIGN" (Reg. No. 4-2006-012364), these were filed on October 28, 2005 and
November 15, 2006, respectively, under the Intellectual Property Code (RA 8293), which follows the
"first to file" rule, and were obviously filed later than respondent's "PAPA BOY & DEVICE" mark filed
on April 4, 2002. These new marks filed much later than the opposed "PAPA BOY & DEVICE" mark
cannot, therefore, be used as basis for the opposition and should in fact, be denied outrightly.

xxxx
A search of the Online Trademark Database of Intellectual Property Office (IPO) will show that only
Registration No. 34681 issued for "PAPA KETSARAP" was properly renewed on August 23, 2005.
xx x Clearly, the registrations of "PAPA" and "PAPA BANANA CATSUP LABEL" marks under
registration nos. 32416 and SR-6282 respectively, have already expired when Petitioner filed its
opposition proceeding against Respondent's trademark on December 11, 2006. Having expired, and
therefore, no longer legally existing, the "PAPA" and "PAPA BANANA CATSUP LABEL" marks
CANNOT BAR the registration of respondent's mark. To allow petitioner's expired marks to prevent
respondent's distinct "PAPA BOY & DEVICE" mark from being registered would be the ultimate
absurdity.32

Respondent posits that the Court of Appeals did not err in reversing the decisions of the
administrative agencies, alleging that "[while] it is true that the general rule is that the factual findings
of administrative bodies deserve utmost respect when supported by evidence, the same is subject to
exceptions,"  and that the Court of Appeals had justifiable reasons to disregard the factual finding of
33

the IPO. Here, the Court of Appeals wisely identified certain material facts that were overlooked by
the IPO-BLA and the IPO Director General which it opined, when correctly appreciated, would alter
the result of the case.

Respondent alleges that the IPO-BLA erroneously considered petitioner's marks "PAPA" and "PAPA
BANANA CATSUP LABEL" when it applied the dominancy test in determining whether petitioner's
marks are confusingly similar to those of respondent's mark "PAPA BOY & DEVICE."

Respondent avers that the IPO-BLA absurdly took emphasis on the mark "PAPA" to arrive at its
decision and did not take into consideration that petitioner's mark was already expired when
respondent applied for the registration of its "PAPA BOY & DEVICE" mark. Respondent compares
its "PAPA BOY & DEVICE" with the only mark that respondent allegedly has, "PAPA KETSARAP,"
and found no confusing similarity between the two.

We quote below respondent's discussion of its application of the dominancy test to the marks in
question:

Applying the Dominancy test, as correctly emphasized by the Court of Appeals, the dominant feature
in respondent's mark is "PAPA BOY" and not "PAPA". It can be gleaned from respondent's mark that
the word "PAPA" was written in the same font, style and color as the word "BOY". There is also the
presence of a "smiling hog-like character" which is positioned very prominently, both in size and
location in said mark, at glance (sic) even more dominant than the word "PAPA BOY".

xxxx

On the other hand, the dominant feature in petitioner's mark is "KETSARAP", not "PAPA". Even an
ordinary examiner could observe that the word "KETSARAP" in petitioner's mark is more prominently
printed than the word "PAPA".

xxxx

In a dominancy test, the prominent feature of the competing trademarks must be similar to cause
confusion or deception. x x x. 34

Verily, respondent's dominant feature "PAPA BOY" and the smiling hog-like character and
petitioner's dominant feature "KETSARAP", being the word written in a larger font, are neither
confusing nor deceiving to the public. In fact, the differences between their dominant marks are very
noticeable and conspicuous to every purchaser.

Furthermore, the Supreme Court in Societe des Produits Nestle, SA. v. Dy [ 641 Phil. 345], applied
the dominancy test by taking into account the aural effects of the words and letters contained in the
marks in determining the issue of confusing similarity. Obviously, petitioners' "PAPA KETSARAP"
mark does not in any way sounds (sic) like respondent's "PAPA BOY" mark. The common prefix
"PAPA" does not render the marks aurally the same. As discussed above, the dominant feature in
petitioner's mark is "KETSARAP" and the dominant feature in respondent's mark is "PAPA BOY".
Thus, the words "KETSARAP" and "PAP A BOY" in petitioner's and respondent's respective marks
are obviously different in sound, making "PAPA BOY & DEVICE" even more distinct from petitioner's
"PAPA KETSARAP" mark. 35

Using the holistic test, respondent further discusses the differences in the marks in this wise:

Even the use of the holistic test x x x takes into consideration the entirety of the marks in question
[to] be considered in resolving confusing similarity. The differences are again very obvious.
Respondent's mark has (1) the word "lechon sauce" printed inside a blue ribbon-like device which is
illustrated below the word "PAPA BOY"; (2) a prominent smiling hog-like character gesturing a
thumbs-up sign and wearing a Filipino hat and scarf stands beside the word "PAPA BOY"; and the
word "BARRIO FIESTA" conspicuously displayed above the said trademark which leaves no doubt
in the consumer's mind on the product that he or she is purchasing. On the other hand, petitioner's
mark is the word "PAPA" enclosed by a cloud on top of the word "KETSARAP' enclosed by a
geometrical figure.

xxxx

In the instant case, the respective marks are obviously different in color scheme, logo, spelling,
sound, meaning and connotation. Thus, yet again, under the holistic test there can be no confusion
or deception between these marks.

It also bears stressing that petitioner's "PAPA KETSARAP" mark covers "banana catsup" while
respondent's "PAPA BOY & DEVICE" covers "lechon sauce'', thereby obliterating any confusion of
products of both marks as they travel different channels of trade. If a consumer is in the market for
banana catsup, he or she will not buy lechon sauce and vice-versa. As a result, the margin of error
in the acquisition of one for the other is simply remote. Lechon sauce which is liver sauce is distinct
from catsup extracted/ made from banana fruit. The flavor and taste of a lechon sauce are far from
those of a banana catsup. Lechon sauce is sauce for "lechon" while banana catsup is apparently
catsup made from banana. 36

Respondent also contends that "PAPA BOY & DEVICE" mark is not confusingly similar to
petitioner's trademark "PAPA KETSARAP" in terms of appearance, sound, spelling and meaning.
The difference in nature, usage, taste and appearance of products decreases the possibility of
deception among buyers. 37

Respondent alleges that since petitioner merely included banana catsup as its product in its
certificate, it cannot claim any further right to the mark "PAPA KETSARAP" on products other than
banana catsup. Respondent also alleges that petitioner cannot raise "international notoriety of the
mark" for the first time on appeal and that there is no proof that petitioner's mark is internationally
well-known. 38
Furthermore, respondent argues that petitioner cannot claim exclusive ownership over the use of the
word "PAPA," a term of endearment for one's father. Respondent points out that there are several
other valid and active marks owned by third parties which use the word "PAPA," even in classes of
goods similar to those of petitioner's. Respondent avers that petitioner's claim that its "PAPA" mark
is an arbitrary mark is belatedly raised in the instant petition, and cannot be allowed because the
"PAPA KETSARAP" mark would immediately bring the consuming public to thinking that the product
involved is catsup and the description of said catsup is "masarap" (delicious) and due to the logical
relation of the petitioner's mark to the actual product, it being descriptive or generic, it is far from
being arbitrary or fanciful.39

Lastly, respondent claims that the Court of Appeals correctly ruled that respondent's product cannot
be confused as originating from the petitioner. Since it clearly appears in the product label of the
respondent that it is manufactured by Barrio Fiesta, the public is dutifully informed of the identity of
the lechon sauce manufacturer. The Court of Appeals further took into account the fact that
petitioner's products have been in commercial use for decades. 40

Petitioner, in its Reply  to respondent's Comment, contends that respondent cannot invoke a prior
41

filing date for the "PAPA BOY" mark as against Petitioner's "PAPA" and "PAPA BANANA CATSUP
LABEL" marks, because the latter marks were still registered when respondent applied for
registration of its "PAPA BOY" mark. Thus, the IPO-BLA and Director General correctly considered
them in deciding whether the "PAPA BOY" mark should be registered, using the "first to file" rule
under Section 123.l(d) of Republic Act No. 8293, or the Intellectual Property Code (IP Code).

Petitioner reiterates its argument that the Court of Appeals erred in applying the holistic test and that
the proper test under the circumstances is the dominancy test, which was correctly applied by the
IPO-BLA and the Director General. 42

THIS COURT'S RULING

The petition has merit.

We find that the Court of Appeals erred in applying the holistic test and in reversing and setting aside
the decision of the IPO-BLA and that of the IPO Director General, both of which rejected
respondent's application for the mark "PAPA BOY & DEVICE."

In Dermaline, Inc. v. Myra Pharmaceuticals, Inc.,  we defined a trademark as "any distinctive word,
43

name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish them from those manufactured,
sold, or dealt by others." We held that a trademark is "an intellectual property deserving protection
by law."

The rights of the trademark owner are found in the Intellectual Property Code, which provides:

Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive
right to prevent all third parties not having the owner's consent from using in the course of trade
identical or similar signs or containers for goods or services which are identical or similar to those in
respect of which the trademark is registered where such use would result in a likelihood of
confusion. In case of the use of an identical sign for identical goods or services, a likelihood of
confusion shall be presumed.
Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has
identified in the mind of the public the goods he manufactures or deals in, his business or services
from those of others, whether or not a registered mark is employed, has a property right in the
goodwill of the said goods, business or services so identified, which will be protected in the same
manner as other property rights.

The guideline for courts in determining likelihood of confusion is found in A.M. No. 10-3-10-SC, or
the Rules of Procedure for Intellectual Property Rights Cases, Rule 18, which provides:

RULE 18
Evidence in Trademark Infringement and Unfair Competition Cases

SECTION 1. Certificate of Registration. - A certificate of registration of a mark shall be prima

facie evidence of:

a) the validity of the registration;

b) the registrant's ownership of the mark; and

c) the registrant's exclusive right to use the same in connection with the goods or services
and those that are related thereto specified in the certificate.

xxxx

SECTION 3. Presumption of Likelihood of Confusion. - Likelihood of confusion shall be presumed in

case an identical sign or mark is used for identical goods or services.

SECTION 4. Likelihood of Confusion in Other Cases. - In determining whether one trademark is

confusingly similar to or is a colorable imitation of another, the court must consider the general
impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and
giving the attention such purchasers usually give in buying that class of goods. Visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the realities of the marketplace must be taken into account. Where there are both
similarities and differences in the marks, these must be weighed against one another to see which
predominates.

In determining likelihood of confusion between marks used on non-identical goods or services,

several factors may be taken into account, such as, but not limited to:

a) the strength of plaintiffs mark;

b) the degree of similarity between the plaintiffs and the defendant's marks;

c) the proximity of the products or services;

d) the likelihood that the plaintiff will bridge the gap;

e) evidence of actual confusion;

f) the defendant's good faith in adopting the mark;

 g) the quality of defendant's product or service; and/or

h) the sophistication of the buyers.

"Colorable imitation" denotes such a close or ingenious imitation as to be calculated to deceive

ordinary persons, or such a resemblance to the original as to deceive an ordinary purchaser giving
such attention as a purchaser usually gives, as to cause him to purchase the one supposing it to be
the other.

SECTION 5. Determination of Similar and Dissimilar Goods or Services. - Goods or services may
not be considered as being similar or dissimilar to each other on the ground that, in any registration
or publication by the Office, they appear in different classes of the Nice Classification.

In this case, the findings of fact of the highly technical agency, the Intellectual Property Office, which
has the expertise in this field, should have been given great weight by the Court of Appeals. As we
held in Berris Agricultural Co., Inc. v. Abyadang :
44

R.A. No. 8293 defines a "mark" as any visible sign capable of distinguishing the goods (trademark)
or services (service mark) of an enterprise and shall include a stamped or marked container of
goods. It also defines a "collective mark" as any visible sign designated as such in the application for
registration and capable of distinguishing the origin or any other common characteristic, including
the quality of goods or services of different enterprises which use the sign under the control of the
registered owner of the collective mark.

On the other hand, R.A. No. 166 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 by
another. A trademark, being a special property, is afforded protection by law. But for one to enjoy
this legal protection, legal protection ownership of the trademark should rightly be established.

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer.
or distributor of the goods made available to the purchasing public. Section 122 of R.A.. No. 8293
provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A
certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of
the registration, of the registrant's ownership of the mark, and of the registrant's exclusive right to
use the same in connection with the goods or services and those that are related thereto specified in
the certificate. R.A. No. 8293, however, requires the applicant for registration or the registrant to file
a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years
from the filing of the application for registration; otherwise, the application shall be refused or the
mark shall be removed from the register. In other words, the prima facie presumption brought about
by the registration of a mark may be challenged and overcome, in an appropriate action, by proof of
the nullity of the registration or of non-use of the mark, except when excused. Moreover, the
presumption may likewise be defeated by evidence of prior use by another person, i.e., it will
controvert a claim of legal appropriation or of ownership based on registration by a subsequent user.
This is because a trademark is a creation of use and belongs to one who first used it in trade or
commerce.

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does
not suffice. One may make advertisements, issue circulars, distribute price lists on certain goods, but
these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are
sold to the public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses
as customers, or orders of buyers, best prove the actual use of a mark in trade and commerce
during a certain period of time.

xxxx

Verily, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on these
goods. On this matter of particular concern, administrative agencies, such as the IPO, by
reason of their special knowledge and expertise over matters falling under their jurisdiction,
are in a better position to pass judgment thereon. Thus, their findings of fact in that regard
are generally accorded great respect, if not finality by the courts, as long as they are
supported by substantial evidence, even if such evidence might not be overwhelming or even
preponderant. It is not the task of the appellate court to weigh once more the evidence
submitted before the administrative body and to substitute its own judgment for that of the
administrative agency in respect to sufficiency of evidence. (Emphasis added, citations
omitted.)

In trademark controversies, each case must be scrutinized according to its peculiar circumstances,
such that jurisprudential precedents should only be made to apply if they are specifically in
point.  The cases discussed below are mentioned only for purposes of lifting the applicable
45

doctrines, laws, and concepts, but not for their factual circumstances, because of the uniqueness of
each case in controversies such as this one.

There are two tests used in jurisprudence to determine likelihood of confusion, namely the
dominancy test used by the IPO, and the holistic test adopted by the Court of Appeals. In Skechers,
U.S.A., Inc. v. Inter Pacific Industrial Trading Corp.,  we held:
46

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to
cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed
tests - the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the
similarity of the prevalent or dominant features of the competing trademarks that might cause
confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not
necessary; neither is it required that the mark sought to be registered suggests an effort to imitate.
Given more consideration are the aural and visual impressions created by the marks on the buyers
of goods, giving little weight to factors like prices, quality, sales outlets, and market segments.

xxxx

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other;
and (2) confusion of business (source or origin confusion), where, although the goods of" the parties
are different, the product, the mark of which registration is applied for by one party, is such as might
reasonably be assumed to originate with the registrant of an earlier product, and the public would
then be deceived either into that belief or into the belief that there is some connection between the
two parties, though inexistent.

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by
respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the
IPO. While it is undisputed that petitioner's stylized "S" is within an oval design, to this Court's mind,
the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which
catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact
that it used the same stylized "S", the same being the dominant feature of petitioner's trademark,
already constitutes infringement under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be
considered as highly identifiable to the products of petitioner alone. The CA even supported its
conclusion by stating that the letter "S" has been used in so many existing trademarks, the most
popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says is
identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent
had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark
for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip on the upper
portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA
of the letter "S" used in the Superman trademark with petitioner's stylized "S" is not appropriate to
the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on
the font and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized
"S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner's trademark.
Indubitably, the likelihood of confusion is present as purchasers will associate the respondent's use
of the stylized "S" as having been authorized by petitioner or that respondent's product is connected
with petitioner's business.

xxxx

While there may be dissimilarities between the appearances of the shoes, to this Court's mind such
dissimilarities do not outweigh the stark and blatant similarities in their general features.xx x.

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic
test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to
this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and
frivolous that it is indubitable that respondent's products will cause confusion and mistake in the eyes
of the public. Respondent's shoes may not be an exact replica of petitioner's shoes, but the features
and overall design are so similar and alike that confusion is highly likely.

xxxx

Neither can the difference in price be a complete defense in trademark infringement. In McDonald's
Corporation v. L.C Big Mak Burger, Inc., this Court held:

Modem law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or
trade-name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see 148 ALR
56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).
xx x.

Indeed, the registered trademark owner may use its mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The purchasing public might be mistaken in thinking
that petitioner had ventured into a lower market segment such that it is not inconceivable for the
public to think that Strong or Strong Sport Trail might be associated or connected with petitioner's
brand, which scenario is plausible especially since both petitioner and respondent manufacture
rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on these
goods. While respondent's shoes contain some dissimilarities with petitioner's shoes, this Court
cannot close its eye to the fact that for all intents and purpose, respondent had deliberately
attempted to copy petitioner's mark and overall design and features of the shoes. Let it be
remembered, that defendants in cases of infringement do not normally copy but only make colorable
changes. The most successful form of copying is to employ enough points of similarity to confuse
the public, with enough points of difference to confuse the courts. (Citations omitted.)

The Court discussed the concept of confusion of business in the case of Societe Des Produits
Nestle, S.A. v. Dy, Jr.,  as quoted below:
47

Among the elements, the element of likelihood of confusion is the gravamen of trademark
infringement. There are two types of confusion in trademark infringement: confusion of goods and
confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft, the Court distinguished the two types of confusion:

Callman notes two types of confusion. The first is the confusion of goods "in which event the
ordinarily prudent purchaser would be induced to purchase one product in the belief that he was
purchasing the other." In which case, "defendant's goods are then bought as the plaintiff's, and the
poorer quality of the former reflects adversely on the plaintiff's reputation." The other is the confusion
of business: "Here though the goods of the parties are different, the defendant's product is such as
might reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."

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

xxxx

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

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case. That is the reason why in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In
recent cases with similar factual milieus, the Court has consistently applied the dominancy test. x x
x.
 xxxx

In McDonald's Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in
holding that "MACJOY" is confusingly similar to "MCDONALD'S." The Court held:

While we agree with the CA's detailed enumeration of differences between the two (2) competing
trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the
dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the
Court has consistently used and applied the dominancy test in determining confusing similarity or
likelihood of confusion between competing trademarks.

xxxx

Applying the dominancy test to the instant case, the Court finds that herein petitioner's
"MCDONALD'S" and respondent's "MACJOY" marks are confusingly similar with each other that an
ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate "M" design logo and the prefixes "Mc" and/or "Mac" as
dominant features. x x x.

For sure, it is the prefix "Mc," and abbreviation of "Mac," which visually and aurally catches the
attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did
"McDonalds," "Mac Fries," "Mc Spaghetti," "McDo," "Big Mac" and the rest of the MCDONALD'S
marks which all use the prefixes Mc and/or Mac.

Besides and most importantly, both trademarks are used in the sale of fastfood products.
Indisputably, the respondent's trademark application for the "MACJOY & DEVICE" trademark covers
goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken,
chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the petitioner's trademark registration for
the MCDONALD'S marks in the Philippines covers goods which are similar if not identical to those
covered by the respondent's application.

In McDonald's Corporation v. L. C. Big Mak Burger, Inc., the Court applied the dominancy test in
holding that "BIG MAK" is confusingly similar to "BIG MAC." The Court held:

This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of
the product arising from the adoption of the dominant features of the registered mark, disregarding
minor differences. Courts will consider more the aural and visual impressions created by the marks
in the public mind, giving little weight to factors like prices, quality, sales outlets and market
segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

x x x It has been consistently held that the question of infringement of a trademark is to be

determined by the test of dominancy. Similarity in size, form and color, while relevant, is not
conclusive. If the competing trademark contains the main or essential or dominant features of
another, and confusion and deception is likely to result, infringement takes place. Duplication or
imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to
imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White
Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of
trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes
in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Hanover Rubber
Co., 107 F. 2d 588; xx x)

xxxx

The test of dominancy is now explicitly incorporated into law in Section 155.l of the Intellectual
Property Code which defines infringement as the "colorable imitation of a registered mark x x x or
a dominant feature thereof."

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first
word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in
"Mak" are the same as the first two letters in "Mac." Fourth, the last letter "Mak" while a "k" sounds
the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in
spelling, thus "Caloocan" is spelled "Kalookan."

In Societe Des Produits Nestle, SA. v. Court of Appeals, the Court applied the dominancy test in
holding that "FLAVOR MASTER" is confusingly similar to "MASTER ROAST" and "MASTER
BLEND." The Court held:

While this Court agrees with the Court of Appeals' detailed enumeration of differences between the
respective trademarks of the two coffee products, this Court cannot agree that totality test is the one
applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this
case in light of its peculiar factual milieu.

Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks
and unfair competition that confusing similarity is to be determined on the basis of visual, aural,
connotative comparisons and overall impressions engendered by the marks in controversy as they
are encountered in the realities of the marketplace. The totality or holistic test only relies on visual
comparison between two trademarks whereas the dominancy test relies not only on the visual but
also on the aural and connotative comparisons and overall impressions between the two
trademarks.

For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held
that:

xxxx

The scope of protection afforded to registered trademark owners is not limited to protection
from. infringers with identical goods.  The scope of protection extends to protection from
1âwphi1

infringers with related goods, and to market areas that are the normal expansion of business
of the registered trademark owners. Section 138 of R.A. No. 8293 states:

Certificates of Registration. - A certificate of registration of a mark shall be prima facie evidence of

validity of the registration, the registrant's ownership of the mark, and of the registrant's exclusive
right to use the same in connection with the goods or services and those that are related thereto
specified in the certificate. x x x.
In Mighty Corporation v. E. & J Gallo Winery, the Court held that, "Non-competing goods may be
those which, though they are not in actual competition, are so related to each other that it can
reasonably be assumed that they originate from one manufacturer, in which case, confusion of
business can arise out of the use of similar marks." In that case, the Court enumerated factors in
determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3)
descriptive properties, physical attributes or essential characteristics of the goods, with reference to
their form, composition, texture or quality; and (4) style of distribution and marketing of the goods,
including how the goods are displayed and sold.

xxxx

x x x. However, as the registered owner of the "NAN" mark, Nestle should be free to use its
mark on similar products, in different segments of the market, and at different price levels.
In McDonald's Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection
afforded to registered trademark owners extends to market areas that are the normal expansion of
business:

xxxx

Even respondent's use of the "Big Mak" mark on non-hamburger food products cannot excuse their
infringement of petitioners' registered mark, otherwise registered marks will lose their protection
under the law.

The registered trademark owner may use his mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court has recognized that the registered
trademark owner enjoys protection in product and market areas that are the normal potential
expansion of his business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or
trade-name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see 148 ALR
56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Arn. Jur. 576, 577).
(Emphases supplied, citations omitted.)

Again, this Court discussed the dominancy test and confusion of business in Dermaline, Inc. v. Myra
Pharmaceuticals, Inc.,  and we quote:
48

The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks
that might cause confusion or deception. It is applied when the trademark sought to be registered
contains the main, essential and dominant features of the earlier registered trademark, and
confusion or deception is likely to result. Duplication or imitation is not even required; neither is it
necessary that the label of the applied mark for registration should suggest an effort to imitate. The
important issue is whether the use of the marks involved would likely cause confusion or mistake in
the mind of or deceive the ordinary purchaser, or one who is accustomed to buy, and therefore to
some extent familiar with, the goods in question. Given greater consideration are the aural and
visual impressions created by the marks in the public mind, giving little weight to factors like prices,
quality, sales outlets, and market segments. The test of dominancy is now explicitly incorporated into
law in Section 155.l of R.A. No. 8293 which provides-
 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a
registered mark or the same container or a dominant feature thereof in connection with the
sale, offering for sale, distribution, advertising of any goods or services including other
preparatory steps necessary to carry out the sale of any goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to
deceive xx x.

xxxx

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other;
and (2) confusion of business (source or origin confusion), where, although the goods of the parties
are different, the product, the mark of which registration is applied for by one party, is such as might
reasonably be assumed to originate with the registrant of an earlier product, and the public would
then be deceived either into that belief or into the belief that there is some connection between the
two parties, though inexistent.

xxxx

We agree with the findings of the IPO. As correctly applied by the IPO in this case, while there are
no set rules that can be deduced as what constitutes a dominant feature with respect to trademarks
applied for registration; usually, what are taken into account are signs, color, design, peculiar shape
or name, or some special, easily remembered earmarks of the brand that readily attracts and
catches the attention of the ordinary consumer.

xxxx

Further, Dermaline's stance that its product belongs to a separate and different classification from
Myra's products with the registered trademark does not eradicate the possibility of mistake on the
part of the purchasing public to associate the former with the latter, especially considering that both
classifications pertain to treatments for the skin.

Indeed, the registered trademark owner may use its mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court is cognizant that the registered trademark
owner enjoys protection in product and market areas that are the normal potential expansion of his
business. Thus, we have held-

Modern law recognizes that the protection to which the owner of a trademark is entitled is not
limited to guarding his goods or business from actual market competition with identical or
similar products of the parties, but extends to all cases in which the use by a junior
appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as
where prospective purchasers would be misled into thinking that the complaining
party has extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576)
or is in any way connected with the activities of the infringer; or when it forestalls the
normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).

Thus, the public may mistakenly think that Dermaline is connected to or associated with Myra, such
that, considering the current proliferation of health and beauty products in the market, the
purchasers would likely be misled that Myra has already expanded its business through Dermaline
from merely carrying pharmaceutical topical applications for the skin to health and beauty services.
Verily, when one applies for the registration of a trademark or label which is almost the same or that
very closely resembles one already used and registered by another, the application should be
rejected and dismissed outright, even without any opposition on the part of the owner and user of a
previously registered label or trademark. This is intended not only to avoid confusion on the part of
the public, but also to protect an already used and registered trademark and an established goodwill.
(Citations omitted.)

Section 123.l(d) of the IP Code provides:

A mark cannot be registered if it:

xxxx

(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier
filing or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or

iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion[.]

A scrutiny of petitioner's and respondent's respective marks would show that the IPO-BLA and the
IPO Director General correctly found the word "PAPA" as the dominant feature of petitioner's mark
"PAPA KETSARAP." Contrary to respondent's contention, "KETSARAP" cannot be the dominant
feature of the mark as it is merely descriptive of the product. Furthermore, it is the "PAPA" mark that
has been in commercial use for decades and has established awareness and goodwill among
consumers.

We likewise agree with the IPO-BLA that the word "PAPA" is also the dominant feature of
respondent's "PAPA BOY & DEVICE" mark subject of the application, such that "the word 'PAPA' is
written on top of and before the other words such that it is the first word/figure that catches the
eyes."  Furthermore, as the IPO Director General put it, the part of respondent's mark which appears
49

prominently to the eyes and ears is the phrase "PAPA BOY" and that is what a purchaser of
respondent's product would immediately recall, not the smiling hog.

We quote the relevant portion of the IPO-BLA decision on this point below:

A careful examination of Opposer's and Respondent-applicant's respective marks shows that the
word "PAPA" is the dominant feature: In Opposer's marks, the word "PAPA" is either the mark by
itself or the predominant word considering its stylized font and the conspicuous placement of the
word "PAPA" before the other words. In Respondent-applicant's mark, the word "PAPA" is written on
top of and before the other words such that it is the first word figure that catches the eyes. The visual
and aural impressions created by such dominant word "PAPA" at the least is that the respective
goods of the parties originated from the other, or that one party has permitted or has been given
license to the other to use the word "PAPA" for the other party's product, or that there is a
relation/connection between the two parties when, in fact, there is none. This is especially true
considering that the products of both parties belong to the same class and are closely related:
Catsup and lechon sauce or liver sauce are both gravy-like condiments used to spice up dishes.
Thus, confusion of goods and of business may likely result.
Under the Dominancy Test, the dominant features of the competing marks are considered in
determining whether these competing marks are confusingly similar. Greater weight is given to the
similarity of the appearance of the products arising from the adoption of the dominant features of the
registered mark, disregarding minor differences. The visual, aural, connotative, and overall
comparisons and impressions engendered by the marks in controversy as they are encountered in
the realities of the marketplace are the main considerations (McDonald's Corporation, et al., v. L. C.
Big Mak Burger, Inc., et al., G. R. No.143993, August 18, 2004; Societe Des Produits Nestle, S. A."
et al. v. Court of Appeals, et al., G. R. No. 112012, April 4, 2001). If the competing trademark
contains the main or essential or dominant features of another, and confusion and deception is likely
to result, infringement takes place. (Lim Hoa v. Director of Patents, 100 Phil. 214 [1956]); Co Tiong
Sa v. Director of Patents, et al., G. R. No. L-5378, May 24, 1954). Duplication or imitation is not
necessary; nor is it necessary that the infringing label should suggest an effort to imitate (Lim Hoa v.
Director of Patents, supra, and Co Liang Sa v. Director of Patents, supra). Actual confusion is not
required: Only likelihood of confusion on the part of the buying public is necessary so as to render
two marks confusingly similar so as to deny the registration of the junior mark (Sterling Products
International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 137 Phil. 838 [1969]).

As to the first issue of whether PAPA BOY is confusingly similar to Opposer's PAPA mark, this
Bureau rules in the affirmative.

The records bear the following:

1. Registration No. 32416 issued for the mark "PAPA" under Class 29 goods was deemed
expired as of February 11, 2004 (Exhibit "A" attached to the VERIFIED NOTICE OF
OPPOSITION). Application Serial No. 4-2005-010788 was filed on October 28, 2005 for the
same mark "PAPA" for Class 30 goods and Registration No. 42005010788 was issued on
March 19, 2007;

2. Opposer was issued for the mark "PAPA BANANA CATSUP LABEL" on August 11, 1983
Registration No. SR-6282 for Class 30 goods in the Supplemental Register, which
registration expired in 2003. Application Serial No. 4-2006-012364 was filed for the mark
"PAPA LABEL DESIGN" for Class 30 goods on November 15, 2006, and Registration No.
42006012364 was issued on April 30, 2007; and

3. Lastly, Registration No. 34681 for the mark "PAPA KETSARAP" for Class 30 goods was
issued on August 23, 1985 and was renewed on August 23, 2005.

Though Respondent-applicant was first to file the subject application on April 04, 2002 vis-a-vis the
mark "PAP A" the filing date of which is reckoned on October 28, 2005, and the mark "PAPA LABEL
DESIGN" the filing date of which is reckoned on November 15, 2006, Opposer was able to secure a
registration for the mark "PAPA KETSARAP" on August 23, 1985 considering that Opposer was the
prior registrant and that its renewal application timely filed on August 23, 2005.

xxxx

Pursuant to [Section 123 .1 (d) of the IP Code], the application for registration of the subject mark
cannot be allowed considering that Opposer was earlier registrant of the marks PAPA and PAPA
KETSARAP which registrations were timely renewed upon its expiration. Respondent-applicant's
mark "PAPA BOY & DEVICE" is confusingly similar to Opposer's mark "PAPA KETSARAP" and is
applied to goods that are related to Opposer's goods, but Opposer's mark "PAPA KETSARAP" was
registered on August 23, 1985 per Certificate of Registration No. 34681, which registration was
renewed for a period of 10 years counted from August 23, 2005 per Certificate of Renewal of
Registration No. 34681 issued on August 23, 2005. To repeat, Opposer has already registered a
mark which Respondent-applicant's mark nearly resembles as to likely deceive or cause confusion
as to origin and which is applied to goods to which respondent-applicant's goods under Class 30 are
closely related.1âwphi1

Section 138 of the IP Code provides that a certificate of registration of a mark is prima
facie evidence of the validity of the registration, the registrant's ownership of the mark, and of the
registrant's exclusive right to use the same in connection with the goods and those that are related
thereto specified in the certificate.
50

We agree that respondent's mark cannot be registered. Respondent's mark is related to a product,
lechon sauce, an everyday all-purpose condiment and sauce, that is not subjected to great scrutiny
and care by the casual purchaser, who knows from regular visits to the grocery store under what
aisle to find it, in which bottle it is contained, and approximately how much it costs. Since petitioner's
product, catsup, is also a household product found on the same grocery aisle, in similar packaging,
the public could think that petitioner had expanded its product mix to include lechon sauce, and that
the "PAPA BOY" lechon sauce is now part of the "PAPA" family of sauces, which is not unlikely
considering the nature of business that petitioner is in. Thus, if allowed. registration, confusion of
business may set in, and petitioner's hard-earned goodwill may be associated to the newer product
introduced by respondent, all because of the use of the dominant feature of petitioner's mark on
respondent's mark, which is the word "PAPA." The words "Barrio Fiesta" are not included in the
mark, and although printed on the label of respondent's lechon sauce packaging, still do not remove
the impression that "PAPA BOY" is a product owned by the manufacturer of "PAPA" catsup, by
virtue of the use of the dominant feature. It is possible that petitioner could expand its business to
include lechon sauce, and that would be well within petitioner's rights, but the existence of a "PAPA
BOY" lechon sauce would already eliminate this possibility and deprive petitioner of its rights as an
owner of a valid mark included in the Intellectual Property Code.

The Court of Appeals likewise erred in finding that "PAPA," being a common term of endearment for
one's father, is a word over which petitioner could not claim exclusive use and ownership. The
Merriam-Webster dictionary defines "Papa" simply as "a person's father." True, a person's father has
no logical connection with catsup products, and that precisely makes "PAPA" as an arbitrary mark
capable of being registered, as it is distinctive, coming from a family name that started the brand
several decades ago. What was registered was not the word "Papa" as defined in the dictionary, but
the word "Papa" as the last name of the original owner of the brand. In fact, being part of several of
petitioner's marks, there is no question that the IPO has found "PAPA" to be a registrable mark.

Respondent had an infinite field of words and combinations of words to choose from to coin a mark
for its lechon sauce. While its claim as to the origin of the term "PAPA BOY" is plausible, it is not a
strong enough claim to overrule the rights of the owner of an existing and valid mark. Furthermore,
this Court cannot equitably allow respondent to profit by the name and reputation carefully built by
petitioner without running afoul of the basic demands of fair play. 51

WHEREFORE, we hereby GRANT the petition. We SET ASIDE the June 23, 2011 Decision and

the October 4, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 107570,
and REINSTATE the March 26, 2008 Decision of the Bureau of Legal Affairs of the Intellectual
Property Office (IPO-BLA) and the January 29, 2009 Decision of the Director General of the IPO.

G.R. No. 188996

SERI SOMBOONSAKDIKUL, Petitioner
vs.
ORLANE S.A., Respondent

DECISION

JARDELEZA, J.:

Assailed in this petition is the Decision  of the Court of Appeals (CA) in CA-G.R. SP No. 105229
1

dated July 14, 2009 which affirmed the decision of the Director General of the Intellectual Property
Office (IPO) denying the application for the mark "LOLANE."

Facts

On September 23, 2003, petitioner Seri Somboonsakdikul (petitioner) filed an application for
registration  of the mark LOLANE with the IPO for goods  classified under Class 3 (personal care
2 3

products) of the International Classification of Goods and Services for the Purposes of the
Registration of Marks (International Classification of Goods).  Orlane S.A. (respondent) filed an
4

opposition to petitioner's application, on the ground that the mark LOLANE was similar to ORLANE
in presentation, general appearance and pronunciation, and thus would amount to an infringement of
its mark.  Respondent alleged that: (1) it was the rightful owner of the ORLANE mark which was first
5

used in 1948; (2) the mark was earlier registered in the Philippines on July 26, 1967 under
Registration No. 129961 for the following goods: 6

x x x perfumes, toilet water, face powders, lotions, essential oils, cosmetics, lotions for the hair,
dentrifices, eyebrow pencils, make-up creams, cosmetics & toilet preparations under Registration
No. 12996. 7

and (3) on September 5, 2003, it filed another application for use of the trademark on its additional
products:

x x x toilet waters; revitalizing waters, perfumes, deodorants and body deodorants, anti-perspiration
toiletries; men and women perfume products for face care and body care; face, eye, lips, nail, hand
make-up products and make-up removal products, towels impregnated with cosmetic lotions;
tanning and instant tanning sunproducts, sunprotection products, (not for medical use), after-
suncosmetic products; cosmetic products; slimming cosmetic aids; toiletries; lotions, shampoos and
hair care products; shave and after shave products, shaving and hair removing products; essential
oils; toothpastes; toiletry, cosmetic and shaving kits for travel, filled or fitted vanity-cases[.]
8

Respondent adds that by promotion, worldwide registration, widespread and high standard use, the
mark had acquired distinction, goodwill, superior quality image and reputation and was now well-
known.  Imputing bad faith on the petitioner, respondent claimed that LOLANE' s first usage was only
9

on August 19, 2003. 10

In his answer,  petitioner denied that the LOLANE mark was confusingly similar to the mark
11

ORLANE. He averred that he was the lawful owner of the mark LOLANE which he has used for
various personal care products sold worldwide. He alleged that the first worldwide use of the mark
was in Vietnam on July 4, 1995. Petitioner also alleged that he had continuously marketed and
advertised Class 3 products bearing LOLANE mark in the Philippines and in different parts of the
world and that as a result, the public had come to associate the mark with him as provider of quality
personal care products. 12
Petitioner maintained that the marks were distinct and not confusingly similar either under the
dominancy test or the holistic test. The mark ORLANE was in plain block upper case letters while the
mark LOLANE was printed in stylized word with the second letter L and the letter A co-joined.
Furthermore, the similarity in one syllable would not automatically result in confusion even if used in
the same class of goods since his products always appear with Thai characters while those of
ORLANE always had the name Paris on it. The two marks are also pronounced differently. Also,
even if the two marks contained the word LANE it would not make them confusingly similar since the
IPO had previously allowed the co-existence of trademarks containing the syllable "joy" or "book"
and that he also had existing registrations and pending applications for registration in other
countries.13

The Bureau of Legal Affairs (BLA) rejected petitioner's application in a Decision  dated February 27,
14

2007, finding that respondent's application was filed, and its mark registered, much earlier.  The BLA
15

ruled that there was likelihood of confusion based on the following observations: (1) ORLANE and
LOLANE both consisted of six letters with the same last four letters - LANE; (2) both were used as
label for similar products; (3) both marks were in two syllables and that there was only a slight
difference in the first syllable; and (4) both marks had the same last syllable so that if these marks
were read aloud, a sound of strong similarity would be produced and such would likely deceive or
cause confusion to the public as to the two trademarks. 16

Petitioner filed a motion for reconsideration but this was denied by the Director of the BLA on May 7,
2007.  The BLA ruled that the law did not require the marks to be so identical as to produce actual
17

error or mistake as the likelihood of confusion was enough. The BLA also found that the dominant
feature in both marks was the word LANE; and that the marks had a strong visual and aural
resemblance that could cause confusion to the buying public. This resemblance was amplified by the
relatedness of the goods. 18

On appeal, the Director General of the IPO affirmed the Decision of the BLA Director. Despite the
difference in the first syllable, there was a strong visual and aural resemblance since the marks had
the same last four letters, i.e., LANE, and such word is pronounced in this jurisdiction as in
"pedestrian lane."  Also, the mark ORLANE is a fanciful mark invented by the owner for the sole
19

purpose of functioning as a trademark and is highly distinctive. Thus, the fact that two or more
entities would accidentally adopt an identical or similar fanciful mark was too good to be true
especially when they dealt with the same goods or services.  The Director General also noted that
20

foreign judgments invoked by petitioner for the grant of its application are not judicial precedents.21

Thus, petitioner filed a petition for review  before the CA arguing that there is no confusing similarity
22

between the two marks. Petitioner maintained that LANE is not the dominant feature of the mark and
that the dominancy test did not apply since the trademarks are only plain word marks and the
dominancy test presupposes that the marks involved are composite marks.  Petitioner pointed out
23

that the IPO had previously allowed the mark GIN LANE under Registration No. 4-2004-006914
which also involved products under Class 3.  While petitioner admitted that foreign judgments are
24

not judicial precedents, he argued that the IPO failed to recognize relevant foreign
judgments, i.e., the Australian Registrar of Trademarks and the IPO of Singapore which ruled that
there was no confusing similarity between the marks LOLANE and ORLANE.  Lastly, the Director
25

General should have deferred to the findings of the Trademark Examiner who made a substantive
examination of the application for trademark registration, and who is an expert in the field and is in
the best position to determine whether there already exists a registered mark or mark for
registration. Since petitioner's application for registration of the mark LOLANE proceeded to
allowance and publication without any adverse citation of a prior confusingly similar mark, this meant
that the Trademark Examiner was of the view that LO LANE was not confusingly similar to
ORLANE. 26
The CA Ruling

The CA denied the petition and held that there exists colorable imitation of respondent's mark by
LOLANE. 27

The CA accorded due respect to the Decision of the Director General and ruled that there was
substantial evidence to support the IPO's findings of fact. Applying the dominancy test, the CA ruled
that LOLANE' s mark is confusingly or deceptively similar to ORLANE. There are predominantly
striking similarities in the two marks including LANE, with only a slight difference in the first letters,
thus the two marks would likely cause confusion to the eyes of the public. The similarity is
highlighted when the two marks are pronounced considering that both are one word consisting of
two syllables. The CA ruled that when pronounced, the two marks produce similar sounds.  The CA28

did not heed petitioner's contention that since the mark ORLANE is of French origin, the same is
pronounced as "ORLAN." Filipinos would invariably pronounce it as "OR-LEYN."  The CA also noted
29

that the trademark ORLANE is a fanciful name and petitioner was not able to explain why he chose
the word LOLANE as trademark for his personal care products. Thus, the only logical conclusion is
that he would want to benefit from the established reputation and goodwill of the ORLANE mark. 30

The CA rejected petitioner's assertion that his products' cheaper price and low-income market
eliminates the likelihood of confusion. Low-income groups, and even those who usually purchased
ORLANE products despite the higher cost, may be led to believe that LOLANE products are low-end
personal care products also marketed by respondent. 31

The CA upheld the applicability of the dominancy test in this case. According to the CA, the
dominancy test is already recognized and incorporated in Section 155.1 of Republic Act No. 8293
(RA 8293), otherwise known as the Intellectual Property Code of the Philippines.  Citing McDonald's
32

Corporation v. MacJoy Fastfood Corporation,  the CA ruled that the dominancy test is also preferred
33

over the holistic test. This is because the latter relies only on the visual comparison between two
trademarks, whereas the dominancy test relies not only on the visual, but also on their aural and
connotative comparisons, and their overall impressions created.  Nonetheless, the CA stated that
34

there is nothing in this jurisdiction dictating that the dominancy test is applicable for composite
marks. 35

The CA was not swayed by the alleged favorable judgment by the IPO in the GIN LANE application,
ruling that in trademark cases, jurisprudential precedents should be applied only to a case if they are
specifically in point.  It also did not consider the ruling of the IPOs in Australia, South Africa,
36

Thailand and Singapore which found no confusing similarity between the marks LOLANE and
ORLANE, stating that foreign judgments do not constitute judicial precedent in this jurisdiction. 37

Finally, the CA did not give merit to petitioner's contention that the Director General should have
deferred to the findings of the Trademark Examiner. According to the CA, the proceedings before the
Trademark Examiner are ex-parte,  and his findings are merely prima facie. Whatever his decision
38

may be is still subject to review and/or appeal. 39

The Petition 40

Petitioner maintains that the CA erred in its interpretation of the dominancy test, when it ruled that
the dominant feature of the contending marks is the suffix "LANE."  The CA failed to consider that in
41

determining the dominant portion of a mark, significant weight must be given to whether the buyer
would be more likely to remember and use one part of a mark as indicating the origin of the
goods.  Thus, that part which will likely make the most impression on the ordinary viewer will be
42

treated as the dominant portion of conflicting marks and given greater weight in the comparison. 43
Petitioner argues that both LOLANE and ORLANE are plain word marks which are devoid of
features that will likely make the most impression on the ordinary viewer. If at all, the very word
marks themselves, LOLANE and ORLANE are each to be regarded as dominant
features.  Moreover, the suffix LANE is a weak mark, being "in common use by many other sellers in
44

the market. "  Thus, LANE is also used in the marks SHELLANE and GIN LANE, the latter covering
45

goods under Class 3. Moreover, the two marks are aurally different since respondent's products
originate from France and is read as "OR-LAN" and not "OR-LEYN." 46

Petitioner also claims that the CA completely disregarded the holistic test, thus ignoring the
dissimilarity of context between LOLANE and ORLANE. Assuming that the two marks produce
similar sounds when pronounced, the differences in marks in their entirety as they appear in their
respective product labels should still be the controlling factor in determining confusing similarity.
47

Besides, there has been no explicit declaration abandoning the holistic test.  Thus, petitioner urges
48

us to go beyond the similarities in spelling and instead consider how the marks appear in their
respective labels, the dissimilarities in the size and shape of the containers, their color, words
appearing thereon and the general appearance,  hence: (1) the commonality of the marks ORLANE
49

and LOLANE starts from and ends with the four-letter similarity-LANE and nothing else;  (2) 50

ORLANE uses "safe" or conventional colors while LOLANE uses loud or psychedelic colors and
designs with Thai characters;  and (3) ORLANE uses the term "Paris," indicating the source of origin
51

of its products. 52

Petitioner likewise claims that consumers will be more careful in their choice because the goods in
question are directly related to personal hygiene and have direct effects on their well-being, health
and safety.  Moreover, with the huge price difference between ORLANE and LOLANE products,
53

relevant purchasers are less likely to be confused. 54

Finally, petitioner notes that respondent has neither validly proven nor presented sufficient evidence
that the mark ORLANE is in actual commercial use in the Philippines. Respondent failed to allege in
any of its pleadings submitted to the IPO's BLA and the IPO Director General the names of local
outlets that products bearing the mark ORLANE are being marketed or sold to the general
consuming public. 55

Respondent's Comment 56

Respondent reiterates the decisions of the CA and the IPO.  It maintains that ORLANE is entitled to
57

protection under RA 8293 since it is registered with the IPO with proof of actual use.  Respondent
58

posits that it has established in the world  and in the Philippines an image and reputation for
59

manufacturing and selling quality beauty products. Its products have been sold in the market for 61
years and have been used in the Philippines since 1972.  Thus, to allow petitioner's application
60

would unduly prejudice respondent's right over its registered trademark.  Lastly, respondent argues
61

that decisions of administrative agencies such as the IPO shall not be disturbed by the courts,
absent any showing that the former have acted without or in excess of their jurisdiction, or with grave
abuse of discretion. 62

Issue

We resolve the issue of whether there is confusing similarity between ORLANE and LOLANE which
would bar the registration of LOLANE before the IPO.

Our Ruling
We find that the CA erred when it affirmed the Decision of the IPO.

While it is an established rule in administrative law that the courts of justice should respect the
findings of fact of administrative agencies, the courts may not be bound by such findings of fact
when there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and
patently insubstantial; and when there is a clear showing that the administrative agency acted
arbitrarily or with grave abuse of discretion or in a capricious and whimsical manner, such that its
action may amount to an excess or lack of jurisdiction.  Moreover, when there is a showing that the
63

findings or conclusions, drawn from the same pieces of evidence, were arrived at arbitrarily or in
disregard of the evidence on record, they may be reviewed by the courts.  Such is the case here.
64

There is no colorable imitation between the marks LOLANE and ORLANE which would lead to any
likelihood of confusion to the ordinary purchasers.

A trademark is defined under Section 121.1 of RA 8293 as any visible sign capable of distinguishing
the goods. It is susceptible to registration if it is crafted fancifully or arbitrarily and is capable of
identifying and distinguishing the goods of one manufacturer or seller from those of another.  Thus,
65

the mark must be distinctive.  The registrability of a trademark is governed by Section 123 of RA
66

8293. Section 123.1 provides:

Section 123. Registrability. -

123 .1. A mark cannot be registered if it:

xxx

d. Is identical with a registered mark belonging to a different proprietor or a mark with an earlier filing
or priority date, in respect of:

i. The same goods or services, or

ii. Closely related goods or services, or

iii. If it nearly resembles such a mark as to be likely to deceive or cause confusion;

e. Is identical with, or confusingly similar to, or constitutes a translation of a mark which is

considered by the competent authority of the Philippines to be well-known internationally and in the
Philippines, whether or not it is registered here, as being already the mark of a person other than the
applicant for registration, and used for identical or similar goods or services: Provided, That in
determining whether a mark is well-known, account shall be taken of the knowledge of the relevant
sector of the public, rather than of the public at large, including knowledge in the Philippines which
has been obtained as a result of the promotion of the mark;

xxx

In Mighty Corporation v. E. & J Gallo Winery,  we laid down the

67

requirements for a finding of likelihood of confusion, thus:

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 defendant's 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 defendant's 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.

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 registrant's express or implied consent and
other fair and equitable considerations. (Citations omitted, emphasis supplied.) 68

While Mighty Corporation enumerates four requirements, the most essential requirement, to our

mind, for the determination of likelihood of confusion is the existence of resemblance between the
trademarks, i.e., colorable imitation. Absent any finding of its existence, there can be no likelihood of
confusion. Thus we held:

Whether a trademark causes confusion and is likely to deceive the public hinges on "colorable
imitation" which has been defined as "such similarity in form, content, words, sound, meaning,
special arrangement or general appearance of the trademark or trade name 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." (Citations omitted.) 69

We had the same view in Emerald Garment Manufacturing Corporation v. Court of Appeals,  where 70

we stated:

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This

term has been defined as "such a close or ingenious imitation as to be calculated to deceive ordinary
purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary
purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one
supposing it to be the other."

Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all
the details be literally copied. x x x (Citation omitted, emphasis supplied.)
71

In determining colorable imitation, we have used either the dominancy test or the holistic or totality
test. The dominancy test considers the similarity of the prevalent or dominant features of the
competing trademarks that might cause confusion, mistake, and deception in the mind of the
purchasing public. More consideration is given on the aural and visual impressions created by the
marks on the buyers of goods, giving little weight to factors like process, quality, sales outlets, and
market segments.  On the other hand, the holistic test considers the entirety of the marks as applied
72

to the products, including the labels and packaging, in determining confusing similarity. The focus is
not only on the predominant words but also on the other features appearing on the labels. 73

The CA's use of the dominancy test is in accord with our more recent ruling in UFC Philippines, Inc.
(now merged with Nutria-Asia, Inc. as the surviving entity) v. Barrio Fiesta Manufacturing
Corporation.  In UFC Philippines, Inc., we relied on our declarations in McDonald's Corporation v.
74

L.C. Big Mak Burger, Inc.,  Co Tiong Sa v. Director of Patents,  and Societe Des Produits Nestle,
75 76

S.A. v. Court of Appeals  that the dominancy test is more in line with the basic rule in trademarks
77

that confusing similarity is determined by the aural, visual and connotative and overall impressions
created by the marks. Thus, based on the dominancy test, we ruled that there is no confusing
similarity between "PAPA BOY & DEVICE" mark, and "PAPA KETSARAP" and "PAPA BANANA
CATSUP."
While there are no set rules as what constitutes a dominant feature with respect to trademarks
applied for registration, usually, what are taken into account are signs, color, design, peculiar shape
or name, or some special, easily remembered earmarks of the brand that readily attracts and
catches the attention of the ordinary consumer.  In UFC Philippines, Inc., what we considered as the
78

dominant feature of the mark is the first word/figure that catches the eyes or that part which appears
prominently to the eyes and ears. 79

However, while we agree with the CA's use of the dominancy test, we arrive at a different
conclusion. Based on the distinct visual and aural differences between LOLANE and ORLANE, we
find that there is no confusing similarity between the two marks.

The suffix LANE is not the dominant feature of petitioner's mark. Neither can it be considered as the
dominant feature of ORLANE which would make the two marks confusingly similar.

First, an examination of the appearance of the marks would show that there are noticeable
differences in the way they are written or printed as shown below: 80

As correctly argued by petitioner in his answer before the BLA, there are visual differences between
LOLANE and ORLANE since the mark ORLANE is in plain block upper case letters while the mark
LOLANE was rendered in stylized word with the second letter L and the letter A co-joined. 81

Second, as to the aural aspect of the marks, LOLANE and ORLANE do not sound alike. Etepha v.
Director of Patents, et al.  finds application in this case. In Etepha, we ruled that there is no
82

confusing similarity between PERTUSSIN and ATUSSIN. The Court considered among other factors
the aural differences between the two marks as follows:

5. As we take up Pertussin and Atussin once again, we cannot escape notice of the fact that the two
words do not sound alike-when pronounced. There is not much phonetic similarity between the two.
The Solicitor General well-observed that in Pertussin the pronunciation of tbe prefix "Per", whether
correct or incorrect, includes a combination of three letters

P, e and r; whereas, in Atussin the whole starts with the single letter A added to suffix
"tussin".  Appeals to the ear are dissimilar. And this, because in a word combination, the part that
1âwphi1

comes first is the most pronounced. An expositor of the applicable rule here is the decision in the
Syrocol-Cheracol controversy. There, the ruling is that trademark Syrocol (a cough medicine
preparation) is not confusedly similar to trademark Cheracol (also a cough medicine preparation).
Reason: the two words "do not look or sound enough alike to justify a holding of trademark
infringement", and the "only similarity is in the last syllable, and that is not uncommon in names
given drug compounds". (Citation omitted, emphasis supplied.) 83

Similar to Etepha, appeals to the ear in pronouncing ORLANE and LOLANE are dissimilar. The first
syllables of each mark, i.e., OR and LO do not sound alike, while the proper pronunciation of the last
syllable LANE-"LEYN" for LOLANE and "LAN" for ORLANE, being of French origin, also differ. We
take exception to the generalizing statement of the Director General, which was affirmed by the CA,
that Filipinos would invariably pronounce ORLANE as "ORLEYN." This is another finding of fact
which has no basis, and thus, justifies our reversal of the decisions of the IPO Director General and
the CA. While there is possible aural similarity when certain sectors of the market would pronounce
ORLANE as "ORLEYN," it is not also impossible that some would also be aware of the proper
pronunciation--especially since, as respondent claims, its trademark ORLANE has been sold in the
market for more than 60 years and in the Philippines, for more than 40 years. 84

Respondent failed to show proof that the suffix LANE has registered in the mind of consumers that
such suffix is exclusively or even predominantly associated with ORLANE products. Notably and as
correctly argued by petitioner, the IPO previously allowed the registration of the mark GIN LANE for
goods also falling under Class 3, i.e., perfume, cologne, skin care preparations, hair care
preparations and toiletries.
85

We are mindful that in the earlier cases of Mighty Corporation and Emerald, despite a finding that
there is no colorable imitation, we still discussed the nature of the goods using the trademark and
whether the goods are identical, similar, competing or related. We need not belabor a similar
discussion here considering that the essential element in determining likelihood of
confusion, i.e., colorable imitation by LO LANE of the mark ORLANE, is absent in this case.
Resemblance between the marks is a separate requirement from, and must not be confused with,
the requirement of a similarity of the goods to which the trademarks are attached. In Great White
Shark Enterprises, Inc v. Caralde, Jr.,  after we ruled that there was no confusing similarity between
86

Great White Shark's "GREG NORMAN LOGO" and Caralde's "SHARK & LOGO" mark due to the
visual and aural dissimilarities between the two marks, we deemed it unnecessary to resolve
whether Great White Shark's mark has gained recognition as a well-known mark.

Finding that LOLANE is not a colorable imitation of ORLANE due to distinct visual and aural
differences using the dominancy test, we no longer find it necessary to discuss the contentions of
the petitioner as to the appearance of the marks together with the packaging, nature of the goods
represented by the marks and the price difference, as well as the applicability of foreign judgments.
We rule that the mark LOLANE is entitled to registration.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated July 14, 2009
is REVERSED and SET ASIDE. Petitioner's application of the mark LOLANE for goods classified
under Class 3 of the International Classification of Goods is GRANTED.

G.R. No. 221717

MANG INASAL PHILIPPINES, INC., Petitioner

vs.
IFP MANUFACTURING CORPORATION, Respondent

DECISION

VELASCO, JR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court of the
Resolutions dated June 10, 2015   and December 2, 2015   of the Court of Appeals (CA) in CA-G.R.
1 2

SP No. 139020.

The Facts
The Trademark Application and the Opposition Respondent IFP Manufacturing Corporation is a local
manufacturer of snacks and beverages.

On May 26, 2011, respondent filed with the Intellectual Property Office (IPO) an application   for the
3

registration of the mark "OK Hotdog Inasal Cheese Hotdog Flavor Mark" (OK Hotdog Inasal mark) in
connection with goods under Class 30 of the Nice Classification.4 The said mark, which respondent
intends to use on one of its curl snack products, appears as follows:

The application of respondent was opposed   by petitioner Mang Inasal Philippines, Inc.
5

Petitioner is a domestic fast food company and the owner of the mark "Mang Inasal, Home of Real
Pinoy Style Barbeque and Device" (Mang Inasal mark) for services under Class 43 of the Nice
Classification.   The said mark, which was registered with the IPO in 2006   and had been used by
6 7

petitioner for its chain of restaurants since 2003,   consists of the following Insignia:
8
Petitioner, in its opposition, contended that the registration of respondent's OK Hotdog Inasal mark is
prohibited under Section 123.l (d)(iii) of Republic Act No. (RA) 8293.   Petitioner averred that the OK
9

Hotdog Inasal mark and the Mang Inasal mark share similarities-both as to their appearance and as
to the goods or services that they represent which tend to suggest a false connection or association
between the said marks and, in that regard, would likely cause confusion on the part of the
public.   As petitioner explained:
10

1. The OK Hotdog Inasal mark is similar to the Mang Inasal mark. Both marks feature the same
dominant element-i.e., the word "INASAL"-printed and stylized in the exact same manner, viz:

a. In both marks, the word "INASAL" is spelled using the same font style and red
color;

b. In both marks, the word "INASAL" is placed inside the same black outline and
yellow background; and

c. In both marks, the word "INASAL" is arranged in the same staggered format.

2. The goods that the OK Hotdog Inasal mark is intended to identify (i.e., curl snack products) are
also closely related to the services represented by the Mang Inasal mark (i.e., fast food restaurants).
Both marks cover inasal or inasal-flavored food products.

Petitioner's opposition was referred to the Bureau of Legal Affairs (BLA) of the IPO for hearing and
disposition.

Decisions of the IPO-BLA and the IPO-DG

On September 19, 2013, after due proceedings, the IPO-BLA issued a Decision   dismissing
11

petitioner's opposition. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the instant opposition is hereby DISMISSED. Let the
filewrapper [sic] of Trademark Application Serial No. 4-2011-006098 be returned, together with a
copy of this Decision, to the Bureau of Trademarks for further information and appropriate action.

SO ORDERED.

Aggrieved, petitioner appealed the Decision of IPO-BLA to the Director General (DG) of the IPO.  12

On December 15, 2014, the IPO-DG rendered a Decision   dismissing the appeal of petitioner.
13

The fallo of the Decision accordingly reads:

Wherefore, premises considered, the appeal is hereby dismissed. Let a copy of this Decision be
furnished to the Director of Bureau of Legal Affairs and the Director of Bureau of Trademarks for
their appropriate action and information. Further, let a copy of this Decision be furnished to the
library of the Documentation, Information and Technology Transfer Bureau for records purposes.

SO ORDERED.

Both the IPO-BLA and the IPO-DG were not convinced that the OK Hotdog Inasal mark is
confusingly similar to the Mang Inasal mark. They rebuffed petitioner's contention, thusly:

1. The OK Hotdog Inasal mark is not similar to the Mang !nasal mark. In terms of appearance, the
only similarity between the two marks is the word "INASAL." However, there are other words
like "OK," "HOTDOG," and "CHEESE' and images like that of curls and cheese that are found in the
OK Hotdog Inasal mark but are not present in the Mang Inasal mark.  14

In addition, petitioner cannot prevent the application of the word "INASAL" in the OK Hotdog Inasal
mark. No person or entity can claim exclusive right to use the word "INASAL" because it is merely a
generic or descriptive word that means barbeque or barbeque products.  15

Neither can the underlying goods and services of the two marks be considered as closely related.
The products represented by the two marks are not competitive and are sold in different channels of
trade. The curl snack products of the OK Hotdog Inasal mark are sold in sari-sari stores, grocery
stores and other small distributor outlets, whereas the food products associated with the Mang
Inasal mark are sold in petitioner's restaurants. 
16

Undeterred, petitioner appealed to the CA.

Resolutions of the CA and the Instant Appeal

On June 10, 2015, the CA issued a Resolution   denying the appeal of petitioner. Petitioner filed a
17

motion for reconsideration, but this too was denied by the CA through its Resolution18 dated
December 2, 2015. The CA, in its Resolutions, simply agreed with the ratiocinations of the IPOBLA
and IPO-DG.

Hence, the instant appeal.

Here, petitioner prays for the reversal of the CA Resolutions. Petitioner maintains that the OK
Hotdog Inasal mark is confusingly similar to the Mang Inasal mark and insists that the trademark
application of respondent ought to be denied for that reason.
 Our Ruling

We have examined the OK Hotdog Inasal and Mang Inasal marks under the lens of pertinent law
and jurisprudence. And, through it, we have determined the justness of petitioner's claim. By our
legal and jurisprudential standards, the respondent's OK Hotdog Inasal mark is, indeed, likely to
cause deception or confusion on the part of the public. Hence, contrary to what the IPO-BLA, IPO-
DG, and the CA had ruled, the respondent's application should have been denied.

We, therefore, grant the appeal.

The Proscription: Sec. 123.l(d)(iii) of RA 8293

A mark that is similar to a registered mark or a mark with an earlier filing or priority date (earlier
mark) and which is likely to cause confusion on the part of the public cannot be registered with the
IPO. Such is the import of Sec. 123.l(d)(iii) of RA 8293:

SECTION 123. Registrability. –

123. 1. A mark cannot be registered if it:

xxxx

d. xxx:

1. x x x

11. x x x

iii. ... nearly resembles [a registered mark belonging to a different proprietor or a mark with an earlier
filing or priority date] as to be likely to deceive or cause confusion.

The concept of confusion, which is at the heart of the proscription, could either refer to confusion of
goods or confusion of business. In Skechers U.S.A., Inc. v. Trendworks International
Corporation,   we discussed and differentiated both types of confusion, as follows:
19

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other;
and (2) confusion of business (source or origin confusion), where, although the goods of the parties
are different, the product, the mark of which registration is applied for by one party, is such as might
reasonably be assumed to originate with the registrant of an earlier product, and the public would
then be deceived either into that belief or into the belief that there is some connection between the
two parties, though inexistent.

Confusion, in either of its forms, is, thus, only possible when the goods or services covered by
allegedly similar marks are identical, similar or related in some manner.  20
Verily, to fall under the ambit of Sec. 123. l(d)(iii) and be regarded as likely to deceive or cause
confusion upon the purchasing public, a prospective mark must be shown to meet two (2) minimum
conditions:

1. The prospective mark must nearly resemble or be similar to an earlier mark; and

2. The prospective mark must pertain to goods or services that are either identical, similar or
related to the goods or services represented by the earlier mark.

The rulings of the IPO-BLA, IPO-DG, and the CA all rest on the notion that the OK Hotdog Inasal
mark does not fulfill both conditions and so may be granted registration.

We disagree.

II

The OK Hotdog Inasal Mark Is Similar to the Mang Inasal Mark

The first condition of the proscription requires resemblance or similarity between a prospective mark
and an earlier mark. Similarity does not mean absolute identity of marks.   To be regarded as similar
21

to an earlier mark, it is enough that a prospective mark be a colorable imitation of the

former.   Colorable imitation denotes such likeness in form, content, words, sound, meaning, special
22

arrangement or general appearance of one mark with respect to another as would likely mislead an
average buyer in the ordinary course of purchase.  23

In determining whether there is similarity or colorable imitation between two marks, authorities
employ either the dominancy test or the holistic test.  In Mighty Corporation v. E. & J. Gallo
24

Winery,  we distinguished between the two tests as follows:

25

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.

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.
(citations omitted and emphasis supplied)

There are currently no fixed rules as to which of the two tests can be applied in any given
case.   However, recent case law on trademark seems to indicate an overwhelming judicial
26

preference towards applying the dominancy test.   We conform.27

Our examination of the marks in controversy yielded the following findings:

1. The petitioner's Mang Inasal mark has a single dominant feature-the word "INASAL" written in a
bold red typeface against a black outline and yellow background with staggered design. The other
perceptible elements of the mark-such as the word "MANG" written in black colored font at the upper
left side of the mark and the phrase "HOME OF REAL PINOY STYLE BARBEQUF' written in a black
colored stylized font at the lower portion of the mark-are not as visually outstanding as the
mentioned feature.

2. Being the sole dominant element, the word "INASAL," as stylized in the Mang Inasal mark, is also
the most distinctive and recognizable feature of the said mark.

3. The dominant element "INASAL," as stylized in the Mang Inasal mark, is different from the
term "inasal' per se. The term "inasal" per se is a descriptive term that cannot be appropriated.
However, the dominant element "INASAL," as stylized in the Mang Inasal mark, is not. Petitioner, as
the registered owner of the Mang Inasal mark, can claim exclusive use of such element.

4. The respondent's OK Hotdog Inasal mark, on the other hand, has three (3) dominant features: (a)
the word "INASAL" written in a bold red typeface against a black and yellow outline with staggered
design; (b) the word "HOTDOG" written in green colored font; and (c) a picture of three pieces of
curls. Though there are other observable elements in the mark-such as the word "OK'' written in red
colored font at the upper left side of the mark, the small red banner overlaying the picture of the curls
with the words "CHEESE HOTDOG FLAVOR" written on it, and the image of a block of cheese
beside the picture of the curls-none of those are as prevalent as the two features aforementioned.

5. The dominant element "INASAL" in the OK Hotdog Inasal mark is exactly the same as the
dominant element "INASAL" in the Mang Inasal mark. Both elements in both marks are printed using
the exact same red colored font, against the exact same black outline and yellow background and is
arranged in the exact same staggered format.

6. Apart from the element "INASAL," there appear no other perceivable similarities between the two
marks.

Given the foregoing premises, and applying the dominancy test, we hold that the OK Hotdog Inasal
mark is a colorable imitation of the Mang Inasal mark.

First. The fact that the conflicting marks have exactly the same dominant element is key. It is
undisputed that the OK Hotdog Inasal mark copied and adopted as one of its dominant features
the "INASAL" element of the Mang Inasal mark. Given that the "INASAL" element is, at the same
time, the dominant and most distinctive feature of the Mang Inasal mark, the said element's
incorporation in the OK Hotdog Inasal mark, thus, has the potential to project the deceptive and false
impression that the latter mark is somehow linked or associated with the former mark.

Second. The differences between the two marks are I trumped by the overall impression created by
their similarity. The mere fact that there are other elements in the OK Hotdog Inasal mark that are
not present in the Mang Inasal mark actually does little to change the probable public perception that
both marks are linked or associated.  It is worth reiterating that the OK Hotdog Inasal mark actually
1âwphi1

brandishes a literal copy of the most recognizable feature of the Mang Inasal mark. We doubt that
an average buyer catching a casual glimpse of the OK Hotdog Inasal mark would pay more attention
to the peripheral details of the said mark than it would to the mark's more prominent feature,
especially when the same invokes the distinctive feature of another more popular brand.

All in all, we find that the OK Hotdog Inasal mark is similar to the Mang Inasal mark.
 III

The Goods for which the Registration of the OK Hotdog Inasal Mark Is Sought Are Related to the
Services Being Represented by the Mang Inasal Mark

The second condition of the proscription requires that the prospective mark pertain to goods or
services that are either identical, similar or related to the goods or services represented by the
earlier mark. While there can be no quibble that the curl snack product for which the registration of
the OK Hotdog Inasal mark is sought cannot be considered as identical or similar to the restaurant
services represented by the Mang Inasal mark, there is ample reason to conclude that the said
product and services may nonetheless be regarded as related to each other.

Related goods and services are those that, though non-identical or non-similar, are so logically
connected to each other that they may reasonably be assumed to originate from one manufacturer
or from economically-linked manufacturers.   In determining whether goods or services are related,
28

several factors may be considered. Some of those factors recognized in our jurisprudence are:  29

1. the business (and its location) to which the goods belong;

2. the class of product to which the goods belong;

3. the product's quality, quantity, or size, including the nature of the package, wrapper or container;

4. the nature and cost of the articles;

5. the descriptive properties, physical attributes or essential characteristics with reference to their
form, composition, texture or quality;

6. the purpose of the goods;

7. whether the article is bought for immediate consumption, that is, day-to-day household items;

8. the fields of manufacture;

9. the conditions under which the article is usually purchased, and

10. the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold.

Relative to the consideration of the foregoing factors, however, Mighty Corporation   significantly

30

imparted:

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. 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.
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. The "purchaser" is not the "completely unwary consumer" but is the "ordinarily
intelligent buyer" considering the type of product involved 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. (citations omitted and emphasis supplied)

Mindful of the foregoing precepts, we hold that the curl snack product for which the registration of the
OK Hotdog Inasal mark is sought is related to the restaurant services represented by the Mang !
nasal mark, in such a way that may lead to a confusion of business. In holding so, we took into
account the specific kind of restaurant business that petitioner is engaged in, the reputation of the
petitioner's mark, and the particular type of curls sought to be marketed by the respondent, thus:

First. Petitioner uses the Mang Inasal mark in connection with its restaurant services that is
particularly known for its chicken inasal, i.e., grilled chicken doused in a
special inasal marinade.   The inasal marinade is different from the typical barbeque marinade and
31

it is what gives the chicken inasal its unique taste and distinct orange color.   Inasal refers to the
32

manner of grilling meat products using an inasal marinade.

Second. The Mang Inasal mark has been used for petitioner's restaurant business since 2003. The
restaurant started in Iloilo but has since expanded its business throughout the country. Currently, the
Mang Inasal chain of restaurants has a total of 464 branches scattered throughout the nation's three
major islands.   It is, thus, fair to say that a sizeable portion of the population is knowledgeable of the
33

Mang Inasal mark.

Third. Respondent, on the other hand, seeks to market under the OK Hotdog Inasal mark curl snack
products which it publicizes as having a cheese hotdog inasal flavor.  34

Accordingly, it is the fact that the underlying goods and services of both marks deal
with inasal and inasal-flavored products which ultimately fixes the relations between such goods and
services. Given the foregoing circumstances and the aforesaid similarity between the marks in
controversy, we are convinced that an average buyer who comes across the curls marketed under
the OK Hotdog Inasal mark is likely to be confused as to the true source of such curls. To our mind,
it is not unlikely that such buyer would be led into the assumption that the curls are of petitioner and
that the latter has ventured into snack manufacturing or, if not, that the petitioner has supplied the
flavorings for respondent's product. Either way, the reputation of petitioner would be taken
advantage of and placed at the mercy of respondent.

All in all, we find that the goods for which the registration of the OK Hotdog Inasal mark is sought are
related to the services being represented by the Mang Inasal mark. 1âwphi1

IV
Conclusion
The OK Hotdog Inasal mark meets the two conditions of the proscription under Sec. 123.l(d)(iii) of
RA 8293. First, it is similar to the Mang Inasal mark, an earlier mark. Second, it pertains to goods
that are related to the services represented by such earlier mark. Petitioner was, therefore, correct;
and the IPO-BLA, IPO-DG, and the CA's rulings must be reversed. The OK Hotdog Inasal mark is
not entitled to be registered as its use will likely deceive or cause confusion on the part of the public
and, thus, also likely to infringe the Mang Inasal mark. The law, in instances such as this, must come
to the succor of the owner of the earlier mark.

WHEREFORE, premises considered, the petition is hereby GRANTED. We hereby render a

decision as follows:

1. REVERSING and SETTING ASIDE the Resolutions dated June 10, 2015 and December 2, 2015
of the Court of Appeals in CA-G.R. SP No. 139020;

2. SETTING ASIDE the Decision dated December 15, 2014 of the Director General of the
Intellectual Property Office in Appeal No. 14-2013-0052;

3. SETTING ASIDE the Decision dated September 19, 2013 of the Director of the Bureau of Legal
Affairs of the Intellectual Property Office in IPC No. 14-2012-00369; and

4. DIRECTING the incumbent Director General and Director of the Bureau of Legal Affairs of the
Intellectual Property Office to DENY respondent's Application No. 4-2011-006098 for the registration
of the mark "OK Hotdog Inasal Cheese Hotdog Flavor Mark"

SO ORDERED.

G.R. No. 186088

WILTON DY and/or PHILITES ELECTRONIC & LIGHTING PRODUCTS, Petitioner

vs
KONINKLIJKE PHILIPS ELECTRONICS, N.V., Respondent

DECISION

SERENO, CJ.:

This Petition for Review on Certiorari  filed by petitioner Wilton Dy and/or Philites Electronic &
1

Lighting Products ("PHILITES") assails the Decision  and Resolution  of the Court of Appeals (CA) in
2 3

CA-G.R. SP No. 103350. The appellate court reversed and set aside the Decision  of the IPP Office
4

of the Director General (IPP-DG), which affirmed the Decision  of the Intellectual Property Philippines
5

Bureau of Legal Affairs (IPP-BLA) upholding petitioner's trademark application.

THE ANTECEDENT FACTS

On 12 April 2000, petitioner PHILITES filed a trademark application (Application Serial Number 4-
2000-002937) covering its fluorescent bulb, incandescent light, starter and ballast. After publication,
respondent Koninklijke Philips Electronics, N .V. ("PHILIPS") filed a Verified Notice of Opposition on
17 March 2006, alleging the following:
(a) The approval of Application Serial No. 4-2000-002937 is contrary to the following provisions of
Republic Act No. [RAJ 8293 or the Intellectual Property Code of the Philippines (IP Code): Sections
123.l(d), (i) and (iii), 123.l(e), 147, and 168.

(b) The approval of Application Serial No. 4-2000-002937 will cause grave and irreparable damage
and injury to oppose.

(c) The use and registration of the applied for mark by [petitioner] will mislead the public as to the
origin, nature, quality, and characteristic of the goods on which it is affixed;

(d) [Petitioner's] application for registration is tantamount to fraud as it seeks to register and obtain
legal protection for an identical or confusingly similar mark that clearly infringes upon the established
rights of the [respondent] over its registered and internationally well-known mark.

(e) The registration of the trademark PHILITES & LETTER P DEVICE in the name of the [petitioner]
will violate the proprietary rights and interests, business reputation and goodwill of the [respondent]
over its trademark, considering that the distinctiveness of the trademark PHILIPS will be diluted.

(t) The registration of the applied for mark will not only prejudice the Opposer, but will also cause
[petitioner] to unfairly profit commercially from the goodwill, fame and notoriety of Opposer's
trademark and reputation.

(g) [Petitioner's] registration and use of the applied for mark in connection with goods under Class 11
will weaken the unique and distinctive significance of mark PHILIPS and will tarnish, degrade or
dilute the distinctive quality of Opposer's trademark and will result in the gradual attenuation or
whittling away of the value of Opposer's trademark, in violation of Opposer's proprietary rights. 6

On 8 August 2006, petitioner filed a Verified Answer, stating that its PHILITES & LETTER P DEVICE
trademark and respondent's PHILIPS have vast dissimilarities in terms of spelling, sound and
meaning. 7

At the conclusion of the hearing, on 9 November 2006, IPP-BLA Director Estrellita Beltran-Abelardo
rendered a Decision  denying the Opposition filed by respondent PHILIPS. The dispositive portion of
8

the Decision reads:

WHEREFORE, premises considered the OPPOSITION filed by Koninklijke Philips Electronics, N.V.

is hereby DENIED. Accordingly, Application Serial no. 4-2000-002937 filed by Respondent-
Applicant, Wilton Dy and/or Philites Electronic & Lighting Products on 12 April 2000 for the mark
"PHILITES & LETTER P DEVICE" used on fluorescent bulb, incandescent light starter, ballast under
class 11, is as it is, hereby GRANTED.

Let the filewrapper of "PHILITES & LETTER P DEVICE," subject matter of this case together with
this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action.
SO ORDERED.

In upholding petitioner's trademark application, the IPP-BLA stated that assuming respondent's mark
was well-known in the Philippines, there should have been prior determination of whether or not the
mark under application for registration was "identical with, or confusingly similar to, or constitutes a
translation of such well-known mark in order that the owner of the well-known mark can prevent its
registration."  From the evidence presented, the IPP-BLA concluded that the PHILIPS and PHILITES
9

marks were so unlike, both visually and aurally. It held that no confusion was likely to occur, despite
their contemporaneous use, based on the following observations:

The Philips shield mark has four stars in different sizes located at the north east and south west
portions inside a circle within the shield. There are three wavy lines dissecting the middle of the
circle. None of these appear in the respondent's mark.

[Respondent] declares that the word Philips is the surname of the brothers who founded the Philips
company engaged in manufacturing and selling lighting products. [Petitioner] on the other hand has
testified that the word Philites is coined from the word 'Philippines' and 'lights,' hence 'Philites.' This
Bureau finds that there is no dictionary meaning to the [petitioner's] mark. It is a coined and arbitrary
word capable of appropriation as a trademark. x x x

Moreover, by mere pronouncing the two marks, the phonetic sounds produced when each mark is
uttered are not the same. The last syllable of respondent's mark is uttered in a long vowel sound,
while the last vowel of the opposer's mark is not.

x x x. This Bureau believes that opposer has no monopoly over the color or diameter or shape of a
light bulb or packaging shape unless registrations were secured to protect the same. The images of
the packages are reproduced below for reference.

x x x. For one, respondent adopts a yellow to light yellow dominant color while the oppose uses an
orange yellow hue. The mark "Philites" is printed in yellow with light blue background as compared
to the "Philips" mark typed in white against a black background.
It is fundamental in trademark jurisprudence that color alone, unless displayed in an arbitrary design
docs not function as a trademark.

Secondly, there appears to be other advertising slogans that appear in respondent's package such
as the words, "new", "prolong lite life", "E-coat finished" and "with additional 35% more than
ordinary". These phrases are absent in opposer's package. These phrases can be considered in the
nature of descriptive terms that can be appropriated by anyone. 10

Upon appeal, the IPP-DG rendered a Decision  on 16 April 2008, affirming the ruling of the IPP-BLA
11

as follows:

WHEREFORE, premises considered, that instant appeal is hereby DISMISSED for lack of merit.
Accordingly, Decision No. 2006-125 of the Director of the Bureau of Legal Affairs dated 09
November 2006, is hereby AFFIRMED.

Let a copy of this Decision as well as the trademark application and records be furnished and
returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the
Directors of the Bureau of Trademarks, the Administrative, Pinancial and Human Resources
Development Services Bureau, and the library of the Documentation, Information and Technology
Transfer Bureau be furnished a copy of this Decision for information, guidance and records
purposes.

SO ORDERED.

In so ruling, the IPP-DG noted that "[t]he dominant feature of the [respondent's] trademark is
'PHILIPS' while that of the [petitioner's] trademark is 'PHILITES.' While the first syllables of the marks
are identical - 'PHI' - the second syllables are not. The differences in the last syllable accounted for
the variance of the trademarks visually and aurally."  Moreover, there were "glaring differences and
12

dissimilarities in the design and general appearance of the Philips shield emblem mark and the letter
'P' of Philites mark."  Thus, "even if the [petitioner's] products bearing the trademark PHILIPS are
13

placed side by side with other brands, the purchaser would not be confused to pick up the
[petitioner's] product if this is his choice or preference, unless the resemblance in the appearance of
the trademarks is so glaring which [it] is not in this case."
14

As regards the issue of petitioner submitting a trademark drawing different from that used in the
packaging, the IPP-DG noted that this case involved an opposition to the registration of a mark,
while labels and packaging were technically not a part thereof.  At best, respondent supposedly had
15

the remedy of filing a case for trademark infringement and/or unfair competition. 16

Upon intermediate appellate review, the CA rendered a Decision   on 7 October 2008. The
17

dispositive portion herein reads:

WHEREFORE, premises considered, the Petition for Review is GRANTED. The Decision dated 16
April 2008 of the Director General of the Intellectual Property Office in Appeal No. 14-06-28; IPC No.
14-2006- 00034 is REVERSED and SET ASIDE. The application for trademark registration
(Application Serial Number 4-2000-002937) of respondent Wilton Dy and/or Philites Electronic &
Lighting Products is DISMISSED. Costs against respondent.

SO ORDERED.
In so ruling, the CA reasoned that the "drawing of the trademark submitted by [petitioner] has a
different appearance from that of [petitioner's] actual wrapper or packaging that contain the light
bulbs, which We find confusingly similar with that of [respondent's] registered trademark and
packaging."  Moreover, it found to be "self-serving [petitioner's] asseveration that the mark
18

'PHILITES' is a coined or arbitrary mark from the words 'Philippines' and 'lights.' Of all the marks that
[petitioner] could possibly think of for his light bulbs, it is odd that [petitioner] chose a mark with the
letters 'PHILI,' which are the same prevalent or dominant five letters found in [respondent's]
trademark 'PHILIPS' for the same products, light bulbs."  Hence, the appellate court concluded that
19

petitioner had intended to ride on the long-established reputation and goodwill of respondent's
trademark. 20

On 25 October 2008, petitioner filed a Motion for Reconsideration, which was denied in a
Resolution  issued by the CA on 18 December 2008.
21

Hence, this petition.

Respondent filed its Comment  on 23 June 2009, and petitioner filed its Reply  on 10 November
22 23

2009.

THE ISSUES

From the foregoing, we reduce the issues to the following:

1. Whether or not respondent's mark is a registered and well-known mark in the Philippines; and

2. Whether or not the mark applied for by petitioner is identical or confusingly similar with that of
respondent.

OUR RULING

The Petition is bereft of merit.

A trademark is "any distinctive word, name, symbol, emblem, sign, or device, or any combination
thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish
them from those manufactured, sold, or dealt by othcrs."  It is "intellectual property deserving
24

protection by law,"  and "susceptible to registration if it is crafted fancifully or arbitrarily and is

25

capable of identifying and distinguishing the goods of one manufacturer or seller from those of
another." 26

Section 122 of the Intellectual Property Code of the Philippines (IPC) provides that rights to a mark
shall be acquired through registration validly done in accordance with the provisions of this
law.  Corollary to that rule, Section 123 provides which marks cannot be registered.
27

Respondent opposes petitioner's application on the ground that PHILITES' registration will mislead
the public over an identical or confusingly similar mark of PHILIPS, which is registered and
internationally well-known mark. Specifically, respondent invokes the following provisions of Section
123:

Section 123. Registrability. - 123 .1. A mark cannot be registered if it:

xxx
(d) Is identical with a registered mark belonging to a different proprietor or a mark with an earlier
filing or priority date, in respect of:

(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion;

(e) Is identical with, or confusingly similar to, or constitutes a translation of a mark whid1 is
considered by the competent authority of the Philippines to be well-known internationally and in the
Philippines, whether or not it is registered here, as being already the mark of a person other than the
applicant for registration, and used for identical or similar goods or services: Provided, That in
determining whether a mark is well-known, account shall be taken of the knowledge of the relevant
sector of the public, rather than of the public at large, including knowledge in the Philipines which
has been obtained as a result of the promotion of the mark. 28

Respondent's mark is a registered and well-known mark in the

Philippines

There is no question that respondent's mark PHILIPS is already a registered and well-known mark in
the Philippines.

As we have said in Fredco Manufacturing Corporation v. Harvard University,  "[i]ndeed, Section

29

123.l(e) of R.A. No. 8293 now categorically states that 'a mark which is considered by the competent
authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is
registered here,' cannot be registered by another in the Ph iii ppines. " 30

Rule l00(a) of the Rules and Regulations on Trademarks, Service Marks, Tradenames and Marked
or Stamped Containers defines "competent authority" in the following manner:

(c) "Competent authority" for purposes of determining whether a mark is well-known, means the
Court, the Director General, the Director of the Bureau of Legal Affairs, or any administrative agency
or office vested with quasi-judicial or judicial jurisdiction to hear and adjudicate any action to enforce
the rights to a mark.

We thus affirm the following findings of the CA, inasmuch as the trademark of PHILIPS is a
registered and well-known mark, as held in the Supreme Court Decision in Philips Export B. V, v.
CA:31

Petitioner (PHILIPS) is the registered owner in the Philippines of the "PHILIPS" and "PHILIPS
SHIELD EMBLEM" trademarks, as shown by Certificates of Registration Nos. 42271 and 42270. The
Philippine trademark registrations of petitioner's "PHILIPS" and "PHILIPS SHIELD EMBLEM" are
also evidenced by Certificates of Registration Nos. R- 1651, R-29134, R-1674, and R-28981. The
said registered trademarks "PHILIPS" and "PHILIPS SHIELD EMBLEM" cover classes 7, 8, 9, 10,
11, 14, and 16. The assailed Decision itself states that "(T)he Appellant's trademark is already
registered and in use in the Philippines". It also appears that worldwide, petitioner has thousands of
trademark registrations x x x in various countries. As found by the High Court in Philips Export B.V.
vs Court of Appeals, PHILIPS is a trademark or trade name which was registered as far back as
1922, and has acquired the status of a well-known mark in the Philippines and internationally as
well.
32
Petitioner seeks to register a mark
nearly resembling that of respondent,
which may likely to deceive or cause
confusion among consumers.

Despite respondent's diversification to numerous and varied industries,  the records show that both
33

parties are engaged in the same line of business: selling identical or similar goods such as
fluorescent bulbs, incandescent lights, starters and ballasts.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the
dominancy test, and the holistic or totality test.
34

On one hand, the dominancy test focuses on "the similarity of the prevalent or dominant features of
the competing trademarks that might cause confusion, mistake, and deception in the mind of the
purchasing public. Duplication or imitation is not necessary; neither is it required that the mark
sought to be registered suggests an effort to imitate. Given more consideration are the aural and
visual impressions created by the marks on the buyers of goods, giving little weight to factors like
prices, quality, sales outlets, and market segments. " 35

On the other hand, the holistic or totality test necessitates a "consideration of the entirety of the
marks as applied to the products, including the labels and packaging, in determining confusing
similarity. The discerning eye of the observer must focus not only on the predominant words, but
also on the other features appearing on both labels so that the observer may draw conclusion on
whether one is confusingly similar to the other." 36
1âwphi1

Applying the dominancy test to this case requires us to look only at the mark submitted by petitioner
in its application, while we give importance to the aural and visual impressions the mark is likely to
create in the minds of the buyers. We agree with the findings of the CA that the mark "PHILITES"
bears an uncanny resemblance or confusing similarity with respondent's mark "PHILIPS," to wit:

Applying the dominancy test in the instant case, it shows the uncanny resemblance or confusing
similarity between the trademark applied for by respondent with that of petitioner's registered
trademark. An examination of the trademarks shows that their dominant or prevalent feature is the
five-letter "PHILI", "PHILIPS" for petitioner, and "PHILITES" for respondent. The marks are
confusingly similar with each other such that an ordinary purchaser can conclude an association or
relation between the marks. The consuming public does not have the luxury of time to ruminate the
phonetic sounds of the trademarks, to find out which one has a short or long vowel sound. At
bottom, the letters "PHILI'' visually catch the attention of the consuming public and the use of
respondent's trademark will likely deceive or cause confusion. Most importantly, both trademarks are
used in the sale of the same goods, which are light bulbs. 37

The confusing similarity becomes even more prominent when we examine the entirety of the marks
used by petitioner and respondent, including the way the products are packaged. In using the holistic
test, we find that there is a confusing similarity between the registered marks PHILIPS and
PHILITES, and note that the mark petitioner seeks to register is vastly different from that which it
actually uses in the packaging of its products. We quote with approval the findings of the CA as
follows:

Applying 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. A comparison
between petitioner's registered trademark "PHILIPS'' as used in the wrapper or packaging of its light
bulbs and that of respondent's applied for trademark "PHILITES" as depicted in the container or
actual wrapper/packaging of the latter's light bulbs will readily show that there is a strong similitude
and likeness between the two trademarks that will likely cause deception or confusion to the
purchasing public. The fact that the parties' wrapper or packaging reflects negligible differences
considering the use of a slightly different font and hue of the yellow is of no moment because taken
in their entirety, respondent's trademark "PHILITES" will likely cause confusion or deception to the
ordinary purchaser with a modicum of intelligence. 38

WHEREFORE, in view of the foregoing, the Petition for Review on Certiorari is hereby DENIED. The
7 October 2008 Decision and 18 December 2008 Resolution of the Court of Appeals in CA-G.R. SP
No. 103350 are hereby AFFIRMED.

SO ORDERED.

G.R. No. 143993             August 18, 2004

MCDONALD'S CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners,

vs.
L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY,
JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review of the Decision dated 26 November 1999 of the Court of Appeals finding
1  2 

respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition
and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11
July 2000 denying reconsideration. The Court of Appeals' Decision reversed the 5 September 1994
Decision of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger,
3 

Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonald's Corporation ("McDonald's") is a corporation organized under the laws of

Delaware, United States. McDonald's operates, by itself or through its franchisees, a global chain of
fast-food restaurants. McDonald's owns a family of marks including the "Big Mac" mark for its
4  5 

"double-decker hamburger sandwich." McDonald's registered this trademark with the United States
6 

Trademark Registry on 16 October 1979. Based on this Home Registration, McDonald's applied
7 

for the registration of the same mark in the Principal Register of the then Philippine Bureau of

Patents, Trademarks and Technology ("PBPTT"), now the Intellectual Property Office
("IPO"). Pending approval of its application, McDonald's introduced its "Big Mac" hamburger
sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed
registration of the "Big Mac" mark in the Principal Register based on its Home Registration in the
United States.

Like its other marks, McDonald's displays the "Big Mac" mark in items and paraphernalia in its
8  9 

restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5
million in advertisement for "Big Mac" hamburger sandwiches alone. 10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's

Philippine franchisee. 11

Respondent L.C. Big Mak Burger, Inc. ("respondent corporation") is a domestic corporation which
operates fast-food outlets and snack vans in Metro Manila and nearby provinces. Respondent
12 

corporation's menu includes hamburger sandwiches and other food items. Respondents Francis B.
13 

Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto
("private respondents") are the incorporators, stockholders and directors of respondent corporation. 14

On 21 October 1988, respondent corporation applied with the PBPTT for the registration of the "Big
Mak" mark for its hamburger sandwiches. McDonald's opposed respondent corporation's application
on the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same
food products. McDonald's also informed respondent Francis Dy ("respondent Dy"), the chairman of
the Board of Directors of respondent corporation, of its exclusive right to the "Big Mac" mark and
requested him to desist from using the "Big Mac" mark or any similar mark.

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the
Regional Trial Court of Makati, Branch 137 ("RTC"), for trademark infringement and unfair
competition. In its Order of 11 July 1990, the RTC issued a temporary restraining order ("TRO")
against respondents enjoining them from using the "Big Mak" mark in the operation of their business
in the National Capital Region. On 16 August 1990, the RTC issued a writ of preliminary injunction
15 

replacing the TRO. 16

In their Answer, respondents admitted that they have been using the name "Big Mak Burger" for
their fast-food business. Respondents claimed, however, that McDonald's does not have an
exclusive right to the "Big Mac" mark or to any other similar mark. Respondents point out that the
Isaiyas Group of Corporations ("Isaiyas Group") registered the same mark for hamburger
sandwiches with the PBPTT on 31 March 1979. One Rodolfo Topacio ("Topacio") similarly
registered the same mark on 24 June 1983, prior to McDonald's registration on 18 July
1985. Alternatively, respondents claimed that they are not liable for trademark infringement or for
unfair competition, as the "Big Mak" mark they sought to register does not constitute a colorable
imitation of the "Big Mac" mark. Respondents asserted that they did not fraudulently pass off their
hamburger sandwiches as those of petitioners' Big Mac hamburgers. Respondents sought damages
17 

in their counterclaim.

In their Reply, petitioners denied respondents' claim that McDonald's is not the exclusive owner of
the "Big Mac" mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the
"Big Mac" mark ahead of McDonald's, the Isaiyas Group did so only in the Supplemental Register of
the PBPTT and such registration does not provide any protection. McDonald's disclosed that it
had acquired Topacio's rights to his registration in a Deed of Assignment dated 18 May 1981. 18

The Trial Court's Ruling

On 5 September 1994, the RTC rendered judgment ("RTC Decision") finding respondent corporation
liable for trademark infringement and unfair competition. However, the RTC dismissed the complaint
against private respondents and the counterclaim against petitioners for lack of merit and
insufficiency of evidence. The RTC held:

Undeniably, the mark "B[ig] M[ac]" is a registered trademark for plaintiff McDonald's, and as
such, it is entitled [to] protection against infringement.

xxxx

There exist some distinctions between the names "B[ig] M[ac]" and "B[ig] M[ak]" as
appearing in the respective signages, wrappers and containers of the food products of the
parties. But infringement goes beyond the physical features of the questioned name and the
original name. There are still other factors to be considered.

xxxx

Significantly, the contending parties are both in the business of fast-food chains and
restaurants. An average person who is hungry and wants to eat a hamburger sandwich may
not be discriminating enough to look for a McDonald's restaurant and buy a "B[ig] M[ac]"
hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into
his pocket and order a "B[ig] M[ak]" hamburger sandwich. Plaintiff McDonald's fast-food
chain has attained wide popularity and acceptance by the consuming public so much so that
its air-conditioned food outlets and restaurants will perhaps not be mistaken by many to be
the same as defendant corporation's mobile snack vans located along busy streets or
highways. But the thing is that what is being sold by both contending parties is a food item –
a hamburger sandwich which is for immediate consumption, so that a buyer may easily be
confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a
food-product of plaintiff McDonald's, or a subsidiary or allied outlet thereof. Surely, defendant
corporation has its own secret ingredients to make its hamburger sandwiches as palatable
and as tasty as the other brands in the market, considering the keen competition among
mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence,
the trademark "B[ig] M[ac]" has been infringed by defendant corporation when it used the
name "B[ig] M[ak]" in its signages, wrappers, and containers in connection with its food
business. xxxx

Did the same acts of defendants in using the name "B[ig] M[ak]" as a trademark or
tradename in their signages, or in causing the name "B[ig] M[ak]" to be printed on the
wrappers and containers of their food products also constitute an act of unfair competition
under Section 29 of the Trademark Law?

The answer is in the affirmative. xxxx

The xxx provision of the law concerning unfair competition is broader and more inclusive
than the law concerning the infringement of trademark, which is of more limited range, but
within its narrower range recognizes a more exclusive right derived by the adoption and
registration of the trademark by the person whose goods or services are first
associated therewith. xxx Notwithstanding the distinction between an action for trademark
infringement and an action for unfair competition, however, the law extends substantially the
same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No.
166)
 Any conduct may be said to constitute unfair competition if the effect is to pass off on the
public the goods of one man as the goods of another. The choice of "B[ig] M[ak]" as
tradename by defendant corporation is not merely for sentimental reasons but was clearly
made to take advantage of the reputation, popularity and the established goodwill of plaintiff
McDonald's. For, as stated in Section 29, a person is guilty of unfair competition who in
selling his goods shall give them the general appearance, of goods of another manufacturer
or dealer, either as to the goods themselves or in the wrapping of the packages in which they
are contained, or the devices or words thereon, or in any other feature of their appearance,
which would likely influence purchasers to believe that the goods offered are those of a
manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have
established their valid cause of action against the defendants for trademark infringement and
unfair competition and for damages. 19

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonald's Corporation and

McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16 August 1990] is made
permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in

the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and
attorney's fees and expenses of litigation in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy,
Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are
dismissed for lack of merit as well as for insufficiency of evidence. 20

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment ("Court of Appeals' Decision")
reversing the RTC Decision and ordering McDonald's to pay respondents P1,600,000 as actual and
compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use
of defendants-appellants of its corporate name – the whole "L.C. B[ig] M[ak] B[urger], I[nc]."
which appears on their food packages, signages and advertisements is an infringement of
their trademark "B[ig] M[ac]" which they use to identify [their] double decker sandwich, sold in
a Styrofoam box packaging material with the McDonald's logo of umbrella "M" stamped
thereon, together with the printed mark in red bl[o]ck capital letters, the words being
separated by a single space. Specifically, plaintiffs-appellees argue that defendants-
appellants' use of their corporate name is a colorable imitation of their trademark "Big Mac".

xxxx

To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the
definition dictates, it is not sufficient that a similarity exists in both names, but that more
importantly, the over-all presentation, or in their essential, substantive and distinctive parts is
such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing
the genuine article. A careful comparison of the way the trademark "B[ig] M[ac]" is being
used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-
appellants, would readily reveal that no confusion could take place, or that the ordinary
purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-
appellees' trademark is used to designate only one product, a double decker sandwich sold
in a Styrofoam box with the "McDonalds" logo. On the other hand, what the defendants-
appellants corporation is using is not a trademark for its food product but a business or
corporate name. They use the business name "L.C. Big Mak Burger, Inc." in their restaurant
business which serves diversified food items such as siopao, noodles, pizza, and
sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-
appellants' corporate or business name appearing in the food packages and signages are
written in silhouette red-orange letters with the "b" and "m" in upper case letters. Above the
words "Big Mak" are the upper case letter "L.C.". Below the words "Big Mak" are the words
"Burger, Inc." spelled out in upper case letters. Furthermore, said corporate or business
name appearing in such food packages and signages is always accompanied by the
company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper
case "m" appearing therein and a blue lower garment. Finally, the defendants-appellants'
food packages are made of plastic material.

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the
appearance of the product and the manner that the tradename "Big Mak" is being used and
presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffs-
appellees' trademark and defendants-appellants' corporate name. Plaintiffs-appellees'
product carrying the trademark "B[ig] M[ac]" is a double decker sandwich (depicted in the
tray mat containing photographs of the various food products xxx sold in a Styrofoam box
with the "McDonald's" logo and trademark in red, bl[o]ck capital letters printed thereon xxx at
a price which is more expensive than the defendants-appellants' comparable food
products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned
"McDonald's" restaurant usually located in a nearby commercial center, advertised and
identified by its logo - the umbrella "M", and its mascot – "Ronald McDonald". A typical
McDonald's restaurant boasts of a playground for kids, a second floor to
accommodate additional customers, a drive-thru to allow customers with cars to make orders
without alighting from their vehicles, the interiors of the building are well-lighted, distinctly
decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it is necessary to
specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it
first before he can find a hamburger sandwich which carry the mark "Big Mac". On the other
hand, defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition,

We likewise find the same untenable.

Unfair competition is defined as "the employment of deception or any other means contrary

to good faith by which a person shall pass off the goods manufactured by him or in which he
deals, or his business, or service, for those of another who has already established good will
for his similar good, business or services, or any acts calculated to produce the same result"
(Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow that there was malice

and that the entity concerned was in bad faith.
 In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that
defendants-appellants deliberately tried to pass off the goods manufactured by them for
those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-
appellants' corporate name with the plaintiffs-appellees' trademark is not sufficient evidence
to conclude unfair competition. Defendants-appellants explained that the name "M[ak]" in
their corporate name was derived from both the first names of the mother and father of
defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up
to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a
settled rule that the law always presumes good faith such that any person who seeks to be
awarded damages due to acts of another has the burden of proving that the latter acted in
bad faith or with ill motive. 
21

Petitioners sought reconsideration of the Court of Appeals' Decision but the appellate court denied
their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS' CORPORATE

NAME "L.C. BIG MAK BURGER, INC." IS NOT A COLORABLE IMITATION OF THE
MCDONALD'S TRADEMARK "BIG MAC", SUCH COLORABLE IMITATION BEING
AN ELEMENT OF TRADEMARK INFRINGEMENT.

A. Respondents use the words "Big Mak" as trademark for their products and not
merely as their business or corporate name.

B. As a trademark, respondents' "Big Mak" is undeniably and unquestionably similar

to petitioners' "Big Mac" trademark based on the dominancy test and the idem
sonans test resulting inexorably in confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT

SIMILARITY BETWEEN THE MARK "BIG MAK" AND THE WORD MARK "BIG MAC" AS
AN INDICATION OF RESPONDENTS' INTENT TO DECEIVE OR DEFRAUD
FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION. 22

Petitioners pray that we set aside the Court of Appeals' Decision and reinstate the RTC Decision.

In their Comment to the petition, respondents question the propriety of this petition as it allegedly
raises only questions of fact. On the merits, respondents contend that the Court of Appeals
committed no reversible error in finding them not liable for trademark infringement and unfair
competition and in ordering petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under
Rule 45.
2. On the merits, (a) whether respondents used the words "Big Mak" not only as part of the
corporate name "L.C. Big Mak Burger, Inc." but also as a trademark for their hamburger products,
and (b) whether respondent corporation is liable for trademark infringement and unfair competition. 23

The Court's Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a
petition for review under Section 1 of Rule 45 ("Section 1") raising only questions of law. A question
24 

of law exists when the doubt or difference arises on what the law is on a certain state of facts. There
is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 
25

Here, petitioners raise questions of fact and law in assailing the Court of Appeals' findings on
respondent corporation's non-liability for trademark infringement and unfair competition. Ordinarily,
the Court can deny due course to such a petition. In view, however, of the contradictory findings of
fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the
recognized exceptions to Section 1. We took a similar course of action in Asia Brewery, Inc. v.
26 

Court of Appeals which also involved a suit for trademark infringement and unfair competition in
27 

which the trial court and the Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used

"Big Mak" in their Business

Petitioners contend that the Court of Appeals erred in ruling that the corporate name "L.C. Big Mak
Burger, Inc." appears in the packaging for respondents' hamburger products and not the words "Big
Mak" only.

The contention has merit.

The evidence presented during the hearings on petitioners' motion for the issuance of a writ of
preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for
their hamburger sandwiches bore the words "Big Mak." The other descriptive words "burger" and
"100% pure beef" were set in smaller type, along with the locations of branches. Respondents' cash
28 

invoices simply refer to their hamburger sandwiches as "Big Mak." It is respondents' snack vans that
29 

carry the words "L.C. Big Mak Burger, Inc." 30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for
their hamburger sandwiches relied on by the Court of Appeals. Respondents' plastic wrappers and
31 

bags were identical with those petitioners presented during the hearings for the injunctive writ except
that the letters "L.C." and the words "Burger, Inc." in respondents' evidence were added above and
below the words "Big Mak," respectively. Since petitioners' complaint was based on facts existing
before and during the hearings on the injunctive writ, the facts established during those hearings are
the proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 ("Section 22) of Republic Act No. 166, as amended ("RA 166"), the law applicable to this
case, defines trademark infringement as follows:
32 
 Infringement, what constitutes. — Any person who [1] shall use, without the consent of the
registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or
trade-name in connection with the sale, offering for sale, or advertising of any goods,
business or services on or in connection with which such use is likely to cause confusion or
mistake or to deceive purchasers or others as to the source or origin of such goods or
services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably
imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles or
advertisements intended to be used upon or in connection with such goods, business or
services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided. 33

Petitioners base their cause of action under the first part of Section 22, i.e. respondents allegedly
used, without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and
selling respondents' hamburger sandwiches. This likely caused confusion in the mind of the
purchasing public on the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of
plaintiff's mark; (2) the plaintiff's ownership of the mark; and (3) the use of the mark or its colorable
imitation by the alleged infringer results in "likelihood of confusion." Of these, it is the element
34 

of likelihood of confusion that is the gravamen of trademark infringement. 35

On the Validity of the "Big Mac"Mark

and McDonald's Ownership of such Mark

A mark is valid if it is "distinctive" and thus not barred from registration under Section 4 of RA 166
36 

("Section 4"). However, once registered, not only the mark's validity but also the registrant's
ownership of the mark is prima facie presumed. 37

Respondents contend that of the two words in the "Big Mac" mark, it is only the word "Mac" that is
valid because the word "Big" is generic and descriptive (proscribed under Section 4[e]), and thus
"incapable of exclusive appropriation." 38

The contention has no merit. The "Big Mac" mark, which should be treated in its entirety and not
dissected word for word, is neither generic nor descriptive. Generic marks are commonly used as
39 

the name or description of a kind of goods, such as "Lite" for beer or "Chocolate Fudge" for
40  41 

chocolate soda drink. Descriptive marks, on the other hand, convey the characteristics, functions,
42 

qualities or ingredients of a product to one who has never seen it or does not know it exists, such as
43 

"Arthriticare" for arthritis medication. On the contrary, "Big Mac" falls under the class of fanciful or
44 

arbitrary marks as it bears no logical relation to the actual characteristics of the product it

represents. As such, it is highly distinctive and thus valid. Significantly, the trademark "Little Debbie"
45 

for snack cakes was found arbitrary or fanciful. 46

The Court also finds that petitioners have duly established McDonald's exclusive ownership of the
"Big Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of
McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The
Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A
mark which is not registered in the Principal Register, and thus not distinctive, has no real
protection. Indeed, we have held that registration in the Supplemental Register is not even a prima
47 

facie evidence of the validity of the registrant's exclusive right to use the mark on the goods specified
in the certificate.
48
On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or colorable imitation
marks, namely, confusion of goods (product confusion) and confusion of business (source or origin
confusion). In Sterling Products International, Incorporated v. Farbenfabriken Bayer
Aktiengesellschaft, et al., the Court distinguished these two types of confusion, thus:
49 

[Rudolf] Callman notes two types of confusion. The first is the confusion of goods "in which
event the ordinarily prudent purchaser would be induced to purchase one product in the
belief that he was purchasing the other." xxx The other is the confusion of business: "Here
though the goods of the parties are different, the defendant's product is such as might
reasonably be assumed to originate with the plaintiff, and the public would then be deceived
either into that belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist."

Under Act No. 666, the first trademark law, infringement was limited to confusion of goods only,
50 

when the infringing mark is used on "goods of a similar kind." Thus, no relief was afforded to the
51 

party whose registered mark or its colorable imitation is used on different although related goods. To
remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark
infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to
include such use of the mark or its colorable imitation that is likely to result in confusion on "the
source or origin of such goods or services, or identity of such business." Thus, while there is
52 

confusion of goods when the products are competing, confusion of business exists when the
products are non-competing but related enough to produce confusion of affiliation. 53

On Whether Confusion of Goods and

Confusion of Business are Applicable

Petitioners claim that respondents' use of the "Big Mak" mark on respondents' hamburgers results in
confusion of goods, particularly with respect to petitioners' hamburgers labeled "Big Mac." Thus,
petitioners alleged in their complaint:

1.15. Defendants have unduly prejudiced and clearly infringed upon the property rights of
plaintiffs in the McDonald's Marks, particularly the mark "B[ig] M[ac]". Defendants'
unauthorized acts are likely, and calculated, to confuse, mislead or deceive the public into
believing that the products and services offered by defendant Big Mak Burger, and the
business it is engaged in, are approved and sponsored by, or affiliated with,
plaintiffs. (Emphasis supplied)
54 

Since respondents used the "Big Mak" mark on the same goods, i.e. hamburger sandwiches, that
petitioners' "Big Mac" mark is used, trademark infringement through confusion of goods is a proper
issue in this case.

Petitioners also claim that respondents' use of the "Big Mak" mark in the sale of hamburgers, the
same business that petitioners are engaged in, results in confusion of
business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff McDonald's nor its
licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to
use and/or appropriate the McDonald's marks, defendant Big Mak Burger acting through
individual defendants, has been operating "Big Mak Burger", a fast food restaurant business
dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food
 products, and has caused to be printed on the wrapper of defendant's food products and
incorporated in its signages the name "Big Mak Burger", which is confusingly similar
to and/or is a colorable imitation of the plaintiff McDonald's mark "B[ig] M[ac]",
xxx. Defendant Big Mak Burger has thus unjustly created the impression that its
business is approved and sponsored by, or affiliated with, plaintiffs . xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and
infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner
and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's
marks, and which are likely to have caused confusion or deceived the public as to the
true source, sponsorship or affiliation of defendants' food products and restaurant
business, plaintiffs have suffered and continue to suffer actual damages in the form of injury
to their business reputation and goodwill, and of the dilution of the distinctive quality of the
McDonald's marks, in particular, the mark "B[ig] M[ac]". (Emphasis supplied)
55 

Respondents admit that their business includes selling hamburger sandwiches, the same food
product that petitioners sell using the "Big Mac" mark. Thus, trademark infringement through
confusion of business is also a proper issue in this case.

Respondents assert that their "Big Mak" hamburgers cater mainly to the low-income group while
petitioners' "Big Mac" hamburgers cater to the middle and upper income groups. Even if this is true,
the likelihood of confusion of business remains, since the low-income group might be led to believe
that the "Big Mak" hamburgers are the low-end hamburgers marketed by petitioners. After all,
petitioners have the exclusive right to use the "Big Mac" mark. On the other hand, respondents
would benefit by associating their low-end hamburgers, through the use of the "Big Mak" mark, with
petitioners' high-end "Big Mac" hamburgers, leading to likelihood of confusion in the identity of
business.

Respondents further claim that petitioners use the "Big Mac" mark only on petitioners' double-decker
hamburgers, while respondents use the "Big Mak" mark on hamburgers and other products like
siopao, noodles and pizza. Respondents also point out that petitioners sell their Big Mac double-
deckers in a styrofoam box with the "McDonald's" logo and trademark in red, block letters at a price
more expensive than the hamburgers of respondents. In contrast, respondents sell their Big Mak
hamburgers in plastic wrappers and plastic bags. Respondents further point out that petitioners'
restaurants are air-conditioned buildings with drive-thru service, compared to respondents' mobile
vans.

These and other factors respondents cite cannot negate the undisputed fact that respondents use
their "Big Mak" mark on hamburgers, the same food product that petitioners' sell with the use of their
registered mark "Big Mac." Whether a hamburger is single, double or triple-decker, and whether
wrapped in plastic or styrofoam, it remains the same hamburger food product. Even respondents'
use of the "Big Mak" mark on non-hamburger food products cannot excuse their infringement of
petitioners' registered mark, otherwise registered marks will lose their protection under the law.

The registered trademark owner may use his mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the products for
specific segments of the market. The Court has recognized that the registered trademark owner
enjoys protection in product and market areas that are the normal potential expansion of his
business. Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not
limited to guarding his goods or business from actual market competition with identical or
 similar products of the parties, but extends to all cases in which the use by a junior
appropriator of a trade-mark or trade-name is likely to lead to a confusion of source, as
where prospective purchasers would be misled into thinking that the complaining party has
extended his business into the field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is
in any way connected with the activities of the infringer; or when it forestalls the normal
potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphasis
56 

supplied)

On Whether Respondents' Use of the "Big Mak"

Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test
and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the
57 

competing trademarks that might cause confusion. In contrast, the holistic test requires the court to
consider the entirety of the marks as applied to the products, including the labels and packaging,
in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion that could arise in the use
of respondents' "Big Mak" mark on hamburgers, relied on the holistic test. Thus, the Court of
Appeals ruled that "it is not sufficient that a similarity exists in both name(s), but that more
importantly, the overall presentation, or in their essential, substantive and distinctive parts is such as
would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine
article." The holistic test considers the two marks in their entirety, as they appear on the goods with
their labels and packaging. It is not enough to consider their words and compare the spelling and
pronunciation of the words. 58

Respondents now vigorously argue that the Court of Appeals' application of the holistic test to this
case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy
test considers the dominant features in the competing marks in determining whether they are
confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the
appearance of the product arising from the adoption of the dominant features of the registered mark,
disregarding minor differences. Courts will consider more the aural and visual impressions created
59 

by the marks in the public mind, giving little weight to factors like prices, quality, sales outlets and
market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:
60 

xxx It has been consistently held that the question of infringement of a trademark is to
be determined by the test of dominancy. Similarity in size, form and color, while relevant, is
not conclusive. If the competing trademark contains the main or essential or dominant
features of another, and confusion and deception is likely to result, infringement takes
place. Duplication or imitation is not necessary; nor is it necessary that the infringing label
should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co.,
191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question
at issue in cases of infringement of trademarks is whether the use of the marks involved
would be likely to cause confusion or mistakes in the mind of the public or deceive
purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx)
(Emphasis supplied.)
The Court reiterated the dominancy test in Lim Hoa v. Director of Patents, Phil. Nut Industry,
61 

Inc. v. Standard Brands Inc., Converse Rubber Corporation v. Universal Rubber Products,
62 

Inc., and Asia Brewery, Inc. v. Court of Appeals. In the 2001 case of Societe Des Produits
63  64 

Nestlé, S.A. v. Court of Appeals, the Court explicitly rejected the holistic test in this wise:
65 

[T]he totality or holistic test is contrary to the elementary postulate of the law on

trademarks and unfair competition that confusing similarity is to be determined on the
basis of visual, aural, connotative comparisons and overall impressions engendered by the
marks in controversy as they are encountered in the realities of the marketplace.
(Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual
Property Code which defines infringement as the "colorable imitation of a registered mark xxx or
a dominant feature thereof."

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in
likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first
word in "Big Mak" is exactly the same as the first word in "Big Mac." Third, the first two letters in
"Mak" are the same as the first two letters in "Mac." Fourth, the last letter in "Mak" while a "k" sounds
the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in
spelling, thus "Caloocan" is spelled "Kalookan."

In short, aurally the two marks are the same, with the first word of both marks phonetically the same,
and the second word of both marks also phonetically the same. Visually, the two marks
have both two words and six letters, with the first word of both marks having the same letters and the
second word having the same first two letters. In spelling, considering the Filipino language, even
the last letters of both marks are the same.

Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the
features of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely
result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters contained in the marks
in determining the issue of confusing similarity. Thus, in Marvex Commercial Co., Inc. v. Petra
Hawpia & Co., et al., the Court held:
66 

The following random list of confusingly similar sounds in the matter of trademarks, culled
from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that
"SALONPAS" and "LIONPAS" are confusingly similar in sound: "Gold Dust" and "Gold Drop";
"Jantzen" and "Jass-Sea"; "Silver Flash" and "Supper Flash"; "Cascarete" and "Celborite";
"Celluloid" and "Cellonite"; "Chartreuse" and "Charseurs"; "Cutex" and "Cuticlean"; "Hebe"
and "Meje"; "Kotex" and "Femetex"; "Zuso" and "Hoo Hoo". Leon Amdur, in his book "Trade-
Mark Law and Practice", pp. 419-421, cities, as coming within the purview of the idem
sonans rule, "Yusea" and "U-C-A", "Steinway Pianos" and "Steinberg Pianos", and "Seven-
Up" and "Lemon-Up". In Co Tiong vs. Director of Patents, this Court unequivocally said that
"Celdura" and "Cordura" are confusingly similar in sound; this Court held in Sapolin Co. vs.
Balmaceda, 67 Phil. 795 that the name "Lusolin" is an infringement of the trademark
"Sapolin", as the sound of the two names is almost the same. (Emphasis supplied)

Certainly, "Big Mac" and "Big Mak" for hamburgers create even greater confusion, not only aurally
but also visually.
Indeed, a person cannot distinguish "Big Mac" from "Big Mak" by their sound. When one hears a
"Big Mac" or "Big Mak" hamburger advertisement over the radio, one would not know whether the
"Mac" or "Mak" ends with a "c" or a "k."

Petitioners' aggressive promotion of the "Big Mac" mark, as borne by their advertisement expenses,
has built goodwill and reputation for such mark making it one of the easily recognizable marks in the
market today. This increases the likelihood that consumers will mistakenly associate petitioners'
hamburgers and business with those of respondents'.

Respondents' inability to explain sufficiently how and why they came to choose "Big Mak" for their
hamburger sandwiches indicates their intent to imitate petitioners' "Big Mac" mark. Contrary to the
Court of Appeals' finding, respondents' claim that their "Big Mak" mark was inspired by the first
names of respondent Dy's mother (Maxima) and father (Kimsoy) is not credible. As petitioners well
noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more
creative choice for a corporate name by using the names of his parents, especially since he
was allegedly driven by sentimental reasons. For one, he could have put his father's name
ahead of his mother's, as is usually done in this patriarchal society, and derived letters from
said names in that order. Or, he could have taken an equal number of letters (i.e., two) from
each name, as is the more usual thing done. Surely, the more plausible reason behind
Respondents' choice of the word "M[ak]", especially when taken in conjunction with the word
"B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]" trademark, with
their alleged sentiment-focused "explanation" merely thought of as a
convenient, albeit unavailing, excuse or defense for such an unfair choice of name. 67

Absent proof that respondents' adoption of the "Big Mak" mark was due to honest mistake or was
fortuitous, the inescapable conclusion is that respondents adopted the "Big Mak" mark to "ride on
68 

the coattails" of the more established "Big Mac" mark. This saves respondents much of the expense
69 

in advertising to create market recognition of their mark and hamburgers. 70

Thus, we hold that confusion is likely to result in the public mind. We sustain petitioners' claim of
trademark infringement.

On the Lack of Proof of

Actual Confusion

Petitioners' failure to present proof of actual confusion does not negate their claim of trademark
infringement. As noted in American Wire & Cable Co. v. Director of Patents, Section71 

22 requires the less stringent standard of "likelihood of confusion" only. While proof

of actual confusion is the best evidence of infringement, its absence is inconsequential. 72

On the Issue of Unfair Competition

Section 29 ("Section 29") of RA 166 defines unfair competition, thus:

73 

xxxx

Any person who will employ deception or any other means contrary to good faith by which
he shall pass off the goods manufactured by him or in which he deals, or his business, or
services for those of the one having established such goodwill, or who shall commit any acts
 calculated to produce said result, shall be guilty of unfair competition, and shall be subject to
an action therefor.

In particular, and without in any way limiting the scope of unfair competition, the

following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the general appearance of

goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words thereon, or
in any feature of their appearance, which would be likely to influence purchasers to believe
that the goods offered are those of a manufacturer or dealer, other
than the actual manufacturer or dealer, or who otherwise clothes the goods with such
appearance as shall deceive the public and defraud another of his legitimate trade,
or any subsequent vendor of such goods or any agent of any vendor engaged in selling such
goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means calculated to

induce the false belief that such person is offering the services of another who has identified
such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or

who shall commit any other act contrary to good faith of a nature calculated to discredit the
goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor. The74 

confusing similarity may or may not result from similarity in the marks, but may result from other
external factors in the packaging or presentation of the goods. The intent to deceive and defraud
may be inferred from the similarity of the appearance of the goods as offered for sale to the
public. Actual fraudulent intent need not be shown.
75  76

Unfair competition is broader than trademark infringement and includes passing off goods with or
without trademark infringement. Trademark infringement is a form of unfair competition. Trademark
77 

infringement constitutes unfair competition when there is not merely likelihood of confusion, but
also actual or probable deception on the public because of the general appearance of the goods.
There can be trademark infringement without unfair competition as when the infringer discloses on
the labels containing the mark that he manufactures the goods, thus preventing the public from
being deceived that the goods originate from the trademark owner. 78

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed
off their hamburgers as "Big Mac" hamburgers. Petitioners add that respondents' fraudulent intent
can be inferred from the similarity of the marks in question. 79

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors. Thus, the defendant gives his goods the
80 

general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and respondents in this wise:
 The mark "B[ig] M[ac]" is used by plaintiff McDonald's to identify its double decker
hamburger sandwich. The packaging material is a styrofoam box with the McDonald's logo
and trademark in red with block capital letters printed on it. All letters of the "B[ig] M[ac]"
mark are also in red and block capital letters. On the other hand, defendants' "B[ig] M[ak]"
script print is in orange with only the letter "B" and "M" being capitalized and the packaging
material is plastic wrapper. xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and
"Ronald McDonald's", respectively, compared to the mascot of defendant Corporation which
is a chubby boy called "Macky" displayed or printed between the words "Big" and
"Mak." (Emphasis supplied)
81 

Respondents point to these dissimilarities as proof that they did not give their hamburgers the
general appearance of petitioners' "Big Mac" hamburgers.

The dissimilarities in the packaging are minor compared to the stark similarities in the words that

give respondents' "Big Mak" hamburgers the general appearance of petitioners' "Big Mac"
hamburgers. Section 29(a) expressly provides that the similarity in the general appearance of the
goods may be in the "devices or words" used on the wrappings. Respondents have applied on their
plastic wrappers and bags almost the same words that petitioners use on their styrofoam box. What
attracts the attention of the buying public are the words "Big Mak" which are almost the same,
aurally and visually, as the words "Big Mac." The dissimilarities in the material and other devices are
insignificant compared to the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives "his goods the general appearance of goods of
another manufacturer." Respondents' goods are hamburgers which are also the goods of petitioners.
If respondents sold egg sandwiches only instead of hamburger sandwiches, their use of the "Big
Mak" mark would not give their goods the general appearance of petitioners' "Big Mac" hamburgers.
In such case, there is only trademark infringement but no unfair competition. However, since
respondents chose to apply the "Big Mak" mark on hamburgers, just like petitioner's use of the "Big
Mac" mark on hamburgers, respondents have obviously clothed their goods with the general
appearance of petitioners' goods.

Moreover, there is no notice to the public that the "Big Mak" hamburgers are products of "L.C. Big
Mak Burger, Inc." Respondents introduced during the trial plastic wrappers and bags with the words
"L.C. Big Mak Burger, Inc." to inform the public of the name of the seller of the
hamburgers. However, petitioners introduced during the injunctive hearings plastic wrappers and
bags with the "Big Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents' belated
presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak Burger, Inc." as the
seller of the hamburgers is an after-thought designed to exculpate them from their unfair business
conduct. As earlier stated, we cannot consider respondents' evidence since petitioners' complaint
was based on facts existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the "Big Mak" hamburgers are products of "L.C.
Big Mak Burger, Inc." and not those of petitioners who have the exclusive right to the "Big Mac"
mark. This clearly shows respondents' intent to deceive the public. Had respondents' placed a notice
on their plastic wrappers and bags that the hamburgers are sold by "L.C. Big Mak Burger, Inc.", then
they could validly claim that they did not intend to deceive the public. In such case, there is only
trademark infringement but no unfair competition. Respondents, however, did not give such notice.
82 

We hold that as found by the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 23 ("Section 23") in relation to Section 29 of RA 166, a plaintiff who successfully
83 

maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary
reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in
its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor
of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by
respondent corporation. Also, the amount of actual damages is a reasonable percentage (11.9%) of
respondent corporation's gross sales for three (1988-1989 and 1991) of the six years (1984-1990)
respondents have used the "Big Mak" mark. 84

The RTC also did not err in awarding exemplary damages by way of correction for the public
good in view of the finding of unfair competition where intent to deceive the public is essential. The
85 

award of attorney's fees and expenses of litigation is also in order. 86

WHEREFORE, we GRANT the instant petition. We SET ASIDE the Decision dated 26 November
1999 of the Court of Appeals and its Resolution dated 11 July 2000 and REINSTATE the Decision
dated 5 September 1994 of the Regional Trial Court of Makati, Branch 137, finding respondent L.C.
Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED.

G.R. No. 195956               March 11, 2015

ABS-CBN CORPORATION, Petitioner,
vs.
FELIPE GOZON, GILBERTO R. DUAVIT, JR., MARISSA L. FLORES, JESSICA A. SORO,
GRACE DELA PENA-REYES, JOHN OLIVER T. MANALASTAS, JOHN DOES AND JANE
DOES, Respondents.

DECISION

LEONEN, J.:

The main issue in this case is whether there is probable cause to charge respondents with
infringement under Republic Act No. 8293, otherwise known as the Intellectual Property Code. The
resolution of this issue requires clarification of the concept of "copyrightable material" in relation to
material that is rebroadcast live as a news story. We are also asked to rule on whether criminal
prosecution for infringement of copyrightable material, such as live rebroadcast, can be negated by
good faith.

ABS-CBN Corporation (ABS-CBN) filed the Petition for Review on Certiorari  to assail the November
1

9, 2010 Decision  and the March 3, 2011 Resolution  of the Court of Appeals. The Court of Appeals
2 3

reinstated the Department of Justice Resolution dated August 1, 2005 that ordered the withdrawal of
the Information finding probable cause for respondents’ violation of Sections 177  and 211  of the
4 5

Intellectual Property Code.  Respondents are officers and employees of GMA Network, Inc. (GMA-
6

7). They are: Felipe Gozon (Gozon), GMA-7 President; Gilberto R. Duavit, Jr. (Duavit, Jr.), Executive
Vice-President; Marissa L. Flores (Flores), Vice-President for New and Public Affairs; Jessica A.
Soho (Soho), Director for News; Grace Dela Peña-Reyes (Dela Peña-Reyes), Head of News and
Public Affairs; John Oliver Manalastas (Manalastas), Program Manager; and others.

The controversy arose from GMA-7’s news coverage on the homecoming of Filipino overseas
worker and hostage victim Angelo dela Cruz on July 22, 2004. As summarized by the Court of
Appeals:

Overseas Filipino worker Angelo dela Cruz was kidnapped by Iraqi militants and as a condition for
his release, a demand was made for the withdrawal of Filipino troops in Iraq. After negotiations, he
was released by his captors and was scheduled to return to the country in the afternoon of 22 July
2004. Occasioned by said homecoming and the public interest it generated, both . . . GMA Network,
Inc. . . . and [petitioner] made their respective broadcasts and coverage of the live event. 7

ABS-CBN "conducted live audio-video coverage of and broadcasted the arrival of Angelo dela Cruz
at the Ninoy Aquino International Airport (NAIA) and the subsequent press conference."  ABS-CBN
8

allowed Reuters Television Service (Reuters) to air the footages it had taken earlier under a special
embargo agreement. 9

ABS-CBN alleged that under the special embargo agreement, any of the footages it took would be
for the "use of Reuter’s international subscribers only, and shall be considered and treated by
Reuters under ‘embargo’ against use by other subscribers in the Philippines. . . . [N]o other
Philippine subscriber of Reuters would be allowed to use ABS-CBN footage without the latter’s
consent."10

GMA-7, to which Gozon, Duavit, Jr., Flores, Soho, Dela Peña-Reyes, and Manalastas are
connected, "assigned and stationed news reporters and technical men at the NAIA for its live
broadcast and non-live news coverage of the arrival of dela Cruz."  GMA-7 subscribes to both
11

Reuters and Cable News Network (CNN). It received a live video feed of the coverage of Angelo
dela Cruz’s arrival from Reuters.12

GMA-7 immediately carried the live news feed in its program "Flash Report," together with its live
broadcast.  Allegedly, GMA-7 did not receive any notice or was not aware that Reuters was airing
13

footages of ABS-CBN.  GMA-7’s news control room staff saw neither the "No Access Philippines"
14

notice nor a notice that the video feed was under embargo in favor of ABS-CBN. 15

On August 13, 2004, ABS-CBN filed the Complaint for copyright infringement under Sections
177  and 211  of the Intellectual Property Code.
16 17 18

On December 3, 2004, Assistant City Prosecutor Dindo Venturanza issued the Resolution  finding 19

probable cause to indict Dela Peña-Reyes and Manalastas.  Consequently, the Information  for
20 21

violation of the Intellectual Property Code was filed on December 17, 2004. It reads:

That on or about the 22nd of July 2004, in Quezon City, Philippines, the above-named accused,
conspiring together, confederating with and mutually helping each other, being the Head of News
Operations and the Program Manager, respectively, for the News and Public Affairs Department of
GMA Network, Inc., did then and there, willfully, unlawfully and feloniously use and broadcast the
footage of the arrival of Angelo [d]ela Cruz at the Ninoy Aquino International Airport of which ABS-
CBN holds the exclusive ownership and copyright by then and there using, airing, and broadcasting
the said footage in its news program "FLASH REPORT" without first obtaining the consent or
authority of said copyright owner, to their damage and prejudice.
Contrary to law. 22

On January 4, 2005, respondents filed the Petition for Review before the Department of Justice.  In 23

the Resolution (Gonzalez Resolution) dated August 1, 2005, Department of Justice Secretary Raul
M. Gonzalez (Secretary Gonzalez) ruled in favor of respondents and held that good faith may be
raised as a defense in the case.  The dispositive portion of the Resolution reads:
24

WHEREFORE, THE PETITION FOR REVIEW FILED BY GMA-7 in I.S. No. 04-10458 is considered
meritorious and is hereby GRANTED. This case is hereby Dismissed, the resolution of the City
Prosecutor of Quezon City is hereby reversed and the same is ordered to withdraw the information if
any and report action taken to this office within ten (10) days.  (Emphasis in the original)
25

Both parties moved for reconsideration of the Gonzalez Resolution. 26

Meanwhile, on January 19, 2005, the trial court granted the Motion to Suspend Proceedings filed
earlier by Dela Peña-Reyes and Manalastas.  The trial court Order reads:
27

Perusing the motion, the court finds that a petition for review was filed with the Department of Justice
on January 5, 2005 as confirmed by the public prosecutor. Under Section 11 (c), Rule 116 of the
Rules of Criminal Procedure, once a petition for review is filed with the Department of Justice, a
suspension of the criminal proceedings may be allowed by the court.

Accordingly, to allow the Department of Justice the opportunity to act on said petition for review, let
the proceedings on this case be suspended for a period of sixty (60) days counted from January 5,
2005, the date the petition was filed with the Department of Justice. The arraignment of the accused
on February 1, 2005 is accordingly cancelled. Let the arraignment be rescheduled to March 8, 2005
at 8:30 a.m. The accused through counsel are notified in open court.

SO ORDERED. 28

On June 29, 2010, Department of Justice Acting Secretary Alberto C. Agra (Secretary Agra) issued
the Resolution (Agra Resolution) that reversed the Gonzalez Resolution and found probable cause
to charge Dela Peña-Reyes and Manalastas for violation of the Intellectual Property
Code.  Secretary Agra also found probable cause to indict Gozon, Duavit, Jr., Flores, and Soho for
29

the same violation.  He ruled that:

30

[w]hile good faith may be a defense in copyright infringement, the same is a disputable presumption
that must be proven in a full-blown trial. Disputable presumptions may be contradicted and
overcome by other evidence. Thus, a full-blown trial is the proper venue where facts, issues and
laws are evaluated and considered. The very purpose of trial is to allow a party to present evidence
to overcome the disputable presumptions involved. 31

The dispositive portion of the Agra Resolution provides:

WHEREFORE, premises considered:

(a) The Motion for Reconsideration filed by appellees ABS-CBN Broadcasting Corporation
(ABS-CBN) of our Resolution promulgated on August 1, 2005 (Resolution No. 364, Series of
2005) and the Petition for Review filed by complainant-appellant ABS-CBN in I.S. No. 04-
10458 on April10, 2006, are GRANTED and the City Prosecutor of Quezon City is hereby
ordered to file the necessary Information for violation of Section 177 and 211 of Republic Act
 No. 8293 against GMA-7. Felipe L. Gozon, Gilberto R. Duavit, Jr., Marissa L.Flores, Jessica
A. Soho, Grace Dela Pena-Reyes, John Oliver T. Manalastas[.]

....

SO ORDERED.  (Emphasis in the original)

32

Respondents assailed the Agra Resolution through the Petition for Certiorari with prayer for issuance
of a temporary restraining order and/or Writ of Preliminary Injunction on September 2, 2010 before
the Court of Appeals. In the Resolution dated September 13, 2010, the Court of Appeals granted the
temporary restraining order preventing the Department of Justice from enforcing the Agra
Resolution.33

On November 9, 2010, the Court of Appeals rendered the Decision granting the Petition and
reversing and setting aside the Agra Resolution.  The Court of Appeals held that Secretary Agra
34

committed errors of jurisdiction in issuing the assailed Resolution. Resolving the issue of copyright
infringement, the Court of Appeals said:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. However, it is an admitted fact that
petitioner GMA had only aired a five (5) second footage of the disputed live video feed that it had
received from Reuters and CNN as a subscriber. Indeed, petitioners had no notice of the right of
ownership of private respondent over the same. Without notice of the "No Access Philippines"
restriction of the live video feed, petitioner cannot be faulted for airing a live video feed from Reuters
and CNN.

Verily, as aptly opined by Secretary Gonzalez in his earlier Resolution, the act of petitioners in airing
the five (5) second footage was undeniably attended by good faith and it thus serves to exculpate
them from criminal liability under the Code. While the Intellectual Property Code is a special law, and
thus generally categorized as malum prohibitum, it bears to stress that the provisions of the Code
itself do not ipso facto penalize a person or entity for copyright infringement by the mere fact that
one had used a copyrighted work or material.

Certainly so, in the exercise of one’s moral and economic or copyrights, the very provisions of Part
IV of the Intellectual Property Code provide for the scope and limitations on copyright protection
under Section 184 and in fact permit fair use of copyrighted work under Section 185. With the
aforesaid statutory limitations on one’s economic and copyrights and the allowable instances where
the other persons can legally use a copyrighted work, criminal culpability clearly attaches only when
the infringement had been knowingly and intentionally committed.  (Emphasis supplied)
35

The dispositive portion of the Decision reads:

WHEREFORE, the foregoing considered, the instant petition is hereby GRANTED and the assailed
Resolution dated 29 June 2010 REVERSED and SET ASIDE. Accordingly, the earlier Resolution
dated 1 August 2005, which ordered the withdrawal of the Information filed, if any, against the
petitioners for violation of Sections 177 and 211 of the Intellectual Property Code, is hereby
REINSTATED. No costs.

SO ORDERED.  (Emphasis in the original)

36
ABS-CBN’s Motion for Reconsideration was denied.  It then filed its Petition for Review before this
37

court assailing the Decision and Resolution of the Court of Appeals. 38

The issues for this court’s consideration are:

First, whether Secretary Agra committed errors of jurisdiction in the Resolution dated June 29, 2010
and, therefore, whether a petition for certiorari was the proper remedy in assailing that Resolution;

Second, whether news footage is copyrightable under the law;

Third, whether there was fair use of the broadcast material;

Fourth, whether lack of knowledge that a material is copyrighted is a defense against copyright
infringement;

Fifth, whether good faith is a defense in a criminal prosecution for violation of the Intellectual
Property Code; and

Lastly, whether the Court of Appeals was correct in overturning Secretary Agra’s finding of probable
cause.

The trial court granted respondents’ Motion to Suspend Proceedings and deferred respondents Dela
Peña-Reyes and Manalastas’ arraignment for 60 days in view of the Petition for Review filed before
the Department of Justice.

Rule 116, Section 11 (c) of the Rules of Criminal Procedure allows

the suspension of the accused’s arraignment in certain circumstances only:

SEC. 11. Suspension of arraignment.–Upon motion by the proper party, the arraignment shall be
suspended in the following cases:

(a) The accused appears to be suffering from an unsound mental condition which effectively
renders him unable to fully understand the charge against him and to plead intelligently
thereto. In such case, the court shall order his mental examination and, if necessary, his
confinement for such purpose;

(b) There exists a prejudicial question; and

(c) A petition for review of the resolution of the prosecutor is pending at either the
Department of Justice, or the Office of the President; provided, that the period of suspension
shall not exceed sixty (60) days counted from the filing of the petition with the reviewing
office. (12a) (Emphasis supplied)

In Samson v. Daway,  this court acknowledged the applicability of Rule 116, Section (c) in a criminal
39

prosecution for infringement under the Intellectual Property Code. However, this court emphasized
the limits of the order of deferment under the Rule:
While the pendency of a petition for review is a ground for suspension of the arraignment, the . . .
provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of
the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the
trial court is bound to arraign the accused or to deny the motion to defer arraignment. 40

We clarify that the suspension of the arraignment should always be within the limits allowed by law.
In Crespo v. Judge Mogul,  this court outlined the effects of filing an information before the trial
41

court, which includes initiating a criminal action and giving this court "authority to hear and determine
the case":42

The preliminary investigation conducted by the fiscal for the purpose of determining whether a prima
facie case exists warranting the prosecution of the accused is terminated upon the filing of the
information in the proper court. In turn, as above stated, the filing of said information sets in motion
the criminal action against the accused in Court. Should the fiscal find it proper to conduct a
reinvestigation of the case, at such stage, the permission of the Court must be secured. After such
reinvestigation the finding and recommendations of the fiscal should be submitted to the Court for
appropriate action. While it is true that the fiscal has the quasi judicial discretion to determine
whether or not a criminal case should be filed in court or not, once the case had already been
brought to Court whatever disposition the fiscal may feel should be proper in the case thereafter
should be addressed for the consideration of the Court, the only qualification is that the action of the
Court must not impair the substantial rights of the accused or the right of the People to due process
of law.

Whether the accused had been arraigned or not and whether it was due to a reinvestigation by the
fiscal or a review by the Secretary of Justice whereby a motion to dismiss was submitted to the
Court, the Court in the exercise of its discretion may grant the motion or deny it and require that the
trial on the merits proceed for the proper determination of the case.

However, one may ask, if the trial court refuses to grant the motion to dismiss filed by the fiscal upon
the directive of the Secretary of Justice will there not be a vacuum in the prosecution? A state
prosecutor to handle the case cannot possibly be designated by the Secretary of Justice who does
not believe that there is a basis for prosecution nor can the fiscal be expected to handle the
prosecution of the case thereby defying the superior order of the Secretary of Justice. The answer is
simple. The role of the fiscal or prosecutor as We all know is to see that justice is done and not
necessarily to secure the conviction of the person accused before the Courts. Thus, in spite of his
opinion to the contrary, it is the duty of the fiscal to proceed with the presentation of evidence of the
prosecution to the Court to enable the Court to arrive at its own independent judgment as to whether
the accused should be convicted or acquitted. The fiscal should not shirk from the responsibility of
appearing for the People of the Philippines even under such circumstances much less should he
abandon the prosecution of the case leaving it to the hands of a private prosecutor for then the entire
proceedings will be null and void. The least that the fiscal should do is to continue to appear for the
prosecution although he may turn over the presentation of the evidence to the private prosecutor but
still under his direction and control.

The rule therefore in this jurisdiction is that once a complaint or information is filed in Court any
disposition of the case as to its dismissal or the conviction or acquittal of the accused rests in the
sound discretion of the Court. Although the fiscal retains the direction and control of the prosecution
of criminal cases even while the case is already in Court he cannot impose his opinion on the trial
court. The Court is the best and sole judge on what to do with the case before it. The determination
of the case is within its exclusive jurisdiction and competence. A motion to dismiss the case filed by
the fiscal should be addressed to the Court who has the option to grant or deny the same. It does
not matter if this is done before or after the arraignment of the accused or that the motion was filed
after a reinvestigation or upon instructions of the Secretary of Justice who reviewed the records of
the investigation.  (Emphasis supplied, citations omitted)
43

The doctrine in Crespo was reiterated in Mayor Balindong v. Court of Appeals,  where this court
44

reminded the Department of Justice Secretary to refrain from entertaining petitions for review when
the case is already pending with this court:

[I]n order to avoid a situation where the opinion of the Secretary of Justice who reviewed the action
of the fiscal may be disregarded by the trial court, the Secretary of Justice should, as far as
practicable, refrain from entertaining a petition for review or appeal from the action of the fiscal,
when the complaint or information has already been filed in the Court. The matter should be left
entirely for the determination of the Court. 45

The trial court should have proceeded with respondents Dela Peña-Reyes and Manalastas’
arraignment after the 60-day period from the filing of the Petition for Review before the Department
of Justice on March 8, 2005. It was only on September 13, 2010 that the temporary restraining order
was issued by the Court of Appeals. The trial court erred when it did not act on the criminal case
during the interim period. It had full control and direction of the case. As Judge Mogul reasoned in
denying the motion to dismiss in Crespo, failure to proceed with the arraignment "disregards the
requirements of due process [and] erodes the Court’s independence and integrity." 46

II

According to ABS-CBN, the Court of Appeals erred in finding that: a motion for reconsideration was
not necessary before a petition for certiorari could be filed; the Department of Justice Secretary
committed errors of jurisdiction since the Agra Resolution was issued within its authority and in
accordance with settled laws and jurisprudence; and respondents were not liable for copyright
infringement.

In its assailed Decision, the Court of Appeals found that respondents committed a procedural error
when they failed to file a motion for reconsideration before filing the Petition for Certiorari. However,
the Court of Appeals held that a motion for reconsideration was unnecessary since the Agra
Resolution was a patent nullity and it would have been useless under the circumstances: Given that
a reading of the assailed Resolution and the instant records readily reveals errors of jurisdiction on
the part of respondent Secretary, direct judicial recourse is warranted under the circumstances.
Aside from the fact that said Resolution is a patent nullity having been issued in grave abuse of
discretion amounting to lack or excess of jurisdiction, the filing of a motion for reconsideration is
evidently useless on account of the fact that the issues and arguments before this Court have
already been duly raised and accordingly delved into by respondent Secretary in his disposition of
the petition a quo.  (Emphasis in the original)
47

In Elma v. Jacobi,  this court ruled that a petition for certiorari under Rule 65 of the Rules of Court is
48

proper when assailing adverse resolutions of the Department of Justice stemming from the
determination of probable cause.  However, grave abuse of discretion must be alleged.
49 50

In Sanrio Company Limited v. Lim,  this court stressed the prosecutor’s role in determining probable
51

cause. Judicial review will only lie when it is shown that the prosecutor acted with grave abuse of
discretion amounting to lack or excess of jurisdiction:

A prosecutor alone determines the sufficiency of evidence that will establish probable cause
justifying the filing of a criminal information against the respondent. By way of exception, however,
judicial review is allowed where respondent has clearly established that the prosecutor committed
grave abuse of discretion. Otherwise stated, such review is appropriate only when the prosecutor
has exercised his discretion in an arbitrary, capricious, whimsical or despotic manner by reason of
passion or personal hostility, patent and gross enough to amount to an evasion of a positive duty or
virtual refusal to perform a duty enjoined by law.  (Citations omitted)
52

Grave abuse of discretion refers to:

such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility and must be so patent and gross as to amount to
an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law. 53

Resorting to certiorari requires that there be there be "no appeal, or any plain, speedy, and adequate
remedy in the ordinary course of law[,]"  such as a motion for reconsideration. Generally, "a motion
54

for reconsideration is a condition sine qua non before a petition for certiorari may lie, its purpose
being to grant an opportunity for the [tribunal or officer] to correct any error attributed to it by a re-
examination of the legal and factual circumstances of the case."  However, exceptions to the rule
55

exist:

(a) where the order is a patent nullity, as where the Court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court; (c) where there is an
urgent necessity for the resolution of the question and any further delay would prejudice the interests
of the Government or of the petitioner or the subject matter of the action is perishable; (d) where,
under the circumstances, a motion for reconsideration would be useless; (e) where petitioner was
deprived of due process and there is extreme urgency for relief; (f) where, in a criminal case, relief
from an order of arrest is urgent and the granting of such relief by the trial Court is improbable; (g)
where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceedings was ex parte or in which the petitioner had no opportunity to object; and (i) where the
issue raised is one purely of law or where public interest is involved.  (Emphasis in the original,
56

citations omitted)

As argued by respondents, "[a] second motion for reconsideration would have been useless and
futile since the D[epartment] [of] J[ustice] had already passed upon the same issues twice."  Equally
57

pressing under the circumstances was the need to resolve the matter, as the Information’s filing
would lead to respondents’ imminent arrest. 58

Moreover, Department of Justice Department Circular No. 70 dated July 3, 2000, or the 2000 NPS
Rules on Appeal, provides that no second motion for reconsideration of the Department of Justice
Secretary’s resolution shall be entertained:

SECTION 13. Motion for reconsideration. The aggrieved party may file a motion for reconsideration
within a non-extendible period of ten (10) days from receipt of the resolution on appeal, furnishing
the adverse party and the Prosecution Office concerned with copies thereof and submitting proof of
such service. No second or further motion for reconsideration shall be entertained.

The Agra Resolution was the result of respondents’ Motion for Reconsideration assailing the
Gonzalez Resolution. To file a motion for reconsideration of the Agra Resolution would be
superfluous. Respondents were, therefore, correct in filing the Petition for Certiorari of the Agra
Resolution before the Court of Appeals.
 III

The Court of Appeals ruled that Secretary Agra committed errors of jurisdiction, which then required
the grant of the writ of certiorari:

So viewed, by ordering the filing of information without proof that probable cause exists to charge
petitioners with a crime, respondent Secretary clearly committed an error of jurisdiction thus
warranting the issuance of the writ of certiorari. Surely, probable cause cannot be had when the very
provisions of the statute exculpates criminal liability in cases classified as fair use of copyrighted
materials. The fact that they admittedly used the Reuters live video feed is not, as a matter of
course, tantamount to copyright infringement that would justify the filing of an information against the
petitioners. 59

Error of jurisdiction must be distinguished from error of judgment:

A line must be drawn between errors of judgment and errors of jurisdiction. An error of judgment is
one which the court may commit in the exercise of its jurisdiction. An error of jurisdiction renders an
order or judgment void or voidable. Errors of jurisdiction are reviewable on certiorari; errors of
judgment, only by appeal. 60

In People v. Hon. Sandiganbayan : 61

An error of judgment is one which the court may commit in the exercise of its jurisdiction. An error of
jurisdictionis one where the act complained of was issued by the court without or in excess of
jurisdiction, or with grave abuse of discretion, which is tantamount to lack or in excess of jurisdiction
and which error is correctible only by the extraordinary writ of certiorari. Certiorari will not be issued
to cure errors of the trial court in its appreciation of the evidence of the parties, or its conclusions
anchored on the said findings and its conclusions of law.  (Emphasis supplied)
62

This court has adopted a deferential attitude towards review of the executive’s finding of probable
cause.  This is based "not only upon the respect for the investigatory and [prosecutorial] powers
63

granted by the Constitution to the executive department but upon practicality as well."  Review of the
64

Department of Justice Secretary’s decision or resolution will be allowed only when grave abuse of
discretion is alleged:

The full discretionary authority to determine probable cause in a preliminary investigation to

ascertain sufficient ground for the filing of information rests with the executive branch. Hence, judicial
review of the resolution of the Secretary of Justice is limited to a determination whether there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction. Courts cannot
substitute the executive branch’s judgment.

....

It is only where the decision of the Justice Secretary is tainted with grave abuse of discretion
amounting to lack or excess of jurisdiction that the Court of Appeals may take cognizance of the
case in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The Court of
Appeals decision may then be appealed to this Court by way of a petition for review on
certiorari.  (Emphasis supplied, citations omitted)
65
In this case, it must be shown that Secretary Agra exceeded his authority when he reversed the
findings of Secretary Gonzalez. This court must determine whether there is probable cause to file an
information for copyright infringement under the Intellectual Property Code.

IV

Probable cause pertains to "such facts as are sufficient to engender a well-founded belief that a
crime has been committed and that respondent is probably guilty thereof."  Preliminary investigation
66

is the inquiry or proceeding to determine whether there is probable cause. 67

In Webb v. De Leon,  this court ruled that determination of probable cause during preliminary
68

investigation does not require trial-like evaluation of evidence since existence of probable cause
does not equate to guilt:

It ought to be emphasized that in determining probable cause, the average man weighs facts and
circumstances without resorting to the calibrations of our technical rules of evidence of which his
knowledge is nil. Rather, he relies on the calculus of common sense of which all reasonable men
have an abundance.

....

. . . A finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt. 69

In Reyes v. Pearlbank Securities, Inc.,  finding probable cause is not equivalent to finding with moral
70

certainty that the accused committed the crime:

A finding of probable cause needs only to rest on evidence showing that more likely than not a crime
has been committed by the suspects. It need not be based on clear and convincing evidence of guilt,
not on evidence establishing guilt beyond reasonable doubt, and definitely not on evidence
establishing absolute certainty of guilt. In determining probable cause, the average man weighs facts
and circumstances without resorting to the calibrations of the rules of evidence of which he has no
technical knowledge. He relies on common sense. 71

During preliminary investigation, a public prosecutor does not adjudicate on the parties’ rights,
obligations, or liabilities.
72

In the recent case of Estrada v. Office of the Ombudsman, et al.,  we reiterated Webb on the
73

determination of probable cause during preliminary investigation and traced the history of probable
cause as borrowed from American jurisprudence:

The purpose in determining probable cause is to make sure that the courts are not clogged with
weak cases that will only be dismissed, as well as to spare a person from the travails of a needless
prosecution.

....

. . . In the United States, from where we borrowed the concept of probable cause, the prevailing
definition of probable cause is this:
In dealing with probable cause, however, as the very name implies, we deal with probabilities. These
are not technical; they are the factual and practical considerations of everyday life on which
reasonable and prudent men, not legal technicians, act. The standard of proof is accordingly
correlative to what must be proved.

"The substance of all the definitions" of probable cause "is a reasonable ground for belief of guilt."
McCarthy v. De Armit, 99 Pa. St. 63, 69, quoted with approval in the Carroll opinion. 267 U. S. at
161. And this "means less than evidence which would justify condemnation" or conviction, as
Marshall, C. J., said for the Court more than a century ago in Locke v. United States, 7 Cranch 339,
348. Since Marshall’s time, at any rate, it has come to mean more than bare suspicion: Probable
cause exists where "the facts and circumstances within their [the officers’] knowledge and of which
they had reasonably trustworthy information [are] sufficient in themselves to warrant a man of
reasonable caution in the belief that" an offense has been or is being committed. Carroll v. United
States, 267 U. S. 132, 162.

These long-prevailing standards seek to safeguard citizens from rash and unreasonable
interferences with privacy and from unfounded charges of crime. They also seek to give fair leeway
for enforcing the law in the community’s protection. Because many situations which confront officers
in the course of executing their duties are more or less ambiguous, room must be allowed for some
mistakes on their part. But the mistakes must be those of reasonable men, acting on facts leading
sensibly to their conclusions of probability. The rule of probable cause is a practical, non technical
conception affording the best compromise that has been found for accommodating these often
opposing interests. Requiring more would unduly hamper law enforcement. To allow less would be
to leave law-abiding citizens at the mercy of the officers’ whim or caprice.

In the Philippines, there are four instances in the Revised Rules of Criminal Procedure where
probable cause is needed to be established:

(1) In Sections 1 and 3 of Rule 112: By the investigating officer, to determine whether there
is sufficient ground to engender a well-founded belief that a crime has been committed and
the respondent is probably guilty thereof, and should be held for trial. A preliminary
investigation is required before the filing of a complaint or information for an offense where
the penalty prescribed by law is at least four years, two months and one day without regard
to the fine;

(2) In Sections 6 and 9 of Rule 112: By the judge, to determine whether a warrant of arrest or
a commitment order, if the accused has already been arrested, shall be issued and that
there is a necessity of placing the respondent under immediate custody in order not to
frustrate the ends of justice;

(3) In Section 5(b) of Rule 113:By a peace officer or a private person making a warrantless
arrest when an offense has just been committed, and he has probable cause to believe
based on personal knowledge of facts or circumstances that the person to be arrested has
committed it; and

(4) In Section 4 of Rule 126: By the judge, to determine whether a search warrant shall be
issued, and only upon probable cause in connection with one specific offense to be
determined personally by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized which may be anywhere in the Philippines.
In all these instances, the evidence necessary to establish probable cause is based only on the
likelihood, or probability, of guilt. 74

Estrada also highlighted that a "[p]reliminary investigation is not part of the criminal action. It is
merely preparatory and may even be disposed of in certain situations." 75

To determine whether there is probable cause that respondents committed copyright infringement, a
review of the elements of the crime, including the existing facts, is required.

ABS-CBN claims that news footage is subject to copyright and prohibited use of copyrighted material
is punishable under the Intellectual Property Code. It argues that the new footage is not a
"newsworthy event" but "merely an account of the arrival of Angelo dela Cruz in the Philippines —
the latter being the newsworthy event": 76

To be clear, it is the event itself or the arrival of Angelo dela Cruz which is not copyrightable because
that is the newsworthy event. However, any footage created from the event itself, in this case the
arrival of Angelo dela Cruz, are intellectual creations which are copyrightable. Thus, the footage
created by ABS-CBN during the arrival of Angelo dela Cruz, which includes the statements of Dindo
Amparo, are copyrightable and protected by the laws on copyright. 77

On the other hand, respondents argue that ABS-CBN’s news footage of Angelo dela Cruz’s arrival is
not copyrightable or subject to protection:

Certainly, the arrival of Angelo [d]ela Cruz, which aroused public attention and the consciousness of
the Filipino people with regard to their countrymen, OFWs working in foreign countries and how the
Philippine government responds to the issues concerning them, is "news". There is no ingenuity or
inventiveness added in the said news footage. The video footage of this "news" is not copyrightable
by any legal standard as facts of everyday life depicted in the news and items of press information is
part of the public domain.  (Emphasis in the original)
78

The news footage is copyrightable.

The Intellectual Property Code is clear about the rights afforded to authors of various kinds of work.
Under the Code, "works are protected by the sole fact of their creation, irrespective of their mode or
form of expression, as well as of their content, quality and purpose."  These include "[a]udiovisual
79

works and cinematographic works and works produced by a process analogous to cinematography
or any process for making audiovisual recordings." 80

Contrary to the old copyright law,  the Intellectual Property Code does not require registration of the
81

work to fully recover in an infringement suit. Nevertheless, both copyright laws provide that copyright
for a work is acquired by an intellectual creator from the moment of creation. 82

It is true that under Section 175 of the Intellectual Property Code, "news of the day and other
miscellaneous facts having the character of mere items of press information" are considered
unprotected subject matter.  However, the Code does not state that expression of the news of the
83

day, particularly when it underwent a creative process, is not entitled to protection.

An idea or event must be distinguished from the expression of that idea or event. An idea has been
likened to a ghost in that it "must be spoken to a little before it will explain itself."  It is a concept that
84
has eluded exact legal definition.  To get a better grasp of the idea/expression dichotomy, the
85

etymology of the term "idea" is traced:

The word "idea" is derived from a Greek term, meaning "a form, the look or appearance of a thing as
opposed to its reality, from idein, to see." In the Timaeus, Plato saw ideas as eternal paradigms,
independent objects to which the divine demiurge looks as patterns in forming the world. This was
later modified to the religious conception of ideas as the thoughts of God. "It is not a very long step
to extend the term ‘idea’ to cover patterns, blueprints, or plans in anyone's mind, not only in God’s."
The word entered the French and English vernacular in the 1600s and possessed two meanings.
The first was the Platonic meaning of a perfect exemplar or paradigm. The second, which probably
has its origin with Descartes, is of a mental concept or image or, more broadly, any object of the
mind when it is active. Objects of thought may exist independently. The sun exists (probably) before
and after you think of it. But it is also possible to think of things that have never existed, such as a
unicorn or Pegasus. John Locke defined ideas very comprehensively, to include: all objects of the
mind. Language was a way of translating the invisible, hidden ideas that make up a person’s
thoughts into the external, perceptible world of articulate sounds and visible written symbols that
others can understand.  (Citations omitted) There is no one legal definition of "idea" in this
86

jurisdiction. The term "idea" is mentioned only once in the Intellectual Property Code.  In Joaquin, Jr.
87

v. Drilon,  a television format (i.e., a dating show format) is not copyrightable under Section 2 of
88

Presidential Decree No. 49;  it is a mere concept:

89

P.D. No. 49, §2, in enumerating what are subject to copyright, refers to finished works and not to
concepts. The copyright does not extend to an idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it is described, explained,
illustrated, or embodied in such work. Thus, the new INTELLECTUAL PROPERTY CODE OF THE
PHILIPPINES provides:

SEC. 175. Unprotected Subject Matter.—Notwithstanding the provisions of Sections 172 and 173,
no protection shall extend, under this law, to any idea, procedure, system, method or operation,
concept, principle, discovery or mere data as such, even if they are expressed, explained, illustrated
or embodied in a work; news of the day and other miscellaneous facts having the character of mere
items of press information; or any official text of a legislative, administrative or legal nature, as well
as any official translation thereof.

What then is the subject matter of petitioners’ copyright? This Court is of the opinion that petitioner
BJPI’s copyright covers audio-visual recordings of each episode of Rhoda and Me, as falling within
the class of works mentioned in P.D. 49, §2(M),to wit:

Cinematographic works and works produced by a process analogous to cinematography or any

process for making audio-visual recordings;

The copyright does not extend to the general concept or format of its dating game show.
Accordingly, by the very nature of the subject of petitioner BJPI’s copyright, the investigating
prosecutor should have the opportunity to compare the videotapes of the two shows.

Mere description by words of the general format of the two dating game shows is insufficient; the
presentation of the master videotape in evidence was indispensable to the determination of the
existence of probable cause. As aptly observed by respondent Secretary of Justice:

A television show includes more than mere words can describe because it involves a whole
spectrum of visuals and effects, video and audio, such that no similarity or dissimilarity may be found
by merely describing the general copyright/format of both dating game shows.  (Emphasis supplied,
90

citations omitted)

Ideas can be either abstract or concrete.  It is the concrete ideas that are generally referred to as
91

expression:

The words "abstract" and "concrete" arise in many cases dealing with the idea/expression
distinction. The Nichols court, for example, found that the defendant’s film did not infringe the
plaintiff’s play because it was "too generalized an abstraction from what plaintiff wrote . . . only a part
of her ideas." In Eichel v. Marcin, the court said that authors may exploit facts, experiences, field of
thought, and general ideas found in another’s work, "provided they do not substantially copy a
concrete form, in which the circumstances and ideas have been developed, arranged, and put into
shape." Judge Hand, in National Comics Publications, Inc. v. Fawcett Publications, Inc. said that "no
one infringes, unless he descends so far into what is concrete as to invade. . . ‘expression.’"

These cases seem to be distinguishing "abstract" ideas from "concrete" tangible embodiments of
these abstractions that may be termed expression. However, if the concrete form of a work means
more than the literal expression contained within it, it is difficult to determine what is meant by
"concrete." Webster's New Twentieth Century Dictionary of the English Language provides several
meanings for the word concrete. These include: "having a material, perceptible existence; of,
belonging to, or characterized by things or events that can be perceived by the senses; real; actual;"
and "referring to a particular; specific, not general or abstract."
92

In Pearl & Dean (Phil.), Incorporated v. Shoemart, Incorporated,  this court, citing the American case
93

of Baker v. Selden, distinguished copyright from patents and illustrated how an idea or concept is
different from the expression of that idea:

In the oft-cited case of Baker vs. Selden, the United States Supreme Court held that only the
expression of an idea is protected by copyright, not the idea itself. In that case, the plaintiff held the
copyright of a book which expounded on a new accounting system he had developed. The
publication illustrated blank forms of ledgers utilized in such a system. The defendant reproduced
forms similar to those illustrated in the plaintiff’s copyrighted book. The US Supreme Court ruled
that:

"There is no doubt that a work on the subject of book-keeping, though only explanatory of well
known systems, may be the subject of a copyright; but, then, it is claimed only as a book. x x x But
there is a clear distinction between the books, as such, and the art, which it is, intended to illustrate.
The mere statement of the proposition is so evident that it requires hardly any argument to support it.
The same distinction may be predicated of every other art as well as that of bookkeeping.

A treatise on the composition and use of medicines, be they old or new; on the construction and use
of ploughs or watches or churns; or on the mixture and application of colors for painting or dyeing; or
on the mode of drawing lines to produce the effect of perspective, would be the subject of copyright;
but no one would contend that the copyright of the treatise would give the exclusive right to the art or
manufacture described therein. The copyright of the book, if not pirated from other works, would be
valid without regard to the novelty or want of novelty of its subject matter. The novelty of the art or
thing described or explained has nothing to do with the validity of the copyright. To give to the author
of the book an exclusive property in the art described therein, when no examination of its novelty has
ever been officially made, would be a surprise and a fraud upon the public. That is the province of
letters patent, not of copyright. The claim to an invention of discovery of an art or manufacture must
be subjected to the examination of the Patent Office before an exclusive right therein can be
obtained; and a patent from the government can only secure it.
The difference between the two things, letters patent and copyright, may be illustrated by reference
to the subjects just enumerated. Take the case of medicines. Certain mixtures are found to be of
great value in the healing art. If the discoverer writes and publishes a book on the subject (as regular
physicians generally do), he gains no exclusive right to the manufacture and sale of the medicine; he
gives that to the public. If he desires to acquire such exclusive right, he must obtain a patent for the
mixture as a new art, manufacture or composition of matter. He may copyright his book, if he
pleases; but that only secures to him the exclusive right of printing and publishing his book. So of all
other inventions or discoveries.

The copyright of a book on perspective, no matter how many drawings and illustrations it may
contain, gives no exclusive right to the modes of drawing described, though they may never have
been known or used before. By publishing the book without getting a patent for the art, the latter is
given to the public.

....

Now, whilst no one has a right to print or publish his book, or any material part thereof, as a book
intended to convey instruction in the art, any person may practice and use the art itself which he has
described and illustrated therein. The use of the art is a totally different thing from a publication of
the book explaining it. The copyright of a book on bookkeeping cannot secure the exclusive right to
make, sell and use account books prepared upon the plan set forth in such book. Whether the art
might or might not have been patented, is a question, which is not before us. It was not patented,
and is open and free to the use of the public. And, of course, in using the art, the ruled lines and
headings of accounts must necessarily be used as incident to it.

The plausibility of the claim put forward by the complainant in this case arises from a confusion of
ideas produced by the peculiar nature of the art described in the books, which have been made the
subject of copyright. In describing the art, the illustrations and diagrams employed happened to
correspond more closely than usual with the actual work performed by the operator who uses the
art. x x x The description of the art in a book, though entitled to the benefit of copyright, lays no
foundation for an exclusive claim to the art itself. The object of the one is explanation; the object of
the other is use. The former may be secured by copyright. The latter can only be secured, if it can be
secured at all, by letters patent."  (Emphasis supplied)
94

News or the event itself is not copyrightable. However, an event can be captured and presented in a
specific medium. As recognized by this court in Joaquin, television "involves a whole spectrum of
visuals and effects, video and audio."  News coverage in television involves framing shots, using
95

images, graphics, and sound effects.  It involves creative process and originality. Television news
96

footage is an expression of the news.

In the United States, a line of cases dwelt on the possibility of television newscasts to be
copyrighted.  Most of these cases focused on private individuals’ sale or resale of tapes of news
97

broadcasts. Conflicting decisions were rendered by its courts. Noteworthy, however, is the District
Court’s pronouncement in Pacific & Southern Co. v. Duncan,  which involves a News Monitoring
98

Service’s videotaping and sale of WXIA-TV’s news broadcasts:

It is axiomatic that copyright protection does not extend to news "events" or the facts or ideas which
are the subject of news reports. Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1368 (5th Cir.
1981); Wainwright Securities, Inc. v. Wall Street Transcript Corp., 558 F.2d 91, 95 (2d Cir. 1977),
cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 759 (1978). But it is equally well-settled that
copyright protection does extend to the reports themselves, as distinguished from the substance of
the information contained in the reports. Wainwright, 558 F.2d at 95; International News Service v.
Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918); see Chicago Record-Herald Co.
v. Tribune Assn., 275 F. 797 (7th Cir.1921); 1 Nimmer on Copyright § 2.11[B] (1983). Copyright
protects the manner of expression of news reports, "the particular form or collocation of words in
which the writer has communicated it." International News Service, 248 U.S. at 234, 39 S.Ct. at 70.
Such protection extends to electronic news reports as well as written reports. See17 U.S.C. § 102(a)
(5), (6), and (7); see also Iowa State University Research Foundations, Inc. v. American
Broadcasting Cos., 621 F.2d 57, 61 (2d Cir. 1980).  (Emphasis supplied)
99

The idea/expression dichotomy has long been subject to debate in the field of copyright law.
Abolishing the dichotomy has been proposed, in that non-protectibility of ideas should be re-
examined, if not stricken, from decisions and the law:

If the underlying purpose of the copyright law is the dual one expressed by Lord Mansfield, the only
excuse for the continuance of the idea-expression test as a judicial standard for determining
protectibility would be that it was or could be a truly useful method of determining the proper balance
between the creator’s right to profit from his work and the public's right that the "progress of the arts
not be retarded."

. . . [A]s used in the present-day context[,] the dichotomy has little or no relationship to the policy
which it should effectuate. Indeed, all too often the sweeping language of the courts regarding the
non-protectibility of ideas gives the impression that this is of itself a policy of the law, instead of
merely a clumsy and outdated tool to achieve a much more basic end. 100

The idea/expression dichotomy is a complex matter if one is trying to determine whether a certain
material is a copy of another.  This dichotomy would be more relevant in determining, for instance,
101

whether a stage play was an infringement of an author’s book involving the same characters and
setting. In this case, however, respondents admitted that the material under review — which is the
subject of the controversy — is an exact copy of the original. Respondents did not subject ABS-
CBN’s footage to any editing of their own. The news footage did not undergo any transformation
where there is a need to track elements of the original.

Having established the protectible nature of news footage, we now discuss the concomitant rights
accorded to authors. The authors of a work are granted several rights in relation to it, including
copyright or economic rights:

SECTION 177. Copyright or Economic Rights. — Subject to the provisions of Chapter VIII, copyright
or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following
acts:

177.1. Reproduction of the work or substantial portion of the work;

177.2. Dramatization, translation, adaptation, abridgment, arrangement or other

transformation of the work;

177.3. The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;

177.4. Rental of the original or a copy of an audiovisual or cinematographic work, a work

embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the original or
the copy which is the subject of the rental; (n)
 177.5. Public display of the original or a copy of the work;

177.6. Public performance of the work; and

177.7. Other communication to the public of the work.(Sec. 5, P. D. No. 49a) (Emphasis
supplied)

Under Section 211 of the Intellectual Property Code, broadcasting organizations are granted a more
specific set of rights called related or neighboring rights:

SECTION 211. Scope of Right. — Subject to the provisions of Section 212, broadcasting
organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following
acts:

211.1. The rebroadcasting of their broadcasts;

211.2. The recording in any manner, including the making of films or the use of video tape, of
their broadcasts for the purpose of communication to the public of television broadcasts of
the same; and

211.3. The use of such records for fresh transmissions or for fresh recording. (Sec. 52, P.D.
No. 49) (Emphasis supplied)

Section 212 of the Code provides:

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

212.1. The use by a natural person exclusively for his own personal purposes;

212.2. Using short excerpts for reporting current events;

212.3. Use solely for the purpose of teaching or for scientific research; and

212.4. Fair use of the broadcast subject to the conditions under Section 185. (Sec. 44, P.D.
No. 49a)

The Code defines what broadcasting is and who broadcasting organizations include:

202.7. "Broadcasting" means the transmission by wireless means for the public reception of
sounds or of images or of representations thereof; such transmission by satellite is also
"broadcasting" where the means for decrypting are provided to the public by the
broadcasting organization or with its consent;

202.8. "Broadcasting organization" shall include a natural person or a juridical entity duly
authorized to engage in broadcasting[.]
Developments in technology, including the process of preserving once ephemeral works and
disseminating them, resulted in the need to provide a new kind of protection as distinguished from
copyright.  The designation "neighboring rights" was abbreviated from the phrase "rights
102

neighboring to copyright."  Neighboring or related rights are of equal importance with copyright as
103

established in the different conventions covering both kinds of rights. 104

Several treaties deal with neighboring or related rights of copyright.  The most prominent of these is
105

the "International Convention for the Protection of Performers, Producers of Phonograms and
Broadcasting Organizations" (Rome Convention). 106

The Rome Convention protects the rights of broadcasting organizations in relation to their
broadcasts. Article XIII of the Rome Convention enumerates the minimum rights accorded to
broadcasting organizations:

Article 13

Minimum Rights for Broadcasting Organizations

Broadcasting organisations shall enjoy the right to authorize or prohibit:

(a) the rebroadcasting of their broadcasts;

(b) the fixation of their broadcasts;

(c) the reproduction:

(i) of fixations, made without their consent, of their broadcasts;

(ii) of fixations, made in accordance with the provisions of Article 15, of their
broadcasts, if the reproduction is made for purposes different from those referred to
in those provisions;

(d) the communication to the public of their television broadcasts if such communication is
made in places accessible to the public against payment of an entrance fee; it shall be a
matter for the domestic law of the State where protection of this right is claimed to determine
the conditions under which it may be exercised.

With regard to the neighboring rights of a broadcasting organization in this jurisdiction, this court has
discussed the difference between broadcasting and rebroadcasting:

Section 202.7 of the IP Code defines broadcasting as "the transmission by wireless means for the
public reception of sounds or of images or of representations thereof; such transmission by satellite
is also ‘broadcasting’ where the means for decrypting are provided to the public by the broadcasting
organization or with its consent."

On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the
Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise
known as the 1961 Rome Convention, of which the Republic of the Philippines is a signatory, is "the
simultaneous broadcasting by one broadcasting organization of the broadcast of another
broadcasting organization."
 ....

Under the Rome Convention, rebroadcasting is "the simultaneous broadcasting by one broadcasting
organization of the broadcast of another broadcasting organization." The Working Paper prepared by
the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting
organizations as "entities that take the financial and editorial responsibility for the selection and
arrangement of, and investment in, the transmitted content."  (Emphasis in the original, citations
107

omitted)

Broadcasting organizations are entitled to several rights and to the protection of these rights under
the Intellectual Property Code. Respondents’ argument that the subject news footage is not
copyrightable is erroneous. The Court of Appeals, in its assailed Decision, correctly recognized the
existence of ABS-CBN’s copyright over the news footage:

Surely, private respondent has a copyright of its news coverage. Seemingly, for airing said video
feed, petitioner GMA is liable under the provisions of the Intellectual Property Code, which was
enacted purposely to protect copyright owners from infringement. 108

News as expressed in a video footage is entitled to copyright protection. Broadcasting organizations

have not only copyright on but also neighboring rights over their broadcasts. Copyrightability of a
work is different from fair use of a work for purposes of news reporting.

VI

ABS-CBN assails the Court of Appeals’ ruling that the footage shown by GMA-7 falls under the
scope of Section 212.2 and 212.4 of the Intellectual Property Code:

The evidence on record, as well as the discussions above, show that the footage used
by[respondents] could hardlybe characterized as a short excerpt, as it was aired over one and a half
minutes.

Furthermore, the footage used does not fall under the contemplation of Section 212.2 of the
Intellectual Property Code. A plain reading of the provision would reveal that copyrighted material
referred to in Section 212 are short portions of an artist’s performance under Section 203, or a
producer’s sound recordings under Sections 208 and 209. Section 212 does not refer to actual use
of video footage of another as its own.

The Angelo dela Cruz footage does not fall under the rule on Section 212.4 of the Intellectual
Property Code on fair use of the broadcast.

....

In determining fair use, several factors are considered, including the nature of the copyrighted work,
and the amount and substantiality of the person used in relation to the copyrighted work as a whole.

In the business of television news reporting, the nature of the copyrighted work or the video
footages, are such that, footage created, must be a novelty to be a good report. Thus, when the . . .
Angelo dela Cruz footage was used by [respondents], the novelty of the footage was clearly
affected.
Moreover, given that a substantial portion of the Angelo dela Cruz footage was utilized by GMA-7 for
its own, its use can hardly be classified as fair use.

Hence, [respondents] could not be considered as having used the Angelo dela Cruz [footage]
following the provisions on fair use.

It is also worthy to note that the Honorable Court of Appeals seem to contradict itself when it relied
on the provisions of fair use in its assailed rulings considering that it found that the Angelo dela Cruz
footage is not copyrightable, given that the fair use presupposes an existing copyright. Thus, it is
apparent that the findings of the Honorable Court of Appeals are erroneous and based on wrong
assumptions.  (Underscoring in the original)
109

On the other hand, respondents counter that GMA-7’s use of ABS-CBN’s news footage falls under
fair use as defined in the Intellectual Property Code. Respondents, citing the Court of Appeals
Decision, argue that a strong statutory defense negates any finding of probable cause under the
same statute.  The Intellectual Property Code provides that fair use negates infringement.
110

Respondents point out that upon seeing ABS-CBN’s reporter Dindo Amparo on the footage, GMA-7
immediately shut off the broadcast. Only five (5) seconds passed before the footage was cut. They
argue that this shows that GMA-7 had no prior knowledge of ABS-CBN’s ownership of the footage or
was notified of it. They claim that the Angelo dela Cruz footage is considered a short excerpt of an
event’s "news" footage and is covered by fair use. 111

Copyright protection is not absolute.  The Intellectual Property Code provides the limitations on
112

copyright:

CHAPTER VIII
LIMITATIONS ON COPYRIGHT

Section 184. Limitations on Copyright. - 184.1. Notwithstanding the provisions of Chapter V, the
following acts shall not constitute infringement of copyright:

....

184.2. The provisions of this section shall be interpreted in such a way as to allow the work to be
used in a manner which does not conflict with the normal exploitation of the work and does not
unreasonably prejudice the right holder's legitimate interests.

....

CHAPTER XV
LIMITATIONS ON PROTECTION

Section 212. Limitations on Rights. - Sections 203, 208 and 209 shall not apply where the acts
referred to in those Sections are related to:

....

212.2. Using short excerpts for reporting current events;

....
212.4. Fair use of the broadcast subject to the conditions under Section 185.(Sec. 44, P.D. No. 49a)
(Emphasis supplied)

The determination of what constitutes fair use depends on several factors. Section 185 of the
Intellectual Property Code states:

SECTION 185. Fair Use of a Copyrighted Work. —

185.1. The fair use of a copyrighted work for criticism, comment, news reporting, teaching including
multiple copies for classroom use, scholarship, research, and similar purposes is not an infringement
of copyright. . . . In determining whether the use made of a work in any particular case is fair use, the
factors to be considered shall include:

a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.
Respondents allege that the news footage was only five (5) seconds long, thus falling under
fair use. ABS-CBN belies this contention and argues that the footage aired for two (2)
minutes and 40 seconds.  According to the Court of Appeals, the parties admitted that only
113

five (5) seconds of the news footage was broadcasted by GMA-7. 114

This court defined fair use as "aprivilege to use the copyrighted material in a reasonable manner
without the consent of the copyright owner or as copying the theme or ideas rather than their
expression."  Fair use is an exception to the copyright owner’s monopoly of the use of the work to
115

avoid stifling "the very creativity which that law is designed to foster."
116

Determining fair use requires application of the four-factor test. Section 185 of the Intellectual
Property Code lists four (4) factors to determine if there was fair use of a copyrighted work:

a. The purpose and character of the use, including whether such use is of a commercial
nature or is for non-profit educational purposes;

b. The nature of the copyrighted work;

c. The amount and substantiality of the portion used in relation to the copyrighted work as a
whole; and

d. The effect of the use upon the potential market for or value of the copyrighted work.

First, the purpose and character of the use of the copyrighted material must fall under those listed in
Section 185, thus: "criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research, and similar purposes."  The purpose and character
117

requirement is important in view of copyright’s goal to promote creativity and encourage creation of
works. Hence, commercial use of the copyrighted work can be weighed against fair use.
The "transformative test" is generally used in reviewing the purpose and character of the usage of
the copyrighted work.  This court must look into whether the copy of the work adds "new
118

expression, meaning or message" to transform it into something else.  "Meta-use" can also occur
119

without necessarily transforming the copyrighted work used. 120

Second, the nature of the copyrighted work is significant in deciding whether its use was fair. If the
nature of the work is more factual than creative, then fair use will be weighed in favor of the user.

Third, the amount and substantiality of the portion used is important to determine whether usage
falls under fair use. An exact reproduction of a copyrighted work, compared to a small portion of it,
can result in the conclusion that its use is not fair. There may also be cases where, though the
entirety of the copyrighted work is used without consent, its purpose determines that the usage is
still fair.  For example, a parody using a substantial amount of copyrighted work may be permissible
121

as fair use as opposed to a copy of a work produced purely for economic gain. Lastly, the effect of
the use on the copyrighted work’s market is also weighed for or against the user. If this court finds
that the use had or will have a negative impact on the copyrighted work’s market, then the use is
deemed unfair.

The structure and nature of broadcasting as a business requires assigned values for each second of
broadcast or airtime. In most cases, broadcasting organizations generate revenue through sale of
time or timeslots to advertisers, which, in turn, is based on market share:  Once a news broadcast
122

has been transmitted, the broadcast becomes relatively worthless to the station. In the case of the
aerial broadcasters, advertising sales generate most of the profits derived from news reports.
Advertising rates are, in turn, governed by market share. Market share is determined by the number
of people watching a show at any particular time, relative to total viewers at that time. News is by
nature time-limited, and so re-broadcasts are generally of little worth because they draw few
viewers. Newscasts compete for market share by presenting their news in an appealing format that
will capture a loyal audience. Hence, the primary reason for copyrighting newscasts by broadcasters
would seem to be to prevent competing stations from rebroadcasting current news from the station
with the best coverage of a particular news item, thus misappropriating a portion of the market
share.

Of course, in the real world there are exceptions to this perfect economic view. However, there are
also many caveats with these exceptions. A common exception is that some stations rebroadcast
the news of others. The caveat is that generally, the two stations are not competing for market
share. CNN, for example, often makes news stories available to local broadcasters. First, the local
broadcaster is often not affiliated with a network (hence its need for more comprehensive
programming), confining any possible competition to a small geographical area. Second, the local
broadcaster is not in competition with CNN. Individuals who do not have cable TV (or a satellite dish
with decoder) cannot receive CNN; therefore there is no competition. . . . Third, CNN sells the right
of rebroadcast to the local stations. Ted Turner, owner of CNN, does not have First Amendment
freedom of access argument foremost on his mind. (Else he would give everyone free cable TV so
everyone could get CNN.) He is in the business for a profit. Giving away resources does not a profit
make.  (Emphasis supplied)
123

The high value afforded to limited time periods is also seen in other media. In social media site
Instagram, users are allowed to post up to only 15 seconds of video.  In short-video sharing website
124

Vine,  users are allowed a shorter period of six (6) seconds per post. The mobile application 1
125

Second Everyday takes it further by capturing and stitching one (1) second of video footage taken
daily over a span of a certain period.
126
Whether the alleged five-second footage may be considered fair use is a matter of defense. We
emphasize that the case involves determination of probable cause at the preliminary investigation
stage. Raising the defense of fair use does not automatically mean that no infringement was
committed. The investigating prosecutor has full discretion to evaluate the facts, allegations, and
evidence during preliminary investigation. Defenses raised during preliminary investigation are
subject to further proof and evaluation before the trial court. Given the insufficiency of available
evidence, determination of whether the Angelo dela Cruz footage is subject to fair use is better left to
the trial court where the proceedings are currently pending. GMA-7’s rebroadcast of ABS-CBN’s
news footage without the latter’s consent is not an issue. The mere act of rebroadcasting without
authority from the owner of the broadcast gives rise to the probability that a crime was committed
under the Intellectual Property Code.

VII

Respondents cannot invoke the defense of good faith to argue that no probable cause exists.

Respondents argue that copyright infringement is malum in se, in that "[c]opying alone is not what is
being prohibited, but its injurious effect which consists in the lifting from the copyright owners’ film or
materials, that were the result of the latter’s creativity, work and productions and without authority,
reproduced, sold and circulated for commercial use to the detriment of the latter." 127

Infringement under the Intellectual Property Code is malum prohibitum. The Intellectual Property
Code is a special law. Copyright is a statutory creation:

Copyright, in the strict sense of the term, is purely a statutory right. It is a new or independent right
granted by the statute, and not simply a pre-existing right regulated by the statute. Being a statutory
grant, the rights are only such as the statute confers, and may be obtained and enjoyed only with
respect to the subjects and by the persons, and on terms and conditions specified in the statute. 128

The general rule is that acts punished under a special law are malum prohibitum.  "An act which is
129

declared malum prohibitum, malice or criminal intent is completely immaterial." 130

In contrast, crimes mala in seconcern inherently immoral acts:

Not every criminal act, however, involves moral turpitude. It is for this reason that "as to what crime
involves moral turpitude, is for the Supreme Court to determine". In resolving the foregoing question,
the Court is guided by one of the general rules that crimes mala in se involve moral turpitude, while
crimes mala prohibita do not, the rationale of which was set forth in "Zari v. Flores," to wit:

It (moral turpitude) implies something immoral in itself, regardless of the fact that it is punishable by
law or not. It must not be merely mala prohibita, but the act itself must be inherently immoral. The
doing of the act itself, and not its prohibition by statute fixes the moral turpitude. Moral turpitude does
not, however, include such acts as are not of themselves immoral but whose illegality lies in their
being positively prohibited. (Emphasis supplied)

[These] guidelines nonetheless proved short of providing a clear cut solution, for in International Rice
Research Institute v. NLRC, the Court admitted that it cannot always be ascertained whether moral
turpitude does or does not exist by merely classifying a crime as malum in se or as malum
prohibitum. There are crimes which are mala in se and yet but rarely involve moral turpitude and
there are crimes which involve moral turpitude and are mala prohibita only. In the final analysis,
whether or not a crime involves moral turpitude is ultimately a question of fact and frequently
depends on all the circumstances surrounding the violation of the statue.  (Emphasis in the original)
131

"Implicit in the concept of mala in se is that of mens rea."  Mens reais defined as "the nonphysical
132

element which, combined with the act of the accused, makes up the crime charged. Most frequently
it is the criminal intent, or the guilty mind[.]" 133

Crimes mala in sepre suppose that the person who did the felonious act had criminal intent to do so,
while crimes mala prohibita do not require knowledge or criminal intent:

In the case of mala in se it is necessary, to constitute a punishable offense, for the person doing the
act to have knowledge of the nature of his act and to have a criminal intent; in the case of mala
prohibita, unless such words as "knowingly" and "willfully" are contained in the statute, neither
knowledge nor criminal intent is necessary. In other words, a person morally quite innocent and with
every intention of being a law abiding citizen becomes a criminal, and liable to criminal penaltes, if
he does an act prohibited by these statutes.  (Emphasis supplied) Hence, "[i]ntent to commit the
134

crime and intent to perpetrate the act must be distinguished. A person may not have consciously
intended to commit a crime; but he did intend to commit an act, and that act is, by the very nature of
things, the crime itself[.]"  When an act is prohibited by a special law, it is considered injurious to
135

public welfare, and the performance of the prohibited act is the crime itself. 136

Volition, or intent to commit the act, is different from criminal intent. Volition or voluntariness refers to
knowledge of the act being done. On the other hand, criminal intent — which is different from motive,
or the moving power for the commission of the crime  — refers to the state of mind beyond
137

voluntariness. It is this intent that is being punished by crimes mala in se.

Unlike other jurisdictions that require intent for a criminal prosecution of copyright infringement, the
Philippines does not statutorily support good faith as a defense. Other jurisdictions provide in their
intellectual property codes or relevant laws that mens rea, whether express or implied, is an element
of criminal copyright infringement. 138

In Canada, criminal offenses are categorized under three (3) kinds: "the full mens rea offence,
meaning the accused’s actual or subjective state of mind has to be proved; strict liability offences
where no mens rea has to be proved but the accused can avoid liability if he can prove he took all
reasonable steps to avoid the particular event; [and] absolute liability offences where Parliament has
made it clear that guilt follows proof of the prescribed act only."  Because of the use of the word
139

"knowingly" in Canada’s Copyright Act, it has been held that copyright infringement is a full mens rea
offense.140

In the United States, willful intent is required for criminal copyright infringement.  Before the
141

passage of the No Electronic Theft Act, "civil copyright infringements were violations of criminal
copyright laws only if a defendant willfully infringed a copyright ‘for purposes of commercial
advantage or private financial gain.’"  However, the No Electronic Theft Act now allows criminal
142

copyright infringement without the requirement of commercial gain. The infringing act may or may
not be for profit.
143

There is a difference, however, between the required liability in civil copyright infringement and that
in criminal copyright infringement in the United States. Civil copyright infringement does not require
culpability and employs a strict liability regime  where "lack of intention to infringe is not a defense to
144

an action for infringement." 145

In the Philippines, the Intellectual Property Code, as amended, provides for the prosecution of
criminal actions for the following violations of intellectual property rights: Repetition of Infringement of
Patent (Section 84); Utility Model (Section 108); Industrial Design (Section 119); Trademark
Infringement (Section 155 in relation to Section 170); Unfair Competition (Section 168 in relation to
Section 170); False Designations of Origin, False Description or Representation (Section 169.1 in
relation to Section 170); infringement of copyright, moral rights, performers’ rights, producers’ rights,
and broadcasting rights (Section 177, 193, 203, 208 and 211 in relation to Section 217); and other
violations of intellectual property rights as may be defined by law.

The Intellectual Property Code requires strict liability for copyright infringement whether for a civil
action or a criminal prosecution; it does not require mens rea or culpa: 146

SECTION 216. Remedies for Infringement. —

216.1. Any person infringing a right protected under this law shall be liable:

a. To an injunction restraining such infringement. The court may also order the
defendant to desist from an infringement, among others, to prevent the entry into the
channels of commerce of imported goods that involve an infringement, immediately
after customs clearance of such goods.

b. Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to the
infringement as well as the profits the infringer may have made due to such
infringement, and in proving profits the plaintiff shall be required to prove sales only
and the defendant shall be required to prove every element of cost which he claims,
or, in lieu of actual damages and profits, such damages which to the court shall
appear to be just and shall not be regarded as penalty.

c. Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other
documents evidencing sales, all articles and their packaging alleged to infringe a
copyright and implements for making them.

d. Deliver under oath for destruction without any compensation all infringing copies or
devices, as well as all plates, molds, or other means for making such infringing
copies as the court may order.

e. Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction
of infringing copies of the work even in the event of acquittal in a criminal case.

216.2. In an infringement action, the court shall also have the power to order the seizure and
impounding of any article which may serve as evidence in the court proceedings. (Sec. 28,
P.D. No. 49a)

SECTION 217. Criminal Penalties. — 217.1. Any person infringing any right secured by provisions of
Part IV of this Actor aiding or abetting such infringement shall be guilty of a crime punishable by:
 a. Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty
thousand pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the
first offense.

b. Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging
from One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos
(₱500,000) for the second offense.

c. Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging
from Five hundred thousand pesos (₱500,000) to One million five hundred thousand
pesos (₱1,500,000) for the third and subsequent offenses.

d. In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court
shall consider the value of the infringing materials that the defendant has produced or
manufactured and the damage that the copyright owner has suffered by reason of the
infringement.

217.3. Any person who at the time when copyright subsists in a work has in his possession
an article which he knows, or ought to know, to be an infringing copy of the work for the
purpose of: a. Selling, letting for hire, or by way of trade offering or exposing for sale, or hire,
the article;

b. Distributing the article for purpose of trade, or for any other purpose to an extent
that will prejudice the rights of the copyright owner in the work; or

c. Trade exhibit of the article in public, shall be guilty of an offense and shall be liable
on conviction to imprisonment and fine as above mentioned. (Sec. 29, P.D. No. 49a)
(Emphasis supplied)

The law is clear. Inasmuch as there is wisdom in prioritizing the flow and exchange of ideas as
opposed to rewarding the creator, it is the plain reading of the law in conjunction with the actions of
the legislature to which we defer. We have continuously "recognized the power of the legislature . . .
to forbid certain acts in a limited class of cases and to make their commission criminal without regard
to the intent of the doer. Such legislative enactments are based on the experience that repressive
measures which depend for their efficiency upon proof of the dealer’s knowledge or of his intent are
of little use and rarely accomplish their purposes."147

Respondents argue that live broadcast of news requires a different treatment in terms of good faith,
intent, and knowledge to commit infringement. To argue this point, they rely on the differences of the
media used in Habana et al. v. Robles, Columbia Pictures v. Court of Appeals, and this case:

Petitioner ABS-CBN argues that lack of notice that the Angelo dela Cruz was under embargo is not a
defense in copyright infringement and cites the case of Columbia Pictures vs. Court of Appeals and
Habana et al. vs. Robles(310 SCRA 511). However, these cases refer to film and literary work where
obviously there is "copying" from an existing material so that the copier knew that he is copying from
an existing material not owned by him. But, how could respondents know that what they are "copying
was not [theirs]" when they were not copying but merely receiving live video feed from Reuters and
CNN which they aired? What they knew and what they aired was the Reuters live video feed and the
CNN feed which GMA-7 is authorized to carry in its news broadcast, it being a subscriber of these
companies[.]

It is apt to stress that the subject of the alleged copyright infringement is not a film or literary work
but live broadcast of news footage. In a film or literary work, the infringer is confronted face to face
with the material he is allegedly copying and therefore knows, or is presumed to know, that what he
is copying is owned by another. Upon the other hand, in live broadcast, the alleged infringer is not
confronted with the fact that the material he airs or re-broadcasts is owned by another, and
therefore, he cannot be charged of knowledge of ownership of the material by another. This specially
obtains in the Angelo dela Cruz news footage which GMA-7 received from Reuters and CNN.
Reuters and CNN were beaming live videos from the coverage which GMA-7 received as a
subscriber and, in the exercise of its rights as a subscriber, GMA-7 picked up the live video and
simultaneously re-broadcast it. In simultaneously broadcasting the live video footage of Reuters,
GMA-7 did not copy the video footage of petitioner ABS-CBN[.]  (Emphasis in the original)
148

Respondents’ arguments must fail.

Respondents are involved and experienced in the broadcasting business. They knew that there
would be consequences in carrying ABS-CBN’s footage in their broadcast. That is why GMA-7
allegedly cut the feed from Reuters upon seeing ABS-CBN’s ogo and reporter. To admit a different
treatment for broadcasts would mean abandonment of a broadcasting organization’s minimum
rights, including copyright on the broadcast material and the right against unauthorized rebroadcast
of copyrighted material. The nature of broadcast technology is precisely why related or neighboring
rights were created and developed. Carving out an exception for live broadcasts would go against
our commitments under relevant international treaties and agreements, which provide for the same
minimum rights. 149

Contrary to respondents’ assertion, this court in Habana,  reiterating the ruling in Columbia
150

Pictures,  ruled that lack of knowledge of infringement is not a valid defense. Habana and Columbia
151

Pictures may have different factual scenarios from this case, but their rulings on copyright
infringement are analogous. In Habana, petitioners were the authors and copyright owners of
English textbooks and workbooks. The case was anchored on the protection of literary and artistic
creations such as books. In Columbia Pictures, video tapes of copyrighted films were the subject of
the copyright infringement suit.

In Habana, knowledge of the infringement is presumed when the infringer commits the prohibited
act:

The essence of intellectual piracy should be essayed in conceptual terms in order to underscore its
gravity by an appropriate understanding thereof. Infringement of a copyright is a trespass on a
private domain owned and occupied by the owner of the copyright, and, therefore, protected by law,
and infringement of copyright, or piracy, which is a synonymous term in this connection, consists in
the doing by any person, without the consent of the owner of the copyright, of anything the sole right
to do which is conferred by statute on the owner of the copyright.

....

A copy of a piracy is an infringement of the original, and it is no defense that the pirate, in such
cases, did not know whether or not he was infringing any copyright; he at least knew that what he
was copying was not his, and he copied at his peril.

....
In cases of infringement, copying alone is not what is prohibited. The copying must produce an
"injurious effect". Here, the injury consists in that respondent Robles lifted from petitioners’ book
materials that were the result of the latter’s research work and compilation and misrepresented them
as her own. She circulated the book DEP for commercial use and did not acknowledge petitioners as
her source.  (Emphasis supplied)
152

Habana and Columbia Pictures did not require knowledge of the infringement to constitute a
violation of the copyright. One does not need to know that he or she is copying a work without
consent to violate copyright law. Notice of fact of the embargo from Reuters or CNN is not material
to find probable cause that respondents committed infringement. Knowledge of infringement is only
material when the person is charged of aiding and abetting a copyright infringement under Section
217 of the Intellectual Property Code. 153

We look at the purpose of copyright in relation to criminal prosecutions requiring willfulness: Most
importantly, in defining the contours of what it means to willfully infringe copyright for purposes of
criminal liability, the courts should remember the ultimate aim of copyright. Copyright is not primarily
about providing the strongest possible protection for copyright owners so that they have the highest
possible incentive to create more works. The control given to copyright owners is only a means to an
end: the promotion of knowledge and learning. Achieving that underlying goal of copyright law also
requires access to copyrighted works and it requires permitting certain kinds of uses of copyrighted
works without the permission of the copyright owner. While a particular defendant may appear to be
deserving of criminal sanctions, the standard for determining willfulness should be set with reference
to the larger goals of copyright embodied in the Constitution and the history of copyright in this
country.154

In addition, "[t]he essence of intellectual piracy should be essayed in conceptual terms in order to
underscore its gravity by an appropriate understanding thereof. Infringement of a copyright is a
trespass on a private domain owned and occupied by the owner of the copyright, and, therefore,
protected by law, and infringement of copyright, or piracy, which is a synonymous term in this
connection, consists in the doing by any person, without the consent of the owner of the copyright, of
anything the sole right to do which is conferred by statute on the owner of the copyright." 155

Intellectual property rights, such as copyright and the neighboring right against rebroadcasting,
establish an artificial and limited monopoly to reward creativity. Without these legally enforceable
rights, creators will have extreme difficulty recovering their costs and capturing the surplus or profit
of their works as reflected in their markets. This, in turn, is based on the theory that the possibility of
gain due to creative work creates an incentive which may improve efficiency or simply enhance
consumer welfare or utility. More creativity redounds to the public good.

These, however, depend on the certainty of enforcement. Creativity, by its very nature, is vulnerable
to the free rider problem. It is easily replicated despite the costs to and efforts of the original creator.
The more useful the creation is in the market, the greater the propensity that it will be copied. The
most creative and inventive individuals are usually those who are unable to recover on their
creations.

Arguments against strict liability presuppose that the Philippines has a social, historical, and
economic climate similar to those of Western jurisdictions. As it stands, there is a current need to
strengthen intellectual property protection.

Thus, unless clearly provided in the law, offenses involving infringement of copyright protections
should be considered malum prohibitum. It is the act of infringement, not the intent, which causes
the damage. To require or assume the need to prove intent defeats the purpose of intellectual
property protection.

Nevertheless, proof beyond reasonable doubt is still the standard for criminal prosecutions under the
Intellectual Property Code.

VIII

Respondents argue that GMA-7’s officers and employees cannot be held liable for infringement
under the Intellectual Property Code since it does not expressly provide direct liability of the
corporate officers. They explain that "(i) a corporation may be charged and prosecuted for a crime
where the penalty is fine or both imprisonment and fine, and if found guilty, may be fined; or (ii) a
corporation may commit a crime but if the statute prescribes the penalty therefore to be suffered by
the corporate officers, directors or employees or other persons, the latter shall be responsible for the
offense."156

Section 217 of the Intellectual Property Code states that "any person" may be found guilty of
infringement. It also imposes the penalty of both imprisonment and fine:

Section 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of
Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand
pesos (₱50,000) to One hundred fifty thousand pesos (₱150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from
One hundred fifty thousand pesos (₱150,000) to Five hundred thousand pesos (₱500,000)
for the second offense.

(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from
five hundred thousand pesos (₱500,000) to One million five hundred thousand pesos
(₱1,500,000) for the third and subsequent offenses.

(d) In all cases, subsidiary imprisonment in cases of insolvency. (Emphasis supplied)

Corporations have separate and distinct personalities from their officers or directors.  This
157

court has ruled that corporate officers and/or agents may be held individually liable for a
crime committed under the Intellectual Property Code: 158

Petitioners, being corporate officers and/or directors, through whose act, default or omission the
corporation commits a crime, may themselves be individually held answerable for the crime. . . . The
existence of the corporate entity does not shield from prosecution the corporate agent who
knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners cannot hide
behind the cloak of the separate corporate personality of the corporation to escape criminal liability.
A corporate officer cannot protect himself behind a corporation where he is the actual, present and
efficient actor.
159

However, the criminal liability of a corporation’s officers or employees stems from their active
participation in the commission of the wrongful act:

The principle applies whether or not the crime requires the consciousness of wrongdoing. It applies
to those corporate agents who themselves commit the crime and to those, who, by virtue of their
managerial positions or other similar relation to the corporation, could be deemed responsible for its
commission, if by virtue of their relationship to the corporation, they had the power to prevent the act.
Moreover, all parties active in promoting a crime, whether agents or not, are principals. Whether
such officers or employees are benefited by their delictual acts is not a touchstone of their criminal
liability. Benefit is not an operative fact.  (Emphasis supplied) An accused’s participation in criminal
160

acts involving violations of intellectual property rights is the subject of allegation and proof. The
showing that the accused did the acts or contributed in a meaningful way in the commission of the
infringements is certainly different from the argument of lack of intent or good faith. Active
participation requires a showing of overt physical acts or intention to commit such acts. Intent or
good faith, on the other hand, are inferences from acts proven to have been or not been committed.

We find that the Department of Justice committed grave abuse of discretion when it resolved to file
the Information against respondents despite lack of proof of their actual participation in the alleged
crime.

Ordering the inclusion of respondents Gozon, GMA-7 President; Duavit, Jr., Executive Vice-
President; Flores, Vice-President for News and Public Affairs; and Soho, Director for News, as
respondents, Secretary Agra overturned the City Prosecutor’s finding that only respondents Dela
Peña-Reyes and Manalastas are responsible for the crime charged due to their duties.  The Agra
161

Resolution reads:

Thus, from the very nature of the offense and the penalty involved, it is necessary that GMA-7’s
directors, officers, employees or other officers thereof responsible for the offense shall be charged
and penalized for violation of the Sections 177 and 211 of Republic Act No. 8293. In their complaint
for libel, respondents Felipe L Gozon, Gilberto R. Duavit, Jr., Marissa L. Flores, Jessica A.Soho,
Grace Dela Pena-Reyes, John Oliver T. Manalastas felt they were aggrieved because they were "in
charge of the management, operations and production of news and public affairs programs of the
network" (GMA-7). This is clearly an admission on respondents’ part. Of course, respondents may
argue they have no intention to infringe the copyright of ABS-CBN; that they acted in good faith; and
that they did not directly cause the airing of the subject footage, but again this is preliminary
investigation and what is required is simply probable cause. Besides, these contentions can best be
addressed in the course of trial.  (Citation omitted)
162

In contrast, the Office of the City Prosecutor, in the Resolution dated December 3, 2004, found that
respondents Gozon, Duavit, Jr., Flores, and Soho did not have active participation in the commission
of the crime charged:

This Office, however, does not subscribe to the view that respondents Atty. Felipe Gozon, Gilberto
Duavit, Marissa Flores and Jessica Soho should be held liable for the said offense. Complainant
failed to present clear and convincing evidence that the said respondents conspired with Reyes and
Manalastas. No evidence was adduced to prove that these respondents had an active participation
in the actual commission of the copyright infringement or they exercised their moral ascendancy
over Reyes and Manalastas in airing the said footage. It must be stressed that, conspiracy must be
established by positive and conclusive evidence. It must be shown to exist as clearly and
convincingly as the commission of the offense itself.  (Emphasis supplied, citations omitted)
163

The City Prosecutor found respondents Dela Peña-Reyes and Manalastas liable due to the nature of
their work and responsibilities. He found that:

[t]his Office however finds respondents Grace Dela Peña-Reyes and John Oliver T. Manalastas
liable for copyright infringement penalized under Republic Act No. 8293. It is undisputed that
complainant ABSCBN holds the exclusive ownership and copyright over the "Angelo [d]ela Cruz
news footage". Hence, any airing and re-broadcast of the said footage without any consent and
authority from ABS-CBN will be held as an infringement and violation of the intellectual property
rights of the latter. Respondents Grace Dela Peña-Reyes as the Head of the News Operation and
John Oliver T. Manalastas as the Program Manager cannot escape liability since the news control
room was under their direct control and supervision. Clearly, they must have been aware that the
said footage coming from Reuters or CNN has a "No Access Philippines" advisory or embargo thus
cannot be re-broadcast. We find no merit to the defense of ignorance interposed by the respondents.
It is simply contrary to human experience and logic that experienced employees of an established
broadcasting network would be remiss in their duty in ascertaining if the said footage has an
embargo.  (Emphasis supplied)
164

We agree with the findings as to respondents Dela Peña-Reyes and Manalastas. Both respondents
committed acts that promoted infringement of ABS-CBN’s footage. We note that embargoes are
common occurrences in and between news agencies and/or broadcast organizations.  Under its
165

Operations Guide, Reuters has two (2) types of embargoes: transmission embargo and publication
embargo.  Under ABS-CBN’s service contract with Reuters, Reuters will embargo any content
166

contributed by ABS-CBN from other broadcast subscribers within the same geographical location:

4a. Contributed Content

You agree to supply us at our request with news and sports news stories broadcast on the Client
Service of up to three (3) minutes each for use in our Services on a non-exclusive basis and at a
cost of US$300.00 (Three Hundred United States Dollars) per story. In respect of such items we
agree to embargo them against use by other broadcast subscribers in the Territory and confirm we
will observe all other conditions of usage regarding Contributed Content, as specified in Section 2.5
of the Reuters Business Principles for Television Services. For the purposes of clarification, any
geographical restriction imposed by you on your use of Contributed Content will not prevent us or
our clients from including such Contributed Content in online transmission services including the
internet. We acknowledge Contributed Content is your copyright and we will not acquire any
intellectual property rights in the Contributed Content.  (Emphasis supplied)
167

Respondents Dela Peña-Reyes and Manalastas merely denied receiving the advisory sent by
Reuters to its clients, including GMA-7. As in the records, the advisory reads:

ADVISORY - - +++LIVE COVER PLANS+++

PHILIPPINES: HOSTAGE RETURN

**ATTENTION ALL CLIENTS**

PLEASE BE ADVISED OF THE FOLLOWING LIVE COVER

PLANNED FOR THURSDAY, JULY 22:

....

SOURCE: ABS-CBN
TV AND WEB RESTRICTIONS: NO ACCESS PHILIPPINES. 168

There is probable cause that respondents Dela Peña-Reyes and Manalastas directly committed
copyright infringement of ABS-CBN’s news footage to warrant piercing of the corporate veil. They
are responsible in airing the embargoed Angelo dela Cruz footage. They could have prevented the
act of infringement had they been diligent in their functions as Head of News Operations and
Program Manager.

Secretary Agra, however, committed grave abuse of discretion when he ordered the filing of the
Information against all respondents despite the erroneous piercing of the corporate veil.
Respondents Gozon, Duavit, Jr., Flores, and Soho cannot be held liable for the criminal liability of
the corporation.

Mere membership in the Board or being President per se does not mean knowledge, approval, and
participation in the act alleged as criminal. There must be a showing of active participation, not
simply a constructive one.

Under principles of criminal law, the principals of a crime are those "who take a direct part in the
execution of the act; [t]hose who directly force or induce others to commit it; [or] [t]hose who
cooperate in the commission of the offense by another act without which it would not have been
accomplished."  There is conspiracy "when two or more persons come to an agreement concerning
169

the commission of a felony and decide to commit it": 170

Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of
conspiracy must be proven beyond reasonable doubt.  While conspiracy need not be established by
1âwphi1

direct evidence, for it may be inferred from the conduct of the accused before, during and after the
commission of the crime, all taken together, however, the evidence must be strong enough to show
the community of criminal design. For conspiracy to exist, it is essential that there must be a
conscious design to commit an offense. Conspiracy is the product of intentionality on the part of the
cohorts.

It is necessary that a conspirator should have performed some overt act as a direct or indirect
contribution to the execution of the crime committed. The overt act may consist of active participation
in the actual commission of the crime itself, or it may consist of moral assistance to his co-
conspirators by being present at the commission of the crime or by exerting moral ascendancy over
the other co-conspirators[.]  (Emphasis supplied, citations omitted)
171

In sum, the trial court erred in failing to resume the proceedings after the designated period. The
Court of Appeals erred when it held that Secretary Agra committed errors of jurisdiction despite its
own pronouncement that ABS-CBN is the owner of the copyright on the news footage. News should
be differentiated from expression of the news, particularly when the issue involves rebroadcast of
news footage. The Court of Appeals also erroneously held that good faith, as. well as lack of
knowledge of infringement, is a defense against criminal prosecution for copyright and neighboring
rights infringement. In its current form, the Intellectual Property Code is malum prohibitum and
prescribes a strict liability for copyright infringement. Good faith, lack of knowledge of the copyright,
or lack of intent to infringe is not a defense against copyright infringement. Copyright, however, is
subject to the rules of fair. use and will be judged on a case-to-case basis. Finding probable cause
includes a determination of the defendant's active participation, particularly when the corporate veil
is pierced in cases involving a corporation's criminal liability.

WHEREFORE, the Petition is partially GRANTED. The Department of Justice Resolution dated June
29, 2010 ordering the filing of the Information is hereby REINSTATED as to respondents Grace Dela
Pena-Reyes and John Oliver T. Manalastas. Branch 93 of the Regional Trial Court of Quezon City is
directed to continue with the proceedings in Criminal Case No. Q-04-131533.
G.R. No. 166391

MICROSOFT CORPORATION, Petitioner
vs.
ROLANDO D. MANANSALA and/or MEL MANANSALA, doing business as DATAMAN
TRADING COMPANY and/or COMIC ALLEY, Respondent

DECISION

BERSAMIN, J.:

This appeal seeks to overturn the decision promulgated on February 27, 2004,  whereby the Court of
1

Appeals (CA) dismissed the petition for certiorari filed by petitioner to annul the orders of the
Department of Justice (DOJ) dated March 20, 2000,  May 15, 2001,  and January 27,
2 3

2003  dismissing the criminal charge of violation of Section 29 of Presidential Decree No. 49 (Decree
4

on Intellectual Property) it had instituted against the respondents; and the resolution promulgated on
December 6, 2004 denying its motion for reconsideration. 5

Antecedents

The CA summarized the factual and procedural antecedents thusly:

Petitioner (Microsoft Corporation) is the copyright and trademark owner of all rights relating to all
versions and editions of Microsoft software (computer programs) such as, but not limited to, MS-
DOS (disk operating system), Microsoft Encarta, Microsoft Windows, Microsoft Word, Microsoft
Excel, Microsoft Access, Microsoft Works, Microsoft Powerpoint, Microsoft Office, Microsoft Flight
Simulator and Microsoft FoxPro, among others, and their user’s guide/manuals.

Private Respondent-Rolando Manansala is doing business under the name of DATAMAN TRADING
COMPANY and/or COMIC ALLEY with business address at 3rd Floor, University Mall Building, Taft
Ave., Manila.

Private Respondent Manansala, without authority from petitioner, was engaged in distributing and
selling Microsoft computer software programs.

On November 3, 1997, Mr. John Benedict A. Sacriz, a private investigator accompanied by an agent
from the National Bureau of Investigation (NBI) was able to purchase six (6) CD-ROMs containing
various computer programs belonging to petitioner.

As a result of the test-purchase, the agent from the NBI applied for a search warrant to search the
premises of the private respondent.

On November 17, 1997, a Search Warrant was issued against the premises of the private
respondent.

On November 19, 1997, the search warrant was served on the private respondent’s premises and
yielded several illegal copies of Microsoft programs.

Subsequently, petitioner, through Atty. Teodoro Kalaw IV filed an Affidavit-Complaint in the DOJ
based on the results of the search and seizure operation conducted on private respondent’s
premises.
However, in a Resolution dated March 20, 2000, public respondent State Prosecutor dismissed the
charge against private respondent for violation of Section 29 P.D. 49 in this wise, to quote:

‘The evidence is extant in the records to show that respondent is selling Microsoft computer software
programs bearing the copyrights and trademarks owned by Microsoft Corporation. There is,
however, no proof that respondent was the one who really printed or copied the products of
complainant for sale in his store.

WHEREFORE, it is hereby, recommended that respondent be charged for violation of Article 189 of
the Revised Penal Code. The charge for violation of Section 29 of PD No. 49 is recommended
dismissed for lack of evidence.’

Petitioner filed a Motion for Partial Reconsideration arguing that printing or copying is not essential in
the crime of copyright infringement under Section 29 of PD No. 49.

On May 15, 2001, the public respondent issued a Resolution denying the Motion for Partial
Reconsideration.

Thereafter, petitioner filed a Petition for Review with the DOJ, which denied the petition for review. 6

Dissatisfied with the outcome of its appeal, the petitioner filed its petition for certiorari in the CA to
annul the DOJ’s dismissal of its petition for review on the ground of grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the DOJ.

On February 27, 2004, the CA rendered the assailed decision affirming the dismissal by the
DOJ,  disposing as follows:
7

WHEREFORE, premises considered, the instant petition is DENIED. Consequently, the Orders
dated March 20, 2000, May 15, 2001 and January 27, 2003 respectively are hereby AFFIRMED. SO
ORDERED. 8

Issue

The petitioner insists that printing or copying was not essential in the commission of the crime of
copyright infringement under Section 29 of Presidential Decree No. 49; hence, contrary to the
holding of the DOJ, as upheld by the CA, the mere selling of pirated computer software constituted
copyright infringement. 9

Ruling of the Court

The appeal is meritorious.

Although the general rule is that the determination of the existence of probable cause by the public
prosecutor is not to be judicially scrutinized because it is an executive function, an exception exists
when the determination is tainted with grave abuse of discretion.  Bearing this in mind, we hold that
10

the DOJ committed grave abuse of discretion in sustaining the public prosecutor’s dismissal of the
charge of copyright infringement under Section 29 of Presidential Decree No. 49 on the ground of
lack of evidence because the public prosecutor thereby flagrantly disregarded the existence of acts
sufficient to engender the well-founded belief that the crime of copyright infringement had been
committed, and that the respondent was probably guilty thereof. 11
Section 5 of Presidential Decree No. 49 specifically defined copyright as an exclusive right in the
following manner:

Section 5. Copyright shall consist in the exclusive right;

(A) To print, reprint, publish, copy, distribute, multiply, sell, and make photographs, photo-
engravings, and pictorial illustrations of the works;

(B) To make any translation or other version or extracts or arrangements or adaptations thereof; to
dramatize it if it be a non-dramatic work; to convert it into a non-dramatic work if it be a drama; to
complete or execute if it be a model or design;

(C) To exhibit, perform, represent, produce, or reproduce, the work in any manner or by any method
whatever for profit or otherwise; it not reproduced in copies for sale, to sell any manuscript or any
record whatsoever thereof;

(D) To make any other use or disposition of the work consistent with the laws of the land.

Accordingly, the commission of any of the acts mentioned in Section 5 of Presidential Decree No. 49
without the copyright owner’s consent constituted actionable copyright infringement. In Columbia
Pictures, Inc. v. Court of Appeals,  the Court has emphatically declared:
12

Infringement of a copyright is a trespass on a private domain owned and occupied by the owner of
the copyright, and, therefore, protected by law, and infringement of copyright, or piracy, which is a
synonymous term in this connection, consists in the doing by any person, without the consent of the
owner of the copyright, of anything the sole right to do which is conferred by statute on the owner of
the copyright.

The "gravamen of copyright infringement," according to NBI-Microsoft Corporation v. Hwang: 13

is not merely the unauthorized manufacturing of intellectual works but rather the unauthorized
performance of any of the acts covered by Section 5. Hence, any person who performs any of the
acts under Section 5 without obtaining the copyright owners prior consent renders himself civilly and
criminally liable for copyright infringement.
14

The CA stated in the assailed decision as follows:

A reading of Section 5 (a) of the Copyright Law shows that the acts enumerated therein are
punctuated by commas and the last phrase is conjoined by the words ‘and’. Clearly, the same
should be interpreted to mean as ‘relating to one another’ because it is basic in legal hermeneutics
that the word ‘and’ is not meant to separate words but is a conjunction used to denote a ‘joinder’ or
‘union’.

In the book of Noli C. Diaz entitled as STATUTORY CONSTRUCTION, the word ‘and’ was defined
as a ‘conjunction connecting words or phrases expressing the idea that the latter is to be added to or
taken along with the first’. Stated differently, the word ‘and’ is a conjunction pertinently defined as
meaning ‘together with’, ‘joined with’, ‘along or together with’, ‘added to or linked to’ used to conjoin
‘word with word’, ‘phrase with phrase’, ‘clause with clause’. The word ‘and’ does not mean ‘or’, it is a
conjunction used to denote a joinder or union, ‘binding together’, relating the one to the other.
Hence the key to interpret and understand Section 5 (a) of P.D. 49 is the word ‘and’. From the
foregoing definitions of the word ‘and’ it is unmistakable that to hold a person liable under the said
provision of law, all the acts enumerated therein must be present and proven. As such, it is not
correct to construe the acts enumerated therein as being separate or independent from one another.

In the case at bar, petitioner failed to allege and adduce evidence showing that the private
respondent is the one who copied, replicated or reproduced the software programs of the petitioner.
In other words, ‘sale’ alone of pirated copies of Microsoft software programs does not constitute
copyright infringement punishable under P.D. 49. 15

The CA erred in its reading and interpretation of Section 5 of Presidential Decree No. 49. Under the
rules on syntax, the conjunctive word "and" denotes a "joinder or union" of words, phrases, or
clause;  it is different from the disjunctive word "or" that signals disassociation or
16

independence.  However, a more important rule of statutory construction dictates that laws should
17

be construed in a manner that avoids absurdity or unreasonableness.  As the Court pointed out
18

in Automotive Parts & Equipment Company, Inc. v. Lingad: 19

Nothing is better settled then that courts are not to give words a meaning which would lead to absurd
or unreasonable consequence. That is a principle that goes back to In re Allen decided on October
29, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to
absurd results. That is a strong argument against its adoption. The words of Justice Laurel are
particularly apt. Thus: ‘The fact that the construction placed upon the statute by the appellants would
lead to an absurdity is another argument for rejecting it x x x.’

It is of the essence of judicial duty to construe statutes so as to avoid such a deplorable result. That
has long been a judicial function. A literal reading of a legislative act which could be thus
characterized is to be avoided if the language thereof can be given a reasonable application
consistent with the legislative purpose. In the apt language of Frankfurter: "A decent respect for the
policy of Congress must save us from imputing to it a self-defeating, if not disingenuous purpose.
Certainly, we must reject a construction that at best amounts to a manifestation of verbal ingenuity
but hardly satisfies the test of rationality on which law must be based. 20

The conjunctive "and" should not be taken in its ordinary acceptation, but should be construed like
the disjunctive "or" if the literal interpretation of the law would pervert or obscure the legislative
intent.  To accept the CA’s reading and interpretation is to accept absurd results because the
21

violations listed in Section 5(a) of Presidential Decree No. 49 – "To print, reprint, publish, copy,
distribute, multiply, sell, and make photographs, photo-engravings, and pictorial illustrations of the
works" – cannot be carried out on all of the classes of works enumerated in Section 2 of Presidential
Decree No. 49, viz.:

Section 2. - The Rights granted by this Decree shall, from the moment of creation, subsist with
respect to any of the following classes of works:

(A) Books, including composite and encyclopedic works, manuscripts, directories, and gazetteers;

(B) Periodicals, including pamphlets and newspapers;

(C) Lectures, sermons, addresses, dissertations prepared for oral delivery;

(D) Letters;
(E) Dramatic or dramatico-musical compositions; choreographic works and entertainments in dumb
shows, the acting form of which is fixed in writing or otherwise;

(F) Musical compositions, with or without words;

(G) Works of drawing, painting, architecture, sculpture, engraving, lithography, and other works of
art; models or designs for works of art;

(H) Reproductions of a work of art;

(I) Original ornamental designs or models for articles of manufacture, whether or not patentable, and
other works of applied art;

(J) Maps, plans, sketches, and charts;

(K) Drawings, or plastic works of a scientific or technical character;

(L) Photographic works and works produced by a process analogous to photography; lantern slides;

(M) Cinematographic works and works produced by a process analogous to cinematography or any
process for making audio-visual recordings;

(N) Computer programs;

(O) Prints, pictorial, illustration, advertising copies, labels, tags, and box wraps;

(P) Dramatization, translations, adaptations, abridgements, arrangements and other alterations of

literary, musical or artistic works or of works of the Philippine Government as herein defined, which
shall be protected as provided in Section 8 of this Decree.

(Q) Collection of literary, scholarly, or artistic works or of works referred to in Section 9 of this Decree
which by reason of the selection and arrangement of their contents constitute intellectual creations,
the same to be protected as such in accordance with Section 8 of this Decree.

(R) Other literary, scholarly, scientific and artistic works.

Presidential Decree No. 49 thereby already acknowledged the existence of computer programs as
works or creations protected by copyright.  To hold, as the CA incorrectly did, that the legislative
22

intent was to require that the computer programs be first photographed, photoengraved, or pictorially
illustrated as a condition for the commission of copyright infringement invites ridicule. Such
interpretation of Section 5(a) of Presidential Decree No. 49 defied logic and common sense because
it focused on terms like "copy," "multiply," and "sell," but blatantly ignored terms like "photographs,"
"photo-engravings," and "pictorial illustrations."

Had the CA taken the latter words into proper account, it would have quickly seen the absurdity of its
interpretation.

The mere sale of the illicit copies of the software programs was enough by itself to show the
existence of probable cause for copyright infringement.  There was no need for the petitioner to still
1âwphi1

prove who copied, replicated or reproduced the software programs. Indeed, the public prosecutor
and the DOI gravely abused their discretion in dismissing the petitioner's charge for copyright
infringement against the respondents for lack of evidence. There was grave abuse of discretion
because the public prosecutor and the DOI acted whimsically or arbitrarily in disregarding the settled
jurisprudential rules on finding the existence of probable cause to charge the offender in court.
Accordingly, the CA erred in upholding the dismissal by the DOI of the petitioner's petition for review.
We reverse.

WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS

ASIDE the decision promulgated on February 27, 2004 in C.A.-G.R. SP No. 76402; DIRECTS the
Department of Justice to render the proper resolution to charge respondent ROLANDO D.
MANANSALA and/or MEL MANANSALA, doing business as DATAMAN TRADING COMPANY
and/or COMIC ALLEY in accordance with this decision; and ORDERS the respondents to pay the
costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

G.R. No. 209843

TAIWAN KOLIN CORPORATION, LTD., Petitioner,

vs.
KOLIN ELECTRONICS CO., INC., Respondent.

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a petition for review under Rule 45 of the Rules of Court interposed by petitioner
Taiwan Kolin Corporation, Ltd. (Taiwan Kolin), assailing the April 30, 2013 Decision  of the Court of
1

Appeals (CA) in CA-G.R. SP No. 122565 and its subsequent November 6, 2013 Resolution.  The 2

assailed issuances effectively denied petitioner's trademark application for the use of "KOLIN" on its
television and DVD players.

The Facts

On February 29, 1996, Taiwan Kolin filed with the Intellectual Property Office (IPO), then Bureau of
Patents, Trademarks, and Technology Transfer, a trademark application, docketed as Application
No. 4-1996-106310, for the use of "KOLIN" on a combination of goods, including colored televisions,
refrigerators, window-type and split-type air conditioners, electric fans and water dispensers. Said
goods allegedly fall under Classes 9, 11, and 21 of the Nice Classification (NCL).

Application No. 4-1996-106310 would eventually be considered abandoned for Taiwan Kolin’s failure
to respond to IPO’s Paper No. 5 requiring it to elect one class of good for its coverage. However, the
same application was subsequently revived through Application Serial No. 4-2002-011002,  with3

petitioner electing Class 9 as the subject of its application, particularly: television sets, cassette
recorder, VCD Amplifiers, camcorders and other audio/video electronic equipment, flat iron, vacuum
cleaners, cordless handsets, videophones, facsimile machines, teleprinters, cellular phones and
automatic goods vending machine. The application would in time be duly published. 4

On July 13, 2006, respondent Kolin Electronics Co., Inc. (Kolin Electronics) opposed petitioner’s
revived application, docketed as Inter Partes Case No. 14-2006-00096. As argued, the mark Taiwan
Kolin seeks to register is identical, if not confusingly similar, with its "KOLIN" mark registered on
November 23, 2003, covering the following products under Class 9 of the NCL: automatic voltage
regulator, converter, recharger, stereo booster, AC-DC regulated power supply, step-down
transformer, and PA amplified AC-DC. 5

To digress a bit, Kolin Electronics’ "KOLIN" registration was, as it turns out, the subject of a prior
legal dispute between the parties in Inter Partes Case No. 14-1998-00050 beforethe IPO. In the said
case, Kolin Electronics’ own application was opposed by Taiwan Kolin, being, as Taiwan Kolin
claimed, the prior registrant and user of the "KOLIN" trademark, having registered the same in
Taipei, Taiwan on December 1, 1988. The Bureau of Legal Affairs of the IPO (BLA-IPO), however,
did not accord priority right to Taiwan Kolin’s Taipei registration absent evidence to prove that it has
already used the said mark in the Philippines as early as 1988. On appeal, the IPO Director General
affirmed the BLA-IPO’s Decision. Taiwan Kolin elevated the case to the CA, but without injunctive
relief, Kolin Electronics was able to register the "KOLIN" trademark on November 23, 2003for its
products.  Subsequently, the CA, on July 31, 2006, affirmed  the Decision of the Director General.
6 7

In answer to respondent’s opposition in Inter Partes Case No. 14-2006-00096, petitioner argued that
it should be accorded the benefits of a foreign-registered mark under Secs. 3 and 131.1 of Republic
Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code);  that it
8

has already registered the "KOLIN" mark in the People’s Republic of China, Malaysia and Vietnam,
all of which are parties to the Paris Convention for the Protection of Industrial Property (Paris
Convention) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS);
and that benefits accorded to a well-known mark should be accorded to petitioner. 9

Ruling of the BLA-IPO

By Decision  dated August 16, 2007, the BLA-IPO denied petitioner’s application disposing as
10

follows:

In view of all the foregoing, the instant Opposition is as, it is hereby SUSTAINED. Accordingly,
application bearing Serial No. 4-1996-106310 for the mark "KOLIN" filed in the name of TAIWAN
KOLIN., LTD. on February 29, 1996 for goods falling under Class 09 of the International
Classification of Goods such as cassette recorder, VCD, woofer, amplifiers, camcorders and other
audio/video electronic equipment, flat iron, vacuum cleaners, cordless handsets, videophones,
facsimile machines, teleprinters, cellular phones, automatic goods vending machines and other
electronic equipment is hereby REJECTED.

Let the file wrapper of "KOLIN", subject of this case be forwarded to the Bureau of Trademarks
(BOT) for appropriate action in accordance with this Decision.

SO ORDERED.

Citing Sec. 123(d) of the IP Code,  the BLA-IPO held that a mark cannot be registered if it is
11

identical with a registered mark belonging to a different proprietor in respect of the same or closely-
related goods. Accordingly, respondent, as the registered owner of the mark "KOLIN" for goods
falling under Class 9 of the NCL, should then be protected against anyone who impinges on its right,
including petitioner who seeks to register an identical mark to be used on goods also belonging to
Class 9 of the NCL.  The BLA-IPO also noted that there was proof of actual confusion in the form of
12

consumers writing numerous e-mails to respondent asking for information, service, and complaints
about petitioner’s products.13

Petitioner moved for reconsideration but the same was denied on January 26, 2009 for lack of
merit.  Thus, petitioner appealed the above Decision to the Office of the Director General of the IPO.
14

Ruling of the IPO Director General

On November 23, 2011, the IPO Director General rendered a Decision  reversing that of the BLA-
15

IPO in the following wise:

Wherefore, premises considered, the appeal is hereby GRANTED. The Appellant’s Trademark
Application No. 4-1996-106310 is hereby GIVEN DUE COURSE subject to the use limitation or
restriction for the goods "television and DVD player". Let a copy of this Decision as well as the
trademark application and records be furnished and returned to the Director of the Bureau of Legal
Affairs for appropriate action. Further, let the Director of the Bureau of Trademarks and the library of
the Documentation, Information and Technology Transfer Bureau be furnished a copy of this
Decision for information, guidance, and records purposes.

SO ORDERED.

In so ruling, the IPO Director General ratiocinated that product classification alone cannot serve as
the decisive factor in the resolution of whether or not the goods are related and that emphasis
should be on the similarity of the products involved and not on the arbitrary classification or general
description of their properties or characteristics. As held, 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.
16

Aggrieved, respondent elevated the case to the CA.

Ruling of the Court of Appeals

In its assailed Decision, the CA found for Kolin Electronics, on the strength of the following premises:
(a) the mark sought to be registered by Taiwan Kolin is confusingly similar to the one already
registered in favor of Kolin Electronics; (b) there are no other designs, special shape or easily
identifiable earmarks that would differentiate the products of both competing companies;  and (c) the
17

intertwined use of television sets with amplifier, booster and voltage regulator bolstered the fact that
televisions can be considered as within the normal expansion of Kolin Electronics,  and is thereby
18

deemed covered by its trademark as explicitly protected under Sec. 138  of the IP
19

Code.  Resultantly, the CA granted respondent’s appeal thusly:

20

WHEREFORE, the appeal is GRANTED. The November 23, 2011 Decision of the Director General
of the Intellectual Property Office in Inter Partes Case No. 14-2006-0096 is REVERSED and SET
ASIDE. The September 17, 2007 Decision of the Bureau of Legal Affairs of the same office is
REINSTATED.

SO ORDERED.

Petitioner moved for reconsideration only to be denied by the CA through its equally assailed
November 6, 2013 Resolution. Hence, the instant recourse.
 The Issue

The primordial issue to be resolved boils down to whether or not petitioner is entitled to its trademark
registration of "KOLIN" over its specific goods of television sets and DVD players. Petitioner
postulates, in the main, that its goods are not closely related to those of Kolin Electronics. On the
other hand, respondent hinges its case on the CA’s findings that its and petitioner’s products are
closely-related. Thus, granting petitioner’s application for trademark registration, according to
respondent, would cause confusion as to the public.

The Court's Ruling

The petition is impressed with merit.

Identical marks may be registered for

products from the same classification

To bolster its opposition against petitioner’s application to register trademark "KOLIN," respondent
maintains that the element of mark identity argues against approval of such application, quoting the
BLA IPO’s ruling in this regard: 21

Indubitably, Respondent-Applicant’s [herein petitioner] mark is identical to the registered mark of

herein Opposer [herein respondent] and the identical mark is used on goods belonging to Class 9 to
which Opposer’s goods are also classified. On this point alone, Respondent-Applicant’s application
should already be denied.

The argument is specious.

The parties admit that their respective sets of goods belong to Class 9 of the NCL, which includes
the following: 22

Class 9

Scientific, nautical, surveying, photographic, cinematographic, optical, weighing, measuring,

signalling, checking (supervision), life-saving and teaching apparatus and instruments; apparatus
and instruments for conducting, switching, transforming, accumulating, regulating or controlling
electricity; apparatus for recording, transmission or reproduction of sound or images; magneticdata
carriers, recording discs; compact discs, DVDs and other digital recording media; mechanisms for
coin-operated apparatus; cash registers, calculating machines, data processing equipment,
computers; computer software; fire-extinguishing apparatus.

But mere uniformity in categorization, by itself, does not automatically preclude the registration of
what appears to be an identical mark, if that be the case. In fact, this Court, in a long line of cases,
has held that such circumstance does not necessarily result in any trademark infringement. The
survey of jurisprudence cited in Mighty Corporation v. E. & J Gallo Winery  is enlightening on this
23

point:

(a) in Acoje Mining Co., Inc. vs. Director of Patents,  we ordered the approval of Acoje
24

Mining’s 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,  we upheld the
25

Patent Director’s registration of the same trademark CAMIA for Ng Sam’s ham under Class
47, despite Philippine Refining Company’s 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,  we 26

dismissed Hickok’s petition to cancel private respondent’s HICKOK trademark registration for
its Marikina shoes as against petitioner’s earlier registration of the same trademark for
handkerchiefs, briefs, belts and wallets.

Verily, whether or not the products covered by the trademark sought to be registered by Taiwan
Kolin, on the one hand, and those covered by the prior issued certificate of registration in favor of
Kolin Electronics, on the other, fall under the same categories in the NCL is not the sole and decisive
factor in determining a possible violation of Kolin Electronics’ intellectual property right should
petitioner’s application be granted. It is hornbook doctrine, as held in the above-cited cases, that
emphasis should be on the similarity of the products involved and not on the arbitrary classification
or general description of their properties or characteristics. The mere fact that one person has
adopted and used a trademark on his goods would not, without more, prevent the adoption and use
of the same trademark by others on unrelated articles of a different kind.  The CA erred in denying
27

petitioner’s registration application

Respondent next parlays the idea of relation between products as a factor militating against
petitioner’s application. Citing Esso Standard Eastern, Inc. v. Court of Appeals,  respondent argues
28

that the goods covered by petitioner’s application and those covered by its registration are actually
related belonging as they do to the same class or have the same physical characteristics with
reference to their form, composition, texture, or quality, or if they serve the same purpose.
Respondent likewise draws parallelisms between the present controversy and the following cases: 29

(a) In Arce & Sons, Inc. vs. Selecta Biscuit Company,  biscuits were held related to milk
30

because they were both food products;

(b) In Chua Che vs. Phil. Patents Office,  soap and perfume, lipstick and nail polish are held
31

to be similarly related because they are common household items;

(c) In Ang vs. Teodoro,  the trademark "Ang Tibay" for shoes and slippers was disallowed to
32

be used for shirts and pants because they belong to the same general class of goods; and

(d) In Khe vs. Lever Bros. Co.,  soap and pomade, although noncompetitive, were held to be
33

similar or belong to the same class, since both are toilet articles.

Respondent avers that Kolin Electronics’ and Taiwan Kolin’s products are closely-related not only
because both fall under Class 9 of the NCL, but mainly because they both relate to electronic
products, instruments, apparatus, or appliances.  Pushing the point, respondent would argue that
34

Taiwan Kolin and Kolin Electronics’ goods are inherently similar in that they are all plugged into
electric sockets and perform a useful function.  Furthermore, respondent echoes the appellate
35

court’s ratiocination in denying petitioner’s application, viz:

36

Significantly, Kolin Electronics’ goods (automatic voltage regulator; converter; recharger; stereo
booster; AC-DC regulated power supply; step-down transformer; and PA amplified AC-DC) and
Taiwan Kolin’s television sets and DVD players are both classified under class 9 of the NICE
agreement. At first glance, it is also evident that all these goods are generally described as electrical
devices. x x x [T]he goods of both Kolin Electronics and Taiwan Kolin will inevitably be introduced to
the public as "KOLIN" products and will be offered for sale in the same channels of trade. Contrary
to Taiwan Kolin’s claim, power supply as well as audio and stereo equipment like booster and
amplifier are not only sold in hardware and electrical shops. These products are commonly found in
appliance stores alongside television sets and DVD players. With the present trend in today’s
entertainment of having a home theater system, it is not unlikely to see a stereo booster, amplifier
and automatic voltage regulator displayed together with the television sets and DVD players. With
the intertwined use of these products bearing the identical "KOLIN" mark, the ordinary intelligent
consumer would likely assume that they are produced by the same manufacturer.

In sum, the intertwined use, the same classification of the products as class 9 under the NICE
Agreement, and the fact that they generally flow through the same channel of trade clearly establish
that Taiwan Kolin’s television sets and DVD players are closely related to Kolin Electronics’ goods.
As correctly pointed out by the BLA-IPO, allowing Taiwan Kolin’s registration would only confuse
consumers as to the origin of the products they intend to purchase. Accordingly, protection should
be afforded to Kolin Electronics, as the registered owner of the "KOLIN" trademark.  (emphasis
37

added)

The CA’s approach and reasoning to arrive at the assailed holding that the approval of petitioner’s
application is likely to cause confusion or deceive fail to persuade.

a. The products covered by petitioner’s application and respondent’s registration are

unrelated

A certificate of trademark registration confers upon the trademark owner the exclusive right to sue
those who have adopted a similar mark not only in connection with the goods or services specified in
the certificate, but also with those that are related thereto.
38

In resolving one of the pivotal issues in this case––whether or not the products of the parties
involved are related––the doctrine in Mighty Corporation is authoritative. There, the Court held that
the goods should be tested against several factors before arriving at a sound conclusion on the
question of relatedness. Among these are:

(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;

(d) the nature and cost of the articles;

(e) the descriptive properties, physical attributes or essential characteristics with reference to
their form, composition, texture or quality;

(f) the purpose of the goods;

(g) whether the article is bought for immediate consumption, that is, day-to-day household
items;

(h) the fields of manufacture;

 (i) the conditions under which the article is usually purchased; and

(j) the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold. 39

As mentioned, the classification of the products under the NCL is merely part and parcel of the
factors to be considered in ascertaining whether the goods are related. It is not sufficient to state that
the goods involved herein are electronic products under Class 9 in order to establish relatedness
between the goods, for this only accounts for one of many considerations enumerated in Mighty
Corporation. In this case, credence is accorded to petitioner’s assertions that: 40

a. Taiwan Kolin’s goods are classified as home appliances as opposed to Kolin Electronics’
goods which are power supply and audio equipment accessories;

b. Taiwan Kolin’s television sets and DVD players perform distinct function and purpose from
Kolin Electronics’ power supply and audio equipment; and

c. Taiwan Kolin sells and distributes its various home appliance products on wholesale and
to accredited dealers, whereas Kolin Electronics’ goods are sold and flow through electrical
and hardware stores.

Clearly then, it was erroneous for respondent to assume over the CA to conclude that all electronic
products are related and that the coverage of one electronic product necessarily precludes the
registration of a similar mark over another. In this digital age wherein electronic products have not
only diversified by leaps and bounds, and are geared towards interoperability, it is difficult to assert
readily, as respondent simplistically did, that all devices that require plugging into sockets are
necessarily related goods.

It bears to stress at this point that the list of products included in Class 9  can be sub-categorized
41

into five (5) classifications, namely: (1) apparatus and instruments for scientific or research
purposes, (2) information technology and audiovisual equipment, (3) apparatus and devices for
controlling the distribution and use of electricity, (4) optical apparatus and instruments, and (5) safety
equipment.  From this sub-classification, it becomes apparent that petitioner’s products, i.e.,
42

televisions and DVD players, belong to audio visiual equipment, while that of respondent, consisting
of automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated power supply,
step-down transformer, and PA amplified AC-DC, generally fall under devices for controlling the
distribution and use of electricity.

b. The ordinarily intelligent

buyer is not likely to be
confused

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no rigid set rules can plausible be formulated. Each case must be decided on its merits,
with due regard to the goods or services involved, the usual purchaser’s character and attitude,
among others. In such cases, even more than in any other litigation, precedent must be studied in
the light of the facts of a particular case. That is the reason why in trademark cases, jurisprudential
precedents should be applied only to a case if they are specifically in point.  For a clearer
43

perspective and as matter of record, the following image on the left  is the trademark applied for by
44

petitioner, while the image juxtaposed to its right  is the trademark registered by respondent:
45
While both competing marks refer to the word "KOLIN" written in upper case letters and in bold font,
the Court at once notes the distinct visual and aural differences between them: Kolin Electronics’
mark is italicized and colored black while that of Taiwan Kolin is white in pantone red color
background. The differing features between the two, though they may appear minimal, are sufficient
to distinguish one brand from the other.

It cannot be stressed enough that the products involved in the case at bar are, generally speaking,
various kinds of electronic products. These are not ordinary consumable household items, like
catsup, soy sauce or soap which are of minimal cost.  The products of the contending parties are
46

relatively luxury items not easily considered affordable. 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.  As further elucidated in Del Monte Corporation v. Court of Appeals:
47 48

x x x 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 x x x. (emphasis added) Respondent has made much reliance
on Arce & Sons, Chua Che, Ang, and Khe, oblivious that they involved common household items––
i.e., biscuits and milk, cosmetics, clothes, and toilet articles, respectively–– whereas the extant case
involves luxury items not regularly and inexpensively purchased by the consuming public. In accord
with common empirical experience, the useful lives of televisions and DVD players last for about five
(5) years, minimum, making replacement purchases very infrequent. The same goes true with
converters and regulators that are seldom replaced despite the acquisition of new equipment to be
plugged onto it. In addition, the amount the buyer would be parting with cannot be deemed minimal
considering that the price of televisions or DVD players can exceed today’s monthly minimum wage.
In light of these circumstances, it is then expected that the ordinary intelligent buyer would be more
discerning when it comes to deciding which electronic product they are going to purchase, and it is
this standard which this Court applies herein in determining the likelihood of confusion should
petitioner’s application be granted.

To be sure, the extant case is reminiscent of Emerald Garment Manufacturing Corporation v. Court
of Appeals,  wherein the opposing trademarks are that of Emerald Garment Manufacturing
49

Corporation’s "Stylistic Mr. Lee" and H.D. Lee’s "LEE." In the said case, the appellate court affirmed
the decision of the Director of Patents denying Emerald Garment’s application for registration due to
confusing similarity with H.D. Lee’s trademark. This Court, however, was of a different beat and
ruled that there is no confusing similarity between the marks, given that the products covered by the
trademark, i.e., jeans, were, at that time, considered pricey, typically purchased by intelligent buyers
familiar with the products and are more circumspect, and, therefore, would not easily be deceived.
As held:

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok  is better suited to the present case. There,
50

the "ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent
familiar with, the goods in question. The test of fraudulent simulation is to be found in the likelihood
of the deception of some persons in some measure acquainted with an established design and
desirous of purchasing the commodity with which that design has been associated. The test is not
found in the deception, or the possibility of deception, of the person who knows nothing about the
design which has been counterfeited, and who must be indifferent between that and the other. The
simulation, in order to be objectionable, must be such as appears likely to mislead the ordinary
intelligent buyer who has a need to supply and is familiar with the article that he seeks to
purchase."  (emphasis added)
51

Consistent with the above ruling, this Court finds that the differences between the two marks, subtle
as they may be, are sufficient to prevent any confusion that may ensue should petitioner’s trademark
application be granted. As held in Esso Standard Eastern, Inc.: 52

Respondent court correctly ruled that considering the general appearances of each mark as a whole,
the possibility of any confusion is unlikely. A comparison of the labels of the samples of the goods
submitted by the parties shows a great many differences on the trademarks used. As pointed out by
respondent court in its appealed decision, "(A) witness for the plaintiff, Mr. Buhay, admitted that the
color of the ‘ESSO’ used by the plaintiff for the oval design where the blue word ESSO is contained
is the distinct and unique kind of blue. In his answer to the trial court’s question, Mr. Buhay informed
the court that the plaintiff never used its trademark on any product where the combination of colors is
similar to the label of the Esso cigarettes," and "Another witness for the plaintiff, Mr. Tengco, testified
that generally, the plaintiff’s trademark comes all in either red, white, blue or any combination of the
three colors. It is to be pointed out that not even a shade of these colors appears on the trademark
of the appellant’s cigarette. The only color that the appellant uses in its trademark is green."

Even the lower court, which ruled initially for petitioner, found that a "noticeable difference between
the brand ESSO being used by the defendants and the trademark ESSO of the plaintiff is that the
former has a rectangular background, while in that of the plaintiff the word ESSO is enclosed in an
oval background."

All told, We are convinced that petitioner's trademark registration not only covers unrelated good, but
is also incapable of deceiving the ordinary intelligent buyer. The ordinary purchaser must be thought
of as having, and credited with, at least a modicum of intelligence to be able to see the differences
between the two trademarks in question. 53

Questions of fact may still be entertained

On a final note, the policy according factual findings of courts a quo great respect, if not finality, is
not binding where they have overlooked, misapprehended, or misapplied any fact or circumstance of
weight and substances.  So it must be here; the nature of the products involved materially affects
54

the outcome of the instant case. A reversal of the appellate Court's Decision is then in order.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The Decision and the
Resolution of the Court of Appeals in CA-G.R. SP No. 122565, dated April 30, 2013 and November
6, 2013, respectively, are hereby REVERSED and SET ASIDE. Accordingly, the Decision of the
Intellectual Property Office Director General in Inter Partes Case No. 14-2006-00096, dated
November 23, 2011, is hereby REINSTATED.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice

G.R. No. 205409, June 13, 2018 - CITIGROUP, INC., Petitioner, v. CITYSTATE SAVINGS
BANK, INC. Respondent.

THIRD DIVISION

G.R. No. 205409, June 13, 2018

CITIGROUP, INC., Petitioner, v. CITYSTATE SAVINGS BANK, INC. Respondent.

DECISION

LEONEN, J.:

This resolves a Petition for Review on Certiorari 1 assailing the August 29, 2012
Decision2 and the January 15, 2013 Resolution3 of the Court of Appeals in CA-G.R. SP
No. 109679.

The facts which led to the controversy before this Court, as summarized by the Court of
Appeals, are as follows:

Petitioner Citigroup, Inc. is a corporation duly organized under the laws of the State of
Delaware engaged in banking and financial services.

In the late 1970s, Citibank N.A., a wholly-owned subsidiary of petitioner, installed its
first automated teller machines in over a hundred New York City branches. In 1984,
Citibank N.A., Philippine Branch, began the development of its domestic Automated
Teller Machine (ATM) network, and started operating ATMs and issuing ATM cards in the
Philippines. Citibank N.A., Philippine Branch then joined Bancnet Inc. ("Bancnet") in
1990, the first year Bancnet commenced operations. To date, Citibank N.A., Philippine
Branch has six branches and 22 ATMs in the Philippines.

In 2005, Citibank Savings, Inc. became an indirect wholly-owned subsidiary of Citibank,

N.A. As a pre-existing thrift bank, it offered ATM services in the Philippines in 1995 and
joined Bancnet in 2005. Citibank Savings, Inc. now has 36 branches and 27 ATMs in the
Philippines.

Combining the branches and ATMs of Citibank N.A., Philippine Branch and Citibank
Savings, Inc., there are a total of 42 branches and 29 ATMs in the Philippines marketed
and identified to the public under the CITI family of marks.

The ATM cards issued by Citibank N.A., Philippine Branch and Citibank Savings, Inc. are
labelled "CITICARD". The trademark CITICARD is owned by Citibank N.A. and is
registered in the [Intellectual Property Office] of the Philippines on 27 September 1995
under Registration Number 34731.

In addition, petitioner or Citibank N.A., a wholly-owned subsidiary of petitioner, owns

the following other trademarks currently registered with the Philippine [Intellectual
Property Office], to wit: "CITI and arc design", "CITIBANK", "CITIBANK PAYLINK",
"CITIBANK SPEEDCOLLECT", "CITIBANKING", "CITICARD", "CITICORP",
"CITIFINANCIAL", "CITIGOLD", "CITIGROUP", "CITIPHONE BANKING'', and
"CITISERVICE".

On the other hand, sometime in the mid-nineties, a group of Filipinos and Singaporean
companies formed a consortium to establish respondent Citystate Savings Bank, Inc.
The consortium included established Singaporean companies, specifically Citystate
Insurance Group and Citystate Management Group Holdings Pte, Ltd.

Respondent's registered mark has in its name affixed a lion's head, which is likened to
the national symbol of Singapore, the Merlion. On 08 August 1997, respondent opened
its initial branch in Makati City. From then on, it endeavored to expand its branch
network. At present it has 19 branches in key cities and municipalities including 3
branches in the province of Bulacan and 1 in Cebu City. Respondent had also
established off site ATMs in key locations in the Philippines as one of its banking
products and services.

In line with this, respondent filed an application for registration with the [Intellectual
Property Office] on 21 June 2005 of the trademark "CITY CASH WITH GOLDEN LION'S
HEAD" for its ATM service, under Application Serial No. 42005005673. 4
After respondent Citystate Savings Bank, Inc. (Citystate) applied for registration of its
trademark "CITY CASH WITH GOLDEN LION'S HEAD" with the Intellectual Property
Office, Citigroup, Inc. (Citigroup) filed an opposition to Citystate's application. Citigroup
claimed that the "CITY CASH WITH GOLDEN LION'S HEAD" mark is confusingly similar
to its own "CITI" marks.5 After an exchange of pleadings, the Director of the Bureau of
Legal Affairs of the Intellectual Property Office rendered a Decision 6 dated November
20, 2008. The Intellectual Property Office concluded that the dominant features of the
marks were the words "CITI" and "CITY," which were almost the same in all aspects. It
further ratiocinated that Citigroup had the better right over the mark, considering that
'its "CITI" and "CITI"-related marks have been registered with the Intellectual Property
Office, as well as with the United States Patent and Trademark Office, covering
"financial services" under Class 36 of the International Classification of Goods. 7 Thus,
applying the dominancy test and considering that Citystate's dominant feature of the
applicant's mark was identical or confusingly similar to a registered trademark, the
Intellectual Property Office ruled that approving it would be contrary to Section 138 of
the Intellectual Property Code and Citigroup's exclusive right to use its marks.

This was appealed to the Office of the Director General of the Intellectual Property
Office. In a Decision8 dated July 3, 2009, Director General Adrian S. Cristobal, Jr.
(Director General Cristobal) reversed the November 20, 2008 Decision of the Director of
the Bureau of Legal Affairs and gave due course to Citystate's trademark application.
He made a visual comparison of the parties' respective marks and considered the
golden lion head device to be the prominent or dominant feature of Citystate's mark,
and not the word "CITY." Thus, Citystate's mark did not resemble Citigroup's mark such
that deception or confusion was likely. Director General Cristobal found plausible
Citystate's explanation for choosing "CITYSTATE," i.e., that its name was based on the
country of Singapore, which was referred to as "city-state," and that the golden lion
head device was similar to the national symbol of Singapore, the merlion.9 He
appreciated that availing of the products and services related to the parties' marks
would entail very detailed procedures, like sales representatives explaining the products
and clients filling up and submitting application forms, such that customers would
necessarily be well informed and not confused. 10

Thus, Citigroup filed a Petition for Review11 before the Court of Appeals, which
dismissed the petition. The Court of Appeals found that Director General Cristobal did
not act with grave abuse of discretion in ruling that the parties' trademarks were not
confusingly similar, and in giving due course to Citystate's trademark application. 12 It
found that Citystate's mark was not confusingly or deceptively similar to Citigroup's
marks:
[Citystate's] trademark is the entire "CITY CASH WITH GOLDEN LION'S HEAD".
Although the words "CITY CASH" are prominent, the entirety of the trademark must be
considered, and focus should not be made solely on the phonetic similarity of the words
"CITY" and "CITI".

The dissimilarities between the two marks are noticeable and substantial. [Citystate's]
mark, "CITY CASH WITH GOLDEN LION'S HEAD", has an insignia of a golden lion's head
at the left side of the words "CITY CASH", while [Citigroup's] "CITI" mark usually has
an arc between the two I's. A further scrutiny of the other "CITI" marks of [Citigroup]
would show that their font type, font size, and color schemes of the said "CITI" marks
vary for each product or service. Most of the time, [Citigroup's] "CITI" mark is joined
with another term to form a single word, with each product or service having different
font types and color schemes. On the contrary, the trademark of [Citystate] consists of
the words "CITY CASH", with a golden lion's head emblem on the left side. It is,
therefore, improbable that the public would immediately and naturally conclude that
[Citystate's] "CITY CASH WITH GOLDEN LION'S HEAD" is but another variation under
[Citigroup's] "CITI" marks.

Verily, the variations in the appearance of the "CITI" marks by [Citigroup], when
conjoined with other words, would dissolve the alleged similarity between them and the
trademark of [Citystate]. These dissimilarities, and the insignia of a golden lion's head
before the words "CITY CASH" in the mark of [Citystate] would sufficiently acquaint and
apprise the public that [Citystate's] trademark "CITY CASH WITH GOLDEN LION'S
HEAD" is not connected with the "CITI" marks of [Citigroup].

Moreover, more credit should be given to the "ordinary purchaser." Cast in this
particular controversy, the ordinary purchaser is not the "completely unwary consumer"
but is the "ordinarily intelligent buyer" considering the type of product involved. It
bears to emphasize that the mark "CITY CASH WITH GOLDEN LION'S HEAD" is a mark
of [Citystate] for its ATM services which it offers to the public. It cannot be gainsaid
that an ATM service is not an ordinary product which could be obtained at any store
without the public noticing its association with the banking institution that provides said
service. Naturally, the customer must first open an account with a bank before it could
avail of its ATM service. Moreover, the name of the banking institution is written and
posted either inside or outside the ATM booth, not to mention the fact that the name of
the bank that operates the ATM is constantly flashed at the screen of the ATM itself.
With this, the public would accordingly be apprised that [Citystate's] "CITY CASH" is an
ATM service of [Citystate], and not that of [Citigroup's]. 13 (Citation omitted)
Thus, the Court of Appeals quoted Director General Cristobal:
In evaluating the relevance of the prefix "CITI", due attention should be given not only
to the other features of the competing marks but also to the attendant circumstances of
the case. Otherwise, a blind adherence to [Citigroup's] claim over the prefix CITI is
tantamount to handing it a monopoly of all marks with such prefix or with a prefix that
sounds alike but with a different spelling like the word "city". Accordingly, the kind of
products and services involved should likewise be scrutinized.

....

Thus, this Court finds no cogent reason to believe [Citigroup's] contention that
consumers may confuse the products and services covered by the competing
trademarks as coming from the same source of origin. The fear that the consumer may
mistake the products as to the source or origin, or that the consumers seeking its
products and services will be redirected or diverted to [Citystate], is unfounded. The
products or services involved are not the ordinary everyday products that one can just
pick up in a supermarket or grocery stores (sic). These products generally require sales
representatives explaining to their prospective customers the features of and
entitlements thereto. Availing the products and services involved follows certain
procedures that ordinarily and routinely gives the prospective customers or clients
opportunity to know exactly with whom they are dealing with (sic). The procedures
usually include the clients filling-up and submitting a pro-forma application form and
other documentary requirements, which means that the person is wel[l]informed and
thus, cannot be misled into believing that the product or service is that of [Citystate]
when in fact it is different from [Citigroup's].

The likelihood of confusion between two marks should be taken from the viewpoint of
the prospective buyer. In Emerald Garment Manufacturing Corp. vs. Court of Appeals,
et al., the Supreme Court ruled that:
"Finally, in line with the foregoing discussions, more credit should be given to the
'ordinary purchaser.' Cast in this particular controversy, the ordinary purchaser is not
the 'completely unwary consumer' but is the 'ordinarily intelligent buyer' considering
the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present
case. There, the 'ordinary purchaser' was defined as one 'accustomed to buy, and
therefore to some extent familiar with, the goods in question. The test of fraudulent
simulation is to be found in the likelihood of the deception of some persons in some
measure acquainted with an established design and desirous of purchasing the
commodity with which that design has been associated. The test is not found in the
deception, or the possibility of deception, of the person who knows nothing about the
design which has been counterfeited, and who must be indifferent between that and the
other. The simulation, in order to be objectionable, must be such as appears likely to
mislead the ordinary intelligent buyer who has a need to supply and is familiar with the
article that he seeks to purchase."14
Citigroup filed a Motion for Reconsideration,15 which the Court of Appeals denied in its
January 15, 2013 Resolution.16

Thus, Citigroup filed a Petition for Review17 against Citystate before this Court. After
respondent filed its Comment/Opposition18 and petitioner filed its Reply,19 respondent
filed its Memorandum.20

Petitioner claims that the Court of Appeals erred in finding that there was no confusing
similarity between the trademark that respondent applied for and petitioner's own
trademarks.21 It avers that Emerald Manufacturing Company v. Court of Appeals22 is not
applicable to this case.23 Contrary to the Court of Appeals' finding, the arc design is not
an integral part of petitioner's "CITI" family of marks. 24

Petitioner asserts that when the dominancy test is applied to the Court of Appeals'
findings of fact, the necessary result is a finding of confusing similarity. 25 It points out
that the Court of Appeals found that "CITY CASH" is the dominant feature of
respondent's applied trademark. However, because the word "CASH" was disclaimed in
respondent's trademark application, only "CITY" may be considered the dominant part
of the mark. "'CITY' ... appears nearly identical to 'CITI'." 26

Further, petitioner argues that the Court of Appeals did not understand the services
offered in relation to respondent's mark when it said that the mark is to be applied only
in relation to respondent's ATMs and within the bank premises. It insists that in
actuality, the mark could be used outside the bank premises, such as in radio,
newspapers, and the internet, where there would not necessarily be a "GOLDEN LION'S
HEAD" symbol to disambiguate the mark from any of petitioner's marks. It argues that
the Court of Appeals should have appreciated the difference between basic financial
services on one hand, which include ATM services, and sophisticated financial services
on the other hand. It avers that customers do not select ATM services after cautious
evaluation, and that ATM services are marketed to ordinary consumers. Thus, petitioner
claims that the Court of Appeals erred when it concluded that customers are intelligent
purchasers, and failed to consider ordinary purchasers who have not yet used the
financial services of petitioner and respondent. 27

It further holds that it is not claiming a monopoly of all marks prefixed by words
sounding like "city." It stresses that it opposes only marks which are registered under
class 36 used in products directly related and in competition with its "CITI" family of
marks, sold under the same business channels, and sold to the same group of
consumers.28

Respondent argues that its mark is not confusingly similar to petitioner's 29 and that
petitioner's fears are purely speculative.30 It claims that the phonetic similarity between
"CITY" and "CITI" is not sufficient to deny its registration, asserting that this Court has
ruled that idem sonans alone is insufficient basis for a determination of the existence of
confusing similarity. As for petitioner's arguments on possible confusion due to
advertising, respondent states that advertisement aims to inform the public of a certain
entity's product and that not mentioning a supplier's trade name in its advertisement
defeats the purpose of advertisement. It disputes petitioner's claims on ATM services
and the kind of caution exercised prior to obtaining an ATM card, asserting that before
customers may avail of ATM services, they have to open an account with the bank
offering them.31

This Court denies the Petition.

The sole issue for this Court's resolution is whether or not the Court of Appeals
committed an error of law in finding that there exists no confusing similarity between
petitioner Citigroup, Inc.'s and respondent Citystate Savings Bank, Inc.'s marks.

In La Chemise Lacoste, S.A. v. Fernandez,32 this Court explained why trademarks are
protected in the market:
The purpose of the law protecting a trademark cannot be overemphasized. They are to
point out distinctly the origin or ownership of the article to which it is affixed, to secure
to him, who has been instrumental in bringing into market a superior article of
merchandise, the fruit of his industry and skill, and to prevent fraud and imposition
(Etepha v. Director of Patents, 16 SCRA 495).

The legislature has enacted laws to regulate the use of trademarks and provide for the
protection thereof. Modem trade and commerce demands that depredations on
legitimate trade marks of non-nationals including those who have not shown prior
registration thereof should not be countenanced. The law against such depredations is
not only for the protection of the owner of the trademark but also, and more
importantly, for the protection of purchasers from confusion, mistake, or deception as
to the goods they are buying. (Asari Yoko Co., Ltd. v. Kee Boc, 1 SCRA 1; General
Garments Corporation v. Director of Patents, 41 SCRA 50).

The law on trademarks and tradenames is based on the principle of business integrity
and common justice. This law, both in letter and spirit, is laid upon the premise that,
while it encourages fair trade in every way and aims to foster, and not to hamper,
competition, no one, especially a trader, is justified in damaging or jeopardizing
another's business by fraud, deceit, trickery or unfair methods of any sort. This
necessarily precludes the trading by one dealer upon the good name and reputation
built up by another (Baltimore v. Moses, 182 Md 229, 34 A (2d) 338). 33
In Mirpuri v. Court of Appeals,34 this Court traced the historical development of
trademark law:
A "trademark" is defined under R.A. 166, the Trademark Law, as including "any word,
name, symbol, emblem, sign or device or any combination thereof adopted and used by
a manufacturer or merchant to identify his goods and distinguish them from those
manufactured, sold or dealt in by others." This definition has been simplified in R.A. No.
8293, the Intellectual Property Code of the Philippines, which defines a "trademark" as
"any visible sign capable of distinguishing goods." In Philippine jurisprudence, the
function of a trademark is to point out distinctly the origin or ownership of the goods to
which it is affixed; to secure to him, who has been instrumental in bringing into the
market a superior article of merchandise, the fruit of his industry and skill; to assure
the public that they are procuring the genuine article; to prevent fraud and imposition;
and to protect the manufacturer against substitution and sale of an inferior and
different article as his product.

Modern authorities on trademark law view trademarks as performing three distinct

functions: ( 1) they indicate origin or ownership of the articles to which they are
attached; (2) they guarantee that those articles come up to a certain standard of
quality; and (3) they advertise the articles they symbolize.

Symbols have been used to identify the ownership or origin of articles for several
centuries. As early as 5,000 B.C., markings on pottery have been found by
archaeologists. Cave drawings in southwestern Europe show bison with symbols on
their flanks. Archaeological discoveries of ancient Greek and Roman inscriptions on
sculptural works, paintings, vases, precious stones, glassworks, bricks, etc. reveal some
features which are thought to be marks or symbols. These marks were affixed by the
creator or maker of the article, or by public authorities as indicators for the payment of
tax, for disclosing state monopoly, or devices for the settlement of accounts between
an entrepreneur and his workmen.

In the Middle Ages, the use of many kinds of marks on a variety of goods was
commonplace. Fifteenth century England saw the compulsory use of identifying marks
in certain trades. There were the baker's mark on bread, bottlemaker's marks, smith's
marks, tanner's marks, watermarks on paper, etc. Every guild had its own mark and
every master belonging to it had a special mark of his own. The marks were not
trademarks but police marks compulsorily imposed by the sovereign to let the public
know that the goods were not "foreign" goods smuggled into an area where the guild
had a monopoly, as well as to aid in tracing defective work or poor craftsmanship to the
artisan. For a similar reason, merchants also used merchants' marks. Merchants dealt
in goods acquired from many sources and the marks enabled them to identify and
reclaim their goods upon recovery after shipwreck or piracy.

With constant use, the mark acquired popularity and became voluntarily adopted. It
was not intended to create or continue monopoly but to give the customer an index or
guarantee of quality. It was in the late 18th century when the industrial revolution gave
rise to mass production and distribution of consumer goods that the mark became an
important instrumentality of trade and commerce. By this time, trademarks did not
merely identify the goods; they also indicated the goods to be of satisfactory quality,
and thereby stimulated further purchases by the consuming public. Eventually, they
came to symbolize the goodwill and business reputation of the owner of the product
and became a property right protected by law. The common law developed the doctrine
of trademarks and tradenames "to prevent a person from palming off his goods as
another's, from getting another's business or injuring his reputation by unfair means,
and, from defrauding the public." Subsequently, England and the United States enacted
national legislation on trademarks as part of the law regulating unfair trade. It became
the right of the trademark owner to exclude others from the use of his mark, or of a
confusingly similar mark where confusion resulted in diversion of trade or financial
injury. At the same time, the trademark served as a warning against the imitation or
faking of products to prevent the imposition of fraud upon the public.

Today, the trademark is not merely a symbol of origin and goodwill; it is often the most
effective agent for the actual creation and protection of goodwill. It imprints upon the
public mind an anonymous and impersonal guaranty of satisfaction, creating a desire
for further satisfaction. In other words, the mark actually sells the goods. The mark has
become the "silent salesman," the conduit through which direct contact between the
trademark owner and the consumer is assured. It has invaded popular culture in ways
never anticipated that it has become a more convincing selling point than even the
quality of the article to which it refers. In the last half century, the unparalleled growth
of industry and the rapid development of communications technology have enabled
trademarks, tradenames and other distinctive signs of a product to penetrate regions
where the owner does not actually manufacture or sell the product itself. Goodwill is no
longer confined to the territory of actual market penetration; it extends to zones where
the marked article has been fixed in the public mind through advertising. Whether in
the print, broadcast or electronic communications medium, particularly on the Internet,
advertising has paved the way for growth and expansion of the product by creating and
earning a reputation that crosses over borders, virtually turning the whole world into
one vast marketplace.35 (Citations omitted)
There is also an underlying economic justification for the protection of trademarks: an
effective trademark system helps bridge the information gap between producers and
consumers, and thus, lowers the costs incurred by consumers in searching for and
deciding what products to purchase. As summarized in a report of the World Intellectual
Property Organization:
Economic research has shown that brands play an important role in bridging so-called
asymmetries of information between producers and consumers. In many modem
markets, product offerings differ across a wide range of quality characteristics.
Consumers, in turn, cannot always discern these characteristics at the moment of
purchase; they spend time and money researching different offerings before deciding
which product to buy. Brand reputation helps consumers to reduce these search costs.
It enables them to draw on their past experience and other information about products
- such as advertisements and third party consumer reviews. However, the reputation
mechanism only works if consumers are confident that they will purchase what they
intend to purchase. The trademark system provides the legal framework underpinning
this confidence. It does so by granting exclusive rights to names, signs and other
identifiers in commerce. In addition, by employing trademarks, producers and sellers
create concise identifiers for specific goods and services, thereby improving
communication about those goods and services.36
Recognizing the significance, and to further the effectivity of our trademark
system,37 our legislators proscribed the registration of marks under certain
circumstances:
Section 123. Registrability. - 123.1. A mark cannot be registered if it:

(a) Consists of immoral, deceptive or scandalous matter, or matter which may

disparage or falsely suggest a connection with persons, living or dead, institutions,
beliefs, or national symbols, or bring them into contempt or disrepute;

(b) Consists of the flag or coat of arms or other insignia of the Philippines or any of its
political subdivisions, or of any foreign nation, or any simulation thereof;

(c) Consists of a name, portrait or signature identifying a particular living individual

except by his written consent, or the name, signature, or portrait of a deceased
President of the Philippines, during the life of his widow, if any, except by written
consent of the widow;

(d) Is identical with a registered mark belonging to a different proprietor or a mark with
an earlier filing or priority date, in respect of:
(i) The same goods or services, or

(ii) Closely related goods or services, or

(iii) If it nearly resembles such a mark as to be likely to deceive or cause confusion;

(e) Is identical with, or confusingly similar to, or constitutes a translation of a mark
which is considered by the competent authority of the Philippines to be well-known
internationally and in the Philippines, whether or not it is registered here, as being
already the mark of a person other than the applicant for registration, and used for
identical or similar goods or services: Provided, That in determining whether a mark is
well known, account shall be taken of the knowledge of the relevant sector of the
public, rather than of the public at large, including knowledge in the Philippines which
has been obtained as a result of the promotion of the mark;

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark

considered well-known in accordance with the preceding paragraph, which is registered
in the Philippines with respect to goods or services which are not similar to those with
respect to which registration is applied for: Provided, That use of the mark in relation to
those goods or services would indicate a connection between those goods or services,
and the owner of the registered mark: Provided, further, That the interests of the
owner of the registered mark are likely to be damaged by such use;

(g) Is likely to mislead the public, particularly as to the nature, quality, characteristics
or geographical origin of the goods or services;

(h) Consists exclusively of signs that are generic for the goods or services that they
seek to identify;

(i) Consists exclusively of signs or of indications that have become customary or usual
to designate the goods or services in everyday language or in bona fide and established
trade practice;
(j) Consists exclusively of signs or of indications that may serve in trade to designate
the kind, quality, quantity, intended purpose, value, geographical origin, time or
production of the goods or rendering of the services, or other characteristics of the
goods or services;

(k) Consists of shapes that may be necessitated by technical factors or by the nature of
the goods themselves or factors that affect their intrinsic value;

(l) Consists of color alone, unless defined by a given form; or

(m) Is contrary to public order or morality.

Based on this proscription, petitioner insists that respondent's mark cannot be
registered because it is confusingly similar to its own set of marks. Thus, granting the
petition rests solely on the question of likelihood of confusion between petitioner's and
respondent's respective marks.

There is no objective test for determining whether the confusion is likely. Likelihood of
confusion must be determined according to the particular circumstances of each
case.38 To aid in determining the similarity and likelihood of confusion between marks,
our jurisprudence has developed two (2) tests: the dominancy test and the holistic test.
This Court explained these tests in Coffee Partners, Inc. v. San Francisco Coffee &
Roastery, Inc.39:
The dominancy test focuses on the similarity of the prevalent features of the competing
trademarks that might cause confusion and deception, thus constituting infringement. If
the competing trademark contains the main, essential, and dominant features of
another, and confusion or deception is likely to result, infringement occurs. Exact
duplication or imitation is not required. The question is whether the use of the marks
involved is likely to cause confusion or mistake in the mind of the public or to deceive
consumers.

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. 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.40 (Citations omitted)
With these guidelines in mind, this Court considered "the main, essential, and dominant
features" of the marks in this case, as well as the contexts in which the marks are to be
used. This Court finds that the use of the "CITY CASH WITH GOLDEN LION'S HEAD"
mark will not result in the likelihood of confusion in the minds of customers.

A visual comparison of the marks reveals no likelihood of confusion.

Respondent's mark is:

(See image)

This Court agrees with the observation of Director General Cristobal that the most
noticeable part of this mark is the golden lion's head device, 41 and finds that after
noticing the image of the lion's head, the words "CITY" and "CASH" are equally
prominent.

On the other hand, petitioner's marks, as noted by the Court of Appeals, often include
the red arc device:

(See image)

Petitioner's other registered marks which do not contain the red arc device include the
following:

(See image)

Examining these marks, this Court finds that petitioner's marks can best be described
as consisting of the prefix "CITI" added to other words.

Applying the dominancy test, this Court sees that the prevalent feature of respondent's
mark, the golden lion's head device, is not present at all in any of petitioner's marks.
The only similar feature between respondent's mark and petitioner's collection of marks
is the word "CITY" in the former, and the "CITI" prefix found in the latter. This Court
agrees with the findings of the Court of Appeals that this similarity alone is not enough
to create a likelihood of confusion.
The dis[s]imilarities between the two marks are noticeable and substantial.
Respondent's mark, "CITY CASH WITH GOLDEN LION'S HEAD", has an insignia of a
golden lion's head at the left side of the words "CITY CASH", while petitioner's "CITI"
mark usually has an arc between the two I's. A further scrutiny of the other "CITI"
marks of petitioner would show that their font type, font size, and color schemes of the
said "CITI" marks vary for each product or service. Most of the time, petitioner's "CITI"
mark is joined with another term to form a single word, with each product or service
having different font types and color schemes. On the contrary, the trademark of
respondent consists of the words "CITY CASH", with a golden lion's head emblem on
the left side. It is, therefore, improbable that the public would immediately and
naturally conclude that respondent's "CITY CASH WITH GOLDEN LION'S HEAD" is but
another variation under petitioner's "CITI" marks.

Verily, the variations in the appearance of the "CITI" marks by petitioner, when
conjoined with other words, would dissolve the alleged similarity between them and the
trademark of respondent. These dissimilarities, and the insignia of a golden lion's head
before the words "CITY CASH" in the mark of the respondent would sufficiently acquaint
and apprise the public that respondent's trademark "CITY CASH WITH GOLDEN LION'S
HEAD" is not connected with the "CITI" marks of petitioner. 42
This Court also agrees with the Court of Appeals that the context where respondent's
mark is to be used, namely, for its ATM services, which could only be secured at
respondent's premises and not in an open market of ATM services, further diminishes
the possibility of confusion on the part of prospective customers. Thus, this Court
quotes with approval the Court of Appeals, which made reference to Emerald
Manufacturing:
Moreover, more credit should be given to the "ordinary purchaser." Cast in this
particular controversy, the ordinary purchaser is not the "completely unwary consumer"
but is the "ordinarily intelligent buyer" considering the type of product involved. It
bears to emphasize that the mark "CITY CASH WITH GOLDEN LION'S HEAD" is a mark
of respondent for its ATM services which it offers to the public. It cannot be gainsaid
that an ATM service is not an ordinary product which could be obtained at any store
without the public noticing its association with the banking institution that provides said
service. Naturally, the customer must first open an account with a bank before it could
avail of its ATM service. Moreover, the name of the banking institution is written and
posted either inside or outside the ATM booth, not to mention the fact that the name of
the bank that operates the ATM is constantly flashed at the screen of the ATM itself.
With this, the public would accordingly be apprised that respondent's "CITY CASH" is an
ATM service of the respondent bank, and not of the petitioner's. 43
Petitioner argues that Emerald Manufacturing is distinguishable from this case, insisting
that ATM services are more akin to ordinary household items than they are akin to
brand name jeans, in terms of how their customers choose their providers:
73. The Emerald Manufacturing case involved the marks "Lee" and "Stylistic Mr. Lee",
and the Supreme Court focused on the nature of the products as "not the ordinary
household items", pointing to the fact that, "the average Filipino consumer generally
buys his jeans by brand. He does not ask the sales clerk for his generic jeans but for,
say a Levis, Guess, Wrangler or even an Armani."

74. In contrast, when an ordinary consumer of ATM services wishes to withdraw cash,
more often than not he will simply locate the nearest ATM, without reference to brand
as long as the ATM accepts his card. When dealing with banks that belong to an ATM
network such as Bancnet, which both parties do, the cards are almost universally and
interchangeably accepted.44
This scenario is unclear, and thus, unconvincing and insufficient to support a finding of
error on the part of the Court of Appeals. Petitioner hypothesizes that there could be
some confusion because ATM users "simply locate the nearest ATM, without reference
to brand as long as the ATM accepts [their] card." 45 This Court is at a loss to see how
this supports petitioner's claims that ATM users locate the nearest ATMs and use them
without reference to brand as long as the ATM accepts their cards. If petitioner's
speculation is true, then bank branding is wholly irrelevant after the ATM service has
been secured. This Court is hard pressed to accept this assumption. In any case, this
Court simply cannot agree that a bank or ATM service is more akin to ordinary
household items than it is to brand name Jeans.

More relevant than the scenario discussed by petitioner is the stage when a bank is
trying to attract customers to avail of its services. Petitioner points out that in
advertisements, such as in radio, newspapers, and the internet, which are shown
beyond the bank premises, there may be no golden lion's head device to disambiguate
"CITY CASH" from any of petitioner's own marks and services. 46 This Court finds this
unconvincing. ATM services, like other bank services, are generally not marketed as
independent products. Indeed, as pointed out by petitioner itself, ATM cards accompany
the basic deposit product in most banks.47 They are generally adjunct to the main
deposit service provided by a bank. Since ATM services must be secured and contracted
for at the offering bank's premises, any marketing campaign for an ATM service must
focus first and foremost on the offering bank. Hence, any effective internet and
newspaper advertisement for respondent would include and emphasize the golden lion's
head device. Indeed, a radio advertisement would not have it. It should not be
forgotten, however, that a mark is a question of visuals, by statutory definition. 48 Thus,
the similarity between the sounds of "CITI" and "CITY" in a radio advertisement alone
neither is sufficient for this Court to conclude that there is a likelihood that a customer
would be confused nor can operate to bar respondent from registering its mark. This
Court notes that any confusion that may arise from using "CITY CASH" in a radio
advertisement would be the same confusion that might arise from using respondent's
own trade name. Aurally, respondent's very trade name, which is not questioned, could
be mistaken as "CITISTATE SAVINGS BANK," and all of petitioner's fears of possible
confusion would be just as likely.

This Court agrees with Director General Cristobal's recognition of respondent's history
and of "Citystate" as part of its name. 49 Upon consideration, it notes that it may have
been more aligned with the purpose of trademark protection for respondent to have
chosen the trademark "CITYSTATE CASH" instead of "CITY CASH" to create a stronger
association between its trade name and the service provided. Nonetheless, there is no
law requiring that trademarks match the offeror's trade name precisely to be
registrable. The only relevant issue is the likelihood of confusion.

This Court also recognizes that there could be other situations involving a combination
of the word "city" and another word that could result in confusion among customers.
However, it is not convinced that this is one of those situations.

Thus, having examined the particularities of this case, this Court affirms the Court of
Appeals' finding that Director General Cristobal of the Intellectual Property Office did
not commit any grave abuse of discretion in allowing the registration of respondent's
trademark.

WHEREFORE, the petition is DENIED. The Court of Appeals August 29, 2012 Decision
and January 15, 2013 Resolution in CA-G.R. SP No. 109679 are AFFIRMED.

SO ORDERED.

Velasco, Jr., (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.

SECOND DIVISION

G.R. No. 217916, June 20, 2018

ABS-CBN PUBLISHING, INC., Petitioner, v. DIRECTOR OF THE BUREAU OF

TRADEMARKS, Respondent.

DECISION

REYES, JR., J.:

The Case

Challenged before the Court via this Petition for Review on Certiorari under Rule 45 of
the Rules of Court is the Resolution1 of the Court of Appeals promulgated on May 20,
2014, which denied ABS-CBN Publishing, Inc.'s (petitioner) "Motion for Extension of
Time [To File Petition for Review]." Likewise challenged is the subsequent Resolution 2 of
the Court of Appeals promulgated on April 15, 2015, which upheld the earlier
Resolution.

The Antecedent Facts

In 2004,3 the petitioner filed with the Intellectual Property Office of the Philippines
(IPO) its application for the registration of its trademark "METRO" (applicant mark)
under class 16 of the Nice classification, with specific reference to "magazines." 4 The
case was assigned to Examiner Arlene M. Icban (Examiner Icban), who, after a
judicious examination of the application, refused the applicant mark's registration.

According to Examiner Icban, the applicant mark is identical with three other cited
marks, and is therefore unregistrable according to Section 123.1(d) of the Intellectual
Property Code of the Philippines (IPC).5 The cited marks were identified as (1) "Metro"
(word) by applicant Metro International S.A. with Application No. 42000002584, 6 (2)
"Metro" (logo) also by applicant Metro International S.A. with Application No.
42000002585,7 and (3) "Inquirer Metro" by applicant Philippine Daily Inquirer, Inc. with
Application No. 42000003811.8

On August 16, 2005, the petitioner wrote a letter 9 in response to Examiner Icban's
assessment, and the latter, through Official Action Paper No. 04, subsequently
reiterated her earlier finding which denied the registration of the applicant mark.
Eventually, in the "Final Rejection"10 of the petitioner's application, Examiner Icban
"determined that the mark subject of the application cannot be registered because it is
identical with the cited marks METRO with Regn. No. 42000002584 ['Metro' (word)] and
Regn. No. 42000003811 ['Inquirer Metro']." 11

The petitioner appealed the assessment of Examiner Icban before the Director of the
Bureau of Trademarks of the IPO, who eventually affirmed Examiner Icban's findings.
The decision averred that the applicant and cited marks were indeed confusingly
similar, so much so that there may not only be a confusion as to the goods but also a
confusion as to the source or origin of the goods. The fallo of the Bureau Director's
decision reads:
WHEREFORE, premises considered, the instant appeal is hereby DENIED and the Final
Rejection contained in Official Action Paper No. 04, SUSTAINED. Serve copies of this
Decision to [petitioner] and herein Examiner Arlene M. Icban.

SO ORDERED.12
Upon the denial of the petitioner's motion for reconsideration, the petitioner appealed
to the Office of the Director General (ODG) of the IPO. After the submission of the
memoranda from the parties, the ODG, on September 19, 2013, rendered a Decision
which upheld Examiner Icban's assessment and the Bureau Director's decision.

According to the ODG; there is no merit in the petitioner's appeal because (1) the
applicant and cited marks are identical and confusingly similar, 13 (2) the petitioner's
mark was deemed abandoned under the old Trademark Law, and thus, petitioner's prior
use of the same did not create a vested right 14 under the IPC,15 and (3) the applicant
mark has not acquired secondary meaning. 16 The fallo of the ODG decision reads:
Wherefore, premises considered, the appeal is hereby DENIED and the Decision dated
29 March 2010 and the Order denying the Appellant's Motion for Reconsideration, of the
Director of the Bureau of Trademarks, are hereby SUSTAINED. The Appellant's
Trademark Application No. 4-2004-004507 for METRO is likewise DENIED.

Let a copy of this Decision as well as the trademark application and records be
furnished and returned to the Director of the Bureau of Trademarks. Let a copy of this
Decision be furnished also the library of the Documentation, Information and
Technology Transfer Bureau for its information and records purposes.

SO ORDERED.17
The petitioner received a copy of the ODG decision only on October 9, 2013. On the
same day, the petitioner filed before the Court of Appeals its "Motion for Extension of
Time (To File Petition for Review)" which requested for an extension of fifteen (15) days
from October 24, 2013, or until November 8, 2013, to file its petition for review. 18 On
October 25, 2013, the petitioner once more filed a motion for extension of time. In the
second motion, the petitioner asked the appellate court for another extension of the
deadline from November 8, 2013 to November 23, 2013. 19

Meanwhile, on October 25, 2013, the Court of Appeals issued a Resolution which
granted the petitioner's first motion praying for an extension of time to file its petition
for review, subject to the "warning against further extension." Thus, the Court of
Appeals extended the deadline only until November 8, 2013. 20

Relying on the appellate court's favorable response to its second motion for extension
(which was not acted upon by the Court of Appeals), the petitioner failed to file its
petition for review on the deadline set in the Resolution dated October 25, 2013.
Instead, the petitioner filed its petition for review only on November 11, 2013-three (3)
days after the deadline.21

To justify this delay in filing, the petitioner stated that: (1) it received a copy of the
October 25, 2013 Resolution only on November 8, 2013 at 11:30 in the morning; (2)
on that same day, this Court, through its Public Information Office, suspended offices in
the National Capital Judicial Region in view of Typhoon Yolanda; and (3) November 9
and 10, 2013 fell on a Saturday and Sunday, respectively. 22

On May 20, 2014, the Court of Appeals rendered the assailed Resolution. It ruled that
the petitioner violated its October 25, 2013 Resolution, as well as Section 4, Rule 43 of
the Rules of Court, which provides for the period of appeal. 23

On the basis of the foregoing, and the prevailing jurisprudence, the Court of Appeals
consequently denied the petitioner's second motion for extension of time, and
dismissed the petition for the petitioner's failure to file its petition for review within the
deadline.24

On April 15, 2015, the appellate court denied the petitioner's motion for
reconsideration.25
Hence, this petition.

The Issues

The ground upon which the petitioner prays for the reversal of the ruling of the Court of
Appeals is two-fold: first is on procedural law-whether or not the Court of Appeals erred
in dismissing the petition outright for the petitioner's failure to file its petition for review
within the time prescribed by the Court of Appeals; and second is on substantive law-
whether or not the ODG was correct in refusing to register the applicant mark for being
identical and confusingly similar with the cited marks already registered with the IPO.

The Court's Ruling

After a careful perusal of the arguments presented and the evidence submitted, the
Court finds no merit in the petition.

First, on the procedural issue:

In Bañez vs. Social Security System,26 the Court had occasion to reiterate that appeal is
not a constitutional right, but a mere statutory privilege. Hence, parties who seek to
avail themselves of it must comply with the statutes or rules allowing it. 27 The rule is
that failure to file or perfect an appeal within the reglementary period will make the
judgment final and executory by operation of law. Perfection of an appeal within the
statutory or reglementary period is not only mandatory but also jurisdictional; failure to
do so renders the questioned decision/resolution final and executory, and deprives the
appellate court of jurisdiction to alter the decision/resolution, much less to entertain the
appeal.28

In connection herewith, Section 4, Rule 43 of the Rules of Court is clear. The appeal
shall be taken within fifteen (15) days from the notice of the award, judgment, final
order or resolution, or from the date of its last publication, if publication is required by
law for its effectivity, or of the denial of petitioner's motion for new trial or
reconsideration duly filed in accordance with the governing law of the court or agency a
quo.29

More, a litigant is allowed to file only one (1) motion for reconsideration, subject to the
payment of the full amount of the docket fee prior to the expiration of the reglementary
period. Beyond this, another motion for extension of time may be granted but only for
the most compelling reasons.30

Again, in Bañez, the Court ruled that filing of an appeal beyond the reglementary period
may, under meritorious cases, be excused if the barring of the appeal would be
inequitable and unjust in light of certain circumstances therein. 31 While there are
instances when the Court has relaxed the governing periods of appeal in order to serve
substantial justice, this was done only in exceptional cases. 32

In this case, no exceptional circumstance exists.

In asking the Court of Appeals for a second extension to file its petition for review, the
petitioner merely cited as its excuse the following: (1) heavy pressure of other
professional work; and (2) attendance of the lawyers in charge in an international
lawyers' conference. It said:
However, due to the heavy pressure of other equally important professional work
coupled with intervening delays and the fact of the necessary attendance of the lawyers
in charge of the case in an international lawyer's (sic) conference, the undersigned
counsel will need more time to review and finalize petitioner ABS-CBN Publishing,
Inc.'s Petition for Review.33
As the Court has ruled upon in a number of cases, a lawyer has the responsibility of
monitoring and keeping track of the period of time left to file pleadings, and to see to it
that said pleadings are filed before the lapse of the period. 34 Personal obligations and
heavy workload do not excuse a lawyer from complying with his obligations particularly
in timely filing the pleadings required by the Court. 35 Indeed, if the failure of the
petitioner's counsel to cope with his heavy workload should be considered a valid
justification to sidestep the reglementary period, there would be no end to litigations so
long as counsel had not been sufficiently diligent or experienced. 36

Further, the petitioner should not assume that its motion for extension of time would be
granted by the appellate court. Otherwise, the Court will be setting a dangerous
precedent where all litigants will assume a favorable outcome of a motion which is
addressed to the discretion of the courts based on the prevailing circumstances of the
case.

To be sure, there is a dearth of jurisprudence that upholds the Court of Appeals' power
of discretion in disallowing a second extension of fifteen (15) days. As correctly cited by
the appellate court, Spouses Dycoco vs. Court of Appeals37 explains that the Court of
Appeals could not be faulted for merely applying the rules, and that a dismissal of a
petition in accordance therewith is discretion duly exercised, and not misused or
abused.38

Based on the foregoing, and for the guidance of both the bench and the bar, the rule as
it currently stands is that, in the absence of, or in the event of a party's failure to
receive, any resolution from the courts which specifically grants a motion for extension
of time to file the necessary pleading, the parties are required to abide by the
reglementary period provided for in the Rules of Court. Failure to comply thereto would
result to a dismissal or denial of the pleadings for being filed beyond the reglementary
period.

In the case at hand, the Court of Appeals was correct in dismissing the petition. The
petitioner could not assume that its motion would be granted, especially in light of its
flimsy excuse for asking the second extension of time to file its petition for review.

On this ground alone, the dismissal of the current petition for review is justifiable. The
Court reiterates its warning in the case of Hernandez vs. Agoncillo:39
Time and again, this Court has cautioned lawyers to handle only as many cases as they
can efficiently handle. The zeal and fidelity demanded of a lawyer to his client's cause
require that not only should he be qualified to handle a legal matter, he must also
prepare adequately and give appropriate attention to his legal work. Since a client is, as
a rule, bound by the acts of his counsel, a lawyer, once he agrees to take a case,
should undertake the task with dedication and care. This Court frowns upon a lawyer's
practice of repeatedly seeking extensions of time to file pleadings and thereafter simply
letting the period lapse without submitting any pleading or even any explanation or
manifestation for his omission. Failure of a lawyer to seasonably file a pleading
constitutes inexcusable negligence on his part. 40 (Emphasis and underscoring
supplied)
That said, however, even on the merits, the petition still fails to convince.

Second, on the substantive issue:

According to Section 123.1(d) of the Intellectual Property Code of the Philippines

(IPC),41 a mark cannot be registered if it is "identical with a registered mark belonging
to a different proprietor or a mark with an earlier filing or priority date," in respect of
the following: (i) the same goods or services, or (ii) closely related goods or services,
or (iii) if it nearly resembles such a mark as to be likely to deceive or cause confusion. 42

To determine whether a mark is to be considered as "identical" or that which is

confusingly similar with that of another, the Court has developed two (2) tests: the
dominancy and holistic tests. While the Court has time and again ruled that the
application of the tests is on a case to case basis, upon the passage of the IPC, the
trend has been to veer away from the usage of the holistic test and to focus more on
the usage of the dominancy test. As stated by the Court in the case of McDonald's
Corporation vs. L.C. Big Mak Burger, Inc.,43 the "test of dominancy is now explicitly
incorporated into law in Section 155.1 of the Intellectual Property Code which defines
infringement as the 'colorable imitation of a registered mark x x x or a dominant
feature thereof.'"44 This is rightly so because Sec. 155.1 provides that:
SECTION 155. Remedies; Infringement. - Any person who shall, without the consent of
the owner of the registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a

registered mark or the same container or a dominant feature thereof in connection
with the sale, offering for sale, distribution, advertising of any goods or services
including other preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause confusion, or to
cause mistake, or to deceive; or x x x. (Emphasis and underscoring supplied)
In using this test, focus is to be given to the dominant features of the marks in
question. In the 1954 case of Co Tiong Sa vs. Director of Patents,45 the Court, in using
the dominancy test, taught that:
But differences of variations in the details of one trademark and of another are not the
legal!y accepted tests of similarity in trademarks. It has been consistently held that the
question of infringement of a trademark is to be determined by the test of
dominancy. Similarity in size, form, and color, while relevant, is not conclusive.
If the competing trademark contains the main or essential or dominant
features of another, and confusion and deception is likely to result,
infringement takes place.46 (Emphasis and underscoring supplied)
The Court, in Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading Corp.,47 and in
once again using the dominancy test, reiterated Del Monte Corporation vs. Court of
Appeals48 in saying that "the defendants in cases of infringement do not normally copy
but only make colorable changes."49 The Court emphasized that "the most successful
form of copying is to employ enough points of similarity to confuse the public, with
enough points of difference to confuse the courts." 50

In other words, in committing the infringing act, the infringer merely introduces
negligible changes in an already registered mark, and then banks on these slight
differences to state that there was no identity or confusing similarity, which would
result in no infringement. This kind of act, which leads to confusion in the eyes of the
public, is exactly the evil that the dominancy test refuses to accept. The small
deviations from a registered mark are insufficient to remove the applicant mark from
the ambit of infringement.

In the present case, the dominant feature of the applicant mark is the word "METRO"
which is identical, both visually and aurally, to the cited marks already registered with
the IPO. As held by the ODG-and correctly at that -
x x x there is no dispute that the subject and cited marks share the same
dominant word, "Metro". (sic) Even if, as the Appellant (petitioner herein) points
out, the second cited mark owned by Metro International contains an accompanying
device, and the third cited mark contains the terms "Philippine Daily Inquirer", (sic) the
dominant feature of the subject and cited marks is still clearly the word
"Metro", (sic) spelled and pronounced in exactly the same way. The identity
between the marks would indubitably result in confusion of origin as well as
goods.51 (Emphasis and underscoring supplied, citations omitted)
Also, greater relevance is to be accorded to the finding of Examiner Icban on the
confusing similarity between, if not the total identity of, the applicant and cited marks.
Examiner Icban, in reiterating with finality her earlier findings, said that the applicant
and cited marks are "the same in sound, spelling, meaning, overall commercial
impression, covers substantially the same goods and flows through the same channel of
trade," which leads to no other conclusion than that "confusion as to the source of
origin is likely to occur."52 This is also the tenor of Examiner Icban's "Final Rejection" of
the application, which stated that:
After an examination of the application, the undersigned IPRS has determined that the
mark subject of the application cannot be registered because it is identical with the
cited marks METRO with Regn. No. 42000002584 and Regn. No. 42000003811. METRO
being dominant word (sic) among the marks causes remarkable similarity in sound,
spelling, meaning, connotation, overall commercial impression, covers identical goods
and flows through the same channel of trade. The concurrent use by the parties of
the word METRO is likely to cause confusion among purchasers as well as
confusion of business or origin hence, registration of this subject application is
proscribed under R.A. 8293, Sec. 123.1(d).53 (Emphasis and underscoring supplied)
The findings of Examiner Icban, reviewed first by the Director of the Bureau of
Trademarks, and again by the Director General of the IPO, are the result of a judicious
study of the case by no less than the government agency duly empowered to examine
applications for the registration of marks.54 These findings deserve great respect from
the Court. Absent any strong justification for the reversal thereof-as in this case-the
Court shall not reverse and set aside the same. As such, the prior findings remain: the
applicant mark, "METRO," is identical to and confusingly similar with the other cited
marks already registered. By authority of the Sec. 123.l(d) of the IPC, the applicant
mark cannot be registered. The ODG is correct in upholding the Decision of both the
Director of the Bureau of Trademarks and Examiner Icban.

This ruling stands despite the specious arguments presented by the petitioner in the
current petition.

The petitioner asserts that it has a vested right over the applicant mark because Metro
Media Publishers, Inc. (Metro Media), the corporation from which the petitioner
acquired the applicant mark, first applied for the registration of the same under the old
Trademark Law,55 and since then, actually used the applicant mark in commerce. The
petitioner belabors the point that under the old Trademark law, actual use in commerce
is a prerequisite to the acquisition of ownership over a trademark and a trade
name.56 The petitioner even went on further in asserting that its actual use of the
applicant mark enabled it to automatically acquire trademark rights, which should have
extended even upon the promulgation of the IPC in 1998.

Two things must be said of this argument.

First, there is no question that the petitioner's predecessor already applied for the
registration of the applicant mark "METRO" on November 3, 1994 under Class 16 of the
Nice classification. It was docketed as Application No. 4-1994-096162. 57 There is
likewise no question that as early as 1989, Metro Media has already used the applicant
mark "METRO" in its magazine publication. At that point, Metro Media exercised all the
rights conferred by law to a trademark applicant.

Second, however, the petitioner itself admitted in its petition that its
application/registration with the IPO under Application No. 4-1994-096162 was already
"deemed abandoned."58

While it is quite noticeable that the petitioner failed to discuss the implications of this
abandonment, it remains a fact that once a trademark is considered abandoned, the
protection accorded by the IPC, or in this case the old Trademark Law, is also
withdrawn. The petitioner, in allowing this abandonment, cannot now come before the
Court to cry foul if another entity has, in the time that it has abandoned its trademark
and in full cognizance of the IPC and the IPO rules, registered its own.

In fact, in Birkenstock Orthopaedie GMBH and Co. KG. vs. Philippine Shoe Expo
Marketing Corporation,59 the Court accorded no right at all to a trademark owner whose
trademark was abandoned for failure to file the declaration of actual use as required by
Sec. 12 of the old Trademark Law.60 In Mattel, Inc. vs. Francisco,61 the Court rendered a
petition as moot and academic because the cited mark has effectively been abandoned
for the non-filing of a declaration of actual use, and thus presents no hindrance to the
registration of the applicant mark.

Also, as correctly pointed out by the ODG, this abandonment is the very reason why the
petitioner lost its rights over its trademark, and that it is also the reason why, after
twenty years (20) from the initial application and after actual use of the applicant mark,
the petitioner once again came before the IPO to apply for registration. The ODG said:
Records show that this is the very situation the [petitioner] finds itself in. It has
acquired no right under the old trademark law since its original application
way back 1994 has been deemed abandoned, which is the reason why it filed
the current application in 2004 under the new law. Clearly, then, if [petitioner]
has acquired no right under R.A. 166, it possesses no existing right that ought to be
preserved by virtue of Section 236 of the IP Code. 62 (Emphasis and underscoring
supplied)
Anent the petitioner's argument that "confusion between the marks is highly
unlikely,"63 the petitioner asserts that the applicant mark "METRO" (word) is covered by
class 16 of the Nice classification under "magazines," the copies of which are sold in
"numerous retail outlets in the Philippines," 64 whereas the cited mark "METRO" (word)
is used in the Philippines only in the internet through its website and does not have any
printed circulation.65

But like the petitioner's earlier argument, this does not hold water. Section 3, Rule 18
of the Rules of Procedure for Intellectual Property Cases 66 provides for the legal
presumption that there is likelihood of confusion if an identical mark is used for identical
goods. The provision states:
SEC. 3. Presumption of likelihood of confusion. - Likelihood of confusion shall be
presumed in case an identical sign or mark is used for identical goods or services.
In the present case, the applicant mark is classified under "magazines," which is found
in class 16 of the Nice classification. A perusal of the records would reveal, however,
that the cited marks "METRO" (word) and "METRO" (logo) are also both classified under
magazines. In fact, Examiner Icban found that the cited marks were used on the
following classification of goods:
Paper, cardboard and goods made from these materials, not included in other classes;
newspapers, magazines, printed matter and other printed publications; bookbinding
material; photographs; stationery; adhesives for stationery or household purposes;
artists materials; paint brushes; typewriters and office requisites (except furniture);
instructional and teaching material (except apparatus); plastics materials for packaging
(not included in other classes); playing cards; printers types; printing
blocks.67 (Emphasis and underscoring supplied)
Thus, the presumption arises.

Even then, it must be emphasized that absolute certainty of confusion or even actual
confusion is not required to refuse registration. Indeed, it is the mere likelihood of
confusion that provides the impetus to accord protection to trademarks already
registered with the IPO. The Court cannot emphasize enough that the cited marks
"METRO" (word) and "METRO" (logo) are identical with the registrant mark "METRO"
both in spelling and in sound. In fact, it is the same exact word. Considering that both
marks are used in goods which are classified as magazines, it requires no stretch of
imagination that a likelihood of confusion may occur. Again, the Court points to the
finding of Examiner Icban which was reviewed and upheld twice: one by the Director of
the Bureau of Trademarks and another by the Director General of the IPO.

As a final point, the petitioner, in the pleadings submitted, manifested that the cited
marks are no longer valid. It said that: (1) the cited mark "METRO" (logo) was removed
from the IPO register for non-use, citing the IPO online database, 68 (2) the cited mark
"INQUIRER METRO," while valid according to the IPO online database, was cancelled
according to a certain certification from the Bureau of Trademarks of the IPO; and (3)
the cited mark "METRO" (word) already expired on June 26, 2016 according to yet
another certification from the IPO.

A perusal of the records, however, would reveal that these alleged de-registration and
cancellation all allegedly occurred after the ODG has already ruled on the instant case.
Considering that the Court is not a trier of facts, the Court could therefore not make a
determination of the validity and accuracy of the statements made in the petitioner's
manifestation. As such, the Court, through the limited facts extant in the records, could
not give weight and credence thereto.

Nonetheless, not all is lost for the petitioner. Should it be true that the cited marks,
which were the basis of the IPO in refusing to register the applicant mark, were already
de-registered and cancelled, nothing prevents the petitioner from once again applying
for the registration of the applicant mark before the IPO.

WHEREFORE, premises considered, the Resolutions of the Court of Appeals dated May
20, 2014 and April 15, 2015, are hereby AFFIRMED without prejudice to the
petitioner's refiling of its application for the registration of the trademark "METRO"
before the Intellectual Property Office.

SO ORDERED.

Peralta, (Acting Chairperson), Del Castillo,*Perlas-Bernabe, and Caguioa, JJ., concur.

THIRD DIVISION

G.R. Nos. 211820-21, June 06, 2018

KENSONIC, INC., Petitioner, v. UNI-LINE MULTI-RESOURCES, INC.,

(PHIL.), Respondent.

G.R. Nos. 211834-35, June 06, 2018

UNI-LINE MULTI-RESOURCES, INC., Petitioner, v. KENSONIC, INC., Respondent.

DECISION

BERSAMIN, J.:

The case concerns the cancellation of the registration of the trademark SAKURA for the
goods of Uni-Line Multi Resources, Inc. (Phils.) (Uni-Line) being sought by Kensonic,
Inc. (Kensonic) on the ground that the latter had prior use and registration of the
SAKURA mark.

The Case

Under consideration are the consolidated appeals urging the review and reversal of the
decision promulgated on July 30, 20131 and the amended decision promulgated on
March 19, 2014,2 whereby the Court of Appeals (CA) affirmed the decision rendered on
June 11, 2012 by the Director General of the Intellectual Property Office (IPO)
upholding the cancellation of the application of Uni-Line for the registration of the
SAKURA mark for goods falling under Class 09 of the Nice International Classification of
Goods (Nice Classification), and allowing the registration of Uni-Line's SAKURA mark
registration for goods falling under Class 07 and Class 11 of the Nice Classification. 3

Antecedents

The CA summarized the following factual and procedural antecedents, viz.:

On June 15, 1999, Uni-Line filed an application for the registration of the mark
"SAKURA" for amplifier, speaker, cassette, cassette disk, video cassette disk, car
stereo, television, digital video disk, mini component, tape deck, compact disk charger,
VHS, and tape rewinder falling under Class 9 of the Nice International Classification of
Goods. Kensonic opposed Uni-Line's application which was docketed as IPC No. 14-
2004-00160 (IPC 1). The Director of the Bureau of Legal Affairs (BLA) rendered
Decision No. 2005-01 dated November 29, 2005 finding that Kensonic was the first to
adopt and use the mark SAKURA since 1994 and thus rejecting Uni-Line's application.
On January 19, 2006, said Decision became final and executory.

While IPC Case 1 was pending, Uni-Line filed an application and was issued a certificate
of registration for the mark "SAKURA & FLOWER DESIGN" for use on recordable
compact disk (CD-R) computer, computer parts and accessories falling under Class 9.
On September 7, 2006, Kensonic filed a petition for cancellation docketed as IPC No.
14-2006-00183 (IPC 2) of Uni-Line's registration. In Decision No. 08-113 dated August
7, 2008, the BLA Director held that Uni-Line's goods are related to Kensonic's goods
and that the latter was the first user of the mark SAKURA used on products under Class
9. The BLA Director thus cancelled Uni-Line's certificate of registration. Uni-Line moved
for reconsideration of the BLA Director's Decision which is pending resolution to date.

On June 6, 2002, Uni-Line filed an application for the registration of the trademark
SAKURA for use on the following:

Goods Nice Classification

Washing machines, high pressure washers, Class 07
vacuum cleaners, floor polishers, blender,
electric mixer, electrical juicer
Television sets, stereo components, Class 09
DVD/VCD players, voltage regulators,
portable generators, switch breakers, fuse
Refrigerators, air conditioners, oven toaster, Class 11
turbo broiler, rice cooker, microwave oven,
coffee maker, sandwich/waffle maker, electric
stove, electric fan, hot & cold water dispenser,
airpot, electric griller and electric hot pot
Uni-Line's application was thereafter published, and there being no opposition thereto,
Certificate of Registration No. 4-2002-004572 for the mark SAKURA effective March 18,
2006 was issued.

On September 7, 2006, Kensonic filed with the BLA a Petition for Cancellation of Uni-
Line's Certificate of Registration alleging that in October 1994, it introduced the
marketing of SAKURA products in the Philippines and that it owned said SAKURA
products and was the first to use, introduce and distribute said products. Kensonic also
alleged that in IPC 1, it opposed Uni-Line's application to register SAKURA and was
already sustained by the Director General, which Decision is now final and executory.
Kensonic further alleged that it is the owner of a copyright for SAKURA and that since
1994, has maintained and established a good name and goodwill over the SAKURA
products.

Kensonic filed its Supplemental Petition for Cancellation and its Reply to Uni-Line's
Answer. Uni-Line filed its Rejoinder thereto.4
Decision of the Bureau of Legal Affairs (BLA), IPO

After due proceedings, the BLA issued Decision No. 2008-149 dated August 11,
2008,5 whereby it ruled in favor of Kensonic and against Uni-Line, and directed the
cancellation of Registration No. 4-2002-004572 of the latter's SAKURA mark. It
observed that an examination of the SAKURA mark of Kensonic and that of Uni-Line
revealed that the marks were confusingly similar with each other; that the goods
sought to be covered by the SAKURA registration of Uni-Line were related to the goods
of Kensonic, thereby necessitating the cancellation of the registration of Uni-Line's
mark; and that considering that Kensonic had used the SAKURA mark as early as 1994
in Class 09 goods (namely: amplifiers, speakers, cassette disks, video cassette disks,
car stereos, televisions, digital video disks, mini components, tape decks, compact disk
chargers, VHS and tape rewinders), Kensonic had acquired ownership of the SAKURA
mark, and should be legally protected thereon. The dispositive portion reads:
WHEREFORE, premises considered, the Verified Petition for Cancellation is
hereby GRANTED. Accordingly, Certificate of Registration No. 4-2002-004572 issued
on 18 March 2006 for the trademark "SAKURA" in the name of Uni-Line Multi
Resources, Inc. Phils., is hereby ordered CANCELLED.

Let the file wrapper of this case be forwarded to the Bureau of Trademark (BOT) for
appropriate action in accordance with this Decision.

SO ORDERED.6
Decision of the Director General, IPO

On appeal,7 the Director General of the IPO modified the decision of the BLR by
upholding Uni-Line's registration of the SAKURA mark as to goods classified as Class 07
and Class 11, thereby effectively reversing the BLR, but affirmed the BLR as regards
the treatment of the SAKURA mark that covered the goods falling under Class 09. The
Director General clarified that the marks of Uni-Line and Kensonic were similar if not
identical; that considering that Inter Partes Case No. 14-2004-00160 (IPC 1) already
effectively ruled that the products registered by Uni-Line were goods related to those
covered by the registration of Kensonic, the registration of Uni-Line insofar as those
products sought to be registered under Class 09 were concerned (i.e., television sets,
stereo components, DVD/VCD players, voltage regulators, portable generators, switch
breakers, fuse) was correctly cancelled; that the registration of products of Uni-Line
falling under Class 07 and Class 11 should not be cancelled because the products were
different from the goods registered under Class 09 in the name of Kensonic; that there
should be evidence showing how the continued registration of the SAKURA mark of Uni-
Line would cause damage to Kensonic; and that the goods covered by the SAKURA
registration of Uni-Line and the SAKURA registration of Kensonic should be
distinguished because:
In addition, the ordinary purchaser must be thought of, as having, and credited with, at
least a modicum of intelligence. It does not defy common sense to assert that a
purchaser would be cognizant of the product he is buying. As a general rule, an
ordinary buyer does not exercise as much pendence 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.

In this instance, the products of the Appellants under Classes 7 and 11 are home
appliances which are not the ordinary everyday goods the public buys and consumes.
These products are not inexpensive items and a purchaser would ordinarily examine
carefully the features and characteristics of the same. It is, therefore, farfetched that
the purchasing public would be misled or be deceived as to the source or origin of the
products. Furthermore, there is nothing in the records that indicate any plans by the
Appellee to enter into business transactions or to the manufacture and distribution of
goods similar to the products of the Appellants under Classes 7 and 11. 8
The Director General of the IPO decreed as follows:
Wherefore, premises considered, the appeal is hereby dismissed in so far as the
cancellation of the Appellant's Cert. of Reg. No. 4-2002- 004572 for goods enumerated
and falling under Class 9 is concerned. However, the appeal is hereby granted in so far
as the cancellation of Cert. of Reg. No. 4-2002-004572 for goods enumerated and
falling under Classes 7 and 11 is concerned.

Accordingly, Cert. of Reg. No. 4-2002-004572 issued in favor of the Appellant for the
mark SAKURA is hereby amended. The registration of goods enumerated under Class 9,
namely television sets, stereo components, DVD/VCD players, voltage regulators,
portable generators, switch breakers, fuse is hereby cancelled.

Let a copy of this Decision as well as the records of this case be furnished and returned
to the Director of the Bureau of Legal Affairs for appropriate action. Further, let also the
Director of the Bureau of Trademarks and the library of Documentation, Information
and Technology Transfer Bureau be furnished a copy of this Decision for information,
guidance, and records purposes.

SO ORDERED.9
Judgment of the CA

Both parties appealed to the CA, which promulgated its decision on July 30, 2013
dismissing the appeal of Kensonic (C.A.-G.R. SP No. 125420) and granting Uni-Line's
appeals (C.A.-G.R. SP No. 125424). The CA upheld Kensonic's ownership of the
SAKURA mark based on its showing of its use of the mark since 1994, but ruled that
despite the identical marks of Kensonic and Uni-Line, Kensonic's goods under Class 09
were different from or unrelated to Uni-Line's goods under Class 07 and Class 11. It
observed that the protection of the law regarding the SAKURA mark could only extend
to television sets, stereo components, DVD and VCD players but not to Uni-Line's
voltage regulators, portable generators, switch breakers and fuses due to such goods
being unrelated to Kensonic's goods; that Kensonic's registration only covered
electronic audio-video products, not electrical home appliances; and that the similarity
of the marks would not confuse the public because the products were different and
unrelated. It ruled:
WHEREFORE, the Petition filed by Kensonic, Inc., in C.A.G.R. SP No. 125420
is DENIED and the Petition filed by Uni-Line Multi Resources, Inc. (Phils.) is GRANTED.

Accordingly, the Decision dated June 11, 2012 of Director General Ricardo R. Blancaflor
of the Intellectual Property Office is MODIFIED such that Uni-Line's Appeal insofar as
the cancellation of its Certificate of Registration No. 4-2002-004572 for goods
enumerated and falling under Class 9 is GRANTED but DELETING therefrom the goods
television sets, stereo components, DVD players and VCD players. The Decision dated
June 11, 2012 of the Director General is hereby UPHELD insofar as it granted Uni-
Line's Appeal on the cancellation of its Certificate of Registration No. 4-2002-004572 for
goods enumerated and falling under Class 7 and Class 11.

SO ORDERED.10
Kensonic sought partial reconsideration, submitting that voltage regulators, portable
generators, switch breakers and fuse were closely related to its products; that
maintaining the two SAKURA marks would cause confusion as to the source of the
goods; and that Uni-Line's goods falling under Class 07 and Class 11 were closely
related to its goods falling under Class 09.

In the assailed amended decision promulgated on March 19, 2014, 11 the CA sided with
Kensonic, and reverted to the ruling by the Director General of IPO cancelling the
registration of the SAKURA mark covering all the goods of Uni-Line falling under Class
09 on the basis that all the goods belonged to the general class of goods. The CA
decreed:
WHEREFORE, the Motion for Partial Reconsideration filed by Kensonic Inc.
is PARTIALLY GRANTED. Uni-Line is prohibited from using the mark SAKURA for
goods falling under Class 9, but is allowed to use the mark SAKURA for goods falling
under Classes 7 and 11. Thus, the DENlAL of Uni-Line's Appeal insofar as the
cancellation of its Certificate of Registration No. 4-2002-004572 for goods enumerated
and falling under Class 9 is UPHELD. The Decision dated June 11, 2012 of the Director
General is AFFIRMED in toto.

SO ORDERED.12
Issues

Hence, this appeal by both parties.

Kensonic (G.R. Nos. 211820-21) insists that the CA erred in not considering that Uni-
Line's goods under Class 07 and Class 11 were related to its goods falling under Class
09; and that all the agencies below were unanimous in declaring that the marks were
identical, and, as such, the use of the SAKURA marks would lead to confusion about the
source of the goods.

Uni-Line (G.R. Nos. 211834-35) contends that the SAKURA mark could not be
appropriated because it simply referred to cherry blossom in Japanese and was thus a
generic name that was not copyrightable; that it was grave error for the IPO and the CA
to rule that Kensonic owned the mark; and that voltage regulators, portable generators,
switch breakers and fuse were unrelated to Kensonic's products because Uni-Line's
products were not electronic.

The following issues are, therefore, to be resolved:

(1) Is the SAKURA mark capable of appropriation?
(2) Are Kensonic's goods falling under Class 09 related to UniLine's goods falling under
Class 07 and Class 11?; and
(3) Are Uni-Line's goods falling under Class 9, namely: voltage regulators, portable
generators, switch breakers and fuses, related to Kensonic's goods falling under Class 9?
Ruling of the Court

The appeal of Kensonic in G.R. Nos. 211820-21 is dismissed but the petition in G.R.
Nos. 211834-35 is partially granted.

I.

The SAKURA mark can be appropriated

Uni-Line's opposition to Kensonic's ownership of the SAKURA mark insists that the:
SAKURA mark is not copyrightable for being generic. Such insistence is unacceptable.

To be noted is that the controversy revolves around the SAKURA mark which is not a
copyright. The distinction is significant. A mark is any visible sign capable of
distinguishing the goods (trademark) or services (service mark) of an enterprise, and
includes a stamped or marked container of goods.13 In contrast, a copyright is the right
to literary property as recognized and sanctioned by positive law; it is an intangible,
incorporeal right granted by statute to the author or originator of certain literary or
artistic productions, whereby he or she is invested, for a specific period, with the sole
and exclusive privilege of multiplying copies of the same and publishing and selling
them.14 Obviously, the SAKURA mark is not an artistic or literary work but a sign used
to distinguish the goods or services of one enterprise from those of another.

An examination of the pertinent laws also reveals that Uni-Line mistakenly argues that
the SAKURA mark was not capable of registration for being generic.

Section 123(h) of the Intellectual Property Code prohibits the registration of a

trademark that consists exclusively of signs that are generic for the goods or services
that they seek to identify. It is clear from the law itself, therefore, that what is
prohibited is not having a generic mark but having such generic mark being identifiable
to the good or service. In Asia Brewery, Inc., v. Court of Appeals,15 the Court ruled that
there was no infringement of San Miguel Brewery's Pale Pilsen trademark because Pale
Pilsen could not be appropriated. The Court explained:
The fact that the words pale pilsen are part of ABI's trademark does not constitute an
infringement of SMC's trademark: SAN MIGUEL PALE PILSEN, for "pale pilsen" are
generic words descriptive of the color ("pale"), of a type of beer ("pilsen"), which is a
light bohemian beer with a strong hops flavor that originated in the City of Pilsen in
Czechoslovakia and became famous in the Middle Ages. (Webster's Third New
International Dictionary of the English Language, Unabridged Edited by Philip Babcock
Gove. Springfield, Mass.: G & C Merriam Co., c) 1976, page 1716.) "Pilsen" is a
"primarily geographically descriptive word," (Sec. 4, subpar. [e] Republic Act No. 166,
as inserted by Sec. 2 of R.A. No. 638) hence, non-registerable and not appropriable by
any beer manufacturer. The Trademark Law provides:
"Sec. 4.... The owner of trade-mark, trade-name or service-mark used to distinguish
his goods, business or services from the goods, business or services of others shall
have the right to register the same [on the principal register], unless it:

xxx   xxx  xxx

"(e) Consists of a mark or trade-name which, when applied to or used in connection

with the goods, business or services of the applicant is merely descriptive or
deceptively misdescriptive of them, or when applied to or used in connection with the
goods, business or services of the applicant is primarily geographically descriptive or
deceptively misdescriptive of them, or is primarily merely a surname." (Emphasis
supplied.)"
The words "pale pilsen" may not be appropriated by SMC for its exclusive use even if
they are part of its registered trademark: SAN MIGUEL PALE PILSEN, any more than
such descriptive words as "evaporated milk," "tomato ketchup," "cheddar cheese,"
"com flakes" and "cooking oil" may be appropriated by any single manufacturer of these
food products, for no other reason than that he was the first to use them in his
registered trademark. In Masso Hermanos, S.A. vs. Director of Patents, 94 Phil. 136,
139 (1953), it was held that a dealer in shoes cannot register "Leather Shoes" as his
trademark because that would be merely descriptive and it would be unjust to deprive
other dealers in leather shoes of the right to use the same words with reference to their
merchandise. No one may appropriate generic or descriptive words. They belong to the
public domain (Ong Ai Gui vs. Director of Patents, 96 Phil. 673, 676  [1955]).
"A word or a combination of words which is merely descriptive of an article of trade, or
of its composition, characteristics, or qualities, cannot be appropriated and protected as
a trademark to the exclusion of its use by others . . . inasmuch as all persons have an
equal right to produce and vend similar articles, they also have the right to describe
them properly and to use any appropriate language or words for that purpose, and no
person can appropriate to himself exclusively any word or expression, properly
descriptive of the article, its qualities, ingredients or characteristics, and thus limit other
persons in the use of language appropriate to the description of their manufactures, the
right to the use of such language being common to all. This rule excluding descriptive
terms has also been held to apply to trade-names. As to whether words employed fall
within this prohibition, it is said that the true test is not whether they are exhaustively
descriptive of the article designated, but whether in themselves, and as they are
commonly used by those who understand their meaning, they are reasonably indicative
and descriptive of the thing intended. If they are thus descriptive, and not arbitrary,
they cannot be appropriated from general use and become the exclusive property of
anyone. (52 Am. Jur. 542-543.)
 
". . . Others may use the same or similar descriptive word in connection with their own
wares, provided they take proper steps to prevent the public being deceived.
(Richmond Remedies Co. vs. Dr. Miles Medical Co., 16 E. [2d] 598.)

". . . A descriptive word may be admittedly distinctive, especially if the user is the first
creator of the article. It will, however, be denied protection, not because it lacks
distinctiveness, but rather because others are equally entitled to its use. (2 Callman,
Unfair Competition and Trademarks, pp. 869-870.)"
This, however, is not the situation herein. Although SAKURA refers to the Japanese
flowering cherry16 and is, therefore, of a generic nature, such mark did not identify
Kensonic's goods unlike the mark in Asia Brewery, Inc., v. Court of Appeals. Kensonic's
DVD or VCD players and other products could not be identified with cherry blossoms.
Hence, the mark can be appropriated.

Kensonic's prior use of the mark since 1994 made it the owner of the mark, and its
ownership cannot anymore be challenged at this stage of the proceedings. Seeking the
review of Kensonic's ownership would entail the examination of facts already settled by
the lower tribunals. Uni-Line's challenge to the ownership of the SAKURA mark should
stop here because the Court cannot act on a factual matter in this appeal by petition for
review on certiorari, which is limited to the consideration of questions of law. Section 1,
Rule 45 of the Rules of Court specifically so provides:
Section 1. Filing of petition with Supreme Court. - A party desiring to appeal
by certiorari from a judgment or final order or resolution of the Court of Appeals,
the Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme Court a verified petition for
review on certiorari. The petition may include an application for a writ of preliminary
injunction or other provisional remedies and shall raise only questions of law which
must be distinctly set forth. The petitioner may seek the same provisional remedies by
verified motion filed in the same action or proceeding lat any time during its pendency.
The distinction between a question of law and a question of fact is well defined.
According to Tongonan Holdings and Development Corporation v. Escaño, Jr.:17
A question of law arises when there is doubt as to what the law is on a certain state of
facts, while there is a question of fact when the doubt arises as to the truth or falsity of
the alleged facts. For a question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by the litigants or any of
them. The resolution of the issue must rest solely on what the law provides on the
given set of circumstances. Once it is clear that the issue invites a review of the
evidence presented, the question posed is one of fact. Thus, the test of whether a
question is one of law or of fact is not the appellation given to such question by the
party raising the same; rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which case, it is a question of
law; otherwise it is a question of fact.
It is timely to remind, too, that the Court is not a trier of facts. Hence, the factual
findings of the quasi-judicial body like the IPO, especially when affirmed by the CA, are
binding on the Court.18 Jurisprudence has laid down certain exceptions to the rule of
bindingness,19 but, alas, Uni-Line did not discharge its burden to show how its urging
for a review of the factual findings came within any of the exceptions.

II.

Uni-Line's goods classified under Class 07 and Class 11 were not related to
Kensonic's goods registered under Class 09

The CA did not err in allowing the registration of Uni-Line's products falling under Class
07 and Class 11, for, indeed, those products - as found by the lower tribunals were
unrelated to the goods of Kensonic registered under Class 09.

Still, Kensonic contends that the goods of Uni-Line classified under Class 07 and Class
11 were covered by the prohibition from registration for being within the normal
potential expansion of Kensonic.

The contention is unwarranted.

The prohibition under Section 123 of the Intellectual Property Code extends to goods

that are related to the registered goods, not to goods that the registrant may
produce in the future. To allow the expansion of coverage is to prevent future
registrants of goods from securing a trademark on the basis of mere possibilities and
conjectures that may or may not occur at all. Surely, the right to a trademark should
not be made to depend on mere possibilities and conjectures.

In Mighty Corporation v. E. & J. Gallo Winery,20 the Court has identified the different
factors by which to determine whether or not goods are related to each other for
purposes of registration:
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. 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. 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.

In resolving whether goods are related, 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
(d) the nature and cost of the articles
(e) the descriptive properties, physical attributes or essential characteristics with reference to
their form, composition, texture or quality
(f) the purpose of the goods
(g) whether the article is bought for immediate consumption, that is, day-to-day household
items
(h) the fields of manufacture
(i) the conditions under which the article is usually purchased and
(j) the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold. (Citations omitted)
An examination of the foregoing factors reveals that the goods of Uni-Line were not
related to the goods of Kensonic by virtue of their differences in class, the descriptive
attribues, the purposes and the conditions of the goods.

In Taiwan Kolin Corporation, Ltd. v. Kolin Electronics, Co., Inc.,21 the Court has opined
tht the mere fact that goods belonged to the same class does not necessarily mean that
they are related; and that the factors listed in Mighty Corporation v. E. & J. Gallo
Winery should be taken into consideration, to wit:
As mentioned, the classification of the products under the NCL is merely part and parcel
of the factors to be considered in ascertaining whether the goods are related. It is not
sufficient to state that the goods involved herein are electronic products under Class 9
in order to establish relatedness petween the goods, for this only accounts for one of
many considerations enumerated in Mighty Corporation. xxx

Clearly then, it was erroneous for respondent to assume over the CA to condude that all
electronic products are related and that the coverage of one electronic product
necessarily precludes the registration of a similar; mark over another. In this digital age
wherein electronic products have not only diversified by leaps and bounds, and are
geared towards interoperability, it is difficult to assert readily, as respondent
simplistically did, that all devices that require plugging into sockets are necessarily
related goods.

It bears to stress at this point that the list of products included in Class 9 can be sub-
categorized into five (5) classifications, namely: (1) apparatus and instruments for
scientific or research purposes, (2) information technology and audiovisual equipment,
(3) apparatus and devices for controlling the distribution and use of electricity, (4)
optical apparatus and instruments, and (5) safety equipment. From this sub-
classification, it becomes apparent that petitioner's products, i.e., televisions and DVD
players, belong to audiovisual equipment, while that of respondent, consisting of
automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated
power supply, step-down transformer, and PA amplified AC-DC, generally fall under
devices for controlling the distribution and use of electricity.
Based on the foregoing pronouncement in Taiwan Kolin Corporation, Ltd. v. Kolin
Electronics, Co., Inc., there are other sub-classifications present even if the goods are
classified under Class 09. For one, Kensonic's goods belonged to the information
technology and audiovisual equipment subclass, but Uni-Line's goods pertained to the
apparatus and devices for controlling the distribution of electricity sub-class. Also, the
Class 09 goods of Kensonic were final products but Uni-Line's Class 09 products were
spare parts. In view of these distinctions, the Court agrees with Uni-Line that its Class
09 goods were unrelated to the Class 09 goods of Kensonic.

WHEREFORE, the Court DENIES the petition for review on certiorari in G.R. No.

211820-21; PARTIALLY GRANTS the petition for review on certiorari in G.R. No.
211834-35; REVERSES and SETS ASIDE the amended decision promulgated on March
19, 2014; PARTIALLY REINSTATES the decision promulgated on July 30, 2013
insofar as it allowed the registration by Uni-Line Multi-Resources, Inc. under the
SAKURA mark of its voltage regulators, portable generators, switch breakers and fuses;
and ORDERS Kensonic, Inc. to pay the costs of suit.

SO ORDERED.
Velasco, Jr., Leonen, Martires, and Gesmundo, JJ., concur.

SECOND DIVISION

G.R. No. 217781, June 20, 2018

SAN MIGUEL PURE FOODS COMPANY, INC., Petitioner, v. FOODSPHERE,

INC., Respondent.

G.R. No. 217788, June 20, 2018

FOODSPHERE, INC., Petitioner, v. SAN MIGUEL PURE FOODS COMPANY,

INC., Respondent.

DECISION

PERALTA, J.:

Before the Court are the consolidated cases of G.R. No. 217781 and G.R. No. 217788.
On the one hand, San Miguel Pure Foods Company, Inc. (SMPFCI), in G.R. No. 217781,
filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, questioning
the Resolution1 dated April 8, 2015 of the Court of Appeals (CA), Former Fourteenth
Division, in CA-G.R. SP No. 131945, but only insofar as the same resolved to delete
from the body of its Decision2 dated September 24, 2014 the award of exemplary
damages. On the other hand, in G.R. No. 217788, Foodsphere, Inc., via a Petition for
Review on Certiorari under Rule 45 of the Rules of Court, seeks to reverse and set aside
the same September 24, 2014 Decision and April 8, 2015 Resolution of the CA declaring
it guilty of unfair competition and holding it liable for damages.

The antecedent facts are as follows:

The parties herein are both engaged in the business of the manufacture, sale, and
distribution of food products, with SMPFCI owning the trademark "PUREFOODS FIESTA
HAM" while Foodsphere, Inc. products (Foodsphere) bear the "CDO" brand. On
November 4, 2010, SMPFCI filed a Complaint 3 for trademark infringement and unfair
competition with prayer for preliminary injunction and temporary restraining order
against Foodsphere before the Bureau of Legal Affairs (BLA) of the Intellectual Property
Office (IPO) pursuant to Sections 155 and 168 of Republic Act (R.A.) No. 8293,
otherwise known as the Intellectual Property Code (IP Code), for using, in commerce, a
colorable imitation of its registered trademark in connection with the sale, offering for
sale, and advertising of goods that are confusingly similar to that of its registered
trademark.4

In its complaint, SMPFCI alleged that its "FIESTA" ham, first introduced in 1980, has
been sold in countless supermarkets in the country with an average annual sales of
P10,791,537.25 and is, therefore, a popular fixture in dining tables during the
Christmas season. Its registered "FIESTA" mark has acquired goodwill to mean
sumptuous ham of great taste, superior quality, and food safety, and its trade dress
"FIESTA", combined with a figure of a partly sliced ham served on a plate with fruits on
the side had likewise earned goodwill. Notwithstanding such tremendous goodwill
already earned by its mark, SMPFCI continues to invest considerable resources to
promote the FIESTA ham, amounting to no less than P3,678,407.95. 5

Sometime in 2006, however, Foodsphere introduced its "PISTA" ham and aggressively
promoted it in 2007, claiming the same to be the real premium ham. In 2008, SMPFCI
launched its "Dapat ganito ka-espesyal" campaign, utilizing the promotional material
showing a picture of a whole meat ham served on a plate with fresh fruits on the side.
The ham is being sliced with a knife and the other portion, held in place by a serving
fork. But in the same year, Foodsphere launched its "Christmas Ham with Taste"
campaign featuring a similar picture. Moreover, in 2009, Foodsphere launched its "Make
Christmas even more special" campaign, directly copying SMPFCI's "Dapat ganito ka-
espesyal" campaign. Also in 2009, Foodsphere introduced its paper ham bag which
looked significantly similar to SMPFCI's own paper ham bag and its trade dress and its
use of the word "PISTA" in its packages were confusingly similar to SMPFCI's "FIESTA"
mark.6

Thus, according to SMPFCI, the striking similarities between the marks and products of
Foodsphere with those of SMPFCI warrant its claim of trademark infringement on the
ground of likelihood of confusion as to origin, and being the owner of "FIESTA," it has
the right to prevent Foodsphere from the unauthorized use of a deceptively similar
mark. The word "PISTA" in Foodsphere's mark means "fiesta," "feast," or "festival" and
connotes the same meaning or commercial impression to the buying public of SMPFCI's
"FIESTA" trademark. Moreover, "FIESTA" and "PISTA" are similarly pronounced, have
the same number of syllables, share common consonants and vowels, and have the
same general appearance in their respective product packages. In addition, the
"FIESTA" and "PISTA" marks are used in the same product which are distributed and
marketed in the same channels of trade under similar conditions, and even placed in
the same freezer and/or displayed in the same section of supermarkets. Foodsphere's
use, therefore, of the "PISTA" mark will mislead the public into believing that its goods
originated from, or are licensed or sponsored by SMPFCI, or that Foodsphere is
associated with SMPFCI, or its affiliate. The use of the "PISTA" trademark would not
only result in likelihood of confusion, but in actual confusion. 7

Apart from trademark infringement, SMPFCI further alleged that Foodsphere is likewise
guilty of unfair competition. This is because there is confusing similarity in the general
appearance of the goods of the parties and intent on the part of Foodsphere, to deceive
the public and defraud SMPFCL According to SMPFCI, there is confusing similarity
because the display panel of both products have a picture of a partly sliced ham served
on a plate of fruits, while the back panel features other ham varieties offered, both
"FIESTA" and "PISTA" are printed in white bold stylized font, and the product packaging
for both "FIESTA" and "PISTA" consists of box-typed paper bags made of cardboard
materials with cut-out holes on the middle top portion for use as handles and
predominantly red in color with a background design of Christmas balls, stars,
snowflakes, and ornate scroll. Moreover, Foodsphere's intent to deceive the public is
seen from its continued use of the word "PISTA" for its ham products and its adoption
of packaging with a strong resemblance of SMPFCI's "FIESTA" ham packaging. For
SMPFCI, this is deliberately carried out for the purpose of capitalizing on the valuable
goodwill of its trademark and causing not only confusion of goods but also confusion as
to the source of the ham product. Consequently, SMPFCI claimed to have failed to
realize income of at least P27,668,538.38 and P899,294.77 per month in estimated
actual damages representing foregone income in sales. Thus, it is entitled to actual
damages and attorney's fees.8

For its part, Foodsphere denied the charges of trademark infringement and countered
that the marks "PISTA" and "PUREFOODS FIESTA HAM" are not confusingly similar and
are, in fact, visually and aurally distinct from each other. This is because PISTA is
always used in conjunction with its house mark "CDO" and that "PUREFOODS FIESTA
HAM" bears the housemark "PUREFOODS," rendering confusion impossible. Moreover,
Foodsphere maintained that SMPFCI does not have a monopoly on the mark "FIESTA"
for the IPO database shows that there are two (2) other registrations for "FIESTA,"
namely "FIESTA TROPICALE" and "HAPPY FIESTA." Also, there are other products in
supermarkets that bear the mark "FIESTA" such as "ARO FIESTA HAM," "ROYAL
FIESTA," and "PUREGOLD FIESTA HAM," but SMPFCI has done nothing against those
manufacturers, making it guilty of estoppel in pais, and is, therefore, estopped from
claiming that the use of other manufacturers of the mark "FIESTA" will result in
confusion and/or damage to itself. Even assuming that the marks are confusingly
similar, Foodsphere asserted that it is SMPFCI who is guilty of infringement vis-a-vis its
registered trademark "HOLIDAY," a translation and word bearing the same meaning as
"FIESTA." Foodsphere has been using its "HOLIDAY" trademark since 1970 and had
registered the same in 1986, while SMPFCI registered its "FIESTA" trademark only in
2007. In fact, Foodsphere noted that it has been using "PISTA" since 2006 which is
earlier than SMPFCI's filing for registration of "FIESTA" in 2007. In addition, Foodsphere
asseverated that SMPFCI cannot appropriate for itself images of traditional utensils and
garnishing of ham in its advertisements. Confusion between the marks, moreover, is
rendered impossible because the products are sold in booths manned by different
"promodisers." Also, hams are expensive products and their purchasers are well-
informed not only as to their features but also as to the manufacturers thereof. 9

Furthermore, Foodsphere similarly denied the allegation that it is guilty of unfair

competition or passing off its product as that of SMPFCI. As mentioned, the "PISTA" and
"FIESTA" labels are substantially different in the manner of presentation, carrying their
respective house marks. Moreover, its paper ham bags are labeled with their respective
house marks and are given to consumers only after purchase, hence, they do not factor
in when the choice of ham is being made. Also, Foodsphere claims to have been using
the red color for its boxes and it was SMPFCI, by its own admission, that switched
colors from green to red in 2009 for its own ham bags. 10

On July 17, 2012, the BLA, through its Director, rendered its Decision 11 dismissing
SMPFCI's complaint for lack of merit. First, the BLA held that there could be no
trademark infringement because Foodsphere began using the "PISTA" mark in 2006
and even filed a trademark application therefor in the same year, while SMPFCI's
application for trademark registration for "FIESTA" was filed and approved only in 2007.
SMPFCI, thus, had no cause of action. Second, SMPFCI's complaint was filed beyond the
four (4)-year prescriptive period prescribed under the Rules and Regulation on
Administrative Complaints for Violation of Law Involving Intellectual Property
Rights. Third, the BLA found the testimonies and surveys adduced in evidence by
SMPFCI to be self-serving. Fourth, comparing the competing marks would not lead to
confusion, much less deception of the public. Finally, the BLA ruled that SMPFCI failed
to convincingly prove the presence of the elements of unfair competition. 12

On September 10, 2013, however, the Office of the Director General partially granted
SMPFCI's appeal, affirming the BLA's ruling on the absence of trademark infringement
but finding Foodsphere liable for unfair competition.13 The Director General held that
one can see the obvious differences in the marks of the parties. SMPFCI's mark is a
composite mark where its house mark, namely "PURE FOODS," is clearly indicated and
is followed by the phrase "FIESTA HAM" written in stylized font whereas Foodsphere's
mark is the word "PISTA" written also in stylized font. Applying the 'Dominancy Test'
and the 'Holistic Test' show that Foodsphere cannot be held liable for trademark
infringement due to the fact that the marks are not visually or aurally similar and that
the glaring differences in the presentation of these marks will prevent any likely
confusion, mistake, or deception to the purchasing public. Moreover, "PISTA" was duly
registered in the IPO, strengthening the position that "PISTA" is not an infringement of
"PURE FOODS FIESTA HAM" for a certificate of registration of a mark is prima
facie evidence of the validity of the registration, the registrant's ownership of the mark,
and of the registrant's exclusive right to use the same. 14 On the other hand, the
Director General found Foodsphere to be guilty of unfair competition for it gave its
"PISTA" ham the general appearance that would likely influence purchasers to believe
that it is similar with SMPFCI's "FIESTA" ham. Moreover, its intention to deceive is
inferred from the similarity of the goods as packed and offered for sale. Thus, the
Director General ordered Foodsphere to pay nominal damages in the amount of
P100,000.00 and attorney's fees in the amount of P300,000.00 and to cease and desist
from using the labels, signs, prints, packages, wrappers, receptacles, and materials
used in committing unfair competition, as well as the seizure and disposal thereof. 15

Both SMPFCI and Foodsphere filed their appeals before the CA via Petitions for Review
dated October 8, 201316 and October 29, 2013,17 respectively. SMPFCI sought a
reconsideration of the Director General's finding that Foodsphere is not guilty of
trademark infringement while Foodsphere faulted said Director General for declaring it
guilty of unfair competition.

On March 6, 2014, the CA, Eleventh Division, denied SMPFCI's petition and affirmed the
ruling of the Director General on the absence of trademark infringement. According to
the appellate court, Foodsphere was merely exercising, in good faith, its right to use its
duly registered trademark "PISTA" in the lawful pursuit of its business. 18 Thereafter, in
a Decision dated September 24, 2014, the CA Fourteenth Division likewise denied
Foodsphere's petition, affirming the Director General's finding that Foodsphere was
guilty of unfair competition. The CA held that the elements thereof are present herein.
Consequently, it ordered Foodsphere to pay SMPFCI nominal and exemplary damages
as well as attorney' fees.19 In a Resolution dated April 8, 2015, however, the CA
clarified its September 24, 2014 Decision and resolved to delete the award of
exemplary damages for SMPFCI never prayed for the same.20

In a Resolution21 dated June 13, 2016, the Court, in G.R. No. 215475, denied SMPFCI's
Petition for Review on Certiorari for failure to sufficiently show that the CA, in its
Decision and Resolution, dated March 6, 2014 and November 13, 2014, respectively,
finding that Foodsphere is not liable for trademark infringement, and committed any
reversible error in the challenged decision and resolution as to warrant the exercise of
the Court's discretionary appellate jurisdiction. The Court also found that the issues
raised by SMPFCI are factual in nature.

Meanwhile, on June 8, 2015, both SMPFCI and Foodsphere filed the instant Petitions for
Review on Certiorari docketed as G.R. No. 217781 and 217788, respectively. In G.R.
No. 217781, SMPFCI invoked the following argument:

I.

THE HONORABLE COURT OF APPEALS ERRED IN RESOLVING THAT THE AWARD OF

EXEMPLARY DAMAGES BE DELETED FROM THE BODY OF ITS DECISION DATED 24
SEPTEMBER 2014 WHEN SMPFCI'S ENTITLEMENT THERETO IS CLEARLY SUPPORTED
NOT ONLY BY PLEADINGS AND EVIDENCE ON RECORD, BUT ALSO BY THE HONORABLE
COURT OF APPEALS' OWN RATIOCINATIONS FOUND IN THE BODY OF ITS DECISION.
Conversely, G.R. No. 217788, Foodsphere raised the following argument:
I.

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN EXCESS OF OR

AMOUNTING TO LACK OF JURISDICTION WHEN IT ISSUED THE ASSAILED DECISION
AND RESOLUTION BEING NOT IN ACCORDANCE WITH LAW OR WITH APPLICABLE
DECISIONS OF THE HONORABLE COURT WHEN IT DECLARED THAT FOODSPHERE WAS
GUILTY OF UNFAIR COMPETITION.
In G.R. No. 217781, SMPFCI clarifies that it assails the April 8, 2015 Resolution of the
CA, not on its finding that Foodsphere was guilty of unfair competition, but only insofar
as it deleted its award of exemplary damages in its September 24, 2014 Decision.
According to SMPFCI, it was a mere mistake that the said Decision failed to state the
amount of exemplary damages and that its dispositive portion failed to award said
exemplary damages, merely stating that "the petition is DENIED, and the Decision x x x
of the Director General is AFFIRMED." 22 SMPFCI asserts that where there is a conflict
between the dispositive portion and the body of the decision, the dispositive portion
controls. But where the inevitable conclusion from the body of the decision is so clear
as to show that there was a mistake in the dispositive portion, the body of the decision
will prevail.23 Here, when the CA held that "as for exemplary damages, the award
thereof was warranted," it is beyond cavil that SMPFCI is entitled thereto.

Moreover, SMPFCI maintains that the CA ruling that it never prayed for exemplary
damages in the proceedings, its prayer for damages being limited only to actual
damages and attorney's fees, is utterly false for it specifically prayed for the same in
several pleadings it filed before the BLA and the Office of the Director General. Even
assuming that it indeed failed to pray for exemplary damages, SMPFCI alleges that it
was still erroneous for the CA to delete the award of the same. It is well settled that a
court may grant relief to a party, even if said party did not pray for it in his pleadings
for a prayer for "other remedies just and equitable under the premises" is broad enough
to justify the extension of a remedy different from that requested. Thus, in view of the
foregoing, coupled with the factual circumstances of the case leading to the conclusion
that Foodsphere is guilty of unfair competition, SMPFCI essentially prays that the Court:
(1) issue a permanent injunction against Foodsphere to prevent it from infringing the
rights of SMPFCI by seizing all products violative of SMPFCI's IP rights and by forfeiting
all properties used in the infringing acts; (2) order Foodsphere to pay SMPFCI the
amount of P27,668,538.38, representing lost income of SMPFCI, P899,294.77 per
month in estimated actual damages, or moderate or temperate damages; (3) order
Foodsphere to pay attorney's fees in the amount of P300,000.00; and (4) order
Foodsphere to pay exemplary damages in the amount of P300,000.00. 24

In G.R. No. 217788, Foodsphere denied the allegations of unfair competition, denying
SMPFCI's claim that the confusing similarity between the respective packaging of the
parties' products began in 2009 when Foodsphere changed its packaging from a paper
box to a paper ham bag, significantly similar to SMPFCI's paper ham bag. According to
Foodsphere, while the packages were both in the form of bags, their respective
trademarks were boldly printed thereon. Moreover, even prior to SMPFCI's use of the
questioned ham bags in 2009, Foodsphere had already been adopting the image of
partly-sliced hams laced with fruits and red color on its packages. 25 In addition,
Foodsphere alleged that any similarity in the general appearance of the packaging does
not, by itself, constitute unfair competition. This is because first, packaging is not the
exclusive ownership of SMPFCI which does not have a patent or trademark protection
therefor. Second, the mere fact of being the first user does not bestow vested right to
use the packaging to the exclusion of everyone else. Third, the circumstance that the
manufacturer has printed its name all over the packaging negates fraudulent intent to
palm off its goods as another's product. Fourth, SMPFCI cannot claim that it has
exclusive right or monopoly to use the colors red and green in its packaging or the
image of partly sliced hams. Fifth, similarity in the packaging does not necessarily
constitute "confusing" similarity. Sixth, the circumstances under which the competing
products are sold negates the likelihood of confusion for consumers are more discerning
on the Christmas ham they will purchase, which is not any ordinary, low priced
product.  Seventh, SMPFCI failed to prove likelihood of confusion or intent to deceive on
the part of Foodsphere. Finally, Foodsphere maintained that there was no basis for the
CA to award nominal damages and attorney's fees in view of the absence of any
violation of SMPFCI's right.26

The petitions are devoid of merit.

With respect to G.R. No. 217781, the. Court finds no reason to reverse the April 8,
2015 Resolution of the CA insofar as it resolved to delete from the body of its
September 24, 2014 Decision the award of exemplary damages. SMPFCI said so itself,
when there is a conflict between the dispositive portion or fallo of a decision and the
opinion of the court contained in the text or body of the judgment, the former prevails
over the latter. This rule rests on the theory that the fallo is the final order, while the
opinion in the body is merely a statement ordering nothing. Thus, an order of execution
is based on the disposition, not on the body, of the Decision. 27 Contrary to SMPFCI's
assertion, moreover, the Court finds inapplicable the exception to the foregoing rule
which states that the body of the decision will prevail in instances where the inevitable
conclusion from the body of the decision is so clear as to show that there was a mistake
in the dispositive portion.

A cursory perusal of the challenged September 24, 2014 Decision reveals that the
mistake lies not in the fallo or dispositive portion but in the body thereof, the pertinent
portions of which provide:

Having been found guilty of unfair competition, Foodsphere was correctly ordered to
pay nominal damages of P100,000.00. Under Article 2221 of the Civil Code, nominal
damages are recoverable in order to vindicate or recognize the rights of the plaintiff
which have been violated or invaded by the defendant. x x x

As for SMPFCI's claim for lost profit or unrealized income of more than P27 Million, its
failure to properly substantiate. the same left the Office of the Director General without
any basis to award it.

As for exemplary damages, the award thereof was warranted on the strength of In-N-
Out Burger, Inc. v. Sehwani, for correction or example for public good, such as the
enhancement of the protection accorded to intellectual property and the prevention of
similar acts of unfair competition. The award of attorney's fees must likewise be upheld
as SMPFCI was compelled to engage the services of counsel to protect its rights. 28
As can be gleaned from above, the intention of the CA was merely to affirm the findings
of the Director General insofar as the award of damage was concerned. This was shown
in its statements such as "Foodsphere was correctly ordered to pay nominal damages,"
"its failure to properly substantiate the same left the Office of the Director General
without any basis to award it," "as for exemplary damages, the award thereof was
warranted," and "the award of attorney's fees must likewise be upheld." This was also
shown when the CA clearly disposed as follows: "ACCORDINGLY, the petition is
DENIED, and the Decision dated September 10, 2013 of the Office of the Director
General, AFFIRMED."29 It can, therefore, be derived, from the wording of the CA
Decision, that it merely intended to adopt the resolution of the Director General on the
award of damages. Consequently, since nowhere in the affirmed Decision did the
Director General award exemplary damages to SMPFCI, for what was awarded was only
nominal damages and attorney's fees, it follows then that the CA likewise did not intend
on awarding the same to SMPFCI. Thus, what controls herein is the fallo.

Besides, it bears stressing that SMPFCI failed to prove its entitlement to exemplary
damages. Article 2233 of the Civil Code provides that exemplary damages cannot be
recovered as a matter of right; the court will decide whether or not they should be
adjudicated while Article 2234 thereof provides that while the amount of the exemplary
damages need not be proven, the plaintiff must show that he is entitled to moral,
temperate or compensatory damages before the court may consider the question of
whether or not exemplary damages should be awarded.

Thus, the Court has held, time and again, that exemplary damages may be awarded for
as long as the following requisites are present: (1) they may be imposed, by way of
example, only in addition, among others, to compensatory damages, only after the
claimant's right to them has been established, and cannot be recovered as a matter of
right, their determination depending upon the amount of compensatory damages that
may be awarded to the claimant; (2) the claimant must first establish his right to
moral, temperate, liquidated or compensatory damages; and (3) the act must be
accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent
manner.30
Here, SMPFCI particularly failed to prove its right to moral, temperate, liquidated or
compensatory damages. In its complaint, SMPFCI prayed that Foodsphere be ordered
to pay P27,668,538.38 representing income it would have made if not for the
infringement and P899,294.77 per month in estimated actual damages, representing
foregone income in sales for the continuous use of the "PISTA" mark in connection with
the selling, offering for sale and distribution of its ham product during the pendency of
the case.31 But as the Director General aptly found, SMPFCI neither adduced sufficient
evidence to prove its claim of foregone income or sales nor presented evidence to show
the profit or sales. Thus,.in view of such failure to prove its right to compensatory
damages, as well as to moral and temperate damages, the CA correctly resolved to
delete from the body of its September 24, 2014 Decision the award of exemplary
damages.

As regards G.R. No. 217788, the Court likewise affirms the ruling of the CA, which in
turn, affirmed the findings of the Director General.

Section 168 of the IP Code provides that:

Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person
who has identified in the mind of the public the goods he manufactures or deals in, his
business or services from those of others, whether or not a registered mark is
employed, has a property right in the goodwill of the said goods, business or services
so identified, which will be protected in the same manner as other property rights.

168.2. Any person who shall employ deception or any other means contrary to good
faith by which he shall pass off the goods manufactured by him or in which he deals, or
his business, or services for those of the one having established such goodwill, or who
shall commit any acts calculated to produce said result, shall be guilty of unfair
competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against
unfair competition, the following shall. be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of
goods of another manufacturer or dealer, either as to the goods themselves or in the
wrapping of the packages in which they are contained, or the devices or words thereon,
or in any other feature of their appearance, which would be likely to influence
purchasers to believe that the goods offered are those of a manufacturer or dealer,
other than the actual manufacturer or dealer, or who otherwise clothes the goods with
such appearance as shall deceive the public and defraud another of his legitimate trade,
or any subsequent vendor of such goods or any agent of any vendor engaged in selling
such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any other means
calculated to induce the false belief that such person is offering the services of another
who has identified such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall
commit any other act contrary to good faith of a nature calculated to discredit the
goods, business or services of another.
168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis
mutandis. (Sec. 29, R.A. No. 166a)
Time and again, the Court has held that unfair competition consists of the passing off
(or palming off) or attempting to pass off upon the public of the goods or business of
one person as the goods or business of another with the end and probable effect of
deceiving the public. Passing off (or palming off) takes place where the defendant, by
imitative devices on the general appearance of the goods, misleads prospective
purchasers into buying his merchandise under the impression that they are buying that
of his competitors. In other words, the defendant gives his goods the general
appearance of the goods of his competitor with the intention of deceiving the public that
the goods are those of his competitor. 32 The "true test," therefore, of unfair competition
has thus been "whether the acts of the defendant have the intent of deceiving or are
calculated to deceive the ordinary buyer making his purchases under the ordinary
conditions of the particular trade to which the controversy relates." 33

Thus, the essential elements of an action for unfair competition are: (1) confusing
similarity in the general appearance of the goods; and (2) intent to deceive the public
and defraud a competitor. The confusing similarity may or may not result from
similarity in the marks, but may result from other external factors in the packaging or
presentation of the goods. The intent to deceive and defraud may be inferred from the
similarity of the appearance of the goods as offered for sale to the public. Actual
fraudulent intent need not be shown.34

In the instant case, the Court finds no error with the findings of the CA and Director
General insofar as the presence of the foregoing elements is concerned. First of all,
there exists a substantial and confusing similarity in the packaging of Foodsphere's
product with that of SMPFCI, which, as the records reveal, was changed by Foodsphere
from a paper box to a paper ham bag that is significantly similar to SMPFCI's paper
ham bag. As duly noted by the Director General and the CA, both packages use paper
ham bags as the container for the hams, both paper ham bags use the red color as the
main colors, and both have the layout design appearing on the bags consisting of a
partly sliced ham and fruits on the front and other ham varieties offered at the back.
Thus, Foodsphere's packaging in its entirety, and not merely its "PISTA" mark thereon,
renders the general appearance thereof confusingly similar with the packaging of
SMPFCI's ham, that would likely influence purchasers to believe that these products are
similar, if not the same, as those of SMPFCI.

Second of all, Foodsphere's intent to deceive the public, to defraud its competitor, and
to ride on the goodwill of SMPFCI's products is evidenced by the fact that not only did
Foodsphere switch from its old box packaging to the same paper ham bag packaging as
that used by SMPFCI, it also used the same layout design printed on the same. As the
Director General observed, why, of the millions of terms and combinations of letters,
designs, and packaging available, Foodsphere had to choose those so closely similar to
SMPFCI's if there was no intent to pass off upon the public the ham of SMPFCI as its
own with the end and probable effect of deceiving the public.

At this juncture, it is worthy to note that unfair competition is always a question of fact.
There is no inflexible rule that can be laid down as to what will constitute the same,
each case being, in the measure, a law unto itself. Thus, the question to be determined
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 defendant's
goods as plaintiffs goods or his business as plaintiffs business. 35 As such, the Court is of
the opinion that the case records readily supports the findings of fact made by the
Director General as to Foodsphere's commission of unfair competition. Settled is the
rule that factual findings of administrative agencies are generally accorded respect and
even finality by this Court, if such findings are supported by substantial evidence, as it
is presumed that these agencies have the knowledge and expertise over matters under
their jurisdiction,36 more so when these findings are affirmed by the Court of Appeals. 37

WHEREFORE, premises considered, the instant petitions in G.R. Nos. 217781 and
217788 are DENIED. The assailed Decision dated September 24, 2014 and Resolution
dated April 8, 2015 of the Court of Appeals in CA-G.R. SP No. 131945 are
hereby AFFIRMED.

SO ORDERED.

Carpio, Senior Associate Justice, (Chairperson), Perlas-Bernabe, Caguioa, and Reyes,

Jr., JJ., concur.

THIRD DIVISION

G.R. No. 195835, March 14, 2016

SISON OLAÑO, SERGIO T. ONG, MARILYN O. GO, AND JAP FUK

HAI, Petitioners, v. LIM ENG CO, Respondent.

DECISION

REYES, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, assailing
the Decision2 dated July 9, 2010 and Resolution3 dated February 24, 2011 of the Court
of Appeals (CA) in CA-G.R. SP No. 95471, which annulled the Resolutions dated March
10, 20064 and May 25, 20065 of the Department of Justice (DOJ) in I.S. No. 2004-925,
finding no probable cause for copyright infringement against Sison Olano, Sergio Ong,
Marilyn Go and Jap Fuk Hai (petitioners) and directing the withdrawal of the criminal
information filed against them.

The Antecedents

The petitioners are the officers and/or directors of Metrotech Steel Industries, Inc.
(Metrotech).6 Lim Eng Co (respondent), on the other hand, is the Chairman of LEC Steel
Manufacturing Corporation (LEC), a company which specializes in architectural metal
manufacturing.7
Sometime in 2002, LEC was invited by the architects of the Manansala Project (Project),
a high-end residential building in Rockwell Center, Makati City, to submit
design/drawings and specifications for interior and exterior hatch doors. LEC complied
by submitting on July 16, 2002, shop plans/drawings, including the diskette therefor,
embodying the designs and specifications required for the metal hatch doors. 8

After a series of consultations and revisions, the final shop plans/drawings were
submitted by LEC on January 15, 2004 and thereafter copied and transferred to the title
block of Ski-First Balfour Joint Venture (SKI-FB), the Project's contractor, and then
stamped approved for construction on February 3, 2004. 9

LEC was thereafter subcontracted by SKI-FB, to manufacture and install interior and
exterior hatch doors for the 7th to 22nd floors of the Project based on the final shop
plans/drawings.10

Sometime thereafter, LEC learned that Metrotech was also subcontracted to install
interior and exterior hatch doors for the Project's 23 rd to 41st floors.11

On June 24, 2004, LEC demanded Metrotech to cease from infringing its intellectual
property rights. Metrotech, however, insisted that no copyright infringement was
committed because the hatch doors it manufactured were patterned in accordance with
the drawings provided by SKI-FB.12

On July 2, 2004, LEC deposited with the National Library the final shop plans/drawings
of the designs and specifications for the interior and exterior hatch doors of the
Project.13 On July 6, 2004, LEC was issued a Certificate of Copyright Registration and
Deposit showing that it is the registered owner of plans/drawings for interior and
exterior hatch doors under Registration Nos. 1-2004-13 and 1-2004-14,
respectively.14 This copyright pertains to class work "I" under Section 172 of Republic
Act (R.A.) No. 8293, The Intellectual Property Code of the Philippines, which covers
"illustrations, maps, plans, sketches, charts and three-dimensional works relative to
geography, topography, architecture or science."

On December 9, 2004, LEC was issued another Certificate of Copyright Registration and
Deposit showing that it is the registered owner of plans/drawings for interior and
exterior hatch doors under Registration Nos. H-2004-566 and H-2004-567 15 which is
classified under Section 172(h) of R.A. No. 8293 as "original ornamental designs or
models for articles of manufacture, whether or not registrable as an industrial design,
and other works of applied art."

When Metrotech still refused to stop fabricating hatch doors based on LEC's shop
plans/drawings, the latter sought the assistance of the National Bureau of Investigation
(NBI) which in turn applied for a search warrant before the Regional Trial Court (RTC)
of Quezon City, Branch 24. The application was granted on August 13, 2004 thus
resulting in the confiscation of finished and unfinished metal hatch doors as well as
machines used in fabricating and manufacturing hatch doors from the premises of
Metrotech.16
On August 13, 2004, the respondent filed a Complaint-Affidavit 17 before the DOJ against
the petitioners for copyright infringement. In the meantime or on September 8, 2004,
the RTC quashed the search warrant on the ground that copyright infringement was not
established.18

Traversing the complaint, the petitioners admitted manufacturing hatch doors for the
Project. They denied, however, that they committed copyright infringement and averred
that the hatch doors they manufactured were functional inventions that are proper
subjects of patents and that the records of the Intellectual Property Office reveal that
there is no patent, industrial design or utility model registration on LEC's hatch doors.
Metrotech further argued that the manufacturing of hatch doors per se is not copyright
infringement because copyright protection does not extend to the objects depicted in
the illustrations and plans. Moreover, there is no artistic or ornamental expression
embodied in the subject hatch doors that would subject them to copyright protection. 19

Resolutions of the DOJ

In a Resolution20 dated August 18, 2005, the investigating prosecutor dismissed the

respondent's complaint based on inadequate evidence showing that: (1) the petitioners
committed the prohibited acts under Section 177 of R.A. No. 8293; and (2) the interior
and exterior hatch doors of the petitioners are among the classes of copyrightable work
enumerated in Sections 172 and 173 of the same law.21

Adamant, the respondent filed a petition for review before the DOJ but it was also
denied due course in the Resolution22 dated November 16, 2005.

Upon the respondent's motion for reconsideration, however, the Resolution 23 dated
January 27, 2006 of the DOJ reversed and set aside the Resolution dated August 18,
2005 and directed the Chief State Prosecutor to file the appropriate information for
copyright infringement against the petitioners.24 The DOJ reasoned that the pieces of
evidence adduced show that the subject hatch doors are artistic or ornamental with
distinctive hinges, door and jamb, among others. The petitioners were not able to
sufficiently rebut these allegations and merely insisted on the non-artistic nature of the
hatch doors. The DOJ further held that probable cause was established insofar as the
artistic nature of the hatch doors and based thereon the act of the petitioners in
manufacturing or causing to manufacture hatch doors similar to those of the
respondent can be considered as unauthorized reproduction; hence, copyright
infringement under Section 177.1 in relation to Section 216 of R.A. No. 8293. 25 cralawred

Aggrieved, the petitioners moved for reconsideration. This time, the DOJ made a
complete turn around by granting the motion, vacating its Resolution dated January 27,
2006 and declaring that the evidence on record did not establish probable cause
because the subject hatch doors were plainly metal doors with functional components
devoid of any aesthetic or artistic features. Accordingly, the DOJ Resolution 26 dated
March 10, 2006 disposed as follows:
chanRoblesvirtualLawlibrary

WHEREFORE, finding cogent reason to reverse the assailed resolution, the motion for
reconsideration is GRANTED finding no probable cause against the [petitioners].
Consequently, the City Prosecutor of Manila is hereby directed to cause the withdrawal
of the information, if any has been filed in court, and to report the action taken thereon
within TEN (10) DAYS from receipt hereof.
SO ORDERED.27 ChanRoblesVirtualawlibrary

The respondent thereafter filed a motion for reconsideration of the foregoing resolution
but it was denied28 on May 25, 2006. The respondent then sought recourse before the
CA via a petition for certiorari29 ascribing grave abuse of discretion on the part of the
DOJ.

In its assailed Decision30 dated July 9, 2010, the CA granted the petition. The CA held
that the vacillating findings of the DOJ on the presence or lack of probable cause
manifest capricious and arbitrary exercise of discretion especially since its opposite
findings were based on the same factual evidence and arguments.

The CA then proceeded to make its own finding of probable cause and held that:
chanRoblesvirtualLawlibrary

[F]or probable cause for copyright infringement to exist, essentially, it must be shown
that the violator reproduced the works without the consent of the owner of the
copyright.

In the present case before Us, [the petitioners] do not dispute that: (1) LEG was issued
copyrights for the illustrations of the hatch doors under Section 171.i, and for the hatch
doors themselves as ornamental design or model for articles of manufacture pursuant
to Section 171.h of R.A. [No.] 8293; and (2) they manufactured hatch doors based on
drawings and design furnished by SKI-FB, which consists of LEC works subject of
copyrights. These two (2) circumstances, taken together, are sufficient to excite the
belief in a reasonable mind that [the petitioners] are probably guilty of copyright
infringement. First, LEC has indubitably established that it is the owner of the copyright
for both the illustrations of the hatch doors and [the] hatch doors themselves, and
second, [the petitioners] manufactured hatch doors based on LEC's works, sans EEC's
consent.

xxxx

[T]he fact that LEC enjoys ownership of copyright not only on the illustrations of the
hatch doors but on the hatch doors itself and that [the petitioners] manufactured the
same is sufficient to warrant a finding of probable cause for copyright infringement. x x
x.31 ChanRoblesVirtualawlibrary

The CA further ruled that any allegation on the non-existence of ornamental or artistic
values on the hatch doors are matters of evidence which are best ventilated in a full-
blown trial rather than during the preliminary investigation stage. Accordingly, the CA
disposed as follows:
chanRoblesvirtualLawlibrary

WHEREFORE, considering the foregoing premises, the present Petition is GRANTED,

and accordingly, the assailed Resolutions dated 10 March 2006 and 25 May 2006
are ANNULLED and SET ASIDE. The Resolution of the Secretory of Justice dated 27
January 2006 finding probable cause against [the petitioners], is REINSTATED.

SO ORDERED.32 ChanRoblesVirtualawlibrary

The CA reiterated the above ruling in its Resolution 33 dated February 24, 2011 when it
denied the petitioners' motion for reconsideration. Hence, the present appeal, arguing
that:
 I. There was no evidence of actual reproduction of the hatch doors during the
preliminary investigation that would lead the investigating prosecutor to declare
the existence of probable cause;34

II. Even assuming that the petitioners manufactured hatch doors based on the
illustrations and plans covered by the respondent's Certificate of Registration
Nos. 1-2004-13 and 1-2004-14, the petitioners could not have committed
copyright infringement. Certificate of Registration Nos. 1-2004-13 and 1-2004-
14 are classified under Section 172(i) which pertains to "illustrations, maps,
plans, sketches, charts and three-dimensional works relative to geography,
topography, architecture or science." Hence the original works that are
copyrighted are the illustrations and plans of interior hatch doors and exterior
hatch doors. Thus, it is the reproduction of the illustrations and plans covered by
the copyright registration that amounts to copyright infringement. The
petitioners did not reproduce the illustrations and plans covered under Certificate
of Registration Nos. 1-2004-13 and 1-2004-14.

The manufacturing of hatch doors per se does not fall within the purview of
copyright infringement because copyright protection does not extend to the
objects depicted in the illustrations and plans; 35 and

III. LEC's copyright registration certificates are not conclusive proofs that the items
covered thereby are copyrightable. The issuance of registration certificate and
acceptance of deposit by the National Library is ministerial in nature and does
not involve a determination of whether the item deposited is copyrightable or
not. Certificates of registration and deposit serve merely as a notice of recording
and registration of the work but do not confer any right or title upon the
registered copyright owner or automatically put his work under the protective
mantle of the copyright law.36

Ruling of the Court

It is a settled judicial policy that courts do not reverse the Secretary of Justice's
findings and conclusions on the matter of probable cause. Courts are not empowered to
substitute their judgment for that of the executive branch upon which full discretionary
authority has been delegated in the determination of probable cause during a
preliminary investigation. Courts may, however, look into whether the exercise of such
discretionary authority was attended with grave abuse of discretion. 37

Otherwise speaking, "judicial review of the resolution of the Secretary of Justice is

limited to a determination of whether there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction." 38

The CA anchored its act of reversing the DOJ Resolution dated March 10, 2006 upon the
foregoing tenets. Thus, the Court's task in the present petition is only to determine if
the CA erred in concluding that the DOJ committed grave abuse of discretion in
directing the withdrawal of any criminal information filed against the petitioners.

Grave abuse of discretion has been defined as "such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be
grave as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act
at all in contemplation of law."39 "'Capricious,' usually used in tandem with the term
'arbitrary,' conveys the notion of willful and unreasoning action." 40 cralawred

According to the CA, the DOJ's erratic findings on the presence or absence of probable
cause constitute grave abuse of discretion. The CA explained:
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This, to Our minds, in itself creates a nagging, persistent doubt as to whether [the DOJ
Secretary] issued the said resolutions untainted with a whimsical and arbitrary use of
his discretion. For one cannot rule that there is reason to overturn the investigating
prosecutor's findings at the first instance and then go on to rule that ample evidence
exists showing that the hatch doors possess artistic and ornamental elements at the
second instance and proceed to rule that no such artistry can be found on the purely
utilitarian hatch doors at the last instance. x x x. 41 ChanRoblesVirtualawlibrary

The Court disagrees. It has been held that the issuance by the DOJ of several
resolutions with varying findings of fact and conclusions of law on the existence of
probable cause, by itself, is not indicative of grave abuse of discretion. 42

Inconsistent findings and conclusions on the part of the DOJ will denote grave abuse of
discretion only if coupled with gross misapprehension of facts, 43 which, after a
circumspect review of the records, is not attendant in the present case.

The facts upon which the resolutions issued by the investigating prosecutor and the DOJ
were actually uniform, viz:
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(a) LEC is the registered owner of plans/drawings for interior and exterior hatch doors under
Certificate of Registration Nos. 1-2004-13 and 1-2004-14 classified under Section 172(i)
of R.A. No. 8293 as pertaining to "illustrations, maps, plans, sketches, charts and three-
dimensional works relative to geography, topography, architecture or science";
(b) LEC is also the registered owner of plans/drawings for interior and exterior hatch doors
under Certificate of Registration Nos. H-2004-566 and H-2004-567 classified under
Section 172(h) of R.A. No. 8293 as to "original ornamental designs or models for articles
of manufacture, whether or not registrable as an industrial design, and other works of
applied art";
(c) LEC as the subcontractor of SKI-FB in the Project first manufactured and installed the
interior and exterior hatch doors at the Manansala Tower in Rockwell Center, Makati
City, from the 7th to 22nd floors. The hatch doors were based on the plans/drawings
submitted by LEC to SKI-FB and subject of the above copyright registration numbers;
and
(d) thereafter, Metrotech fabricated and installed hatch doors at the same building's 23rd to
41st floor based on the drawings and specifications provided by SKI-FB.44
The positions taken by the DOJ and the investigating prosecutor differed only in the
issues tackled and the conclusions arrived at.

It may be observed that in the Resolution dated August 18, 2005 issued by the
investigating prosecutor, the primary issue was whether the hatch doors of LEC fall
within copyrightable works. This was resolved by ruling that hatch doors themselves are
not covered by LEC's Certificate of Registration Nos. 1-2004-13 and 1-2004-14 issued
on the plans/drawing depicting them. The DOJ reversed this ruling in its Resolution
dated January 27, 2006 wherein the issue was streamlined to whether the illustrations
of the hatch doors under LEC's Certificate of Registration Nos. H-2004-566 and H-2004-
567 bore artistic ornamental designs.

This situation does not amount to grave abuse of discretion but rather a mere
manifestation of the intricate issues involved in the case which thus resulted in varying
conclusions of law. Nevertheless, the DOJ ultimately pronounced its definite construal of
copyright laws and their application to the evidence on record through its Resolution
dated March 10, 2006 when it granted the petitioners' motion for reconsideration. Such
construal, no matter how erroneous to the CA's estimation, did not amount to grave
abuse of discretion. "[I]t is elementary that not every erroneous conclusion of law or
fact is an abuse of discretion."45

More importantly, the Court finds that no grave abuse of discretion was committed by
the DOJ in directing the withdrawal of the criminal information against the respondents
because a finding of probable cause contradicts the evidence on record, law, and
jurisprudence.

"Probable cause has been defined as the existence of such facts and circumstances as
would excite the belief in a reasonable mind, acting on the facts within the knowledge
of the prosecutor, that the person charged was guilty of the crime for which he was
prosecuted. It is a reasonable ground of presumption that a matter is, or may be, well-
founded on such a state of facts in the mind of the prosecutor as would lead a person of
ordinary caution and prudence to believe, or entertain an honest or strong suspicion,
that a thing is so."46

"The term does not mean actual and positive cause nor does it import absolute
certainty. It is merely based on opinion and reasonable belief. Thus, a finding of
probable cause does not require an inquiry into whether there is sufficient evidence to
procure a conviction. It is enough that it is believed that the act or omission complained
of constitutes the offense charged."47

"In order that probable cause to file a criminal case may be arrived at, or in order to
engender the well-founded belief that a crime has been committed, the elements of the
crime charged should be present. This is based on the principle that every crime is
defined by its elements, without which there should be - at the most - no criminal
offense."48

A copyright refers to "the right granted by a statute to the proprietor of an intellectual

production to its exclusive use and enjoyment to the extent specified in the
statute."49 Under Section 177 of R.A. No. 8293, the Copyright or Economic Rights
consist of the exclusive right to carry out, authorize or prevent the following acts:
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177.1 Reproduction of the work or substantial portion of the work;

177.2 Dramatization, translation, adaptation, abridgment, arrangement or other
transformation of the work;
177.3 The first public distribution of the original and each copy of the work by sale or other
forms of transfer of ownership;
177.4 Rental of the original or a copy of an audiovisual or cinematographic work, a work
embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the
original or the copy which is the subject of the rental;
177.5 Public display of the original or a copy of the work;
177.6 Public performance of the work; and
177.7 Other communication to the public of the work.
Copyright infringement is thus committed by any person who shall use original literary
or artistic works, or derivative works, without the copyright owner's consent in such a
manner as to violate the foregoing copy and economic rights. For a claim of copyright
infringement to prevail, the evidence on record must demonstrate: (1) ownership of a
validly copyrighted material by the complainant; and (2) infringement of the copyright
by the respondent.50

While both elements subsist in the records, they did not simultaneously concur so as to
substantiate infringement of LEC's two sets of copyright registrations.

The respondent failed to substantiate the alleged reproduction of the drawings/sketches

of hatch doors copyrighted under Certificate of Registration Nos. 1-2004-13 and 1-
2004-14. There is no proof that the respondents reprinted the copyrighted
sketches/drawings of LEC's hatch doors. The raid conducted by the NBI on Metrotech's
premises yielded no copies or reproduction of LEC's copyrighted sketches/drawings of
hatch doors. What were discovered instead were finished and unfinished hatch doors.

Certificate of Registration Nos. 1-2004-13 and 1-2004-14 pertain to class work "I"
under Section 172 of R.A. No. 8293 which covers "illustrations, maps, plans, sketches,
charts and three-dimensional works relative to geography, topography, architecture or
science."51 As such, LEC's copyright protection there under covered only the hatch door
sketches/drawings and not the actual hatch door they depict. 52

As the Court held in Pearl and Dean (Philippines), Incorporated v. Shoemart,

Incorporated:53
Copyright, in the strict sense of the term, is purely a statutory right. Being a mere
statutory grant, the rights are limited to what the statute confers. It may be obtained
and enjoyed only with respect to the subjects and by the persons, and on terms and
conditions specified in the statute. Accordingly, it can cover only the works falling
within the statutory enumeration or description. 54 (Citations omitted and italics in the
original)
Since the hatch doors cannot be considered as either illustrations, maps, plans,
sketches, charts and three-dimensional works relative to geography, topography,
architecture or science, to be properly classified as a copyrightable class "I" work, what
was copyrighted were their sketches/drawings only, and not the actual hatch doors
themselves. To constitute infringement, the usurper must have copied or appropriated
the original work of an author or copyright proprietor, absent copying, there can be no
infringement of copyright. 55

"Unlike a patent, a copyright gives no exclusive right to the art disclosed; protection is
given only to the expression of the idea — not the idea itself." 56

The respondent claimed that the petitioners committed copyright infringement when
they fabricated/manufactured hatch doors identical to those installed by LEC. The
petitioners could not have manufactured such hatch doors in substantial quantities had
they not reproduced the copyrighted plans/drawings submitted by LEC to SK1-FB. This
insinuation, without more, does not suffice to establish probable cause for infringement
against the petitioners. "[Although the determination of probable cause requires less
than evidence which would justify conviction, it should at least be more than mere
suspicion."57

Anent, LEC's Certificate of Registration Nos. H-2004-566 and H-2004-567, the Court
finds that the ownership thereof was not established by the evidence on record because
the element of copyrightability is absent.

"Ownership of copyrighted material is shown by proof of originality and

copyrightability."58 While it is true that where the complainant presents a copyright
certificate in support of the claim of infringement, the validity and ownership of the
copyright is presumed. This presumption, however, is rebuttable and it cannot be
sustained where other evidence in the record casts doubt on the question of
ownership,59 as in the instant case.

Moreover, "[t]he presumption of validity to a certificate of copyright registration merely

orders the burden of proof. The applicant should not ordinarily be forced, in the first
instance, to prove all the multiple facts that underline the validity of the copyright
unless the respondent, effectively challenging them, shifts the burden of doing so to the
applicant."60

Here, evidence negating originality and copyrightability as elements of copyright

ownership was satisfactorily proffered against LEC's certificate of registration.

The following averments were not successfully rebuffed by LEC:

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[T]he hinges on LEC's "hatch doors" have no ornamental or artistic value. In fact, they
are just similar to hinges found in truck doors that had been in common use since the
1960's. The gaskets on LEC's "hatch doors", aside from not being ornamental or
artistic, were merely procured from a company named Pemko and are not original
creations of LEC. The locking device in LEC's "hatch doors" are ordinary drawer locks
commonly used in furniture and office desks.61 ChanRoblesVirtualawlibrary

In defending the copyrightability of its hatch doors' design, LEC merely claimed:
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LEC's Hatch Doors were particularly designed to blend in with the floor of the units in
which they are installed and, therefore, appeal to the aesthetic sense of the owner of
units or any visitors thereto[;]

LEC's Hatch Doors have a distinct set of hinges, a distinct door a distinct jamb, all of
which are both functional or utilitarian and artistic or ornamental at the same time[;]
and
Moreover, the Project is a high-end residential building located in the Rockwell Center,
a very prime area in Metro Manila. As such, the owner of the Project is not expected to
settle for Hatch Doors that simply live up to their function as such. The owner would
require, as is the case for the Project, Hatch Doors that not only fulfill their utilitarian
purposes but also appeal to the artistic or ornamental sense of their beholders. 62 ChanRoblesVirtualawlibrary

From the foregoing description, it is clear that the hatch doors were not artistic works
within the meaning of copyright laws. A copyrightable work refers to literary and artistic
works defined as original intellectual creations in the literary and artistic domain. 63

A hatch door, by its nature is an object of utility. It is defined as a small door, small
gate or an opening that resembles a window equipped with an escape for use in case of
fire or emergency.64 It is thus by nature, functional and utilitarian serving as egress
access during emergency. It is not primarily an artistic creation but rather an object of
utility designed to have aesthetic appeal. It is intrinsically a useful article, which, as a
whole, is not eligible for copyright.

A "useful article" defined as an article "having an intrinsic utilitarian function that is not
merely to portray the appearance of the article or to convey information" is excluded
from copyright eligibility.65

The only instance when a useful article may be the subject of copyright protection is
when it incorporates a design element that is physically or conceptually separable from
the underlying product. This means that the utilitarian article can function without the
design element. In such an instance, the design element is eligible for copyright
protection.66

The design of a useful article shall be considered a pictorial, graphic, or sculptural work
only if, and only to the extent that, such design incorporates pictorial, graphic, or
sculptural features that can be identified separately from, and are capable of existing
independently of, the utilitarian aspects of the article. 67

A belt, being an object utility with the function of preventing one's pants from falling
down, is in itself not copyrightable. However, an ornately designed belt buckle which is
irrelevant to or did not enhance the belt's function hence, conceptually separable from
the belt, is eligible for copyright. It is copyrightable as a sculptural work with
independent aesthetic value, and not as an integral element of the belt's functionality. 68

A table lamp is not copyrightable because it is a functional object intended for the
purpose of providing illumination in a room. The general shape of a table lamp is
likewise not copyrightable because it contributes to the lamp's ability to illuminate the
reaches of a room. But, a lamp base in the form of a statue of male and female dancing
figures made of semi vitreous china is copyrightable as a work of art because it is
unrelated to the lamp's utilitarian function as a device used to combat darkness. 69

In the present case, LEC's hatch doors bore no design elements that are physically and
conceptually separable, independent and distinguishable from the hatch door itself. The
allegedly distinct set of hinges and distinct jamb, were related and necessary hence,
not physically or conceptually separable from the hatch door's utilitarian function as an
apparatus for emergency egress. Without them, the hatch door will not function.
More importantly, they are already existing articles of manufacture sourced from
different suppliers. Based on the records, it is unrebutted that: (a) the hinges are
similar to those used in truck doors; (b) the gaskets were procured from a company
named Pemko and are not original creations of LEC; and (c) the locking device are
ordinary drawer locks commonly used in furniture and office desks.

Being articles of manufacture already in existence, they cannot be deemed as original

creations. As earlier stated, valid copyright ownership denotes originality of the
copyrighted material. Originality means that the material was not copied, evidences at
least minimal creativity and was independently created by the author. 70 It connotes
production as a result of independent labor.71 LEC did not produce the door jambs and
hinges; it bought or acquired them from suppliers and thereafter affixed them to the
hatch doors. No independent original creation can be deduced from such acts.

The same is true with respect to the design on the door's panel. As LEC has stated, the
panels were "designed to blend in with the floor of the units in which they [were]
installed."72 Photos of the panels indeed show that their color and pattern design were
similar to the wooden floor parquet of the condominium units. 73 This means that the
design on the hatch door panel was not a product of LEC's independent artistic
judgment and discretion but rather a mere reproduction of an already existing design.

Verily then, the CA erred in holding that a probable cause for copyright infringement is
imputable against the petitioners. Absent originality and copyrightability as elements of
a valid copyright ownership, no infringement can subsist. chanroblesla w

WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision

dated July 9, 2010 and Resolution dated February 24, 2011 of the Court of Appeals in
CA-G.R. SP No. 95471 are REVERSED and SET ASIDE. The Resolutions dated March
10, 2006 and May 25, 2006 of the Department of Justice in I.S. No. 2004-925
dismissing the complaint for copyright infringement are REINSTATED.

G.R. No. 190706               July 21, 2014

SHANG PROPERTIES REALTY CORPORATION (formerly THE SHANG GRAND TOWER

CORPORATION) and SHANG PROPERTIES, INC. (formerly EDSA PROPERTIES HOLDINGS,
INC.), Petitioners,
vs.
ST. FRANCIS DEVELOPMENT CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari  is the Decision  dated December 18, 2009 of the
1 2

Court of Appeals (CA) in CA-G.R. SP No. 105425 which affirmed with modification the
Decision  dated September 3, 2008 of the Intellectual Property Office (IPO) Director-General. The
3

CA: (a) affirmed the denial of the application for registration of the mark "ST. FRANCIS TOWERS"
filed by petitioners Shang Properties Realty Corporation and Shang Properties, Inc. (petitioners); ( b)
found petitioners to have committed unfair competition for using the marks "THE ST. FRANCIS
TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE"; (c) ordered petitioners to cease and
desist from using "ST. FRANCIS" singly or as part of a composite mark; and (d) ordered petitioners
to jointly and severally pay respondent St. Francis Square Development Corporation (respondent) a
fine in the amount of ₱200,000.00.

The Facts

Respondent – a domestic corporation engaged in the real estate business and the developer of the
St. Francis Square Commercial Center, built sometime in 1992, located at Ortigas Center,
Mandaluyong City, Metro Manila (Ortigas Center)  – filed separate complaints against petitioners
4

before the IPO - Bureau of Legal Affairs (BLA), namely: (a) an intellectual property violation case for
unfair competition, false or fraudulent declaration, and damages arising from petitioners’ use and
filing of applications for the registration of the marks "THE ST. FRANCIS TOWERS" and "THE ST.
FRANCIS SHANGRI-LA PLACE," docketed as IPV Case No. 10-2005-00030 (IPV Case); and (b) an
inter partes case opposing the petitioners’ application for registration of the mark "THE ST.
FRANCIS TOWERS" for use relative to the latter’s business, particularly the construction of
permanent buildings or structures for residential and office purposes, docketed as Inter PartesCase
No. 14-2006-00098 (St. Francis Towers IP Case); and (c) an inter partes case opposing the
petitioners’ application for registration of the mark "THE ST. FRANCIS SHANGRI-LA PLACE,"
docketed as IPC No. 14-2007-00218 (St. Francis Shangri-La IP Case). 5

In its complaints, respondent alleged that it has used the mark "ST. FRANCIS" to identify its
numerous property development projects located at Ortigas Center, such as the aforementioned St.
Francis Square Commercial Center, a shopping mall called the "St. Francis Square," and a mixed-
use realty project plan thatincludes the St. Francis Towers. Respondent added that as a result of its
continuous use of the mark "ST. FRANCIS" in its real estate business,it has gained substantial
goodwill with the public that consumers and traders closely identify the said mark with its property
development projects. Accordingly, respondent claimed that petitioners could not have the mark
"THE ST. FRANCIS TOWERS" registered in their names, and that petitioners’ use of the marks
"THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" in their own real
estate development projects constitutes unfair competition as well as false or fraudulent declaration. 6

Petitioners denied committing unfair competition and false or fraudulent declaration, maintaining that
they could register the mark "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA
PLACE" under their names. They contended that respondent is barred from claiming ownership and
exclusive use ofthe mark "ST. FRANCIS" because the same is geographically descriptive ofthe
goods or services for which it is intended to be used.  This is because respondent’s as well as
7

petitioners’ real estate development projects are locatedalong the streets bearing the name "St.
Francis," particularly, St. FrancisAvenue and St. Francis Street (now known as Bank Drive),  both
8

within the vicinity of the Ortigas Center.

The BLA Rulings

On December 19, 2006, the BLA rendered a Decision  in the IPV Case, and found that petitioners
9

committed acts of unfair competition against respondent by its use of the mark "THE ST. FRANCIS
TOWERS" but not with its use of the mark "THE ST. FRANCIS SHANGRI-LA PLACE." It, however,
refused to award damages in the latter’s favor, considering that there was no evidence presented to
substantiate the amount of damages it suffered due to the former’s acts. The BLA found that "ST.
FRANCIS," being a name of a Catholic saint, may be considered as an arbitrary mark capable of
registration when used in real estate development projects as the name has no direct connection or
significance when used in association with real estate. The BLA neither deemed "ST. FRANCIS" as
a geographically descriptive mark, opiningthat there is no specific lifestyle, aura, quality or
characteristic that the real estate projects possess except for the fact that they are located along St.
Francis Avenueand St. Francis Street (now known as Bank Drive), Ortigas Center. In this light, the
BLA found that while respondent’s use of the mark "ST. FRANCIS" has not attained exclusivity
considering that there are other real estate development projects bearing the name "St. Francis" in
other areas,  it must nevertheless be pointed out that respondent has been known to be the only
10

real estate firm to transact business using such name within the Ortigas Center vicinity. Accordingly,
the BLA considered respondent to have gained goodwill and reputation for its mark, which therefore
entitles it to protection against the use by other persons, at least, to those doing business within the
Ortigas Center. 11

Meanwhile, on March 28, 2007, the BLA rendered a Decision  in the St. Francis Towers IP Case,
12

denying petitioners’ application for registration of the mark "THE ST. FRANCIS TOWERS."
Excluding the word "TOWERS" in view of petitioners’ disclaimer thereof, the BLA ruled that
petitioners cannot register the mark "THE ST. FRANCIS" since it is confusingly similar to
respondent’s"ST. FRANCIS" marks which are registered with the Department of Trade and
Industry(DTI). It held that respondent had a better right over the use of the mark "ST. FRANCIS"
because of the latter’s appropriation and continuous usage thereof for a long period of time.  A little
13

over a year after, or on March 31, 2008, the BLA then rendered a Decision  in the St. Francis
14

Shangri-La IP Case, allowing petitioners’ application for registration of the mark "THE ST. FRANCIS
SHANGRI-LA PLACE." It found that respondent cannot preclude petitioners from using the mark
"ST. FRANCIS" as the records show that the former’s use thereof had not been attended with
exclusivity. More importantly, it found that petitioners had adequately appended the word "Shangri-
La" to its composite mark to distinguish it from that of respondent, in which case, the former had
removed any likelihood of confusion that may arise from the contemporaneous use by both parties of
the mark "ST. FRANCIS."

Both parties appealed the decision in the IPV Case, while petitioners appealed the decision in the St.
Francis Towers IP Case. Due to the identity of the parties and issues involved, the IPO Director-
General ordered the consolidation of the separate appeals.  Records are, however, bereft of any
15

showing that the decision in the St. Francis Shangri-La IP Casewas appealed by either party and,
thus, is deemed to have lapsed into finality.

The IPO Director-General Ruling

In a Decision  dated September 3, 2008, then IPO Director-General Adrian S. Cristobal, Jr.
16

affirmedthe rulings of the BLA that: (a) petitioners cannot register the mark "THEST. FRANCIS
TOWERS"; and (b) petitioners are not guilty of unfair competition in its use of the mark "THE ST.
FRANCIS SHANGRI-LA PLACE." However, the IPO DirectorGeneral reversed the BLA’s findingthat
petitioners committed unfair competition through their use of the mark "THE ST. FRANCIS
TOWERS," thus dismissing such charge. He foundthat respondent could not be entitled to the
exclusive use of the mark "ST. FRANCIS," even at least to the locality where it conducts its
business, because it is a geographically descriptive mark, considering that it was petitioners’ as well
as respondent’s intention to use the mark "ST. FRANCIS"in order to identify, or at least associate,
their real estate development projects/businesses with the place or location where they are
situated/conducted, particularly, St. Francis Avenue and St. Francis Street (now known as Bank
Drive), Ortigas Center. He further opined that respondent’s registration of the name "ST. FRANCIS"
with the DTI is irrelevant since what should be controlling are the trademark registrations with the
IPO itself.  Also, the IPO Director-General held that since the parties are both engaged in the real
17

estate business, it would be "hard to imagine that a prospective buyer will be enticed to buy, rent or
purchase [petitioners’] goods or servicesbelieving that this is owned by [respondent] simply because
of the name ‘ST. FRANCIS.’ The prospective buyer would necessarily discuss things with the
representatives of [petitioners] and would readily know that this does not belong to [respondent]." 18

Disagreeing solely with the IPO Director-General’s ruling on the issue of unfair competition (the bone
of contention in the IPV Case), respondent elevated the sameto the CA.

In contrast, records do not show that either party appealed the IPO Director-General’s ruling on the
issue ofthe registrability of the mark "THE ST. FRANCIS TOWERS" (the bone of contention in the
St. Francis Towers IP Case). As such, said pronouncement isalso deemed to have lapsed into
finality.

The CA Ruling

In a Decision  dated December 18, 2009, the CA found petitioners guilty of unfair competition not
19

only withrespect to their use of the mark "THE ST. FRANCIS TOWERS" but alsoof the mark "THE
ST. FRANCIS SHANGRI-LA PLACE." Accordingly, itordered petitioners to cease and desist from
using "ST. FRANCIS" singly or as part of a composite mark, as well as to jointly and severally pay
respondent a fine in the amount of ₱200,000.00.

The CA did not adhere to the IPO Director-General’s finding that the mark "ST. FRANCIS" is
geographically descriptive, and ruled that respondent – which has exclusively and continuously used
the mark "ST. FRANCIS" for more than a decade, and,hence, gained substantial goodwill and
reputation thereby – is very muchentitled to be protected against the indiscriminate usage by other
companies of the trademark/name it has so painstakingly tried to establish and maintain. Further, the
CA stated that even on the assumption that "ST. FRANCIS" was indeed a geographically descriptive
mark, adequateprotection must still begiven to respondent pursuant to the Doctrine of Secondary
Meaning. 20

Dissatisfied, petitioners filed the present petition.

The Issue Before the Court

With the decisions in both Inter PartesCases having lapsed into finality, the sole issue thus left for
the Court’s resolution is whether or not petitioners are guilty of unfair competition in using the marks
"THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

The Court’s Ruling

The petition is meritorious.

Section 168 of Republic Act No. 8293,  otherwise known as the "Intellectual Property Code of the
21

Philippines" (IP Code), provides for the rules and regulations on unfair competition.

To begin, Section 168.1 qualifies who is entitled to protection against unfair competition. It states
that "[a]person who has identified in the mind of the public the goods he manufacturesor deals in, his
business or services from those of others, whether or not a registered mark is employed, has a
property right in the goodwill of the said goods, business or services so identified, which will be
protected inthe same manner as other property rights."

Section 168.2proceeds to the core of the provision, describing forthwith who may be found guilty of
and subject to an action of unfair competition – that is, "[a]ny person who shall employ deception or
any other means contrary to good faith by which he shall pass off the goods manufactured by him or
in which he deals, or his business, or services for those of the one having established such goodwill,
or who shall commit any acts calculated to produce said result x x x."

Without limiting its generality, Section 168.3goes on to specify examples of acts which are
considered as constitutive of unfair competition, viz.:

168.3. In particular, and without in any way limiting the scope of protection against unfair
competition, the following shall be deemed guilty of unfair competition:

(a) Any person who is selling his goods and gives them the general appearance of goods of
another manufacturer or dealer, either as to the goods themselves or in the wrapping of the
packages in which they are contained, or the devices or words thereon, or in any other
feature of their appearance, which would be likely to influence purchasers to believe that the
goods offered are those of a manufacturer or dealer, other than the actual manufacturer or
dealer, or who otherwise clothes the goods with such appearance as shall deceive the public
and defraud another of his legitimate trade, or any subsequent vendor ofsuch 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 service of another who has identified
such services in the mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall
commit any other act contrary to good faith of a nature calculated to discredit the goods,
business or services of another.

Finally, Section 168.4 dwells on a matter of procedure by stating that the "[t]he remedies provided by
Sections 156,  157,  and 161  shall apply mutatis mutandis."
22 23 24

The statutory attribution of the unfair competition concept is wellsupplemented by jurisprudential

pronouncements. In the recent case of Republic Gas Corporation v. Petron Corporation,  the Court
25

has echoed the classic definition of the term which is "‘the passing off (or palming off) or attempting
to pass off upon the public of the goods or business of one person as the goods or business of
another with the end and probable effect of deceiving the public.’ Passing off (or palming off) takes
place where the defendant, by imitative devices on the general appearance of the goods, misleads
prospective purchasers into buying his merchandise under the impression that they are buying that
of his competitors. [In other words], the defendant gives his goods the general appearance of the
goods of his competitor with the intention of deceiving the publicthat the goods are those of his
competitor."  The "true test" of unfair competition has thus been "whether the acts of the defendant
26

have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases
under the ordinary conditions of theparticular trade to which the controversy relates." Based on the
foregoing, it is therefore essential to prove the existence of fraud, or the intent to deceive, actual or
probable,  determined through a judicious scrutiny of the factual circumstances attendant to a
27

particular case. 28
Here, the Court finds the element of fraud to be wanting; hence, there can be no unfair competition.
The CA’scontrary conclusion was faultily premised on its impression that respondenthad the right to
the exclusive use of the mark "ST. FRANCIS," for which the latter had purportedly established
considerable goodwill. What the CA appears to have disregarded or been mistaken in its
disquisition, however, is the geographicallydescriptive nature of the mark "ST. FRANCIS" which thus
bars its exclusive appropriability, unless a secondary meaning is acquired. As deftly explained in the
U.S. case of Great Southern Bank v. First Southern Bank:  "[d]escriptive geographical terms are
29

inthe ‘public domain’ in the sense that every seller should have the right to inform customers of the
geographical origin of his goods. A ‘geographically descriptive term’ is any noun or adjective that
designates geographical location and would tend to be regarded by buyers as descriptive of the
geographic location of origin of the goods or services. A geographically descriptive term can indicate
any geographic location on earth, such as continents, nations, regions, states, cities, streets and
addresses, areas of cities, rivers, and any other location referred to by a recognized name. In order
to determine whether or not the geographic term in question is descriptively used, the following
question is relevant: (1) Is the mark the name of the place or region from which the goods actually
come? If the answer is yes, then the geographic term is probably used in a descriptive sense, and
secondary meaning is required for protection." 30

In Burke-Parsons-Bowlby Corporation v. Appalachian Log Homes, Inc.,  it was held that secondary
31

meaningis established when a descriptive mark no longer causes the public to associate the goods
with a particular place, but to associate the goods with a particular source.In other words, it is not
enough that a geographically-descriptive mark partakes of the name of a place known generally to
the public to be denied registration as it is also necessary to show that the public would make a
goods/place association – that is, to believe that the goods for which the mark is sought to be
registered originatein that place.  To hold sucha belief, it is necessary, of course, that the purchasers
1âwphi1

perceive the mark as a place name, from which the question of obscurity or remoteness then comes
to the fore.  The more a geographical area is obscure and remote, it becomes less likely that the
32

public shall have a goods/place association with such area and thus, the mark may not be deemed
as geographically descriptive. However, where there is no genuine issue that the geographical
significance of a term is its primary significanceand where the geographical place is neither obscure
nor remote, a public association of the goods with the place may ordinarily be presumed from the
fact that the applicant’s own goods come from the geographical place named in the mark. 33

Under Section 123.2  of the IP Code, specific requirements have to be met in order to conclude that
34

a geographically-descriptive mark has acquired secondary meaning, to wit: (a) the secondary
meaning must have arisen as a result of substantial commercial use of a mark in the Philippines; (b)
such use must result in the distinctiveness of the mark insofar as the goods or theproducts are
concerned; and (c) proof of substantially exclusive and continuous commercial use in the Philippines
for five (5) years beforethe date on which the claim of distinctiveness is made. Unless secondary
meaning has been established, a geographically-descriptive mark, dueto its general public domain
classification, is perceptibly disqualified from trademark registration. Section 123.1(j) of the IP Code
states this rule as follows:

SEC. 123. Registrability. –

123.1 A mark cannot be registered if it:

xxxx

(j) Consists exclusively of signs orof indications that may serve in trade to designate the kind, quality,
quantity, intended purpose, value, geographical origin, time or production of the goods or rendering
of the services, or other characteristics of the goods or services; (Emphasis supplied) x x x x
Cognizant of the foregoing, the Court disagrees with the CA that petitioners committed unfair
competition due to the mistaken notion that petitioner had established goodwill for the mark "ST.
FRANCIS" precisely because said circumstance, by and of itself, does not equateto fraud under the
parameters of Section 168 of the IP Code as above-cited. In fact, the records are bereft of any
showing thatpetitioners gave their goods/services the general appearance that it was respondent
which was offering the same to the public. Neither did petitioners employ any means to induce the
public towards a false belief that it was offering respondent’s goods/services. Nor did petitioners
make any false statement or commit acts tending to discredit the goods/services offered by
respondent. Accordingly, the element of fraud which is the core of unfair competition had not been
established.

Besides, respondent was not able toprove its compliance with the requirements stated in Section
123.2 of the IP Code to be able to conclude that it acquired a secondary meaning – and, thereby, an
exclusive right – to the "ST. FRANCIS" mark, which is, as the IPO Director-General correctly pointed
out, geographically-descriptive of the location in which its realty developments have been built, i.e.,
St. Francis Avenue and St. Francis Street (now known as "Bank Drive"). Verily, records would reveal
that while it is true that respondent had been using the mark "ST. FRANCIS" since 1992, its use
thereof has been merely confined to its realty projects within the Ortigas Center, as specifically
mentioned.As its use of the mark is clearly limited to a certain locality, it cannot be said thatthere
was substantial commercial use of the same recognizedall throughout the country. Neither is there
any showing of a mental recognition in buyers’ and potential buyers’ minds that products connected
with the mark "ST. FRANCIS" are associated with the same source  – that is, the enterprise of
35

respondent. Thus, absent any showing that there exists a clear goods/service-association between
the realty projects located in the aforesaid area and herein respondent as the developer thereof, the
latter cannot besaid to have acquired a secondary meaning as to its use of the "ST. FRANCIS"
mark.

In fact, even on the assumption that secondary meaning had been acquired, said finding only
accords respondents protectional qualification under Section 168.1 of the IP Code as above quoted.
Again, this does not automatically trigger the concurrence of the fraud element required under
Section 168.2 of the IP Code, as exemplified by the acts mentioned in Section 168.3 of the same.
Ultimately, as earlier stated, there can be no unfair competition without this element. In this respect,
considering too the notoriety of the Shangri-La brand in the real estate industry which dilutes
petitioners' propensity to merely ride on respondent's goodwill, the more reasonable conclusion is
that the former's use of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS
SHANGRI-LA PLACE" was meant only to identify, or at least associate, their real estate project/s
with its geographical location. As aptly observed by the IPO DirectorGeneral: 36

In the case at hand, the parties are business competitors engaged in real estate or property
development, providing goods and services directly connected thereto. The "goods" or "products" or
"services" are real estate and the goods and the services attached to it or directly related to it, like
sale or lease of condominium units, offices, and commercial spaces, such as restaurants, and other
businesses. For these kinds of goods or services there can be no description of its geographical
origin as precise and accurate as that of the name of the place where they are situated. (Emphasis
and underscoring supplied)

Hence, for all the reasons above-discussed, the Court hereby grants the instant petition, and, thus,
exonerates petitioners from the charge of unfair competition in the IPV Case. As the decisions in the
Inter Partes Cases were not appealed, the registrability issues resolved therein are hereby deemed
to have attained finality and, therefore, are now executory.
WHEREFORE, the petition is GRANTED. The Decision dated December 18, 2009 of the Court of
Appeals in CA-G.R. SP No. 105425 is hereby REVERSED and SET ASIDE. Accordingly, the
Decision dated September 3, 2008 of the Intellectual Property Office-Director General is
REINSTATED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

G.R. No. 194062               June 17, 2013

REPUBLIC GAS CORPORATION, ARNEL U. TY, MARI ANTONETTE N. TY, ORLANDO REYES,
FERRER SUAZO and ALVIN U. TV, Petitioners,
vs.
PETRON CORPORATION, PILIPINAS SHELL PETROLEUM CORPORATION, and SHELL
INTERNATIONAL PETROLEUM COMPANY LIMITED, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
petitioners seeking the reversal of the Decision1 dated July 2, 2010, and Resolution2 dated October
11, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 106385.

Stripped of non-essentials, the facts of the case, as summarized by the CA, are as follows:

Petitioners Petron Corporation ("Petron" for brevity) and Pilipinas Shell Petroleum Corporation
("Shell" for brevity) are two of the largest bulk suppliers and producers of LPG in the Philippines.
Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL cylinders
used for its LGP products. It is the sole entity in the Philippines authorized to allow refillers and
distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks.

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename,
trademarks, symbols or designs of its principal, Shell International Petroleum Company Limited,
including the marks SHELLANE and SHELL device in connection with the production, sale and
distribution of SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow
refillers and distributors to refill, use, sell and distribute SHELLANE LGP containers and products.
Private respondents, on the other hand, are the directors and officers of Republic Gas Corporation
("REGASCO" for brevity), an entity duly licensed to engage in, conduct and carry on, the business of
refilling, buying, selling, distributing and marketing at wholesale and retail of Liquefied Petroleum
Gas ("LPG").

LPG Dealers Associations, such as the Shellane Dealers Association, Inc., Petron Gasul Dealers
Association, Inc. and Totalgaz Dealers Association, received reports that certain entities were
engaged in the unauthorized refilling, sale and distribution of LPG cylinders bearing the registered
tradenames and trademarks of the petitioners. As a consequence, on February 5, 2004, Genesis
Adarlo (hereinafter referred to as Adarlo), on behalf of the aforementioned dealers associations, filed
a letter-complaint in the National Bureau of Investigation ("NBI") regarding the alleged illegal trading
of petroleum products and/or underdelivery or underfilling in the sale of LPG products.

Acting on the said letter-complaint, NBI Senior Agent Marvin E. De Jemil (hereinafter referred to as
"De Jemil") was assigned to verify and confirm the allegations contained in the letter-complaint. An
investigation was thereafter conducted, particularly within the areas of Caloocan, Malabon,
Novaliches and Valenzuela, which showed that several persons and/or establishments, including
REGASCO, were suspected of having violated provisions of Batas Pambansa Blg. 33 (B.P. 33). The
surveillance revealed that REGASCO LPG Refilling Plant in Malabon was engaged in the refilling
and sale of LPG cylinders bearing the registered marks of the petitioners without authority from the
latter. Based on its General Information Sheet filed in the Securities and Exchange Commission,
REGASCO’s members of its Board of Directors are: (1) Arnel U. Ty – President, (2) Marie Antoinette
Ty – Treasurer, (3) Orlando Reyes – Corporate Secretary, (4) Ferrer Suazo and (5) Alvin Ty
(hereinafter referred to collectively as private respondents).

De Jemil, with other NBI operatives, then conducted a test-buy operation on February 19, 2004 with
the former and a confidential asset going undercover. They brought with them four (4) empty LPG
cylinders bearing the trademarks of SHELLANE and GASUL and included the same with the
purchase of J&S, a REGASCO’s regular customer. Inside REGASCO’s refilling plant, they witnessed
that REGASCO’s employees carried the empty LPG cylinders to a refilling station and refilled the
LPG empty cylinders. Money was then given as payment for the refilling of the J&S’s empty
cylinders which included the four LPG cylinders brought in by De Jemil and his companion. Cash
Invoice No. 191391 dated February 19, 2004 was issued as evidence for the consideration paid.

After leaving the premises of REGASCO LPG Refilling Plant in Malabon, De Jemil and the other NBI
operatives proceeded to the NBI headquarters for the proper marking of the LPG cylinders. The LPG
cylinders refilled by REGASCO were likewise found later to be underrefilled.

Thus, on March 5, 2004, De Jemil applied for the issuance of search warrants in the Regional Trial
Court, Branch 24, in the City of Manila against the private respondents and/or occupants of
REGASCO LPG Refilling Plant located at Asucena Street, Longos, Malabon, Metro Manila for
alleged violation of Section 2 (c), in relation to Section 4, of B.P. 33, as amended by PD 1865. In his
sworn affidavit attached to the applications for search warrants, Agent De Jemil alleged as follows:

"x x x.

"4. Respondent’s REGASCO LPG Refilling Plant-Malabon is not one of those entities authorized to
refill LPG cylinders bearing the marks of PSPC, Petron and Total Philippines Corporation. A
Certification dated February 6, 2004 confirming such fact, together with its supporting documents,
are attached as Annex "E" hereof.

6. For several days in the month of February 2004, the other NBI operatives and I conducted
surveillance and investigation on respondents’ REGASCO LPG refilling Plant-Malabon. Our
surveillance and investigation revealed that respondents’ REGASCO LPG Refilling Plant-Malabon is
engaged in the refilling and sale of LPG cylinders bearing the marks of Shell International, PSPC
and Petron.

x x x.

8. The confidential asset and I, together with the other operatives of the NBI, put together a test-buy
operation. On February 19, 2004, I, together with the confidential asset, went undercover and
executed our testbuy operation. Both the confidential assets and I brought with us four (4) empty
LPG cylinders branded as Shellane and Gasul. x x x in order to have a successful test buy, we
decided to "ride-on" our purchases with the purchase of Gasul and Shellane LPG by J & S, one of
REGASCO’s regular customers.

9. We proceeded to the location of respondents’ REGASCO LPG Refilling Plant-Malabon and asked
from an employee of REGASCO inside the refilling plant for refill of the empty LPG cylinders that we
have brought along, together with the LPG cylinders brought by J & S. The REGASCO employee,
with some assistance from other employees, carried the empty LPG cylinders to a refilling station
and we witnessed the actual refilling of our empty LPG cylinders.

10. Since the REGASCO employees were under the impression that we were together with J & S,
they made the necessary refilling of our empty LPG cylinders alongside the LPG cylinders brought
by J & S. When we requested for a receipt, the REGASCO employees naturally counted our LPG
cylinders together with the LPG cylinders brought by J & S for refilling. Hence, the amount stated in
Cash Invoice No. 191391 dated February 19, 2004, equivalent to Sixteen Thousand Two Hundred
Eighty-Six and 40/100 (Php16,286.40), necessarily included the amount for the refilling of our four
(4) empty LPG cylinders. x x x.

11. After we accomplished the purchase of the illegally refilled LPG cylinders from respondents’
REGASCO LPG Refilling Plant-Malabon, we left its premises bringing with us the said LPG
cylinders. Immediately, we proceeded to our headquarters and made the proper markings of the
illegally refilled LPG cylinders purchased from respondents’ REGASCO LPG Refilling Plant-Malabon
by indicating therein where and when they were purchased. Since REGASCO is not an authorized
refiller, the four (4) LPG cylinders illegally refilled by respondents’ REGASCO LPG Refilling Plant-
Malabon, were without any seals, and when weighed, were underrefilled. Photographs of the LPG
cylinders illegally refilled from respondents’ REGASCO LPG Refilling Plant-Malabon are attached as
Annex "G" hereof. x x x."

After conducting a personal examination under oath of Agent De Jemil and his witness, Joel Cruz,
and upon reviewing their sworn affidavits and other attached documents, Judge Antonio M. Eugenio,
Presiding Judge of the RTC, Branch 24, in the City of Manila found probable cause and
correspondingly issued Search Warrants Nos. 04-5049 and 04-5050.

Upon the issuance of the said search warrants, Special Investigator Edgardo C. Kawada and other
NBI operatives immediately proceeded to the REGASCO LPG Refilling Station in Malabon and
served the search warrants on the private respondents. After searching the premises of REGASCO,
they were able to seize several empty and filled Shellane and Gasul cylinders as well as other allied
paraphernalia.

Subsequently, on January 28, 2005, the NBI lodged a complaint in the Department of Justice against
the private respondents for alleged violations of Sections 155 and 168 of Republic Act (RA) No.
8293, otherwise known as the Intellectual Property Code of the Philippines.

On January 15, 2006, Assistant City Prosecutor Armando C. Velasco recommended the dismissal of
the complaint. The prosecutor found that there was no proof introduced by the petitioners that would
show that private respondent REGASCO was engaged in selling petitioner’s products or that it
imitated and reproduced the registered trademarks of the petitioners. He further held that he saw no
deception on the part of REGASCO in the conduct of its business of refilling and marketing LPG.
The Resolution issued by Assistant City Prosecutor Velasco reads as follows in its dispositive
portion:
"WHEREFORE, foregoing considered, the undersigned finds the evidence against the respondents
to be insufficient to form a well-founded belief that they have probably committed violations of
Republic Act No. 9293. The DISMISSAL of this case is hereby respectfully recommended for
insufficiency of evidence."

On appeal, the Secretary of the Department of Justice affirmed the prosecutor’s dismissal of the
complaint in a Resolution dated September 18, 2008, reasoning therein that:

"x x x, the empty Shellane and Gasul LPG cylinders were brought by the NBI agent specifically for
refilling. Refilling the same empty cylinders is by no means an offense in itself – it being the
legitimate business of Regasco to engage in the refilling and marketing of liquefied petroleum gas. In
other words, the empty cylinders were merely filled by the employees of Regasco because they
were brought precisely for that purpose. They did not pass off the goods as those of complainants’
as no other act was done other than to refill them in the normal course of its business.

"In some instances, the empty cylinders were merely swapped by customers for those which are
already filled. In this case, the end-users know fully well that the contents of their cylinders are not
those produced by complainants. And the reason is quite simple – it is an independent refilling
station.

"At any rate, it is settled doctrine that a corporation has a personality separate and distinct from its
stockholders as in the case of herein respondents. To sustain the present allegations, the acts
complained of must be shown to have been committed by respondents in their individual capacity by
clear and convincing evidence. There being none, the complaint must necessarily fail. As it were,
some of the respondents are even gainfully employed in other business pursuits. x x x." 3

Dispensing with the filing of a motion for reconsideration, respondents sought recourse to the CA
through a petition for certiorari.

In a Decision dated July 2, 2010, the CA granted respondents’ certiorari petition. The fallo states:

WHEREFORE, in view of the foregoing premises, the petition filed in this case is hereby GRANTED.
The assailed Resolution dated September 18, 2008 of the Department of Justice in I.S. No. 2005-
055 is hereby REVERSED and SET ASIDE.

SO ORDERED.4

Petitioners then filed a motion for reconsideration. However, the same was denied by the CA in a
Resolution dated October 11, 2010.

Accordingly, petitioners filed the instant Petition for Review on Certiorari raising the following issues
for our resolution:

Whether the Petition for Certiorari filed by RESPONDENTS should have been denied outright.

Whether sufficient evidence was presented to prove that the crimes of Trademark Infringement and
Unfair Competition as defined and penalized in Section 155 and Section 168 in relation to Section
170 of Republic Act No. 8293 (The Intellectual Property Code of the Philippines) had been
committed.

Whether probable cause exists to hold INDIVIDUAL PETITIONERS liable for the offense charged. 5
Let us discuss the issues in seriatim.

Anent the first issue, the general rule is that a motion for reconsideration is a condition sine qua non
before a certiorari petition may lie, its purpose being to grant an opportunity for the court a quo to
correct any error attributed to it by re-examination of the legal and factual circumstances of the
case.6

However, this rule is not absolute as jurisprudence has laid down several recognized exceptions
permitting a resort to the special civil action for certiorari without first filing a motion for
reconsideration, viz.:

(a) Where the order is a patent nullity, as where the court a quo has no jurisdiction;

(b) Where the questions raised in the certiorari proceedings have been duly raised and
passed upon by the lower court, or are the same as those raised and passed upon in the
lower court.

(c) Where there is an urgent necessity for the resolution of the question and any further
delay would prejudice the interests of the Government or of the petitioner or the subject
matter of the petition is perishable;

(d) Where, under the circumstances, a motion for reconsideration would be useless;

(e) Where petitioner was deprived of due process and there is extreme urgency for relief;

(f) Where, in a criminal case, relief from an order of arrest is urgent and the granting of such
relief by the trial court is improbable;

(g) Where the proceedings in the lower court are a nullity for lack of due process;

(h) Where the proceeding was ex parte or in which the petitioner had no opportunity to
object; and,

(i) Where the issue raised is one purely of law or public interest is involved. 7

In the present case, the filing of a motion for reconsideration may already be dispensed with
considering that the questions raised in this petition are the same as those that have already been
squarely argued and passed upon by the Secretary of Justice in her assailed resolution.

Apropos the second and third issues, the same may be simplified to one core issue: whether
probable cause exists to hold petitioners liable for the crimes of trademark infringement and unfair
competition as defined and penalized under Sections 155 and 168, in relation to Section 170 of
Republic Act (R.A.) No. 8293.

Section 155 of R.A. No. 8293 identifies the acts constituting trademark infringement as follows:

Section 155. Remedies; Infringement. – Any person who shall, without the consent of the owner of
the registered mark:

155.1 Use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered
mark of the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2 Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.8

From the foregoing provision, the Court in a very similar case, made it categorically clear that the
mere unauthorized use of a container bearing a registered trademark in connection with the sale,
distribution or advertising of goods or services which is likely to cause confusion, mistake or
deception among the buyers or consumers can be considered as trademark infringement. 9

Here, petitioners have actually committed trademark infringement when they refilled, without the
respondents’ consent, the LPG containers bearing the registered marks of the respondents. As
noted by respondents, petitioners’ acts will inevitably confuse the consuming public, since they have
no way of knowing that the gas contained in the LPG tanks bearing respondents’ marks is in reality
not the latter’s LPG product after the same had been illegally refilled. The public will then be led to
believe that petitioners are authorized refillers and distributors of respondents’ LPG products,
considering that they are accepting empty containers of respondents and refilling them for resale.

As to the charge of unfair competition, Section 168.3, in relation to Section 170, of R.A. No. 8293
describes the acts constituting unfair competition as follows:

Section 168. Unfair Competition, Rights, Regulations and Remedies. x x x.

168.3 In particular, and without in any way limiting the scope of protection against unfair competition,
the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another
manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in
which they are contained, or the devices or words thereon, or in any other feature of their
appearance, which would be likely to influence purchasers to believe that the goods offered are
those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise
clothes the goods with such appearance as shall deceive the public and defraud another of his
legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in
selling such goods with a like purpose;

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 (₱50,000) to Two hundred thousand pesos (₱200,000), shall be imposed on any
person who is found guilty of committing any of the acts mentioned in Section 155, Section 168 and
Subsection 169.1.
From jurisprudence, unfair competition has been defined as the passing off (or palming off) or
attempting to pass off upon the public of the goods or business of one person as the goods or
business of another with the end and probable effect of deceiving the public. 10

Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors. Thus, the defendant gives his goods the
general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.11

In the present case, respondents pertinently observed that by refilling and selling LPG cylinders
bearing their registered marks, petitioners are selling goods by giving them the general appearance
of goods of another manufacturer.

What's more, the CA correctly pointed out that there is a showing that the consumers may be misled
into believing that the LPGs contained in the cylinders bearing the marks "GASUL" and
"SHELLANE" are those goods or products of the petitioners when, in fact, they are not. Obviously,
the mere use of those LPG cylinders bearing the trademarks "GASUL" and "SHELLANE" will give
the LPGs sold by REGASCO the general appearance of the products of the petitioners.

In sum, this Court finds that there is sufficient evidence to warrant the prosecution of petitioners for
trademark infringement and unfair competition, considering that petitioner Republic Gas Corporation,
being a corporation, possesses a personality separate and distinct from the person of its officers,
directors and stockholders.12 Petitioners, being corporate officers and/or directors, through whose
act, default or omission the corporation commits a crime, may themselves be individually held
answerable for the crime.13 Veritably, the CA appropriately pointed out that petitioners, being in direct
control and supervision in the management and conduct of the affairs of the corporation, must have
known or are aware that the corporation is engaged in the act of refilling LPG cylinders bearing the
marks of the respondents without authority or consent from the latter which, under the
circumstances, could probably constitute the crimes of trademark infringement and unfair
competition. The existence of the corporate entity does not shield from prosecution the corporate
agent who knowingly and intentionally caused the corporation to commit a crime. Thus, petitioners
cannot hide behind the cloak of the separate corporate personality of the corporation to escape
criminal liability. A corporate officer cannot protect himself behind a corporation where he is the
actual, present and efficient actor.14

WHEREFORE, premises considered, the petition is hereby DENIED and the Decision dated July 2,
2010 and Resolution dated October 11, 2010 of the Court of Appeals in CA-G.R. SP No. 106385 are
AFFIRMED.

SO ORDERED.

G.R. No. 212705               September 10, 2014

ROBERTO CO, Petitioner,
vs.
KENG HUAN JERRY YEUNG and EMMA YEUNG, Respondents.

RESOLUTION

PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari  assailing the Decision  dated September 16,
1 2

2013 and the Resolution  dated May 29, 2014 of the Court of Appeals (CA) in CA-G.R. CV No.
3

93679 which affirmed the Decision  dated October 27, 2008 of the Regional Trial Court of Quezon
4

City, Branch 90 (RTC), finding petitioner Roberto Co (Co), among others, guilty of unfair competition
and, thus, liable for damages to respondents Keng Huan Jerry Yeung and Emma Yeung (Sps.
Yeung).

The Facts

At the core of the controversy isthe product Greenstone Medicated Oil Item No. 16 (Greenstone)
which is manufactured by Greenstone Pharmaceutical, a traditional Chinese medicine manufacturing
firm based in Hong Kong and owned by Keng HuanJerry Yeung (Yeung), and is exclusively imported
and distributed in the Philippines by Taka Trading owned by Yeung’s wife, Emma Yeung (Emma). 5

On July 27, 2000, Sps. Yeung filed a civil complaint for trademark infringement and unfair
competition before the RTC against Ling Na Lau, her sister Pinky Lau (the Laus), and Cofor
allegedly conspiring in the sale of counterfeit Greenstone products tothe public. In the complaint,
Sps. Yeung averred that on April 24, 2000, Emma’s brother, Jose Ruivivar III (Ruivivar), bought a
bottle of Greenstone from Royal Chinese Drug Store (Royal) in Binondo, Manila, owned by Ling Na
Lau.However, when he used the product, Ruivivar doubted its authenticity considering that it had a
different smell, and the heat it producedwas not as strong as the original Greenstone he frequently
used. Having been informed by Ruivivar of the same, Yeung, together with his son, John Philip, went
to Royal on May 4, 2000 to investigate the matter, and, there, found seven (7) bottles of counterfeit
Greenstone on display for sale. He was then told by Pinky Lau (Pinky) – the store’s proprietor –
thatthe items came from Co of Kiao An Chinese Drug Store. According to Pinky, Co offered the
products on April 28, 2000 as "Tienchi Fong Sap Oil Greenstone" (Tienchi) which she eventually
availed from him. Upon Yeung’s prodding, Pinky wrote a note stating these events. 6

In defense, Co denied having supplied counterfeit items to Royal and maintained that the stocks of
Greenstone came only from Taka Trading. Meanwhile, the Laus denied selling Greenstone and
claimed that the seven (7) items of Tienchi were left by an unidentified male person at the counter of
their drug store and that when Yeung came and threatened to report the matter to the authorities,
the items were surrendered to him. As to Pinky’s note, it was claimed that she was merely forced by
Yeung to sign the same. 7

The RTC Ruling

In a Decision  dated October 27, 2008, the RTC ruled in favor of Sps. Yeung, and accordingly
8

ordered Co and the Laus to pay Sps. Yeung: (a) ₱300,000.00 as temperate damages; (b)
₱200,000.00 as moral damages; (c) ₱100,000.00 as exemplary damages; (d) ₱100,000.00 as
attorney’s fees; and (e) costs of suit. 9

It found that the Sps. Yeung had proven by preponderance of evidence that the Laus and Co
committed unfair competition through their conspiracy to sell counterfeit Greenstone products that
resulted in confusion and deception not only to the ordinary purchaser, like Ruivivar, but also to the
public.  It, however, did not find the Laus and Co liable for trademark infringement as there was no
10

showing that the trademark "Greenstone" was registered at the time the acts complained of
occurred, i.e., in May 2000.  Dissatisfied, the Laus and Co appealed to the CA. The CA Ruling
11

In a Decision  dated September 16, 2013, the CA affirmed the RTC Decision, pointing out that in the
12

matter of credibility of witnesses, the findings of the trial court are given great weight and the highest
degree of respect.  Accordingly, it sustained the RTC’s finding of unfair competition, considering that
13
Sps. Yeung’s evidence preponderated over that of the Laus and Co which was observed to be
shiftyand contradictory. Resultantly, all awards of damages in favor of Sps. Yeung were upheld. 14

The Laus and Co respectively moved for reconsideration but were, however, denied in a
Resolution  dated May 29, 2014, hence, Co filed the instant petition. On the other hand, records are
15

bereft of any showing that the Laus instituted any appeal before this Court.

The Issue Before the Court

The sole issue for the Court’s resolution is whether or not the CA correctly upheld Co’s liability for
unfair competition.

The Court’s Ruling

The petition is without merit.

The Court’s review of the present case is via a petition for review under Rule 45 of the Rules of
Court,which generally bars any question pertaining to the factual issues raised. The well-settled rule
is that questions of fact are not reviewable in petitionsfor review under Rule 45, subject only to
certain exceptions, among them, the lack of sufficient support in evidence of the trial court’s
judgment or the appellate court’s misapprehension of the adduced facts. 16

Co, who mainly interposes a denialof the acts imputed against him, fails to convince the Court that
any of the exceptions exists so as to warrant a review of the findings of facts in this case. Factual
findings of the RTC, when affirmed by the CA, are entitled to great weight and respect by the Court
and are deemed final and conclusive when supported by the evidence on record.  The Court finds
17

that both the RTC and the CA fully considered the evidence presented by the parties, and have
adequately explained the legal and evidentiary reasons in concluding that Co committed acts of
unfair competition.

Unfair competition is defined as the passing off (or palming off) or attempting to pass off upon the
public of the goods or business of one person as the goods or business of another with the end and
probable effect of deceiving the public. This takes place where the defendant gives his goods the
general appearance ofthe goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor. 18

Here, it has been established that Coconspired with the Laus in the sale/distribution of counterfeit
Greenstone products to the public, which were even packaged in bottles identical to that of the
original, thereby giving rise to the presumption of fraudulent intent.  In light of the foregoing
19

definition, it is thus clear that Co, together with the Laus, committed unfair competition, and should,
consequently, beheld liable therefor. To this end, the Court finds the award of ₱300,000.00 as
temperate damages to be appropriate in recognition of the pecuniary loss suffered by Sps. Yeung,
albeit its actual amount cannot, from the nature of the case, as it involves damage to goodwill, be
proved with certainty.  The awards of moral and exemplary damages, attorney's fees, and costs of
20

suit are equally sustained for the reasons already fully-explained by the courts a quo in their
decisions.

Although liable for unfair competition, the Court deems it apt to clarify that Co was properly
exculpated from the charge of trademark infringement considering that the registration of the
trademark "Greenstone" – essential as it is in a trademark infringement case – was not proven to
have existed during the time the acts complained of were committed, i.e., in May 2000. In this
relation, the distinctions between suits for trademark infringement and unfair competition prove
useful: (a) the former is the unauthorized use of a trademark, whereas the latter is the passing off of
one's goods as those of another; (b) fraudulent intent is unnecessary in the former, while it is
essential in the latter; and (c) in the former, prior registration of the trademark is a pre-requisite to the
action, while it is not necessary in the latter. 21

WHEREFORE, the petition is DENIED. The Decision dated September 16, 2013 and the Resolution
dated May 29, 2014 of the Court of Appeals in CA-G.R. CV No. 93679 are hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

G.R. No. 164321               March 23, 2011

SKECHERS, U.S.A., INC., Petitioner,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP., and/or INTER PACIFIC TRADING CORP.
and/or STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or
STRONG FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T.
MAGAYAGA and/or JEFFREY R. MORALES and/or any of its other proprietor/s, directors,
officers, employees and/or occupants of its premises located at S-7, Ed & Joe's Commercial
Arcade, No. 153 Quirino Avenue, Parañaque City, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

TRENDWORKS INTERNATIONAL CORPORATION, Petitioner-Intervenor,

vs.
INTER PACIFIC INDUSTRIAL TRADING CORP. and/or INTER PACIFIC TRADING CORP. and/or
STRONG SPORTS GEAR CO., LTD., and/or STRONGSHOES WAREHOUSE and/or STRONG
FASHION SHOES TRADING and/or TAN TUAN HONG and/or VIOLETA T. MAGAYAGA and/or
JEFFREY R. MORALES and/or any of its other proprietor/s, directors, officers, employees
and/or occupants of its premises located at S-7, Ed & Joe's Commercial Arcade, No. 153
Quirino Avenue, Parañaque City, Respondents.

RESOLUTION

PERALTA, J.:

For resolution are the twin Motions for Reconsideration1 filed by petitioner and petitioner-intervenor
from the Decision rendered in favor of respondents, dated November 30, 2006.

At the outset, a brief narration of the factual and procedural antecedents that transpired and led to
the filing of the motions is in order.
The present controversy arose when petitioner filed with Branch 24 of the Regional Trial Court
(RTC) of Manila an application for the issuance of search warrants against an outlet and warehouse
operated by respondents for infringement of trademark under Section 155, in relation to Section 170
of Republic Act No. 8293, otherwise known as the Intellectual Property Code of the Philippines. 2 In
the course of its business, petitioner has registered the trademark "SKECHERS" 3 and the trademark
"S" (within an oval design) 4 with the Intellectual Property Office (IPO).

Two search warrants5 were issued by the RTC and were served on the premises of respondents. As
a result of the raid, more than 6,000 pairs of shoes bearing the "S" logo were seized.

Later, respondents moved to quash the search warrants, arguing that there was no confusing
similarity between petitioner’s "Skechers" rubber shoes and its "Strong" rubber shoes.

On November 7, 2002, the RTC issued an Order6 quashing the search warrants and directing the
NBI to return the seized goods. The RTC agreed with respondent’s view that Skechers rubber shoes
and Strong rubber shoes have glaring differences such that an ordinary prudent purchaser would not
likely be misled or confused in purchasing the wrong article.

Aggrieved, petitioner filed a petition for certiorari7 with the Court of Appeals (CA) assailing the RTC
Order. On November 17, 2003, the CA issued a Decision 8 affirming the ruling of the RTC.

Subsequently, petitioner filed the present petition9 before this Court which puts forth the following
assignment of errors:

A. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

IN CONSIDERING MATTERS OF DEFENSE IN A CRIMINAL TRIAL FOR TRADEMARK
INFRINGEMENT IN PASSING UPON THE VALIDITY OF THE SEARCH WARRANT WHEN
IT SHOULD HAVE LIMITED ITSELF TO A DETERMINATION OF WHETHER THE TRIAL
COURT COMMITTED GRAVE ABUSE OF DISCRETION IN QUASHING THE SEARCH
WARRANTS.

B. WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

IN FINDING THAT RESPONDENTS ARE NOT GUILTY OF TRADEMARK INFRINGEMENT
IN THE CASE WHERE THE SOLE TRIABLE ISSUE IS THE EXISTENCE OF PROBABLE
CAUSE TO ISSUE A SEARCH WARRANT.10

In the meantime, petitioner-intervenor filed a Petition-in-Intervention 11 with this Court claiming to be

the sole licensed distributor of Skechers products here in the Philippines.

On November 30, 2006, this Court rendered a Decision12 dismissing the petition.

Both petitioner and petitioner-intervenor filed separate motions for reconsideration.

In petitioner’s motion for reconsideration, petitioner moved for a reconsideration of the earlier
decision on the following grounds:

(a) THIS HONORABLE COURT MUST RE-EXAMINE THE FACTS OF THIS CASE DUE TO
THE SIGNIFICANCE AND REPERCUSSIONS OF ITS DECISION.

(b) COMMERCIAL QUANTITIES OF THE SEIZED ITEMS WITH THE UNAUTHORIZED

REPRODUCTIONS OF THE "S" TRADEMARK OWNED BY PETITIONER WERE
 INTENDED FOR DISTRIBUTION IN THE PHILIPPINE MARKET TO THE DETRIMENT OF
PETITIONER – RETURNING THE GOODS TO RESPONDENTS WILL ADVERSELY
AFFECT THE GOODWILL AND REPUTATION OF PETITIONER.

(c) THE SEARCH WARRANT COURT AND THE COURT OF APPEALS BOTH ACTED
WITH GRAVE ABUSE OF DISCRETION.

(d) THE SEARCH WARRANT COURT DID NOT PROPERLY RE-EVALUATE THE
EVIDENCE PRESENTED DURING THE SEARCH WARRANT APPLICATION
PROCEEDINGS.

(e) THE SOLID TRIANGLE CASE IS NOT APPLICABLE IN THIS CASE, AS IT IS BASED
ON A DIFFERENT FACTUAL MILIEU. PRELIMINARY FINDING OF GUILT (OR ABSENCE
THEREOF) MADE BY THE SEARCH WARRANT COURT AND THE COURT OF APPEALS
WAS IMPROPER.

(f) THE SEARCH WARRANT COURT OVERSTEPPED ITS DISCRETION. THE LAW IS
CLEAR. THE DOMINANCY TEST SHOULD BE USED.

(g) THE COURT OF APPEALS COMMITTED ERRORS OF JURISDICTION. 13

On the other hand, petitioner-intervenor’s motion for reconsideration raises the following errors for
this Court’s consideration, to wit:

(a) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED
CONTRARY TO LAW AND JURISPRUDENCE IN ADOPTING THE ALREADY-REJECTED
HOLISTIC TEST IN DETERMINING THE ISSUE OF CONFUSING SIMILARITY;

(b) THE COURT OF APPEALS AND THE SEARCH WARRANT COURT ACTED
CONTRARY TO LAW IN HOLDING THAT THERE IS NO PROBABLE CAUSE FOR
TRADEMARK INFRINGEMENT; AND

(c) THE COURT OF APPEALS SANCTIONED THE TRIAL COURT’S DEPARTURE FROM
THE USUAL AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS WHEN IT
UPHELD THE QUASHAL OF THE SEARCH WARRANT ON THE BASIS SOLELY OF A
FINDING THAT THERE IS NO CONFUSING SIMILARITY.14

A perusal of the motions submitted by petitioner and petitioner-intervenor would show that the
primary issue posed by them dwells on the issue of whether or not respondent is guilty of trademark
infringement.

After a thorough review of the arguments raised herein, this Court reconsiders its earlier decision.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293.
Specifically, Section 155 of R.A. No. 8293 states:

Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered
mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.15

The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to
cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed
tests  the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the
similarity of the prevalent or dominant features of the competing trademarks that might cause
confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not
necessary; neither is it required that the mark sought to be registered suggests an effort to imitate.
Given more consideration are the aural and visual impressions created by the marks on the buyers
of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. 16

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining confusing similarity. The
discerning eye of the observer must focus not only on the predominant words, but also on the other
features appearing on both labels so that the observer may draw conclusion on whether one is
confusingly similar to the other. 17

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2)
types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent
purchaser would be induced to purchase one product in the belief that he was purchasing the other;
and (2) confusion of business (source or origin confusion), where, although the goods of the parties
are different, the product, the mark of which registration is applied for by one party, is such as might
reasonably be assumed to originate with the registrant of an earlier product, and the public would
then be deceived either into that belief or into the belief that there is some connection between the
two parties, though inexistent. 18

Applying the Dominancy Test to the case at bar, this Court finds that the use of the stylized "S" by
respondent in its Strong rubber shoes infringes on the mark already registered by petitioner with the
IPO. While it is undisputed that petitioner’s stylized "S" is within an oval design, to this Court’s mind,
the dominant feature of the trademark is the stylized "S," as it is precisely the stylized "S" which
catches the eye of the purchaser. Thus, even if respondent did not use an oval design, the mere fact
that it used the same stylized "S", the same being the dominant feature of petitioner’s trademark,
already constitutes infringement under the Dominancy Test.

This Court cannot agree with the observation of the CA that the use of the letter "S" could hardly be
considered as highly identifiable to the products of petitioner alone. The CA even supported its
conclusion by stating that the letter "S" has been used in so many existing trademarks, the most
popular of which is the trademark "S" enclosed by an inverted triangle, which the CA says is
identifiable to Superman. Such reasoning, however, misses the entire point, which is that respondent
had used a stylized "S," which is the same stylized "S" which petitioner has a registered trademark
for. The letter "S" used in the Superman logo, on the other hand, has a block-like tip on the upper
portion and a round elongated tip on the lower portion. Accordingly, the comparison made by the CA
of the letter "S" used in the Superman trademark with petitioner’s stylized "S" is not appropriate to
the case at bar.

Furthermore, respondent did not simply use the letter "S," but it appears to this Court that based on
the font and the size of the lettering, the stylized "S" utilized by respondent is the very same stylized
"S" used by petitioner; a stylized "S" which is unique and distinguishes petitioner’s trademark.
Indubitably, the likelihood of confusion is present as purchasers will associate the respondent’s use
of the stylized "S" as having been authorized by petitioner or that respondent’s product is connected
with petitioner’s business.

Both the RTC and the CA applied the Holistic Test in ruling that respondent had not infringed
petitioner’s trademark. For its part, the RTC noted the following supposed dissimilarities between the
shoes, to wit:

1. The mark "S" found in Strong Shoes is not enclosed in an "oval design."

2. The word "Strong" is conspicuously placed at the backside and insoles.

3. The hang tags and labels attached to the shoes bears the word "Strong" for respondent
and "Skechers U.S.A." for private complainant;

4. Strong shoes are modestly priced compared to the costs of Skechers Shoes. 19

While there may be dissimilarities between the appearances of the shoes, to this Court’s mind such
dissimilarities do not outweigh the stark and blatant similarities in their general features. As can be
readily observed by simply comparing petitioner’s Energy20 model and respondent’s Strong21 rubber
shoes, respondent also used the color scheme of blue, white and gray utilized by petitioner. Even
the design and "wavelike" pattern of the midsole and outer sole of respondent’s shoes are very
similar to petitioner’s shoes, if not exact patterns thereof. At the side of the midsole near the heel of
both shoes are two elongated designs in practically the same location. Even the outer soles of both
shoes have the same number of ridges, five at the back and six in front. On the side of respondent’s
shoes, near the upper part, appears the stylized "S," placed in the exact location as that of the
stylized "S" on petitioner’s shoes. On top of the "tongue" of both shoes appears the stylized "S" in
practically the same location and size. Moreover, at the back of petitioner’s shoes, near the heel
counter, appears "Skechers Sport Trail" written in white lettering. However, on respondent’s shoes
appears "Strong Sport Trail" noticeably written in the same white lettering, font size, direction and
orientation as that of petitioner’s shoes. On top of the heel collar of petitioner’s shoes are two
grayish-white semi-transparent circles. Not surprisingly, respondent’s shoes also have two grayish-
white semi-transparent circles in the exact same location. lihpwa1

Based on the foregoing, this Court is at a loss as to how the RTC and the CA, in applying the holistic
test, ruled that there was no colorable imitation, when it cannot be any more clear and apparent to
this Court that there is colorable imitation. The dissimilarities between the shoes are too trifling and
frivolous that it is indubitable that respondent’s products will cause confusion and mistake in the
eyes of the public. Respondent’s shoes may not be an exact replica of petitioner’s shoes, but the
features and overall design are so similar and alike that confusion is highly likely.1avvphi1

In Converse Rubber Corporation v. Jacinto Rubber & Plastic Co., Inc., 22 this Court, in a case for
unfair competition, had opined that even if not all the details are identical, as long as the general
appearance of the two products are such that any ordinary purchaser would be deceived, the
imitator should be liable, to wit:

From said examination, We find the shoes manufactured by defendants to contain, as found by the
trial court, practically all the features of those of the plaintiff Converse Rubber Corporation and
manufactured, sold or marketed by plaintiff Edwardson Manufacturing Corporation, except for their
respective brands, of course. We fully agree with the trial court that "the respective designs, shapes,
the colors of the ankle patches, the bands, the toe patch and the soles of the two products are
exactly the same ... (such that) at a distance of a few meters, it is impossible to distinguish
"Custombuilt" from "Chuck Taylor." These elements are more than sufficient to serve as basis for a
charge of unfair competition. Even if not all the details just mentioned were identical, with the general
appearances alone of the two products, any ordinary, or even perhaps even a not too perceptive and
discriminating customer could be deceived, and, therefore, Custombuilt could easily be passed off
for Chuck Taylor. Jurisprudence supports the view that under such circumstances, the imitator must
be held liable. x x x23

Neither can the difference in price be a complete defense in trademark infringement. In McDonald’s
Corporation v. L.C. Big Mak Burger. Inc.,24 this Court held:

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or
trade-name is likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the field (see 148 ALR
56 et seq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it
forestalls the normal potential expansion of his business (v. 148 ALR 77, 84; 52 Am. Jur. 576, 577).
x x x25

Indeed, the registered trademark owner may use its mark on the same or similar products, in
different segments of the market, and at different price levels depending on variations of the
products for specific segments of the market.26 The purchasing public might be mistaken in thinking
that petitioner had ventured into a lower market segment such that it is not inconceivable for the
public to think that Strong or Strong Sport Trail might be associated or connected with petitioner’s
brand, which scenario is plausible especially since both petitioner and respondent manufacture
rubber shoes.

Withal, the protection of trademarks as intellectual property is intended not only to preserve the
goodwill and reputation of the business established on the goods bearing the mark through actual
use over a period of time, but also to safeguard the public as consumers against confusion on these
goods.27 While respondent’s shoes contain some dissimilarities with petitioner’s shoes, this Court
cannot close its eye to the fact that for all intents and purpose, respondent had deliberately
attempted to copy petitioner’s mark and overall design and features of the shoes. Let it be
remembered, that defendants in cases of infringement do not normally copy but only make colorable
changes.28 The most successful form of copying is to employ enough points of similarity to confuse
the public, with enough points of difference to confuse the courts.29

WHEREFORE, premises considered, the Motion for Reconsideration is GRANTED. The Decision
dated November 30, 2006 is RECONSIDERED and SET ASIDE.
G.R. No. 194307               November 20, 2013

BIRKENSTOCK ORTHOPAEDIE GMBH AND CO. KG (formerly BIRKENSTOCK ORTHOPAEDIE

GMBH), Petitioner,
vs.
PHILIPPINE SHOE EXPO MARKETING CORPORATION, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari  are the Court of Appeals (CA) Decision  dated June
1 2

25, 2010 and Resolution  dated October 27, 2010 in CA-G.R. SP No. 112278 which reversed and
3

set aside the Intellectual Property Office (IPO) Director General’s Decision  dated December 22,
4

2009 that allowed the registration of various trademarks in favor of petitioner Birkenstock
Orthopaedie GmbH & Co. KG.

The Facts

Petitioner, a corporation duly organized and existing under the laws of Germany, applied for various
trademark registrations before the IPO, namely: (a) "BIRKENSTOCK" under Trademark Application
Serial No. (TASN) 4-1994-091508 for goods falling under Class 25 of the International Classification
of Goods and Services (Nice Classification) with filing date of March 11, 1994; (b) "BIRKENSTOCK
BAD HONNEF -RHEIN & DEVICE COMPRISING OF ROUND COMPANY SEAL AND
REPRESENTATION OF A FOOT, CROSS AND SUNBEA M" under TASN 4-1994-091509 for goods
falling under Class 25 of the Nice Classification with filing date of March 11, 1994; and (c)
"BIRKENSTOCK BAD HONNEF-RHEIN & DEVICE COMPRISING OF ROUND COMPANY SEAL
AND REPRESENTATION OF A FOOT, CROSS AND SUNBEAM" under TASN 4-1994-095043 for
goods falling under Class 10 of the Nice Classification with filing date of September 5, 1994 (subject
applications). 5

However, registration proceedings of the subject applications were suspended in view of an existing
registration of the mark "BIRKENSTOCK AND DEVICE" under Registration No. 56334 dated
October 21, 1993 (Registration No. 56334) in the name of Shoe Town International and Industrial
Corporation, the predecessor-in-interest of respondent Philippine Shoe Expo Marketing
Corporation.  In this regard, on May 27, 1997 petitioner filed a petition for cancellation of Registration
6

No. 56334 on the ground that it is the lawful and rightful owner of the Birkenstock marks
(Cancellation Case).  During its pendency, however, respondent and/or its predecessor-in-interest
7

failed to file the required 10th Year Declaration of Actual Use (10th Year DAU) for Registration No.
56334 on or before October 21, 2004,  thereby resulting in the cancellation of such
8

mark.  Accordingly, the cancellation case was dismissed for being moot and academic.
9 10

The aforesaid cancellation of Registration No. 56334 paved the way for the publication of the subject
applications in the IPO e-Gazette on February 2, 2007.  In response, respondent filed three (3)
11

separate verified notices of oppositions to the subject applications docketed as Inter Partes Case
Nos. 14-2007-00108, 14-2007-00115, and 14-2007-00116,  claiming, inter alia, that: (a) it, together
12

with its predecessor-in-interest, has been using Birkenstock marks in the Philippines for more than
16 years through the mark "BIRKENSTOCK AND DEVICE"; (b) the marks covered by the subject
applications are identical to the one covered by Registration No. 56334 and thus, petitioner has no
right to the registration of such marks; (c) on November 15, 1991, respondent’s predecessor-in-
interest likewise obtained a Certificate of Copyright Registration No. 0-11193 for the word
"BIRKENSTOCK" ; (d) while respondent and its predecessor-in-interest failed to file the 10th Yea r
DAU, it continued the use of "BIRKENSTOCK AND DEVICE" in lawful commerce; and (e) to record
its continued ownership and exclusive right to use the "BIRKENSTOCK" marks, it has filed TASN 4-
2006-010273 as a " re-application " of its old registration, Registration No. 56334.  On November 13,
13

2007, the Bureau of Legal Affairs (BLA) of the IPO issued Order No. 2007-2051 consolidating the
aforesaid inter partes cases (Consolidated Opposition Cases). 14

The Ruling of the BLA

In its Decision  dated May 28, 2008, the BLA of the IPO sustained respondent’s opposition, thus,
15

ordering the rejection of the subject applications. It ruled that the competing marks of the parties are
confusingly similar since they contained the word "BIRKENSTOCK" and are used on the same and
related goods. It found respondent and its predecessor-in-interest as the prior user and adopter of
"BIRKENSTOCK" in the Philippines, while on the other hand, petitioner failed to present evidence of
actual use in the trade and business in this country. It opined that while Registration No. 56334 was
cancelled, it does not follow that prior right over the mark was lost, as proof of continuous and
uninterrupted use in trade and business in the Philippines was presented. The BLA likewise opined
that petitioner’s marks are not well -known in the Philippines and internationally and that the various
certificates of registration submitted by petitioners were all photocopies and, therefore, not
admissible as evidence. 16

Aggrieved, petitioner appealed to the IPO Director General.

The Ruling of the IPO Director General

In his Decision  dated December 22, 2009, the IPO Director General reversed and set aside the
17

ruling of the BLA, thus allowing the registration of the subject applications. He held that with the
cancellation of Registration No. 56334 for respondent’s failure to file the 10th Year DAU, there is no
more reason to reject the subject applications on the ground of prior registration by another
proprietor.  More importantly, he found that the evidence presented proved that petitioner is the true
18

and lawful owner and prior user of "BIRKENSTOCK" marks and thus, entitled to the registration of
the marks covered by the subject applications.  The IPO Director General further held that
19

respondent’s copyright for the word "BIRKENSTOCK" is of no moment since copyright and
trademark are different forms of intellectual property that cannot be interchanged. 20

Finding the IPO Director General’s reversal of the BLA unacceptable, respondent filed a petition for
review with the CA.

Ruling of the CA

In its Decision  dated June 25, 2010, the CA reversed and set aside the ruling of the IPO Director
21

General and reinstated that of the BLA. It disallowed the registration of the subject applications on
the ground that the marks covered by such applications "are confusingly similar, if not outright
identical" with respondent’s mark.  It equally held that respondent’s failure to file the 10th Year DAU
22

for Registration No. 56334 "did not deprive petitioner of its ownership of the ‘BIRKENSTOCK’ mark
since it has submitted substantial evidence showing its continued use, promotion and advertisement
thereof up to the present."  It opined that when respondent’s predecessor-in-interest adopted and
23

started its actual use of "BIRKENSTOCK," there is neither an existing registration nor a pending
application for the same and thus, it cannot be said that it acted in bad faith in adopting and starting
the use of such mark.  Finally, the CA agreed with respondent that petitioner’s documentary
24

evidence, being mere photocopies, were submitted in violation of Section 8.1 of Office Order No. 79,
Series of 2005 (Rules on Inter Partes Proceedings).
Dissatisfied, petitioner filed a Motion for Reconsideration  dated July 20, 2010, which was, however,
25

denied in a Resolution  dated October 27, 2010. Hence, this petition.

26 27

Issues Before the Court

The primordial issue raised for the Court’s resolution is whether or not the subject marks should be
allowed registration in the name of petitioner.

The Court’s Ruling

The petition is meritorious.

A. Admissibility of Petitioner’s Documentary Evidence.

In its Comment  dated April 29, 2011, respondent asserts that the documentary evidence submitted
28

by petitioner in the Consolidated Opposition Cases, which are mere photocopies, are violative of
Section 8.1 of the Rules on Inter Partes Proceedings, which requires certified true copies of
documents and evidence presented by parties in lieu of originals.  As such, they should be deemed
29

inadmissible.

The Court is not convinced.

It is well-settled that "the rules of procedure are mere tools aimed at facilitating the attainment of
justice, rather than its frustration. A strict and rigid application of the rules must always be eschewed
when it would subvert the primary objective of the rules, that is, to enhance fair trials and expedite
justice. Technicalities should never be used to defeat the substantive rights of the other party. Every
party-litigant must be afforded the amplest opportunity for the proper and just determination of his
cause, free from the constraints of technicalities."  "Indeed, the primordial policy is a faithful
30

observance of [procedural rules], and their relaxation or suspension should only be for persuasive
reasons and only in meritorious cases, to relieve a litigant of an injustice not commensurate with the
degree of his thoughtlessness in not complying with the procedure prescribed."  This is especially
31

true with quasi-judicial and administrative bodies, such as the IPO, which are not bound by technical
rules of procedure.  On this score, Section 5 of the Rules on Inter Partes Proceedings provides:
32

Sec. 5. Rules of Procedure to be followed in the conduct of hearing of Inter Partes cases. – The
rules of procedure herein contained primarily apply in the conduct of hearing of Inter Partes cases.
The Rules of Court may be applied suppletorily. The Bureau shall not be bound by strict technical
rules of procedure and evidence but may adopt, in the absence of any applicable rule herein, such
mode of proceedings which is consistent with the requirements of fair play and conducive to the just,
speedy and inexpensive disposition of cases, and which will give the Bureau the greatest possibility
to focus on the contentious issues before it. (Emphasis and underscoring supplied)

In the case at bar, while petitioner submitted mere photocopies as documentary evidence in the
Consolidated Opposition Cases, it should be noted that the IPO had already obtained the originals of
such documentary evidence in the related Cancellation Case earlier filed before it. Under this
circumstance and the merits of the instant case as will be subsequently discussed, the Court holds
that the IPO Director General’s relaxation of procedure was a valid exercise of his discretion in the
interest of substantial justice.
33

Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive
issues.
B. Registration and ownership of "BIRKENSTOCK."

Republic Act No. (RA) 166,  the governing law for Registration No. 56334, requires the filing of a
34

DAU on specified periods,  to wit:

35

Section 12. Duration. – Each certificate of registration shall remain in force for twenty years:
Provided, That registrations under the provisions of this Act shall be cancelled by the Director,
unless within one year following the fifth, tenth and fifteenth anniversaries of the date of issue of the
certificate of registration, the registrant shall file in the Patent Office an affidavit showing that the
mark or trade-name is still in use or showing that its non-use is due to special circumstance which
excuse such non-use and is not due to any intention to abandon the same, and pay the required fee.

The Director shall notify the registrant who files the above- prescribed affidavits of his acceptance or
refusal thereof and, if a refusal, the reasons therefor. (Emphasis and underscoring supplied)

The aforementioned provision clearly reveals that failure to file the DAU within the requisite period
results in the automatic cancellation of registration of a trademark. In turn, such failure is tantamount
to the abandonment or withdrawal of any right or interest the registrant has over his trademark. 36

In this case, respondent admitted that it failed to file the 10th Year DAU for Registration No. 56334
within the requisite period, or on or before October 21, 2004. As a consequence, it was deemed to
have abandoned or withdrawn any right or interest over the mark "BIRKENSTOCK." Neither can it
invoke Section 236  of the IP Code which pertains to intellectual property rights obtained under
37

previous intellectual property laws, e.g., RA 166, precisely because it already lost any right or
interest over the said mark.

Besides, petitioner has duly established its true and lawful ownership of the mark "BIRKENSTOCK."

Under Section 2  of RA 166, which is also the law governing the subject applications, in order to
38

register a trademark, one must be the owner thereof and must have actually used the mark in
commerce in the Philippines for two (2) months prior to the application for registration. Section 2-
A  of the same law sets out to define how one goes about acquiring ownership thereof. Under the
39

same section, 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. Significantly, to
be an owner, Section 2-A does not require that the actual use of a trademark must be within the
Philippines. Thus, under RA 166, one may be an owner of a mark due to its actual use but may not
yet have the right to register such ownership here due to the owner’s failure to use the same in the
Philippines for two (2) months prior to registration. 40

It must be emphasized that registration of a trademark, by itself, is not a mode of acquiring

ownership.  If the applicant is not the owner of the trademark, he has no right to apply for its
1âwphi1

registration. Registration merely creates a prima facie presumption of the validity of the registration,
of the registrant’s ownership of the trademark, and of the exclusive right to the use thereof. Such
presumption, just like the presumptive regularity in the performance of official functions, is rebuttable
and must give way to evidence to the contrary. 41

Clearly, it is not the application or registration of a trademark that vests ownership thereof, but it is
the ownership of a trademark that confers the right to register the same. A trademark is an industrial
property over which its owner is entitled to property rights which cannot be appropriated by
unscrupulous entities that, in one way or another, happen to register such trademark ahead of its
true and lawful owner. The presumption of ownership accorded to a registrant must then necessarily
yield to superior evidence of actual and real ownership of a trademark.
The Court’s pronouncement in Berris Agricultural Co., Inc. v. Abyadang  is instructive on this point:
42

The ownership of a trademark is acquired by its registration and its actual use by the manufacturer
or distributor of the goods made available to the purchasing public. x x x A certificate of registration
of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the
registrant’s ownership of the mark, and of the registrant’s exclusive right to use the same in
connection with the goods or services and those that are related thereto specified in the certificate. x
x x In other words, the prima facie presumption brought about by the registration of a mark may be
challenged and overcome in an appropriate action, x x x by evidence of prior use by another person,
i.e. , it will controvert a claim of legal appropriation or of ownership based on registration by a
subsequent user. This is because a trademark is a creation of use and belongs to one who first used
it in trade or commerce.  (Emphasis and underscoring supplied)
43

In the instant case, petitioner was able to establish that it is the owner of the mark "BIRKENSTOCK."
It submitted evidence relating to the origin and history of "BIRKENSTOCK" and its use in commerce
long before respondent was able to register the same here in the Philippines. It has sufficiently
proven that "BIRKENSTOCK" was first adopted in Europe in 1774 by its inventor, Johann
Birkenstock, a shoemaker, on his line of quality footwear and thereafter, numerous generations of
his kin continuously engaged in the manufacture and sale of shoes and sandals bearing the mark
"BIRKENSTOCK" until it became the entity now known as the petitioner. Petitioner also submitted
various certificates of registration of the mark "BIRKENSTOCK" in various countries and that it has
used such mark in different countries worldwide, including the Philippines. 44

On the other hand, aside from Registration No. 56334 which had been cancelled, respondent only
presented copies of sales invoices and advertisements, which are not conclusive evidence of its
claim of ownership of the mark "BIRKENSTOCK" as these merely show the transactions made by
respondent involving the same. 45

In view of the foregoing circumstances, the Court finds the petitioner to be the true and lawful owner
of the mark "BIRKENSTOCK" and entitled to its registration, and that respondent was in bad faith in
having it registered in its name. In this regard, the Court quotes with approval the words of the IPO
Director General, viz.:

The facts and evidence fail to show that [respondent] was in good faith in using and in registering the
mark BIRKENSTOCK. BIRKENSTOCK, obviously of German origin, is a highly distinct and arbitrary
mark. It is very remote that two persons did coin the same or identical marks. To come up with a
highly distinct and uncommon mark previously appropriated by another, for use in the same line of
business, and without any plausible explanation, is incredible. The field from which a person may
select a trademark is practically unlimited. As in all other cases of colorable imitations, the
unanswered riddle is why, of the millions of terms and combinations of letters and designs available,
[respondent] had to come up with a mark identical or so closely similar to the [petitioner’s] if there
was no intent to take advantage of the goodwill generated by the [petitioner’s] mark. Being on the
same line of business, it is highly probable that the [respondent] knew of the existence of
BIRKENSTOCK and its use by the [petitioner], before [respondent] appropriated the same mark and
had it registered in its name.
46

WHEREFORE, the petition is GRANTED. The Decision dated June 25, 2010 and Resolution dated
October 27, 2010 of the Court of Appeals in CA-G.R. SP No. 112278 are REVERSED and SET
ASIDE. Accordingly, the Decision dated December 22, 2009 of the IPO Director General is hereby
REINSTATED.
G.R. No. 188225               November 28, 2012

SHIRLEY F. TORRES, Petitioner,
vs.
IMELDA PEREZ and RODRIGO PEREZ, Respondents.

x-----------------------x

G.R. No. 198728

SHIRLEY F. TORRES, Petitioner,
vs.
IMELDA PEREZ and RODRIGO PEREZ, Respondents.

DECISION

SERENO, CJ.:

These are Petitions for Review on Certiorari under Rule 45 of the Rules of Court. The petition
docketed as G.R. No. 188225 assails the Decision of the Court of Appeals (CA) in CA-G.R. SP No.
1 

103846 dated 11 March 2009. The CA Decision nullified the Orders dated 12 February 2008 and 11 2 

April 2008 of the Regional Trial Court (RTC) of Makati, Branch 149. The RTC Orders had denied the
3 

Motion to Dismiss and/or Withdraw Information filed against respondents for unfair competition
(violation of Section 168 in relation to Section 170) under Republic Act No. (R.A.) 8293 (Intellectual
4 

Property Code of the Philippines).

On the other hand, the petition docketed as G.R. No. 198728 assails the Decision in CA-G.R. SP
5 

No. 111903 dated 29 September 2011, which affirmed the RTC Orders dated 29 July 2009 and 19 6 

October 2009, this time quashing the Information against respondents.

7 

Respondents Imelda and Rodrigo are spouses who own RGP Footwear Manufacturing (RGP),
which supplies ladies’ shoes to Shoe Mart (SM). They met petitioner when she sold them business-
8 

class plane tickets to the United States in 2002. She was also interested in doing business with SM,
9 

and they suggested that she form a partnership with their daughter Sunshine, nicknamed Sasay. 10

Petitioner and Sunshine formed Sasay’s Closet Co. (SCC), a partnership registered with the
Securities and Exchange Commission on 17 October 2002. SCC was engaged in the supply,
trading, retailing of garments such as underwear, children’s wear, women’s and men’s wear, and
other incidental activities related thereto.
11

For its products, SCC used the trademark "Naturals with Design," which it filed with the Intellectual
Property Office on 24 August 2005 and registered on 26 February 2007. These products were
12 

primarily supplied to SM, which assigned to them the vendor code "190501" for purposes of
13 

identification.14

SCC used the facilities and equipment owned by RGP, as well as the latter’s business address (No.
72 Victoria Subdivision, Barangay Dela Paz, Biñan, Laguna), which was also the residential address
of respondents. 15
In August 2003, Sunshine pulled out of the partnership, because she was hired to work in an
international school. Respondent Imelda took over Sunshine’s responsibilities in the partnership.
16  17

On 14 December 2005, petitioner sent an email to respondent Imelda asking to be reimbursed for
expenses incurred in the former’s travel to China. Respondent Imelda replied the following day,
18 

stating that the partnership could not reimburse petitioner, because the trip was personal and not
business-related. In the same email, respondent Imelda vented her frustration over the fact that she,
19 

together with respondent Rodrigo, had been doing all the work for SCC and incurring expenses that
they did not charge to the partnership. Respondent Imelda then informed petitioner of the former’s
20 

decision to dissolve the partnership. Despite the objections of petitioner to the dissolution of SCC,
21 

various amounts were paid to her by respondents from January to April 2006 representing her share
in the partnership assets. 22

Meanwhile, on 27 March 2006, petitioner established Tezares Enterprise, a sole proprietorship

engaged in supplying and trading of clothing and accessories except footwear. Also in March 2006,
23 

she discovered that underwear products bearing the brand "Naturals" were being sold in SM with
vendor code "180195." This code was registered to RGP, a fact confirmed by test buys conducted
24  25 

by her lawyers on 13 and 14 May 2006. 26

On 5 June 2006, a search warrant for unfair competition under Section 168 in relation to Section 170
of R.A. 8293 was issued by the RTC of Manila, Branch 24, against respondents at their
address. The search warrant called for the seizure of women’s undergarments bearing the brand
27 

"Naturals," as well as equipment and papers having the vendor code "180195" or the inscription
"RGP." The search warrant was implemented on the same day. However, it was quashed by the
same court on 20 October 2006 upon motion of respondents. The trial court ruled that respondents
did not pass off "Naturals" as the brand of another manufacturer. On the contrary, they used the
brand in the honest belief that they owned SCC, the owner of the brand.

On 9 June 2006, petitioner filed a criminal complaint for unfair competition against respondents and
Sunshine before the City Prosecution Office of Makati City. Assistant City Prosecutor Imelda P.
28 

Saulog found probable cause to indict respondents for unfair competition. She ruled that they had
29 

clearly passed off the "Naturals" brand as RGP’s even if the brand was owned by SCC. According to
the prosecutor, SCC was indeed dissolved when respondent Imelda manifested her intention to
cease from the partnership in an email sent to petitioner on 15 December 2005. The prosecutor
30 

said, however, that it remained operational, since the process of winding up its business had not
been completed. Thus, SCC remained the owner of the "Naturals" brand, and petitioner – being a
legitimate partner thereof – had a right to file the complaint against respondents. The prosecutor
found no probable cause against Sunshine, as it was established that she had withdrawn from SCC
as of August 2003.

The indictment was raffled to RTC Makati City, Branch 149. On 23 October 2006, it issued an Order
finding probable cause for the issuance of a warrant of arrest against respondents. 31

Respondents filed a petition for review of the prosecutor’s resolution before the Department of
Justice (DOJ), which on 13 December 2006 issued its own Resolution reversing the finding of
32 

existence of probable cause against them. Contrary to the prosecutor’s finding, the DOJ found that
SCC had effectively wound up the latter’s partnership affairs on 24 April 2006 when petitioner was
reimbursed for her trip to China. That was the last of the payments made to her to cover her share in
the partnership affairs, which started after respondent Imelda manifested her intention to cease from
the partnership business on 15 December 2005. Thus, when the criminal complaint for unfair
competition was filed on 9 June 2006, there was "no longer any competition, unfair or otherwise,
involving the partnership." 33
Furthermore, the DOJ ruled that even if SCC had not yet terminated its business and therefore still
existed, respondents had the right to use the "Naturals" brand, as they were already the exclusive
owners of SCC following the completion of payments of petitioner’s share in the partnership affairs.
Also, the establishment by petitioner of Tezares Enterprise – which directly competed with SCC in
terms of products – and its subsequent accreditation as supplier of intimate apparel for SM in April
2006 were regarded by the DOJ as apparent indications that she no longer had any share in SCC.
Thus, the petition for review was granted, and the city prosecutor of Makati was ordered to withdraw
the Information against respondents for unfair competition.

The DOJ denied the motion for reconsideration filed by petitioner on 28 March 2007. Hence, she
34 

filed a petition for certiorari before the CA, where it was docketed as CA-G.R. SP No. 98861. In her
petition, she questioned the DOJ Resolution, but later withdrew the same on 6 December 2007 for
an unknown reason. 35

Following the directive of the DOJ, the prosecutor filed before the RTC of Makati City, Branch 149, a
Motion to Dismiss and/or Withdraw Information on 3 April 2007. The trial court denied the motion in
36 

an Order dated 12 February 2008. It maintained the correctness of its finding of existence of
37 

probable cause in the case and ruled that the findings of the DOJ would be better appreciated and
evaluated in the course of the trial.

Respondents moved for reconsideration, but their motion was denied by the RTC. Aggrieved, they
38  39 

filed a Petition for Certiorari (with Prayer for the Issuance of a Temporary Restraining Order and
thereafter a Preliminary Injunction) before the CA. They argued that probable cause for the
40 

issuance of a warrant of arrest is different from probable cause for holding a person for trial. The first
is the function of the judge, while the second is the prosecutor’s. Thus, respondents claimed that it
41 

was wrong for Presiding Judge Cesar O. Untalan to deny the prosecutor’s motion to dismiss for lack
of probable cause on the basis of the judge’s own finding that there was probable cause to issue a
warrant of arrest against respondents. Furthermore, the Judge Untalan based his finding solely on
the evidence submitted by petitioner without evaluating the evidence of respondents.

In the first assailed Decision in CA-G.R. SP No. 103846 dated 11 March 2009, the CA granted the
42 

petition. It found that the trial judge committed grave abuse of discretion amounting to lack or excess
of jurisdiction when he denied the prosecutor’s motion to dismiss for lack of probable cause. The CA
sustained the position of respondents that the finding of probable cause for the filing of an
information is an executive function lodged with the prosecutor. It also found that the trial judge did
not make an independent assessment of the evidence on record in determining the existence of
probable cause for the offense of unfair competition, as opposed to the exhaustive study made by
the DOJ before arriving at its finding of lack of probable cause.

The CA also ruled that in determining probable cause, the essential elements of the crime charged
must be considered, for their absence would mean that there is no criminal offense. In determining
probable cause for unfair competition, the question is "whether or not the offenders by the use of
deceit or any other means contrary to good faith 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 shall commit any acts calculated to produce said result." The CA affirmed the findings of the
43 

DOJ and the RTC of Manila, Branch 24 that respondents used the "Naturals" brand because they
believed that they were the owners of SCC, which owned the brand. Furthermore, the partnership
had been terminated as of April 2006; hence, the filing of the criminal complaint on 9 June 2006
could no longer prosper. Even if SCC had not yet terminated its business, respondents, having
bought petitioner out of SCC, were already its exclusive owners and, as such, had the right to use
the "Naturals" brand.
According to the CA, the filing of the criminal complaint for unfair competition was nothing but an
offshoot of the misunderstanding and quarrel that arose when respondents initially refused to
reimburse the expenses incurred by petitioner in her trip to China and further escalated when
respondent Imelda decided to dissolve SCC.

Petitioner moved for reconsideration of the CA Decision, but the motion was denied on 1 June
44 

2009. She then brought the matter before this Court via a Petition for Review on Certiorari filed
45 

under Rule 45 of the Rules of Court and docketed as G.R. No. 188225. Without giving due course
46 

to the petition, the Court required respondents to comment thereon. Upon their
47 

compliance, petitioner was required to file a reply, which was later received on 11 December 2009.
48  49  50 

On 19 May 2011, she filed her Memorandum. 51

Meanwhile, following the promulgation of the Decision in CA-G.R. SP No. 103846, respondents filed
an Urgent Motion to Dismiss the criminal complaint for unfair competition before the RTC on 1 April
2009. The motion was duly opposed by petitioner, arguing that the CA Decision had not yet attained
52 

finality in view of her pending petition before this Court; thus, the motion was premature. The RTC
53 

denied the motion to dismiss for lack of merit. However, upon motion for reconsideration filed by
54  55 

respondents, it issued the Order dated 29 July 2009 ordering the quashal of the Information against
56 

them. The trial court issued another Order on 19 October 2009 denying petitioner’s Motion for
57 

Reconsideration. 58

Petitioner filed a Petition for Certiorari before the CA on the ground that the trial judge committed
59 

grave abuse of discretion amounting to lack or excess of jurisdiction when he quashed the
Information against respondents based on a CA Decision that was not yet final and executory, being
the subject of a petition still pending before this Court.

On 29 September 2011, the CA issued the second assailed Decision in CA-G.R. SP No. 111903
affirming the RTC Orders dated 29 July 2009 and 19 October 2009. The appellate court ruled that
while its Decision in CA-G.R. SP No. 103846 was still under review before this Court, neithercourt
had issued a restraining order or injunction that would prevent the RTC from implementing the said
Decision ordering the dismissal of the information against respondents. Furthermore, the CA ruled
that since petitioner had withdrawn her petition in CA-G.R. SP No. 98861 questioning the DOJ
Resolution, the issue of whether there was probable cause had "already been resolved with finality
in the negative." Thus, the trial court cannot be faulted for following the CA directive to dismiss the
60 

Information against respondents.

Opting not to file a motion for reconsideration, petitioner again comes before us on a Petition for
61 

Review on Certiorari questioning the Decision in CA-G.R. SP No. 111903. In her petition docketed
62 

as G.R. No. 198728, she argues that Presiding Judge Cesar O. Untalan committed grave abuse of
discretion amounting to lack or excess of jurisdiction when he dismissed the criminal case against
respondents for unfair competition based on CA findings that were not yet final. The trial judge was
fully aware that those findings were still subject to a pending petition before this Court.

On 23 November 2011, the Court consolidated G.R. Nos. 198728 and 188225. 63

ISSUE

Despite the extensive legal battle that petitioner and respondents have waged heretofore, these
petitions will be settled simply through a ruling on whether there exists probable cause to indict
respondents for unfair competition (violation of Section 168 in relation to Section 170) under R.A.
8293.
OUR RULING

No probable cause to indict respondents

At the outset, it is worth noting that Judge Untalan acted well within the exercise of his judicial
discretion when he denied the Motion to Dismiss and/or Withdraw Information filed by the
prosecution. His finding that there was probable cause to indict respondents for unfair competition,
and that the findings of the DOJ would be better appreciated in the course of a trial, was based on
his own evaluation of the evidence brought before him. It was an evaluation that was required of him
as a judge.

Thus, in Yambot v. Armovit, this Court reiterated the mandate of judges to make a personal
64 

evaluation of records submitted in support of criminal complaints filed before their respective salas:

Crespo v. Mogul instructs in a very clear manner that once a complaint or information is filed in
court, any disposition of the case as to its dismissal, or the conviction or acquittal of the accused,
rests on the sound discretion of the said court, as it is the best and sole judge of what to do with the
case before it. While the resolution of the prosecutorial arm is persuasive, it is not binding on the
court. It may therefore grant or deny at its option a motion to dismiss or to withdraw the information
based on its own assessment of the records of the preliminary investigation submitted to it, in the
faithful exercise of judicial discretion and prerogative, and not out of subservience to the
prosecutor. x x x. (Emphasis supplied)
65 

Judge Untalan stood firm on this finding in his denial of the motion for reconsideration and even
initially after the CA had made a ruling on the matter. He only performed a task he was called upon
to do, and his judgment on the matter – although erroneous – cannot be regarded as capricious and
whimsical. Thus, he did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction.

However, while we recognize that Judge Untalan did not commit grave abuse of discretion, we take
note of his apparent loss of steam when he issued the Order dated 29 July 2009 granting
respondents’ motion for reconsideration of his earlier ruling denying the Urgent Motion to Dismiss.
The good judge yielded, even though he was well aware that the CA Decision had not yet attained
finality pending review by this Court.

We now rule on the issue of probable cause.

Probable cause, for purposes of filing a criminal information, is described as "such facts as are
sufficient to engender a well-founded belief that a crime has been committed and the respondent is
probably guilty thereof, and should be held for trial."
66

Thus, the determination of the existence of probable cause necessitates the prior determination of
whether a crime or an offense was committed in the first place. Here, we find that there was no
probable cause to indict respondents, because the crime of unfair competition was not committed.

In positing that respondents were guilty of unfair competition, petitioner makes a lot of the fact that
they used the vendor code of RGP in marketing the "Naturals" products. She argues that they
passed off the "Naturals" products, which they marketed under RGP, as those of SCC; thus, they
allegedly prejudiced the rights of SCC as owner of the trademark. She also claims that she has the
personality to prosecute respondents for unfair competition on behalf of SCC. 1âwphi1
When Judge Untalan denied the Motion to Dismiss and/or Withdraw Information filed by the
prosecution and thereby sustained the position of petitioner, his error lay in the fact that his focus on
the crime of unfair competition was unwarranted. In this case, much more important than the issue of
protection of intellectual property is the change of ownership of SCC. The arguments of petitioner
have no basis, because respondents are the exclusive owners of SCC, of which she is no longer a
partner.

Based on the findings of fact of the CA and the DOJ, respondents have completed the payments of
the share of petitioner in the partnership affairs. Having bought her out of SCC, respondents were
already its exclusive owners who, as such, had the right to use the "Naturals" brand.

The use of the vendor code of RGP was resorted to only for the practical purpose of ensuring that
SM’s payments for the "Naturals" products would go to respondents, who were the actual suppliers.

Furthermore, even if we were to assume that the issue of protection of intellectual property is
paramount in this case, the criminal complaint for unfair competition against respondents cannot
prosper, for the elements of the crime were not present. We have enunciated in CCBPI v.
Gomez that the key elements of unfair competition are "deception, passing off and fraud upon the
67 

public." No deception can be imagined to have been foisted on the public through different vendor
68 

codes, which are used by SM only for the identification of suppliers’ products.

WHEREFORE, the Decisions dated 11 March 2009 in CA-G.R. SP No. 103846 and 29 September
2011 in CA-G.R. SP No. 111903, finding lack of probable cause for respondents’ alleged violation of
Section 168 in relation to Section 170 of Republic Act No. 8293 (unfair competition), are AFFIRMED.
The Information against respondents for unfair competition is

DISMISSED.

G.R. No. 180677               February 18, 2013

VICTORIO P. DIAZ, Petitioner,
vs.
PEOPLE OF THE PHILIPPINES AND LEVI STRAUSS [PHILS.], INC., Respondents.

DECISION

BERSAMIN, J.:

It is the tendency of the allegedly infringing mark to be confused with the registered trademark that is
the gravamen of the offense of infringement of a registered trademark. The acquittal of the accused
should follow if the allegedly infringing mark is not likely to cause confusion. Thereby, the evidence
of the State does not satisfy the quantum of proof beyond reasonable doubt.

Accused Victorio P. Diaz (Diaz) appeals the resolutions promulgated on July 17, 2007 1 and
November 22, 2007,2 whereby the Court of Appeals (CA), respectively, dismissed his appeal in C.A.-
G.R. CR No. 30133 for the belated filing of the appellant's brief, and denied his motion for
reconsideration. Thereby, the decision rendered on February 13, 2006 in Criminal Case No. 00-0318
and Criminal Case No. 00-0319 by the Regional Trial Court, Branch 255, in Las Pifias City (RTC)
convicting him for two counts of infringement of trademark were affirmed. 3

Antecedents
On February 10, 2000, the Department of Justice filed two informations in the RTC of Las Piñas City,
charging Diaz with violation of Section 155, in relation to Section 170, of Republic Act No. 8293, also
known as the Intellectual Property Code of the Philippines (Intellectual Property Code), to wit:

Criminal Case No. 00-0318

That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the
jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levi’s
Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully,
feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting,
copying and colorably imitating Levi’s registered trademarks or dominant features thereof such as
the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH
PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH,
and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and
jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans,
which likely caused confusion, mistake, and /or deceived the general consuming public, without the
consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter
of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of
LEVI’S.

CONTRARY TO LAW.4

Criminal Case No. 00-0319

That on or about August 28, 1998, and on dates prior thereto, in Las Pinas City, and within the
jurisdiction of this Honorable Court, the abovenamed accused, with criminal intent to defraud Levi’s
Strauss (Phil.) Inc. (hereinafter referred to as LEVI’S), did then and there, willfully, unlawfully,
feloniously, knowingly and intentionally engaged in commerce by reproducing, counterfeiting,
copying and colorably imitating Levi’s registered trademarks or dominant features thereof such as
the ARCUATE DESIGN, TWO HORSE BRAND, TWO HORSE PATCH, TWO HORSE LABEL WITH
PATTERNED ARCUATE DESIGN, TAB AND COMPOSITE ARCUATE/TAB/TWO HORSE PATCH,
and in connection thereto, sold, offered for sale, manufactured, distributed counterfeit patches and
jeans, including other preparatory steps necessary to carry out the sale of said patches and jeans,
which likely caused confusion, mistake, and /or deceived the general consuming public, without the
consent, permit or authority of the registered owner, LEVI’S, thus depriving and defrauding the latter
of its right to the exclusive use of its trademarks and legitimate trade, to the damage and prejudice of
LEVI’S.

CONTRARY TO LAW.5

The cases were consolidated for a joint trial. Diaz entered his pleas of not guilty to each information
on June 21, 2000.6

1.

Evidence of the Prosecution

Levi Strauss and Company (Levi’s), a foreign corporation based in the State of Delaware, United
States of America, had been engaged in the apparel business. It is the owner of trademarks and
designs of Levi’s jeans like LEVI’S 501, the arcuate design, the two-horse brand, the two-horse
patch, the two-horse patch with pattern arcuate, and the composite tab arcuate. LEVI’S 501 has the
following registered trademarks, to wit: (1) the leather patch showing two horses pulling a pair of
pants; (2) the arcuate pattern with the inscription "LEVI STRAUSS & CO;" (3) the arcuate design that
refers to "the two parallel stitching curving downward that are being sewn on both back pockets of a
Levi’s Jeans;" and (4) the tab or piece of cloth located on the structural seam of the right back
pocket, upper left side. All these trademarks were registered in the Philippine Patent Office in the
1970’s, 1980’s and early part of 1990’s. 7

Levi Strauss Philippines, Inc. (Levi’s Philippines) is a licensee of Levi’s. After receiving information
that Diaz was selling counterfeit LEVI’S 501 jeans in his tailoring shops in Almanza and Talon, Las
Piñas City, Levi’s Philippines hired a private investigation group to verify the information.
Surveillance and the purchase of jeans from the tailoring shops of Diaz established that the jeans
bought from the tailoring shops of Diaz were counterfeit or imitations of LEVI’S 501. Levi’s
Philippines then sought the assistance of the National Bureau of Investigation (NBI) for purposes of
applying for a search warrant against Diaz to be served at his tailoring shops. The search warrants
were issued in due course. Armed with the search warrants, NBI agents searched the tailoring shops
of Diaz and seized several fake LEVI’S 501 jeans from them. Levi’s Philippines claimed that it did
not authorize the making and selling of the seized jeans; that each of the jeans were mere imitations
of genuine LEVI’S 501 jeans by each of them bearing the registered trademarks, like the arcuate
design, the tab, and the leather patch; and that the seized jeans could be mistaken for original
LEVI’S 501 jeans due to the placement of the arcuate, tab, and two-horse leather patch. 8

2.

Evidence of the Defense

On his part, Diaz admitted being the owner of the shops searched, but he denied any criminal
liability.

Diaz stated that he did not manufacture Levi’s jeans, and that he used the label "LS Jeans Tailoring"
in the jeans that he made and sold; that the label "LS Jeans Tailoring" was registered with the
Intellectual Property Office; that his shops received clothes for sewing or repair; that his shops
offered made-to-order jeans, whose styles or designs were done in accordance with instructions of
the customers; that since the time his shops began operating in 1992, he had received no notice or
warning regarding his operations; that the jeans he produced were easily recognizable because the
label "LS Jeans Tailoring," and the names of the customers were placed inside the pockets, and
each of the jeans had an "LSJT" red tab; that "LS" stood for "Latest Style;" and that the leather patch
on his jeans had two buffaloes, not two horses.9

Ruling of the RTC

On February 13, 2006, the RTC rendered its decision finding Diaz guilty as charged, disposing thus:

WHEREFORE, premises considered, the Court finds accused Victorio P. Diaz, a.k.a. Vic Diaz,
GUILTY beyond reasonable doubt of twice violating Sec. 155, in relation to Sec. 170, of RA No.
8293, as alleged in the Informations in Criminal Case Nos. 00-0318 & 00-0319, respectively, and
hereby sentences him to suffer in each of the cases the penalty of imprisonment of TWO (2) YEARS
of prision correcional, as minimum, up to FIVE (5) YEARS of prision correcional, as maximum, as
well as pay a fine of ₱50,000.00 for each of the herein cases, with subsidiary imprisonment in case
of insolvency, and to suffer the accessory penalties provided for by law.

Also, accused Diaz is hereby ordered to pay to the private complainant Levi’s Strauss (Phils.), Inc.
the following, thus:
1. ₱50,000.00 in exemplary damages; and

2. ₱222,000.00 as and by way of attorney’s fees.

Costs de officio.

SO ORDERED.10

Ruling of the CA

Diaz appealed, but the CA dismissed the appeal on July 17, 2007 on the ground that Diaz had not
filed his appellant’s brief on time despite being granted his requested several extension periods.

Upon denial of his motion for reconsideration, Diaz is now before the Court to plead for his acquittal.

Issue

Diaz submits that:

THE COURT OF APPEALS VIOLATED EXISTING LAW AND JURISPRUDENCE WHEN IT

APPLIED RIGIDLY THE RULE ON TECHNICALITIES AND OVERRIDE SUBSTANTIAL JUSTICE
BY DISMISSING THE APPEAL OF THE PETITIONER FOR LATE FILING OF APPELLANT’S
BRIEF.11

Ruling

The Court first resolves whether the CA properly dismissed the appeal of Diaz due to the late filing of
his appellant’s brief.

Under Section 7, Rule 44 of the Rules of Court, the appellant is required to file the appellant’s brief in
the CA "within forty-five (45) days from receipt of the notice of the clerk that all the evidence, oral
and documentary, are attached to the record, seven (7) copies of his legibly typewritten,
mimeographed or printed brief, with proof of service of two (2) copies thereof upon the appellee."
Section 1(e) of Rule 50 of the Rules of Court grants to the CA the discretion to dismiss an appeal
either motu proprio or on motion of the appellee should the appellant fail to serve and file the
required number of copies of the appellant’s brief within the time provided by the Rules of Court.12

The usage of the word may in Section 1(e) of Rule 50 indicates that the dismissal of the appeal
upon failure to file the appellant’s brief is not mandatory, but discretionary. Verily, the failure to serve
and file the required number of copies of the appellant’s brief within the time provided by the Rules
of Court does not have the immediate effect of causing the outright dismissal of the appeal. This
means that the discretion to dismiss the appeal on that basis is lodged in the CA, by virtue of which
the CA may still allow the appeal to proceed despite the late filing of the appellant’s brief, when the
circumstances so warrant its liberality. In deciding to dismiss the appeal, then, the CA is bound to
exercise its sound discretion upon taking all the pertinent circumstances into due consideration.

The records reveal that Diaz’s counsel thrice sought an extension of the period to file the appellant’s
brief. The first time was on March 12, 2007, the request being for an extension of 30 days to
commence on March 11, 2007. The CA granted his motion under its resolution of March 21, 2007.
On April 10, 2007, the last day of the 30-day extension, the counsel filed another motion, seeking an
additional 15 days. The CA allowed the counsel until April 25, 2007 to serve and file the appellant’s
brief. On April 25, 2007, the counsel went a third time to the CA with another request for 15 days.
The CA still granted such third motion for extension, giving the counsel until May 10, 2007.
Notwithstanding the liberality of the CA, the counsel did not literally comply, filing the appellant’s brief
only on May 28, 2007, which was the 18th day beyond the third extension period granted.

Under the circumstances, the failure to file the appellant’s brief on time rightly deserved the outright
rejection of the appeal. The acts of his counsel bound Diaz like any other client. It was, of course,
only the counsel who was well aware that the Rules of Court fixed the periods to file pleadings and
equally significant papers like the appellant’s brief with the lofty objective of avoiding delays in the
administration of justice.

Yet, we have before us an appeal in two criminal cases in which the appellant lost his chance to be
heard by the CA on appeal because of the failure of his counsel to serve and file the appellant’s brief
on time despite the grant of several extensions the counsel requested. Diaz was convicted and
sentenced to suffer two indeterminate sentences that would require him to spend time in detention
for each conviction lasting two years, as minimum, to five years, as maximum, and to pay fines
totaling ₱100,000.00 (with subsidiary imprisonment in case of his insolvency). His personal liberty is
now no less at stake. This reality impels us to look beyond the technicality and delve into the merits
of the case to see for ourselves if the appeal, had it not been dismissed, would have been worth the
time of the CA to pass upon. After all, his appellant’s brief had been meanwhile submitted to the CA.
While delving into the merits of the case, we have uncovered a weakness in the evidence of guilt
that cannot be simply ignored and glossed over if we were to be true to our oaths to do justice to
everyone.

We feel that despite the CA being probably right in dismissing the excuses of oversight and
excusable negligence tendered by Diaz’s counsel to justify the belated filing of the appellant’s brief
as unworthy of serious consideration, Diaz should not be made to suffer the dire consequence. Any
accused in his shoes, with his personal liberty as well as his personal fortune at stake, expectedly
but innocently put his fullest trust in his counsel’s abilities and professionalism in the handling of his
appeal. He thereby delivered his fate to the hands of his counsel. Whether or not those hands were
efficient or trained enough for the job of handling the appeal was a learning that he would get only in
the end. Likelier than not, he was probably even unaware of the three times that his counsel had
requested the CA for extensions. If he were now to be left to his unwanted fate, he would surely
suffer despite his innocence. How costly a learning it would be for him! That is where the Court
comes in. It is most important for us as dispensers of justice not to allow the inadvertence or
incompetence of any counsel to result in the outright deprivation of an appellant’s right to life, liberty
or property.13

We do not mind if this softening of judicial attitudes be mislabeled as excessive leniency. With so
much on the line, the people whose futures hang in a balance should not be left to suffer from the
incompetence, mindlessness or lack of professionalism of any member of the Law Profession. They
reasonably expect a just result in every litigation. The courts must give them that just result. That
assurance is the people’s birthright. Thus, we have to undo Diaz’s dire fate.

Even as we now set aside the CA’s rejection of the appeal of Diaz, we will not remand the records to
the CA for its review. In an appeal of criminal convictions, the records are laid open for review. To
avoid further delays, therefore, we take it upon ourselves to review the records and resolve the issue
of guilt, considering that the records are already before us.

Section 155 of R.A. No. 8293 defines the acts that constitute infringement of trademark, viz:
Remedies; Infringement. — Any person who shall, without the consent of the owner of the registered
mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered
mark or the same container or a dominant feature thereof in connection with the sale, offering for
sale, distribution, advertising of any goods or services including other preparatory steps necessary to
carry out the sale of any goods or services on or in connection with which such use is likely to cause
confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall
be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth:
Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or
services using the infringing material.

The elements of the offense of trademark infringement under the Intellectual Property Code are,
therefore, the following:

1. The trademark being infringed is registered in the Intellectual Property Office;

2. The trademark is reproduced, counterfeited, copied, or colorably imitated by the infringer;

3. The infringing mark is used in connection with the sale, offering for sale, or advertising of
any goods, business or services; or the infringing mark is applied to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used upon or in
connection with such goods, business or services;

4. The use or application of the infringing mark is likely to cause confusion or mistake or to
deceive purchasers or others as to the goods or services themselves or as to the source or
origin of such goods or services or the identity of such business; and

5. The use or application of the infringing mark is without the consent of the trademark owner
or the assignee thereof.14

As can be seen, the likelihood of confusion is the gravamen of the offense of trademark
infringement.15 There are two tests to determine likelihood of confusion, namely: the dominancy test,
and the holistic test. The contrasting concept of these tests was explained in Societes Des Produits
Nestle, S.A. v. Dy, Jr., thus:

x x x. The dominancy test focuses on the similarity of the main, prevalent or essential features of the
competing trademarks that might cause confusion. Infringement takes place when the competing
trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary.
The question is whether the use of the marks is likely to cause confusion or deceive purchasers.

The holistic test considers the entirety of the marks, including labels and packaging, in determining
confusing similarity. The focus is not only on the predominant words but also on the other features
appearing on the labels.16
As to what test should be applied in a trademark infringement case, we said in McDonald’s
Corporation v. Macjoy Fastfood Corporation 17 that:

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to

another, no set rules can be deduced because each case must be decided on its merits. In such
cases, even more than in any other litigation, precedent must be studied in the light of the facts of
the particular case. That is the reason why in trademark cases, jurisprudential precedents should be
applied only to a case if they are specifically in point.

The case of Emerald Garment Manufacturing Corporation v. Court of Appeals,18 which involved an

alleged trademark infringement of jeans products, is worth referring to. There, H.D. Lee Co., Inc.
(H.D. Lee), a corporation based in the United States of America, claimed that Emerald Garment’s
trademark of "STYLISTIC MR. LEE" that it used on its jeans products was confusingly similar to the
"LEE" trademark that H.D. Lee used on its own jeans products. Applying the holistic test, the Court
ruled that there was no infringement.

The holistic test is applicable here considering that the herein criminal cases also involved trademark
infringement in relation to jeans products. Accordingly, the jeans trademarks of Levi’s Philippines
and Diaz must be considered as a whole in determining the likelihood of confusion between them.
The maong pants or jeans made and sold by Levi’s Philippines, which included LEVI’S 501, were
very popular in the Philippines. The consuming public knew that the original LEVI’S 501 jeans were
under a foreign brand and quite expensive. Such jeans could be purchased only in malls or
boutiques as ready-to-wear items, and were not available in tailoring shops like those of Diaz’s as
well as not acquired on a "made-to-order" basis. Under the circumstances, the consuming public
could easily discern if the jeans were original or fake LEVI’S 501, or were manufactured by other
brands of jeans. Confusion and deception were remote, for, as the Court has observed in Emerald
Garments:

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not
your ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong
pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more
cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception,
then, is less likely. In Del Monte Corporation v. Court of Appeals, we noted that:

.... Among these, what essentially determines the attitudes of the purchaser, specifically his
inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies
will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary
buyer does not exercise as much prudence in buying an article for which he pays a few centavos as
he does in purchasing a more valuable thing. Expensive and valuable items are normally bought
only after deliberate, comparative and analytical investigation. But mass products, low priced articles
in wide use, and matters of everyday purchase requiring frequent replacement are bought by the
casual consumer without great care....

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not
ask the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is,
therefore, more or less knowledgeable and familiar with his preference and will not easily be
distracted.

Finally, in line with the foregoing discussions, more credit should be given to the "ordinary
purchaser." Cast in this particular controversy, the ordinary purchaser is not the "completely unwary
consumer" but is the "ordinarily intelligent buyer" considering the type of product involved.
The definition laid down in Dy Buncio v. Tan Tiao Bok is better suited to the present case. There, the
"ordinary purchaser" was defined as one "accustomed to buy, and therefore to some extent familiar
with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the
deception of some persons in some measure acquainted with an established design and desirous of
purchasing the commodity with which that design has been associated. The test is not found in the
deception, or the possibility of deception, of the person who knows nothing about the design which
has been counterfeited, and who must be indifferent between that and the other. The simulation, in
order to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer
who has a need to supply and is familiar with the article that he seeks to purchase. 19

Diaz used the trademark "LS JEANS TAILORING" for the jeans he produced and sold in his tailoring
shops. His trademark was visually and aurally different from the trademark "LEVI STRAUSS & CO"
appearing on the patch of original jeans under the trademark LEVI’S 501. The word "LS" could not
be confused as a derivative from "LEVI STRAUSS" by virtue of the "LS" being connected to the word
"TAILORING", thereby openly suggesting that the jeans bearing the trademark "LS JEANS
TAILORING" came or were bought from the tailoring shops of Diaz, not from the malls or boutiques
selling original LEVI’S 501 jeans to the consuming public.

There were other remarkable differences between the two trademarks that the consuming public
would easily perceive. Diaz aptly noted such differences, as follows:

The prosecution also alleged that the accused copied the "two horse design" of the petitioner-
private complainant but the evidence will show that there was no such design in the seized jeans.
Instead, what is shown is "buffalo design." Again, a horse and a buffalo are two different animals
which an ordinary customer can easily distinguish. x x x.

The prosecution further alleged that the red tab was copied by the accused. However, evidence will
show that the red tab used by the private complainant indicates the word "LEVI’S" while that of the
accused indicates the letters "LSJT" which means LS JEANS TAILORING. Again, even an ordinary
customer can distinguish the word LEVI’S from the letters LSJT.

xxxx

In terms of classes of customers and channels of trade, the jeans products of the private
complainant and the accused cater to different classes of customers and flow through the different
channels of trade. The customers of the private complainant are mall goers belonging to class A and
B market group – while that of the accused are those who belong to class D and E market who can
only afford Php 300 for a pair of made-toorder pants. 20 x x x.

Moreover, based on the certificate issued by the Intellectual Property Office, "LS JEANS
TAILORING" was a registered trademark of Diaz. He had registered his trademark prior to the filing
of the present cases.21 The Intellectual Property Office would certainly not have allowed the
registration had Diaz’s trademark been confusingly similar with the registered trademark for LEVI’S
501 jeans.

Given the foregoing, it should be plain that there was no likelihood of confusion between the
trademarks involved. Thereby, the evidence of guilt did not satisfy the quantum of proof required for
a criminal conviction, which is proof beyond reasonable doubt. According to Section 2, Rule 133 of
the Rules of Court, proof beyond a reasonable doubt does not mean such a degree of proof as,
excluding possibility of error, produces absolute certainty. Moral certainty only is required, or that
degree of proof which produces conviction in an unprejudiced mind. Consequently, Diaz should be
acquitted of the charges.
WHEREFORE, the Court ACQUITS petitioner VICTORIO P. DIAZ of the crimes of infringement of
trademark charged in Criminal Case No. 00-0318 and Criminal Case No. 00-0319 for failure of the
State to establish his guilt by proof beyond reasonable doubt.

No pronouncement on costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

G.R. No. 174379

E.I DUPONT DE NEMOURS AND CO., (assignee of inventors Carino, Duncia and
Wong), Petitioner
vs.
DIRECTOR EMMA C. FRANCISCO (in ger capacity as DIRECTOR GENERAL OF THE
INTELLECTUAL PROPERTY OFFICE), DIRECTOR EPIFANIO M. VELASCO (in his capacity as
the DIRECTOR OF THE BUREAU OF PATENTS, and THERAPHARMA, INC., Respondents

DECISION

LEONEN, J.:

A patent is granted to provide rights and protection to the inventor after an invention is disclosed to
the public. It also seeks to restrain and prevent unauthorized persons from unjustly profiting from a
protected invention. However, ideas not covered by a patent are free for the public to use and
exploit. Thus, there are procedural rules on the application and grant of patents established to
protect against any infringement. To balance the public interests involved, failure to comply with
strict procedural rules will result in the failure to obtain a patent.

This resolves a Petition for Review on Certiorari   assailing the Court of Appeals Amended
1

Decision  dated August 30, 2006, which denied the revival of Philippine Patent Application No.
2

35526, and the Court of Appeals Resolution  dated January 31, 2006, which granted the intervention
3

of Therapharma, Inc. in the revival proceedings.

E.I. Dupont Nemours and Company (E.I. Dupont Nemours) is an American corporation organized
under the laws of the State of Delaware.   It is the assignee of inv~ntors David John Carini, John
4

Jonas Vytautas Duncia, and Pancras Chor Bun Wong, all citizens of the United States of America. 5

On July 10, 1987, E.I. Dupont Nemours filed Philippine Patent Application No. 35526 before the
Bureau of Patents, Trademarks, and Technology Transfer.  The application was for Angiotensin II
6

Receptor Blocking Imidazole (losartan), an invention related to the treatment of hypertension and
congestive heart failure.  The product was produced and marketed by Merck, Sharpe, and Dohme
7

Corporation (Merck), E.I. Dupont Nemours' licensee, under the brand names Cozaar and Hyzaar. 8
The patent application was handled by Atty. Nicanor D. Mapili (Atty. Mapili), a local resident agent
who handled a majority of E.I. Dupont Nemours' patent applications in the Philippines from 1972 to
1996. 9

On December 19, 2000, E.I. Dupont Nemours' new counsel, Ortega, Del Castillo, Bacorro, Odulio,
Calma, and Carbonell,  sent the Intellectual Property Office  a letter requesting that an office action
10 11

be issued on Philippine Patent Application No. 35526.  12

In response, Patent Examiner Precila O. Bulihan of Intellectual Property Office sent an office action
marked Paper No. 2 on January 30, 2002,  which stated:
13

The appointed attorney on record was the late Atty. Nicanor D. Mapili. The reconstituted documents
provided no documents that will show that the authority to prosecute the instant application is now
transferred to the present counsel. No official revocation on record is available.

Therefore, an official revocation of the Power of Attorney of the former counsel and the appointment
of the present by the applicant is therefore required before further action can be undertaken.

....

1. Contrary to what was alleged, the Chemical Examining Division's (CED) record will show that as
far as the said division is concern[ ed], it did not fail to issue the proper and timely action on the
instant application. CED record shows that the subject application was assigned to the examiner on
June 7, 1988. A month after that was July 19, 1988, the first Office Action was mailed but was
declared abandoned as of September 20, 1988 for applicant's failure to respond within the period as
prescribed under Rule 112. Since then, no other official transactions were recorded. Tlris record is
complemented by the Examiner-in-charge's own record ....

....

2. It was noted that it took thirteen (13) long years for the applicant to request for such Office Action.
This is not expected of the applicant since it is an acceptable fact that almost all inventors/
applicants wish for the early disposition for their applications. 14

On May 29, 2002, E.I. Dupont Nemours replied to the office action by submitting a Power of Attorney
executed by Miriam Meconnahey, authorizing Ortega, Castillo, Del Castillo, Bacorro, Odulio, Calma,
and Carbonell to prosecute and handle its patent applications.   On the same day, it also filed a
15

Petition for Revival with Cost of Philippine Patent Application No. 35526.  16

In its Petition for Revival, E.I. Dupont Nemours argued that its former counsel, Atty. Mapili, did not
inform it about the abandonment of the application, and it was not aware that Atty. Mapili had
already died.   It argued that it discovered Atty. Mapili's death when its senior-level patent attorney
17

visited the Philippines in 1996.   It argued that it only had actual notice of the abandonment on
18

January 30, 2002, the date of Paper No. 2.   Thus, it argued that its Petition for Revival was properly
19

filed under Section 113 of the 1962 Revised Rules of Practice before the Philippines Patent Office in
Patent Cases (1962 Revised Rules of Practice). 20

On April 18, 2002, the Director of Patents denied the Petition for Revival for having been filed out of
time.  The Resolution  stated:
21 22
Propriety dictates that the well-settled rule on agency should be applied to this case to maintain the
objectivity and discipline of the Office. Therefore, for cases such as the instant case, let the Office
maintain its position that mistakes of the counsel bind the client,' regardless of the degree of
negligence committed by the former counsel. Although it appears that the former counsel, Atty.
Nicanor Mapili was remiss in his obligations as counsel for the applicants, the Office cannot revive
the abandoned application because of the limitations provided in Rule 115. Clearly, the Petition for
Revival was filed beyond the reglementary period. Since the law and rules do not give the Director of
Patents the discretion to stretch the period for revival, the Office is constrained to apply Rule 115 to
the instant case.

In view of the foregoing considerations, applicants' petition to revive the subject application is hereby
denied.

SO ORDERED. 23

E.I. Dupont Nemours appealed the denial to the Director-General of the Intellectual Property Office
on August 26, 2002.  In the Decision  dated October 22, 2003, Director-General Emma C. Francisco
24 25

denied the appeal and affirmed the Resolution of the Director of Patents.

On November 21, 2003, petitioner filed before the Court of Appeals a Petition for Review seeking to
set aside the Intellectual Property Office's Decision dated October 22, 2003.  26

On August 31, 2004, the Court of Appeals granted the Petition for Review.   In allowing the Petition
27

for Revival, the Court of Appeals stated:

After an exhaustive examination of the records of this case, this Court believes that there is sufficient
justification to relax the application of the above-cited doctrine in this case, and to afford petitioner
some relief from the gross negligence committed by its former lawyer, Atty. Nicanor D. Mapili[.] 28

The Office of the Solicitor General, on behalf of the Intellectual Property Office, moved for
reconsideration of this Decision on September 22, 2004.  29

In the interim, Therapharma, Inc. moved for leave to intervene and admit the Attached Motion for
Reconsideration dated October 11, 2004  and argued that the Court of Appeals' August 31, 2004
30

Decision directly affects its "vested" rights to sell its own product. 
31

Therapharma, Inc. alleged that on January 4, 2003, it filed before the Bureau of Food and Drugs its
own application for a losartan product "Lifezar," a medication for hypertension, which the Bureau
granted.  It argued that it made a search of existing patent applications for similar products before its
32

application, and that no existing patent registration was found since E.I. Dupont Nemours'
application for its losartan product was considered abandoned by the Bureau of Patents,
Trademarks, and Technology Transfer.  It alleged that sometime in 2003 to 2004, there was an
33

exchange of correspondence between Therapharma, Inc. and Merck. In this exchange, Merck
informed Therapharma, Inc. that it was pursuing a patent on the losartan products in the Philippines
and that it would pursue any legal action necessary to protect its product. 34

On January 31, 2006, the Court of Appeals issued the Resolution  granting the Motion· for Leave to
35

Intervene. According to the Court of Appeals, Therapharma, Inc. had an interest in the revival of E.I.
Dupont Nemours' patent application since it was the local competitor for the losartan product.   It
36

stated hat even if the Petition for Review was premised on the revival of the patent application,
Therapharma, Inc.' s intervention was not premature since E.I. Dupont Nemours, through Merck,
already threatened Therapharma, Inc. with legal action if it continued to market its losartan product. 37

E.I. Dupont Nemours moved for reconsideration on February 22, 2006, assailing the Court of
Appeals' January 31, 2006 Resolution. 38

On August 30,. 2006, the Court of Appeals resolved both Motions for Reconsideration and rendered
the Amended Decision  reversing its August 31, 2004 Decision.
39

The Court of Appeals ruled that the public interest would be prejudiced by the revival of E.I. Dupont
Nemours' application.  It found that losartan was used to treat hypertension, "a chronic ailment
40

afflicting an estimated 12.6 million Filipinos,"  and noted that the presence of competition lowered
41

the price for losartan products.   It also found that the revival of the application prejudiced
42

Therapharma, Inc.' s interest, in that it had already invested more than P20,000,000.00 to develop its
own losartan product and that it acted in good faith when it marketed its product. 43

The Court of Appeals likewise found that it erroneously based its August 31, 2004 Decision on E.I
Dupont Nemours' allegation that it took seven (7) to 13 years for the Intellectual Property Office to
act on a patent application.   It stated that while it might have taken that long to issue the patent, it
44

did not take that long for the Intellectual Property Office to act on application.  Citing Schuartz v.
45

Court of Appeals,  it found that both E.I. Dupont Nemours and Atty. Mapili were inexcusably
46

negligent in

prosecuting the patent application. 47

On October 19, 2006, petitioner E.I. Dupont Nemours filed before this Court this Petition for Review
on Certiorari.  Both respondents Intellectual Property Office and Therapharma, Inc. were directed to
48

comment on the comment on the Petition.  Upon submission of their respective

49

Comments,  petitioner was directed to file its Consolidated Reply.   Thereafter, the parties were
50 51

directed to file their respective memoranda.  52

The arguments of the parties present several issues for this Court's resolution, as follows:

First, whether the Petition for Review on Certiorari complied with Rule 45, Section 4 of the Rules of
Court when petitioner failed to attach certain documents to support the allegations in the complaint;

Second, whether petitioner should have filed a petition for certiorari under Rule 65 of the Rules of
Court;

Third, whether the Petition for Review on Certiorari raises questions of fact;

Fourth, whether the Court of Appeals erred in allowing the intervention of respondent Therapharma,
Inc. in petitioner's appeal;

Fifth, whether the Court of Appeals erred in denying petitioner's appeal for the revival of its patent
application on the grounds that (a) petitioner committed inexcusable negligence in the prosecution of
its patent application; and (b) third-party rights and the public interest would be prejudiced by the
appeal;

Sixth, whether Schuartz applies to this case in that the negligence of a patent applicant's counsel
binds the applicant; and
Lastly, whether the invention has already become part of public domain.

The question of whether the Court of Appeals may resolve a motion for intervention is a question
that assails an interlocutory order and requests a review of a lower court's exercise of discretion.
Generally, a petition for certiorari under Rule 65 of the Rules of Court will lie to raise this issue in a
limited manner. There must be a clear showing of grave abuse of discretion for writ of certiorari to be
issued.

However, when the Court of Appeals has already resolved the question of intervention and the
merits of the case, an appeal through a petition for review on certiorari under Rule 45 of the Rules of
Court is the proper remedy.

Respondent Therapharma, Inc. argues that the Petition should be dismissed outright for being the
wrong mode of appeal.  It argues that petitioner should have filed a petition for certiorari under Rule
53

65 since petitioner was assailing an act done by the Court of Appeals in the exercise of its
discretion.   It argues that petitions under Rule 45 are limited to questions of law, and petitioner
54

raised findings of fact that have already been affirmed by the Court of Appeals.   Petitioner, on the
55

other hand, argues that Rule 65 is only available when there is no appeal or any plain, speedy
remedy in the ordinary course of law. Since a petition for review under Rule 45 was still available to
it, it argues that it correctly availed itself of this remedy.   Petitioner also argues that there are
56

exceptions to the general rule on the conclusiveness of the Court of Appeals' findings of fact.   It
57

argues that it was necessary for it to discuss relevant facts in order for it to show that the Court of
Appeals made a misapprehension of facts.  58

The special civil action of certiorari under Rule 65 is intended to correct errors of

jurisdiction.   Courts lose competence in relation to an order if it acts in grave abuse of discretion
59

amounting to lack or excess of jurisdiction.  A petition for review under Rule 45, on the other hand, is
60

a mode of appeal intended to correct errors of judgment.  Errors of judgment are errors committed
61

by a court within its jurisdiction.  This includes a review of the conclusions of law  of the lower court
62 63

and, in appropriate cases, evaluation of the admissibility, weight, and inference from the evidence
presented.

Intervention results in an interlocutory order ancillary to a principal action.  Its grant or denial is
64

subject to the sound discretion of the court.  Interlocutory orders, or orders that do not make a final
65

disposition of the merits of the main controversy or cause of action,  are generally not
66

reviewable.  The only exception is a limited one, in that when there is no plain, speedy, and
67

adequate remedy, and where it can be shown that the court acted without, in excess, or with such
grave abuse of discretion that such action ousts it of jurisdiction.

Judicial economy, or the goal to have cases prosecuted with the least cost to the parties,  requires
68

that unnecessary or frivolous reviews of orders by the trial court, which facilitate the resolution of the
main merits of the case, be reviewed together with the main merits of the case. After all, it would be
more efficient for an appellate court to review a case in its entire context when the case is finally
disposed.

The question of whether intervention is proper is a question of law. Settled is the distinction between
a question of law and a question of fact. A question of fact arises when there is doubt as to the truth
or falsity of certain facts.  A question of law, on the other hand, arises when "the appeal raises doubt
69

as to the applicable law on a certain set of facts."   The test often used by this Court to determine
70

whether there is a question of fact or a question of law "is not the appellation given to such question
by the party raising the same; rather, it is whether the appellate court can determine the issue raised
without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise it is a
question of fact." 71

Petitioner raises the question of whether Republic Act No. 165 allows the Court of Appeals to grant a
motion for intervention. This necessarily requires a determination of whether Rule 19 of the Rules of
Court   applies in appeals of cases filed under Republic Act No. 165. The determination of this
72

question does not require a review of re-evaluation of the evidence. It requires a determination of the
applicable law.

II

If a petition fails to attach material portions of the record, it may still be given due course if it falls
under certain exceptions. Although Rule 45, Section 4 of the Rules of Court requires that the petition
"be accompanied by ... such material portions of the record as would support the petition," the failure
to do so will not necessarily warrant the outright dismissal of the complaint.  73

Respondent Therapharma, Inc. argues that the Petition should have been outright dismissed since it
failed to attach certain documents to support its factual allegations and legal arguments, particularly:
the annexes of the Petition for Review it had filed before the Court of Appeals and the annexes in
the Motion for Leave to Intervene it had filed.   It argues that petitioner's failure to attach the
74

documents violates Rule 45, Section 4, which requires the submission of material portions of the
record.  75

On the other hand, petitioner argues that it was able to attach the Court of Appeals Decision dated
August 31, 2004, the Resolution dated January 31, 2006, and the Amended Decision dated August
30, 2006, all of which were sufficient for this Court to give due course to its Petition. 
76

In Magsino v. De Ocampo,   this Court applied the procedural guideposts in Galvez v. Court of
77

Appeals   in determining whether the Court of Appeals correctly dismissed a petition for review
78

under Rule 42 for failure to attach relevant portions of the record. Thus:

In Galvez v. Court of Appeals, a case that involved the dismissal of a petition for certiorari to assail
an unfavorable ruling brought about by the failure to attach copies of all pleadings submitted and
other material portions of the record in the trial court (like the complaint, answer and position paper)
as would support the allegations of the petition, the Court recognized three guideposts for the CA to
consider in determining whether or not the rules of procedures should be relaxed, as follows:

First, not all pleadings and parts of case records are required to be attached to the petition. Only
those which are relevant and pertinent must accompany it. The test of relevancy is whether the
document in question will support the material allegations in the petition, whether said document will
make out a prima facie case of grave abuse of discretion as to convince the court to give due course
to the petition.

Second, even if a document is relevant and pertinent to the petition, it need not be appended if it is
shown that the contents thereof can also [sic] found in another document already attached to the
petition. Thus, if the material allegations in a position paper are summarized in a questioned
judgment, it will suffice that only a certified true copy of the judgment is attached.
Third, a petition lacking an essential pleading or part of the case record may still be given due
course or reinstated (if earlier dismissed) upon showing that petitioner later submitted the documents
required, or that it will serve the higher interest of justice that the case be decided on the merits. 79

Although Magsino referred to a petition for review under Rule 42 before the Court of Appeals, the
procedural guideposts cited in Mafilsino may apply to this case since the contents of a pleading
under Rule 42  are substantially the same as the contents of a pleading under Rule 45,  in that both
80 81

procedural rules require the submission of "material portions of the record as would support the
allegations of the petition." 82

In support of its Petition for Review on Certiorari, petitioner attached the Court of Appeals Decision
dated August 31, 2004,   the Resolution dated January 31, 2006,  and the Amended Decision dated
83 84

August 30, 2006.  The Court of Appeals Resolution and Amended Decision quoted extensive
85

portions of its rollo in support of its rulings.   These conclusions were sufficient to convince this Court
86

not to outright dismiss the Petition but to require respondents to first comment on the Petition, in
satisfaction of the first and second procedural guideposts in Magsino.

Upon filing of its Consolidated Reply,  petitioner was able to attach the following additional
87

documents:

(1) Petition for Review filed before the Court of Appeals; 88

(2) Letters dated July 18, 1995, December 12, 1995, and December 29, 1995; 89

(3) Declaration of Ms. Miriam Meconnahey dated June 25, 2002; 90

(4) Spreadsheet of petitioner's patent applications handled by Atty. Mapili; 91

(5) Power of Attorney and Appointment of Resident Agent dated September 26, 1996; 92

(6) Letter dated December 19, 2000 requesting an Office Action on Patent Application No.
35526; 93

(7) Paper No. 2 dated January 30, 2002; 94

(8) Petition for Revival dated January 30, 2002 with attached Power of Attorney and
Appointment of Resident Agent; 95

(9) Resolution dated July 24, 2002 by Director of the Bureau of Patents;  and96

(10) Notice of and Memorandum on Appeal before the DirectorGeneral of the Intellectual
Property Office. 97

The third procedural guidepost in Magsino was complied with upon the submission of these
documents. Petitioner, therefore, has substantially complied with Rule 45, Section 4 of the Rules of
Court.

III

Appeal is not a right but a mere privilege granted by statute.  It may only be exercised in accordance
98

with the law that grants it.

Accordingly, the Court of Appeals is not bound by the rules of procedure in administrative agencies.
The procedural rules of an administrative agency only govern proceedings within the agency. Once
the Court of Appeals has given due course to an appeal from a ruling of an administrative agency,
the proceedings before it are governed by the Rules of Court.

However, petitioner argues that intervention should not have been allowed on appeal  since the
99

revival of a patent application is ex parte and is "strictly a contest between the examiner and the
applicant"  under Sections 78  and 79  of the 1962 Revised Rules of Practice.   It argues that the
100 101 102 103

disallowance of any intervention is to ensure the confidentiality of the proceedings under Sections 13
and 14 of the 1962 Revised Rules of Practice.  104

Respondents argue that the 1962 Revised Rules of Practice is only applicable before the Intellectual
Property Office.   In particular, respondent Therapharma, Inc. argues that the issue before the Court
105

of Appeals was beyond the realm of patent examination proceedings since it did not involve the
patentability of petitioner's invention.   It further argues that its intervention did not violate the
106

confidentiality of the patent application proceedings since petitioner was not required to divulge
confidential information regarding its patent application.  107

In the 1962 Revised Rules of Practice, final decisions of the Director of Patents are appealed to this
Court and governed by Republic Act No. 165. In particular:

PARTX
PETITION AND APPEALS

....

CHAPTER IV
APPEALS TO THE SUPREME COURT FROM FINAL ORDERS OR
DECISIONS OF THE DIRECTOR OF PATENTS IN EX PARTE AND
INTER PARTES PROCEEDINGS

265. Appeals to the Supreme Court in ex parte and inter partes proceedings.-Any person who is
dissatisfied with the final decision of the Director of Patents, (affirming that of a Principal Examiner)
denying him a patent for an invention, industrial design or utility model; any person who is
dissatisfied with any final decision of the Director of Patents (affirming that of the Executive
Examiner) in any proceeding; and any party who is dissatisfied with any final decision of the Director
of Patents in an inter partes proceeding, may appeal such final decision to the Supreme Court within
thirty days from the date he receives a copy of such decision. (Republic Act No. 165, section 16, as
amended by section 3, Republic Act No. 864.)

266. Procedure on appeal to the Supreme Court.-For the procedure on appeal to the Supreme
Court, from the final decisions of the Director of Patents, see sections 63 to 73, inclusive, of Republic
Act No. 165 (patent law).

Particularly instructive is Section 73 of Republic Act No. 165, which provides:

Section 73. Rules of Court applicable. - In all other matters not herein provided, the applicable
provisions of the Rules of Court shall govern.

Republic Act No. 165 has since been amended by Republic Act No. 8293, otherwise known as the
Intellectual Property Code of the Philippines (Intellectual Property Code), in 1997. This is the
applicable law with regard to the revival of petitioner's patent application. Section 7 (7.1 )(a) of the
Intellectual Property Code states:

SECTION 7. The Director General and Deputies Director General. -

7 .1. Functions. - The Director General shall exercise the following powers and functions:

....

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 the 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[.] (Emphasis supplied)

Thus, it is the Rules of Court, not the 1962 Revised Rules of Practice, which governs the Court of
Appeals' proceedings in appeals from the decisions of the Director-General of the Intellectual
Property Office regarding the revival of patent applications.

Rule 19 of the Rules of Court provides that a court has the discretion to determine whether to give
due course to an intervention. Rule 19, Section 1 states:

RULE 19
INTERVENTION

SECTION 1. Who may intervene. -A person who has a legal interest in the matter in litigation, or in
the success of either of the parties, or an interest against both, or is so situated as to be adversely
affected by a distribution or other disposition of property in the custody of the court or of an officer
thereof may, with leave of court, be allowed to intervene in the action. The court shall consider
whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the
original parties, and whether or not the intervenor's rights may be fully protected in a separate
proceeding.

The only questions the court need to consider in a motion to intervene are whether the intervenor
has standing to intervene, whether the motion will / unduly delay the proceedings or prejudice rights
already established, and whether the intervenor's rights may be protected in a separate action. 108

If an administrative agency's procedural rules expressly prohibit an intervention by third parties, the
prohibition is limited only to the proceedings before the administrative agency. Once the matter is
brought before the Court of Appeals in a petition for review, any prior prohibition on intervention does
not apply since the only question to be determined is whether the intervenor has established a right
to intervene under the Rules of Court.

In this case, respondent Therapharma, Inc. filed its Motion for Leave to Intervene   before the Court
109

of Appeals, not before the Intellectual Property Office. In assessing whether to grant the intervention,
the Court of Appeals considered respondent Therapharma, Inc.' s legal interest in the case and its
other options for the protection of its interests.   This was within the discretion of the Court of
110

Appeals under the Rules of Court.

Respondent Therapharma, Inc. was able to show that it had legal interest to intervene in the appeal
of petitioner's revival of its patent application. While its intervention may have been premature as no
patent has been granted yet, petitioner's own actions gave rise to respondent Therapharma, Inc.' s
right to protect its losartan product.

Respondent Therapharma, Inc. filed an application for product registration before the Bureau of
Food and Drugs on June 4, 2003 and was granted a Certificate of Product Registration on January
27, 2004.   It conducted patent searches from October 15, 1995 and found that no patent
111

application for losartan had been filed either before the Bureau of Patents, Trademarks, and
Technology Transfer or before the Intellectual Property Office. 112

As early as December 11, 2003, petitioner through Merck was already sending communications
threatening legal action if respondent Therapharma, Inc. continued to develop and market losartan in
the Philippines. The letter stated:

Merck is strongly committed to the protection of its valuable intellectual property rights, including the
subject losartan patents. While fair competition by sale of pharmaceutical products which are
domestically produced legally is always welcomed by Merck and MSD Philippines, Merck will
vigorously pursue all available legal remedies against any unauthorized manufacturer, distributor or
supplier of losartan in countries where its patents are in force and where such activity is prohibited
by law. Thus, Merck is committed to preventing the distribution of losartan in the Philippines if it
originates from, or travels through, a country in which Merck holds patent rights.   (Emphasis
113

supplied)

This letter was presented before the Court of Appeals, which eventually granted the revival of the
patent application in its August 31, 2004 Decision. Petitioner had no pending patent application for
its losartan product when it threatened respondent Therapharma, Inc. with legal action. 114

Respondent Therapharma, Inc. expressed its willingness to enter into a Non-Use and Confidentiality
Contract if there was a pending patent application.   After several negotiations on the clauses of the
115

contract,   the parties were unable to come to an agreement. In its letter dated May 24,
116

2004,   respondent Therapharma, Inc. expressed its frustration on petitioner's refusal to give a clear
117

answer on whether it had a pending patent application:

For easy reference, we have reproduced below paragraph 5 of the Confidentiality and Non-Use
Agreement ("Confidentiality Agreement"), underscoring your proposed amendment:

"THERAPHARMA agrees that upon receipt of Specifications and Claims of Application No. 35526 or
at any time thereafter, before it becomes part of the public domain, through no fault of
THERAPHARMA, it will not, either directly or indirectly, alone, or through, on behalf of, or in
conjunction with any other person or entity, make use of any information contained therein,
particularly the product covered by its claims and the equivalents thereof, in any manner
whatsoever."

We find your proposed insertion odd. What may be confidential, and which we agree you have every
right to protect by way of the Confidentiality Agreement, are the Specifications and Claims in the
patent application, not the product per se. The product has been in the market for years. Hence, how
can it be confidential? Or is the ambiguity intended to create a legal handle because you have no
cause of action against us should we launch our own version of the losartan product?

....
Finally, the questions we posed in our previous letters are plain and simple - Is the Philippine
Patent Application No. 35526 still pending before the IPO, i.e., it has neither been withdrawn
by your licensor nor denied registration by the IPO for any reason whatsoever? When did
your licensor file said application with the IPO? These questions are easy to answer, unless
there is an intention to mislead. You are also

aware that the IPO is the only government agency that can grant letters patent. This is why we find
disturbing your statement that the pendency of the patent application before the IPO is "not
relevant". Hence, unless we receive unequivocal answers to the questions above, we regret that we
cannot agree to execute the Confidentiality Agreement; otherwise, we may be acknowledging by
contract a right that you do not have, and never will have, by law.   (Emphasis and underscoring in
118

the original)

The threat of legal action against respondent Therapharma, Inc. was real and imminent. If
respondent Therapharma, Inc. waited until petitioner was granted a patent application so it could file
a petition for compulsory licensing and petition for cancellation of patent under Section 240  and
119

Section 247   of the 1962 Revised Rules of Practice,   its continued marketing of Lifezar would be
120 121

considered as an infringement of petitioner's patent.

Even assuming that the Intellectual Property Office granted the revival of Philippine Patent
Application No. 35526 back in 2000, petitioner's claim of absolute confidentiality in patent
proceedings is inaccurate.

In the 1962 Revised Rules of Practice, the Bureau of Patents, Trademarks, and Technology Transfer
previously required secrecy in pending patent applications. Section 13 states:

13. Pending applications are preserved in secrecy.-No information will be given to anyone respecting
the filing by any particular person of any application for a patent, the pendency of any particular case
before the Office, or the subject matter of any particular application, unless the same is authorized
by the applicant in writing, and unless it shall be necessary, in the opinion of the Director of Patents
for the proper conduct of business before the Office.

The Intellectual Property Code, however, changed numerous aspects of the old patent law. The
Intellectual Property Code was enacted not only to amend certain provisions of existing laws on
trademark, patent, and copyright, but also to honor the country's commitments under the World
Trade Organization - Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS
Agreement), a treaty that entered force in the Philippines on January 1, 1995. 122

The mandatory disclosure requirement in the TRIPS Agreement  precipitated the shift from a first-
123

to-invent system to a first-to-file system. The first-to-file system required citizens of foreign countries
to register their patents in the Philippines before they can sue for infringement.  124

Lawmakers, however, expressed their concern over the extension of the period of protection for
registered patents.   Under Section 21   of Republic Act No. 165, a patent had a term of 17 years.
125 126

The Intellectual Property Code extended the period to 20 years.  127

During the interpellations before the House of Representatives, then Representative Neptali
Gonzales II (Gonzales) explained that under the Intellectual Property Code, the period of protection
would have been shortened because of the publication requirement:
MR. TANADA. Under the proposed measure, Your Honor, what is the period of protection that is
given to the holder of the patent registered?

MR. GONZALES. Seventeen years from grant of patent, Mr. Speaker. Unlike before ...

MR. TANADA. Under the present law, Mr. Speaker.

MR. GONZALES. I mean 17 years from filing, Mr. Speaker, unlike before which is 20 years from
grant. Okay.

I am sorry, Mr. Speaker. Seventeen years from filing under the existing law, 20 years from grant
under the proposed measure. It would appear, Mr. Speaker, that the proposed measure seeks to
extend the grant of the patent.

MR. TA.NADA. But you have made the period of protection longer, Mr. Speaker.

MR. GONZALES. On the contrary, Mr. Speaker, when a similar question was previously propounded
before, actually Mr. Speaker, it may decrease in fact the period of protection, Mr. Speaker. Because
unlike before 17 years from grant, Mr. Speaker, now 20 years from application or from filing but
actually, Mr. Speaker, it normally takes three to four years before a patent is actually granted even
under the proposed measure. Because as you can see[,] publication in the BPTTT Gazette would
even taken place after 18 months from filing. In other words, the procedure itself is such a manner
that normally takes a period of about three years to finally grant the patent. So even if 20 years is
given from the time of filing actually in essence it will be the same, Mr. Speaker, because under the
existing law 17 years from grant. But even under our existing law from the time that a patent
application is filed it also takes about three to four years, Mr. Speaker, to grant the same.

Now, why from filing, Mr. Speaker? Because the patent holder applicant is now required to publish in
a manner easily understood by a person trained or with the same skill as that of a patent holder. And
from that time this is published, this process covered by the patent is already made available. In fact,
from the time that it is published, any interested person may even examine and go over the records
as filed with the BPTTT and, therefore, this new technology or new invention is now made available
to persons equipped or possessed with the same skills as that of the patent holder. And that is the
reason why the patent is - the time of the patent is now tacked from the time it is filed because as a
compromise it is now mandatory to publish the said patent together with its description - the
description of the process and even would, at times demand the deposit of sample of the industrial
design, Mr. Speaker.  128

Gonzales further clarified that the publication requirements of the Intellectual Property Code would
necessarily shorten the period for confidentiality of patent applications:

MR. MONFORT. Now, another question is, (another is) you know, the time from the filing of the date
up to publication which is the period of pendency or confidentiality, may I know how many years will
it take, that confidentiality period, variability.

MR. GONZALES. Eighteen months, Mr. Speaker.

MR. MONFORT. How many?

MR. GONZALES. Eighteen months.

MR. MONFORT. I do not think it is 18 months.

MR. GONZALES. It is provided for in the law, Mr. Speaker, because prior to the publication,
naturally, the records become confidential because the essence of a patent, trademark, or copyright
is to give the author or the inventor exclusive right to work on his own invention. And that is his
invention, and naturally, it is but right that he should have the exclusive right over his invention.

On the other hand, the law requires that after 18 months, it should now be published. When it is now
published, naturally, it ceases to be confidential in character because it is now ready for
examination. It is now ready for possible copying of any interested person because the application,
as we have repeatedly said on the floor, would require the filing of a description of the invention that
can be carried out by a Eerson similarly trained in the arts and sciences as that of the patent
holder.129

Thus, the absolute secrecy required by the 1962 Revised Rules of Practice would not be applicable
to a patent application before the Intellectual Property Office. Section 13 of the 1962 Revised Rules
of Practice does not appear in the Intellectual Property Code,   in the Rules and Regulations on
130

Inventions,   or in the Revised Implementing Rules and Regulations for Patents, Utility Models and
131

Industrial Design.   The Intellectual Property Code now states that all patent applications must be
132

published in the Intellectual Property Office Gazette and that any interested party may inspect all
documents submitted to the Intellectual Property Office. The patent application is only confidential
before its publication. Sections 44 and 45 of the Intellectual Property Code provide:

SECTION 44. Publication of Patent Application. -

44.1. The patent application shall be published in the IPO Gazette together with a search document
established by or on behalf of the Office citing any documents that reflect prior art, after the
expiration of eighteen (18) months from the filing date or priority date.

44.2. After publication of a patent application, any interested party may inspect the application
documents filed with the Office.

44.3. The Director General, subject to the approval of the Secretary of Trade and Industry, may
prohibit or restrict the publication of an application, if in his opinion, to do so would be prejudicial to
the national security and interests of the Republic of the Philippines. (n)

SECTION 45. Confidentiality Before Publication. -A patent application, which has not yet been
published, and all related documents, shall not be made available for inspection without the consent
of the applicant.

It was inaccurate, therefore, for petitioner to argue that secrecy in patent applications prevents any
intervention from interested parties. The confidentiality in patent applications under the Intellectual
Property Code is not absolute since a party may already intervene after the publication of
application.

IV

An abandoned patent application may only be revived within four (4) months from the date of
abandonment. No extension of this period is provided by the 1962 Revised Rules of Practice.
Section 113 states:
113. Revival of abandoned application.-An application abandoned for failure to prosecute may be
revived as a pending application if it is shown to the satisfaction of the Director that the delay was
unavoidable. An abandoned application may be revived as a pending application within four months
from the date of abandonment upon good cause shown and upon the payment of the required fee of
₱25. An application not revived within the specified period shall be deemed forfeited.

Petitioner argues that it was not negligent in the prosecution of its patent application  since it was
133

Atty. Mapili or his heirs who failed to inform it of crucial developments with regard to its patent
application.   It argues that as a client in a foreign country, it does not have immediate supervision
134

over its local counsel so it should not be bound by its counsel's negligence.   In any case, it
135

complied with all the requirements for the revival of an abandoned application under Rule 113 of the
1962 Revised Rules of Practice.  136

Respondents, on the other hand, argue that petitioner was inexcusably and grossly negligent in the
prosecution of its patent application since it allowed eight (8) years to pass before asking for a status
update on its application.   Respondent Intellectual Property Office argues that petitioner's inaction
137

for eight (8) years constitutes actual abandonment.   It also points out that from the time petitioner
138

submitted its new Special Power of Attorney on September 29, 1996, it took them another four (4)
years to request a status update on its application.  139

Under Chapter VII, Section 1 ll(a) of the 1962 Revised Rules of Practice, a patent application is
deemed abandoned if the applicant fails to prosecute the application within four months from the
date of the mailing of J the notice of the last action by the Bureau of Patents, Trademarks, and
Technology Transfer, and not from applicant's actual notice. Section 11 l(a)

states:

Chapter VII

TIME FOR RESPONSE BY APPLICANT; ABANDONMENT OF APPLICATION

111. Abandonment for failure to respond within the time limit.-

(a) If an applicant fails to prosecute his application within four months after the date when the last
official notice of action by the Office was mailed to him, or within such time as may be fixed (rule
112), the application will become abandoned.

According to the records of the Bureau of Patents, Trademarks, and Technology Transfer Chemical
Examining Division, petitioner filed Philippine Patent Application No. 35526 on July 10, 1987. It was
assigned to an examiner on June 7, 1988. An Office Action was mailed to petitioner's agent, Atty.
Mapili, on July 19, 1988. Because petitioner failed to respond within the allowable period, the
application was deemed abandoned on September 20, 1988.  Under Section 113, petitioner had
140

until January 20, 1989 to file for a revival of the patent application. Its Petition for Revival, however,
was filed on May 30, 2002,   13 years after the date of abandonment.
141

Section 113 has since been superseded by Section 133.4 of the Intellectual Property Code, Rule
930 of the Rules and Regulations on Inventions, and Rule 929 of the Revised Implementing Rules
and Regulations for Patents, Utility Models and Industrial Design. The period of four (4) months from
the date of abandonment, however, remains unchanged. The Intellectual Property Code even
provides for a shorter period of three (3) months within which to file for revival:
SECTION 133. Examination and Publication. –

....

133.4. An abandoned application may be revived as a pending application within three (3) months
from the date of abandonment, upon good cause shown and the payment of the required fee.

Rule 930 of the Rules and Regulations on Inventions provides:

Rule 930. Revival of application. - An application deemed withdrawn for failure to prosecute may be
revived as a pending application within a

period of four (4) months from the mailing date of the notice of withdrawal if it is shown to the
satisfaction of the Director that the failure was due to fraud, accident, mistake or excusable
negligence.

A petition to revive an application deemed withdrawn must be accompanied by (1) a showing of the
cause of the failure to prosecute, (2) a complete proposed response, and (3) the required fee.

An application not revived in accordance with this rule shall be deemed forfeited.

Rule 929 of the Revised Implementing Rules and Regulations for Patents, Utility Models and
Industrial Design provides:

Rule 929. Revival of Application. - An application deemed withdrawn for failure to prosecute may be
revived as a pending application within a period of four (4) months from the mailing date of the notice
of withdrawal if it is shown to the satisfaction of the Director that the failure was due to fraud,
accident, mistake, or excusable negligence. A petition to revive an application deemed withdrawn
shall be accompanied by:

(a) A showing of a justifiable reason for the failure to prosecute;

(b) A complete proposed response; and

(c) Full payment of the required fee.

No revival shall be granted to an application that has been previously revived with cost.

An application not revived in accordance with this Rule shall be deemed forfeited.

Even if the delay was unavoidable, or the failure to prosecute was due to fraud, accident, mistake, or
excusable negligence, or the Petition was accompanied by a complete proposed response, or all
fees were paid, the Petition would still be denied since these regulations only provide a four (4 )-
month period within which to file for the revival of the application. The rules do not provide any
exception that could extend this four (4)-month period to 13 years.

Petitioner’s patent application, therefore, should not be revived since it was filed beyond the
allowable period.

V
Even assuming that the four (4)-month period could be extended, petitioner was inexcussably
negligent in the prosecution of its patent application.

Negligence is inexcusable if its commission could have been avoided through ordinary diligence and
prudence.   It is also settled that negligence of counsel binds the client as this "ensures against the
142

resulting uncertainty and tentativeness of proceedings if clients were allowed to merely

disown.   their counsels' conduct."
143

Petitioner's resident agent, Atty. Mapili, was undoubtedly negligent in failing to respond to the Office
Action sent by the Bureau of Patents, Trademarks, and Technology Transfer on June 19, 1988.
Because of his negligence, petitioner's patent application was declared abandoned. He was again
negligent when he failed to revive the abandoned application within four (4) months from the date of
abandonment.

Petitioner tries to disown Atty. Mapili 's conduct by arguing that it was not informed of the
abandonment of its patent application or of Atty. Mapili's death. By its own evidence, however,
petitioner requested a status update from Atty. Mapili only on July 18, 1995, eight (8) years after the
filing of its application.   It alleged that it only found out about Atty. Mapili 's death sometime in
144

March 1996, as a result of its senior patent attorney's visit to the Philippines.   Although it was in
145

petitioner's discretion as a foreign client to put its complete trust and confidence on its local resident
agent, there was a correlative duty on its part to be diligent in keeping itself updated on the progress
of its patent applications. Its failure to be informed of the abandonment of its patent application was
caused by its own lack of prudence.

In Bernardo v. Court of Appeals,   "[n]o prudent party will leave the fate of his case entirely to his
146

lawyer .... It is the duty of a party-litigant to be in contact with his counsel from time to time in order to
be informed of the progress of his case."  147

Even if Atty. Mapili's death prevented petitioner from submitting a petition for revival on time, it was
clearly negligent when it subsequently failed to immediately apprise itself of the status of its patent
application.

Upon learning of Atty. Mapili’s death, petitioner issued a Power of Attorney and Appointment of
Resident Agent in favor of Bito, Lozada, Ortega & Castillo on March 25, 1996.   Despite the
148

immediate action in the substitution of its resident agent, it only requested a status update of
Philippine Patent Application No. 35526 from the Intellectual Property Office on December 14,
2000,   or four (4) years after it learned of Atty. Mapili' s death.
149

Petitioner attempts to explain that it took them four (4) years to request a status update because the
Bureau of Patents, Trademarks, and Technology Transfer failed to take any action when it submitted
its Power of Attorney and Appointment of Resident Agent in favor of Bito, Lozada, Ortega &
Castillo.  The Power of Attorney, however, shows that it was only to inform the Bureau that all
150

notices relating to its pending patent applications should be sent to it. Philippine Patent Application
No. 35526 was declared abandoned on September 20, 1988. As far as the Bureau was concerned, it
was a forfeited application that had already been archived. It was not the Bureau's duty to resurrect
previous notices of forfeited and abandoned applications to be sent to new resident agents unless a
specific status update was requested. Considering that petitioner only requested a status update on
December 14, 2000, it was only then that the Intellectual Property Office would start sending notices
to it.

Contrary to the posturing of petitioner, Schuartz is applicable.

In Schuartz, several foreign inventors seeking to file patent applications in the Philippines hired the
law firm Siguion Reyna, Montecillo and Ongsiako to process their applications.   The Bureau of
151

Patents, Trademarks, and Technology Transfer mailed the law firm several notices of abandonment
on its patent applications from June 1987 to September 1987. The law firm only found out about this
in December 1987, after it dismissed two (2) of its employees in charge of handling
correspondences from the Bureau. 1  The law firm filed petitions for revival of its patent applications
52

from March 1988, all of which were denied by the Director of the Bureau of Patents for being filed
out of time.   An appeal was subsequently filed before the Court of Appeals but was dismissed for
153

being filed beyond the reglementary period.  154

This Court found that although the Court of Appeals may have erred in counting the period for
appeal, it could not grant the Petition. This Court stated:

[P]etitioners lost sight of the fact that the petition could not be granted because of laches. Prior to
the filing of the petition for revival of the patent application with the Bureau of Patents, an
unreasonable period of time had lapsed due to the negligence of petitioners' counsel. By such
inaction, petitioners were deemed to have forfeited their right to revive their applications for patent.

Facts show that the patent attorneys appointed to follow up the applications for patent registration
had been negligent in complying with the rules of practice prescribed by the Bureau of Patents.  The1âwphi1

firm had been notified about the abandonment as early as June 1987, but it was only after
December 7, 1987, when their employees Bangkas and Rosas had been dismissed, that they came
to know about it. This clearly showed that petitioners' counsel had been remiss in the handling of
their clients' applications.

"A lawyer's fidelity to the cause of his client requires him to be ever mindful of the responsibilities
that should be expected of him. A lawyer shall not neglect a legal matter entrusted to him." In the
instant case, petitioners' patent attorneys not only failed to take notice of the notices of
abandonment, but they failed to revive the application within the four-month period, as provided in
the rules of practice in patent cases. These applications are deemed forfeited upon the lapse of such
period.   (Emphasis supplied)
155

Petitioner attempts to distinguish itself from Schuartz by arguing that the petitioners in Schuartz had
actual notice of abandonment while petitioner here was only able to have actual notice when it
received Paper No. 2.

The four (4 )-month period in Section 111  of the 1962 Revised Rules of Practice, however, is not
156

counted from actual notice of abandonment but from mailing of the notice. Since it appears from the
Intellectual Property Office's records that a notice of abandonment was mailed to petitioner's
resident agent on July 19, 1988,  the time for taking action is counted from this period. Petitioner's
157

patent application cannot be revived simply because the period for revival has already lapsed and no
extension of this period is provided for by the 1962 Revised Rules of Practice.

VI

The right of priority given to a patent applicant is only relevant when there are two or more conflicting
patent applications on the same invention. Because a right of priority does not automatically grant
letters patent to an applicant, possession of a right of priority does not confer any property rights on
the applicant in the absence of an actual patent.

Petitioner argues that its patent application was filed on July 10, 1987, within 12 months from the
prior filing of a U.S. patent application on July 11, 1986.  It argues that it is protected from becoming
158
part of the public domain because of convention priority under the Paris Convention for the
Protection of Industrial Property and Section 9 of Republic Act No. 165.  159

Respondent Therapharma, Inc., on the other hand, argues that a mere patent application does not
vest any right in the applicant before the issuance of the patent.  It argues that the "priority date"
160

argued by petitioner is only relevant in determining who has a better right to the patent among the
other applicants who subsequently apply for the same invention.  161

Under Section 31 of the Intellectual Property Code, a right of priority is given to any patent applicant
who has previously applied for a patent in a country that grants the same privilege to Filipinos.
Section 31 states:

SECTION 31. Right of Priority. - An application for patent filed by any person who has previously
applied for the same invention in another country which by treaty, convention, or law affords similar
privileges to Filipino citizens, shall be considered as filed as of the date of filing the foreign
application: Provided, That:

a. the local application expressly claims priority;

b. it is filed within twelve (12) months from the date the earliest foreign application was filed; and

c. a certified copy of the foreign application together with an English translation is filed within six (6)
months from the date of filing in the Philippines.

A patent applicant with the right of priority is given preference in the grant of a patent when there are
two or more applicants for the same invention. Section 29 of the Intellectual Property Code provides:

SECTION 29. First to File Rule. - If two (2) or more persons have made the invention separately and
independently of each other, the right to the patent shall belong to the person who filed an
application for such invention, or where two or more applications are filed for the same invention, to
the applicant who has the earliest filing date or, the earliest priority date.

Since both the United States  and the Philippines  are signatories to the Paris Convention for the
162 163

Protection of Industrial Property, an applicant who has filed a patent application in the United States
may have a right of priority over the same invention in a patent application in the
Philippines.  However, this right of priority does not immediately entitle a patent applicant the grant
164

of a patent. A right of priority is not equivalent to a patent. Otherwise, a patent holder of any
member-state of the Paris Convention need not apply for patents in other countries where it wishes
to exercise its patent.

It was, therefore, inaccurate for petitioner to argue that its prior patent application in the United
States removed the invention from the public domain in the Philippines. This argument is only
relevant if respondent Therapharma, Inc. had a conflicting patent application with the Intellectual
Property Office. A right of priority has no bearing in a case for revival of an abandoned patent
application.

VII

The grant of a patent is to provide protection to any inventor from any patent infringement.   Once
165

an invention is disclosed to the public, only the patent holder has the exclusive right to manufacture,
utilize, and market the invention.  In Creser Precision Systems v. Court of Appeals:
166 167
Under American jurisprudence, an inventor has no common-law right to a monopoly of his invention.
He has the right to make, use and vend his own invention, but if he voluntarily discloses it, such as
by offering it for sale, the world is free to copy and use it with impunity. A patent, however, gives the
inventor the right to exclude all others. As a patentee, he has the exclusive right of making, using or
selling the invention. 
168

Under the Intellectual Property Code, a patent holder has the right to "to restrain, prohibit and
prevent"   any unauthorized person or entity from manufacturing, selling, or importing any product
169

derived from the patent. However, after a patent is granted and published in the Intellectual Property
Office Gazette,   any interested third party "may inspect the complete description, claims, and
170

drawings of the patent."  171

The grant of a patent provides protection to the patent holder from the indiscriminate use of the
invention. However, its mandatory publication also has the correlative effect of bringing new ideas
into the public consciousness. After the publication of the patent, any person may examine the
invention and develop it into something further than what the original patent holder may have
envisioned. After the lapse of 20 years,   the invention becomes part of the public domain and is
172

free for the public to use. In Pearl and Dean v. Shoemart, Inc.:  173

To be able to effectively and legally preclude others from copying and profiting from the invention, a
patent is a primordial requirement. No patent, no protection. The ultimate goal of a patent system is
to bring new designs and technologies into the public domain through disclosure. Ideas, once
disclosed to the public without the protection of a valid patent, are subject to appropriation without
significant restraint.

On one side of the coin is the public which will benefit from new ideas; on the other are the inventors
who must be protected. As held in Bauer & Cie vs. O'Donnell, "The act secured to the inventor the
exclusive right to make use, and vend the thing patented, and consequently to prevent others from
exercising like privileges without the consent of the patentee. It was passed for the purpose of
encouraging useful invention and promoting new and useful inventions by the protection and
stimulation new and useful inventions by the protection and stimulation given to inventive genius,
and was intended to secure to the public, after the lapse of the exclusive privileges granted the
benefit of such inventions and improvements."

The law attempts to strike an ideal balance between the interests:

"(The p)atent system thus embodies a carefully varafted bargain for encouraging the creation and
disclosure of new useful and non-obvious advances in technology and design, in return for the
exclusive right to practice the invention for a number of years. The inventor may keep his invention
secret and reap its fruits indefinitely. In consideration of its disclosure and the consequent benefit to
the community, the patent is granted. An exclusive enjoyment is guaranteed him for 17 years, but
upon the expiration of that period, the knowledge of the invention inures to the people, who are thus
enabled to practice it and profit by its use."

The patent law has a three-fold purpose: "first, patent law seeks to foster and reward invention;
second, it promotes disclosures of inventions to stimulate further innovation and to permit the public
to practice the invention once the patent expires; third, the stringent requirements for patent
protection. seek to ensure that ideas in the public domain remain there for the free use of the
public."

It is only after an exhaustive examination by the patent office that a patent is issued. Such an in-
depth investigation is required because "in rewarding a useful invention, the rights and welfare of the
community must be fairly dealt with and effectively guarded. To that end, the prerequisites to
obtaining a patent are strictly observed and when a patent is issued, the limitations on its exercise
are equally strictly enforced. To begin with, a genuine invention or discovery must be demonstrated
lest in the constant demand for new appliances, the heavy hand of tribute be laid on each slight
technological advance in art."  (Emphasis supplied)
174

In addition, a patent holder of inventions relating to food or medicine does not enjoy absolute
monopoly over the patent. Both Republic Act No. 165 and the Intellectual Property Code provide for
compulsory licensing. Compulsory licensing is defined in the Intellectual Property Code as the "grant
a license to exploit a patented invention, even without the agreement of the patent owner."  175

Under Republic Act No. 165, a compulsory license may be granted to any applicant three (3) years
after the grant of a patent if the invention relates to food or medicine necessary for public health or
safety.   In Smith Kline & French Laboratories, Ltd. vs. Court of Appeals: 
176 177

Section 34 of R.A. No. 165, even if the Act was enacted prior to the Philippines' adhesion to the
[Paris] Convention, fits well within the aforequoted provisions of Article 5 of the Paris Convention. In
the explanatory note of Bill No. 1156 which eventually became R.A. No. 165, the legislative intent in
the grant of a compulsory license was not only to afford others an opportunity to provide the public
with the quantity of the patented product, but also to prevent the growth of monopolies. Certainly, the
growth of monopolies was among the abuses which Section A, Article 5 of the Convention foresaw,
and which our Congress likewise wished to prevent in enacting R.A. No. 165.  178

The patent holder’s proprietary right over the patent only lasts for three (3) years from the grant of
the patent, after which any person may be allowed to manufacture, use or sell the invention subject
to the payment of royalties:

The right to exclude others from the manufacturing, using or vending an invention relating to food or
medicine should be conditioned to allowing any person to manufacture, use or vend the same after a
period of three years from the date of the grant of the letters patent. After all, the patentee is not
entirely deprived of any proprietary right. In fact, he has been given the period of three years of
complete monopoly over the patent. Compulsory licensing of a patent on food or medicine without
regard to the other conditions imposed in Section 34 is not an undue deprivation of proprietary
interests over a patent right because the law sees to it that even after three years of complete
monopoly something is awarded to the inventor in the form of a bilateral and workable licensing
agreement and a reasonable royalty to be agreed upon by the parties and in default of such
agreement, the Director of Patent may fix the terms and conditions of the license. 179

A patent is a monopoly granted only for specific purposes and objectives. Thus, its procedures must
be complied with to attain its social objective. Any request for leniency in its procedures should be
taken in this context. Petitioner, however, has failed to convince this court that the revival of its
patent application would have a significant impact on the pharmaceutical industry.

Hypertension, or high blood pressure, is considered a "major risk factor for cardiovascular
disease"   such as "heart disease, stroke, kidney failure and blindness."   In a study conducted by
180 181

the World Health Organization, 25% of adults aged 21 years and older in the Philippines suffer from
high blood pressure.   According to the Department of Health, heart disease remains the leading
182

cause of mortality in the Philippines.   Angiotensin II Receptor Blocking Imidazole or "losartan" is

183

one of the medications used for the treatment ofhypertension.  184

In a study conducted by the Philippine Institute for Development Studies, "affordability of drugs
remains a serious problem"   in the Philippines. It found that because of the cost of drugs,
185
accessibility to drugs become prohibitive for the lowest-earning households and are "even more
prohibitive for the u:nemployed and indigent."   Several measures have been enacted by the
186

government to address the high costs of medicine, among them, parallel drug importation  and the 187

passage of Republic Act No. 9502, otherwise known as the Universally Accessible Cheaper and
Quality Medicines Act of 2008.   Figures submitted by respondent Therapharma, Inc., however, also
188

show that the presence of competition in the local pharmaceutical market may ensure the public
access to cheaper medicines.

According to respondent Therapharma, Inc., the retail price of petitioner's losartan product, Cozaar,
decreased within one (1) month of respondent Therapharma, Inc.' s entry into the market:  189

BRAND TRADER RETAIL PRICE RETAIL PRICE Within

As of Lifezar's first one month from
entry into the market Lifezar's entry or by
on June 4, 2004 July 4, 2004

LIFEZAR Therapharma 50 mg - P20.20 50 mg - P20.20

COZAAR Merck 50 mg - P39.50 50 mg - P39.50

100 mg - P55.00 100 -P44.00

Respondent Therapharma, Inc. also presented figures showing that there was a 44% increase in the
number of losartan units sold within five (5) months of its entry into the market.   More Filipinos are
190

able to purchase losartan products when there are two (2) different players providing competitive
prices in the market.

Lifezar, and another of respondent Therapharma, Inc.'s products, Combizar, have also been
recommended as cheaper alternative losartan medication, since they were priced "50 percent less
than foreign brands."  191

Public interest will be prejudiced if, despite petitioner's inexcusable negligence, its Petition for
Revival is granted.  Even without a pending patent application and the absence of any exception to
1awp++i1

extend the period for revival, petitioner was already threatening to pursue legal action against
respondent Therapharma, Inc. if it continued to develop and market its losartan product,
Lifezar.   Once petitioner is granted a patent for its losartan products, Cozaar and Hyzaar, the loss
192

of competition in the market for losartan products may result in higher prices. For the protection of
public interest, Philippine Patent Application No. 35526 should be considered a forfeited patent
application.

WHEREFORE, the Petition is DENIED. The Resolution dated January 31, 2006 and the Amended
Decision dated August 30, 2006 of the Court of Appeals are AFFIRMED.

SO ORDERED.

G.R. No. 169504               March 3, 2010

COFFEE PARTNERS, INC., Petitioner,
vs.
SAN FRANCISCO COFFEE & ROASTERY, INC., Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 15 June 2005 Decision2 and the 1 September 2005 Resolution3 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 Decision4 of the Office of the Director General-Intellectual Property
Office and reinstated the 14 August 2002 Decision5 of the Bureau of Legal Affairs-Intellectual
Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioner’s motion
for reconsideration and respondent’s motion for partial reconsideration.

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and
maintaining coffee shops in the country. It registered with the Securities and Exchange Commission
(SEC) in January 2001. It has a franchise agreement 6 with Coffee Partners Ltd. (CPL), a business
entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to
operate coffee shops in the Philippines using trademarks designed by CPL such as "SAN
FRANCISCO COFFEE."

Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered
with the SEC in May 1995. It registered the business name "SAN FRANCISCO COFFEE &
ROASTERY, INC." with the Department of Trade and Industry (DTI) in June 1995. Respondent had
since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willy’s, and
other coffee companies.

In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company
name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting,
and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee
carts in malls and other commercial establishments in Metro Manila.

In June 2001, respondent discovered that petitioner was about to open a coffee shop under the
name "SAN FRANCISCO COFFEE" in Libis, Quezon City. According to respondent, petitioner’s
shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the
business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using
the name "SAN FRANCISCO COFFEE." Respondent also filed a complaint with the Bureau of Legal
Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims
for damages.

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the
Intellectual Property Office (IPO) applications for registration of the mark "SAN FRANCISCO
COFFEE & DEVICE" for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark
could not be confused with respondent’s trade name because of the notable distinctions in their
appearances. Petitioner argued respondent stopped operating under the trade name "SAN
FRANCISCO COFFEE" when it formed a joint venture with Boyd Coffee USA. Petitioner contended
respondent did not cite any specific acts that would lead one to believe petitioner had, through
fraudulent means, passed off its mark as that of respondent, or that it had diverted business away
from respondent.

Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon
City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall,
Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed
in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said
he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop
and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop "SAN
FRANCISCO COFFEE" has branches in Malaysia and Singapore. He added that he formed CPL in
1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former
managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar
venture and adopted the name "SAN FRANCISCO COFFEE" from the famous city in California
where he and his former colleagues once lived and where special coffee roasts came from.

The Ruling of the Bureau of Legal Affairs-Intellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioner’s trademark infringed on
respondent’s trade name. It ruled that the right to the exclusive use of a trade name with freedom
from infringement by similarity is determined from priority of adoption. Since respondent registered
its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001
in the Philippines and in 1997 in other countries, then respondent must be protected from
infringement of its trade name.

The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial
evidence indicated respondent continuously used its trade name in connection with the purpose for
which it was organized. It found that although respondent was no longer involved in blending,
roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and
doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that
for abandonment to exist, the disuse must be permanent, intentional, and voluntary.

The BLA-IPO held that petitioner’s use of the trademark "SAN FRANCISCO COFFEE" will likely
cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial
impression of the words "SAN FRANCISCO" which is the dominant portion of respondent’s trade
name and petitioner’s trademark. It held that no significant difference resulted even with a diamond-
shaped figure with a cup in the center in petitioner's trademark because greater weight is given to
words – the medium consumers use in ordering coffee products.

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that
petitioner adopted the trademark "SAN FRANCISCO COFFEE" because of the authority granted to it
by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of
petitioner.

The BLA-IPO also dismissed respondent’s claim of actual damages because its claims of profit loss
were based on mere assumptions as respondent had not even started the operation of its coffee
carts. The BLA-IPO likewise dismissed respondent’s claim of moral damages, but granted its claim
of attorney’s fees.

Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while
respondent questioned the denial of actual damages. The BLA-IPO denied the parties’ partial motion
for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property
Office (ODG-IPO).

The Ruling of the Office of the Director General-

Intellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioner’s use of
the trademark "SAN FRANCISCO COFFEE" did not infringe on respondent's trade name. The ODG-
IPO found that respondent had stopped using its trade name after it entered into a joint venture with
Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it
opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade
name in good faith and a prior user who had stopped using such trade name, it would be inequitable
to rule in favor of the latter.

The Ruling of the Court of Appeals

In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the
ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002
decision of the BLA-IPO finding infringement. The appellate court denied respondent’s claim for
actual damages and retained the award of attorney’s fees. In its 1 September 2005 Resolution, the
Court of Appeals denied petitioner’s motion for reconsideration and respondent’s motion for partial
reconsideration.

The Issue

The sole issue is whether petitioner’s use of the trademark "SAN FRANCISCO COFFEE" constitutes
infringement of respondent’s trade name "SAN FRANCISCO COFFEE & ROASTERY, INC.," even if
the trade name is not registered with the Intellectual Property Office (IPO).

The Court’s Ruling

The petition has no merit.

Petitioner contends that when a trade name is not registered, a suit for infringement is not available.
Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondent’s
registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when
petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek
the renewal of its business name registration. Petitioner stresses respondent’s failure to continue the
use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims
no confusion is likely to occur between its trademark and respondent’s trade name because of a
wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is
in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun
"San Francisco" and the generic word "coffee" are not capable of exclusive appropriation.

Respondent maintains the law protects trade names from infringement even if they are not
registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293) 7 dispensed with
registration of a trade name with the IPO as a requirement for the filing of an action for infringement.
All that is required is that the trade name is previously used in trade or commerce in the Philippines.
Respondent insists it never abandoned the use of its trade name as evidenced by its letter to
petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the
infringement case. Respondent alleges petitioner’s trademark is confusingly similar to respondent’s
trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the
source, affiliation, or sponsorship of petitioner’s coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that
respondent continued to make plans and do research on the retailing of coffee and the
establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of
Appeals, which further found that while respondent stopped using its trade name in its business of
selling coffee, it continued to import and sell coffee machines, one of the services for which the use
of the business name has been registered. The binding effect of the factual findings of the Court of
Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the
BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also
settled that absent any circumstance requiring the overturning of the factual conclusions made by
the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court
necessarily upholds such findings of fact.8

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management
SA,9 this Court laid down what constitutes infringement of an unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in
infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated
by the infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark or trade name is
applied to labels, signs, prints, packages, wrappers, 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.10 (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed
by its owner against the owner of an infringing trademark. All that is required is that the trade name
is previously used in trade or commerce in the Philippines. 11

Section 22 of Republic Act No. 166,12 as amended, required registration of a trade name as a
condition for the institution of an infringement suit, to wit:

Sec. 22. Infringement, what constitutes. – Any person who shall use, without the consent of the
registrant, any reproduction, counterfeit, copy, or colorable imitation of any registered mark or trade
name in connection with the sale, offering for sale, or advertising of any goods, business or services
on or in connection with which such use is likely to cause confusion or mistake or to deceive
purchasers or others as to the source or origin of such goods or services, or identity of such
business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages,
wrappers, receptacles, or advertisements intended to be used upon or in connection with such
goods, business, or services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided. (Emphasis supplied)

However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration
requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected,
even prior to or without registration with the IPO, against any unlawful act including any subsequent
use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the
public.  Thus:
1avvph!1

SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to
register trade names, such names shall be protected, even prior to or without registration,
against any unlawful act committed by third parties.

(b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a
mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public,
shall be deemed unlawful. (Emphasis supplied)

It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute
standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of
each case can determine its existence. Thus, in infringement cases, precedents must be evaluated
in the light of each particular case.13

In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the
dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent
features of the competing trademarks that might cause confusion and deception, thus constituting
infringement. If the competing trademark contains the main, essential, and dominant features of
another, and confusion or deception is likely to result, infringement occurs. Exact duplication or
imitation is not required. The question is whether the use of the marks involved is likely to cause
confusion or mistake in the mind of the public or to deceive consumers. 14

In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the
products, including the labels and packaging, in determining confusing similarity. 15 The discerning
eye of the observer must focus not only on the predominant words but also on the other features
appearing on both marks in order that the observer may draw his conclusion whether one is
confusingly similar to the other. 16

Applying either the dominancy test or the holistic test, petitioner’s "SAN FRANCISCO COFFEE"
trademark is a clear infringement of respondent’s "SAN FRANCISCO COFFEE & ROASTERY, INC."
trade name. The descriptive words "SAN FRANCISCO COFFEE" are precisely the dominant
features of respondent’s trade name. Petitioner and respondent are engaged in the same business
of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the
business of one corporation is the same or substantially the same as that of another corporation. In
this case, the consuming public will likely be confused as to the source of the coffee being sold at
petitioner’s coffee shops. Petitioner’s argument that "San Francisco" is just a proper name referring
to the famous city in California and that "coffee" is simply a generic term, is untenable. Respondent
has acquired an exclusive right to the use of the trade name "SAN FRANCISCO COFFEE &
ROASTERY, INC." since the registration of the business name with the DTI in 1995. Thus,
respondent’s use of its trade name from then on must be free from any infringement by similarity. Of
course, this does not mean that respondent has exclusive use of the geographic word "San
Francisco" or the generic word "coffee." Geographic or generic words are not, per se, subject to
exclusive appropriation. It is only the combination of the words "SAN FRANCISCO COFFEE," which
is respondent’s trade name in its coffee business, that is protected against infringement on matters
related to the coffee business to avoid confusing or deceiving the public.

In Philips Export B.V. v. Court of Appeals,17 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.18

This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the
name and reputation so far built by respondent without running afoul of the basic demands of fair
play. Not only the law but equity considerations hold petitioner liable for infringement of respondent’s
trade name.

The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the
Director General-Intellectual Property Office and in reinstating the 14 August 2002 Decision of the
Bureau of Legal 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
Associate Justice

WE CONCUR: