III.

TRADEMARK LAW

A. LEGISLATIVE HISTORY

Republic Act (R.A.) No. 166: AN ACT TO PROVIDE FOR THE REGISTRATION AND PROTECTION OF TRADE-
MARKS, TRADE-NAMES AND SERVICE-MARKS, DEFINING UNFAIR COMPETITION AND FALSE MARKING
AND PROVIDING REMEDIES AGAINST THE SAME, AND FOR OTHER PURPOSES; June 20, 1947

Section 239.2, IPC: 239.2. Marks registered under Republic Act No. 166 shall remain in force but shall be deemed to
have been granted under this Act and shall be due for renewal within the period provided for under this Act and, upon
renewal, shall be reclassified in accordance with the International Classification. Trade names and marks registered
in the Supplemental Register under Republic Act No. 166 shall remain in force but shall no longer be subject to
renewal.

Section 235.2, IPC: 235.2. All applications for registration of marks or trade names pending in the Bureau of Patents,
Trademarks and Technology Transfer at the effective date of this Act may be amended, if practicable to bring them
under the provisions of this Act. The prosecution of such applications so amended and the grant of registrations
thereon shall be proceeded with in accordance with the provisions of this Act. If such amendments are not made, the
prosecution of said applications shall be proceeded with and registrations thereon granted in accordance with the
Acts under which said applications were filed, and said Acts are hereby continued in force to this extent for this
purpose only, notwithstanding the foregoing general repeal thereof. (n)

Section 236, IPC: SECTION 236. Preservation of Existing Rights. - Nothing herein shall adversely affect the rights on
the enforcement of rights in patents, utility models, industrial designs, marks and works, acquired in good faith prior
to the effective date of this Act. (n)

Section 241, IPC: SECTION 241. Effectivity. - This Act shall take effect on 1 January 1998. (n) [NON-
RETROACTIVE]

Section 239, IPC: SECTION 239. Repeals. 239.1. All Acts and parts of Acts inconsistent herewith, more particularly
Republic Act No. 165, as amended; Republic Act No. 166, as amended; and Articles 188 and 189 of the Revised
Penal Code; Presidential Decree No. 49, including Presidential Decree No. 285, as amended, are hereby repealed.
239.2. Marks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted
under this Act and shall be due for renewal within the period provided for under this Act and, upon renewal, shall be
reclassified in accordance with the International Classification. Trade names and marks registered in the
Supplemental Register under Republic Act No. 166 shall remain in force but shall no longer be subject to renewal.
239.3. The provisions of this Act shall apply to works in which copyright protection obtained prior to the effectivity of
this Act is subsisting: Provided, That the application of this Act shall not result in the diminution of such protection. (n)

B. DEFINITION OF TRADEMARKS

Section 121.1, IPC: 121.1. “Mark” means 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; (Sec. 38, R.A. No. 166a)

Distilleria Washington v. CA, 263 SCRA 303 (1996): It is to be pointed out that a trademark refers to a word, name,
symbol, emblem, sign or device or any combination thereof adopted and used by a merchant to identify, and
distinguish from others, his goods of commerce. It is basically an intellectual creation that is susceptible to
ownership and, consistently therewith, gives rise to its own elements of  jus posidendi, jus utendi, jus fruendi, jus
disponendi, and jus abutendi, along with the applicable jus lex, comprising that ownership. The incorporeal right,
however, is distinct from the property in the material object subject to it. Ownership in one does not necessarily vest
ownership in the other. Thus, the transfer or assignment of the intellectual property will not necessarily constitute a
conveyance of the thing it covers, nor would a conveyance of the latter imply the transfer or assignment of the
intellectual right.

C. FUNCTIONS OF TRADEMARK

Ang v. Teodoro, 74 Phil 50 (1942): In the present state of development of the law on Trade-Marks, Unfair
Competition, and Unfair Trading, the test employed by the courts to determine whether noncompeting goods are or
are not of the same class is confusion as to the origin of the goods of the second user. Although two noncompeting
articles may be classified under two different classes by the Patent Office because they are deemed not to possess
the same descriptive properties, they would, nevertheless, be held by the courts to belong to the same class if the
simultaneous use on them of identical or closely similar trade-marks would be likely to cause confusion as to the
origin, or personal source, of the second user's goods. They would be considered as not falling under the same class
only if they are so dissimilar or so foreign to each other as to make it unlikely that the purchaser would think the first
user made the second user's goods.

DOCTRINE OF "SECONDARY MEANING" - This doctrine is to the effect that a word or phrase originally incapable
of exclusive appropriation with reference to an article of the market, because geographically or otherwise descriptive,
might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in
that trade and to that branch of the purchasing public, the word or phrase has come to mean that the article was his
product. (G. & C. Merriam Co. vs. Salfield, 198 F., 369, 373.)

Etepha v. Director of Patents, 16 SCRA 495 (1966): Confusion is likely between trademarks, however, only if
their over-all  presentations in any of the particulars of sound, appearance, or meaning are such as would lead the
purchasing public into believing that the products to which the marks are applied emanated from the same source. In
testing this issue, fixed legal rules exist — if not in harmony, certainly in abundance — but, in the final analysis, the
application of these rules in any given situation necessarily reflects a matter of individual judgment largely predicated
on opinion. There is, however, and can be no disagreement with the rule that the purchaser is confused, if at all, by
the marks as a whole.

Mirpuri v. Court of Appeals, 318 SCRA 516 (1999): The Convention of Paris for the Protection of Industrial Property,
otherwise known as the Paris Convention, is a multilateral treaty that seeks to protect industrial property consisting of
patents, utility models, industrial designs, trademarks, service marks, trade names and indications of source or
appellations of origin, and at the same time aims to repress unfair competition. The Convention is essentially a
compact among various countries which, as members of the Union, have pledged to accord to citizens of the other
member countries trademark and other rights comparable to those accorded their own citizens by their domestic laws
for an effective protection against unfair competition. Art. 6bis is a self-executing provision and does not require
legislative enactment to give it effect in the member country. It may be applied directly by the tribunals and officials of
each member country by the mere publication or proclamation of the Convention, after its ratification according to the
public law of each state and the order for its execution.

The Philippines and the United States of America have acceded to the WTO Agreement. Conformably, the State
must reaffirm its commitment to the global community and take part in evolving a new international economic order at
the dawn of the new millennium.
TRADEMARK - 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.

THREE DISTINCT FUNCTIONS OF TRADEMARK - 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.

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. 30 Whether in the print, broadcast or electronic
communications medium, particularly on the Internet, 31 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.

D. HOW ARE MARKS ACQUIRED

Unno Commercial Enterprises v. General Milling Corp., 120 SCRA 904 (1983): The right to register trademark is
based on ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply
for the registration of the same. Under the Trademark Law only the owner of the trademark, trade name or service
mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to
register the same. 

The term owner does not include the importer of the goods bearing the trademark, trade name, service mark, or other
mark of ownership, unless such importer is actually the owner thereof in the country from which the goods are
imported. A local importer, however, may make application for the registration of a foreign trademark, trade name or
service mark if he is duly authorized by the actual owner of the name or other mark of ownership.

REGISTRATION AND OWNERSHIP - Ownership of a trademark is not acquired by the mere fact of registration
alone. 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. Registration does not perfect a trademark
right. x x x Evidence may be presented to overcome the presumption. Prior use by one will controvert a claim of legal
appropriation, by subsequent users.

Kabushi Kaisha Isetan v. IAC, 203 SCRA 583 (1991): A fundamental principle of Philippine Trademark Law is that
actual use in commerce in the Philippines is a pre-requisite to the acquisition of ownership over a trademark or a
tradename.

The respondent registered its trademark in 1979. It has continuously used that name in commerce. It has established
a goodwill through extensive advertising. The people who buy at Isetann Store do so because of Isetann's efforts.
There is no showing that the Japanese firm's registration in Japan or Hongkong has any influence whatsoever on the
Filipino buying public.

Philip Morris v. CA, 224 SCRA 576 (1993): In other words, petitioners may have the capacity to sue for infringement
irrespective of lack of business activity in the Philippines on account of Section 21-A of the Trademark Law but the
question whether they have an exclusive right over their symbol as to justify issuance of the controversial writ will
depend on actual use of their trademarks in the Philippines in line with Sections 2 and 2-A of the same law. It is thus
incongruous for petitioners to claim that when a foreign corporation not licensed to do business in Philippines files a
complaint for infringement, the entity need not be actually using its trademark in commerce in the Philippines. Such a
foreign corporation may have the personality to file a suit for infringement but it may not necessarily be entitled to
protection due to absence of actual use of the emblem in the local market.

“However, on May, 21, 1984, Section 21-A, the provision under consideration, was qualified by this Court in La
Chemise Lacoste S.A. vs. Fernandez (129 SCRA 373 [1984]), to the effect that a foreign corporation not doing
business in the Philippines may have the right to sue before Philippine Courts, but existing adjective axioms require
that qualifying circumstances necessary for the assertion of such right should first be affirmatively pleaded (2
Agbayani Commercial Laws of the Philippines, 1991 Ed., p. 598; 4 Martin, Philippine Commercial Laws, Rev. Ed.,
1986, p. 381). Indeed, it is not sufficient for a foreign corporation suing under Section 21-A to simply allege its alien
origin. Rather, it must additionally allege its personality to sue. Relative to this condition precedent, it may be
observed that petitioners were not remiss in averring their personality to lodge a complaint for infringement (p.
75, Rollo in AC-G.R. SP No. 13132) especially so when they asserted that the main action for infringement is
anchored on an isolated transaction (p. 75, Rollo in AC-G.R. SP No. 13132; Atlantic Mutual Ins. Co. vs. Cebu
Stevedoring Co., Inc., 17 SCRA 1037 (1966), 1 Regalado, Remedial Law Compendium, Fifth Rev. Ed., 1988, p.
103).”
GENERAL RULE: Foreign corporations not engaged in business in the Philippines may maintain a cause of action
for infringement primarily because of Section 21-A of the Trademark Law when the legal standing to sue is alleged x
xx
EXCEPTION: A fundamental principle of Philippine Trademark Law is that actual use in commerce in the Philippines
is a pre-requisite to the acquisition of ownership over a trademark or a tradename.

Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual
use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided
by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions
93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has
been made part of the law of the land does not by any means imply the primacy of international law over national law
in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law
are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International
Law, Fourth ed., 1974, p. 16).

ACTUAL USE IN COMMERCE PRIOR TO ITS REGISTRATION; NECESSARY: . . . Adoption alone of a trademark
would not give exclusive right thereto. Such right grows out of their actual use. Adoption is not use. One may make
advertisements, issue circulars, give out price lists on certain goods; but these alone would not give exclusive right of
use. For trademark is a creation of use. The underlying reason for all these is that purchasers have come to
understand the mark as indicating the origin of the wares. Flowing from this is the trader's right to protection in the
trade he has built up and the goodwill he has accumulated from use of the trademark. . . . In fact, a prior registrant
cannot claim exclusive use of the trademark unless it uses it in commerce.

Philip Morris v. Fortune Tobacco, GR No. 158589, 27 June 2006: [THIS HAS REFERENCE TO THE 1993 CASE]

TRADEMARK; PROTECTION - A "trademark" is any distinctive word, name, symbol, emblem, sign, or device, or any
combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them
from those manufactured, sold, or dealt in by others. Inarguably, a trademark deserves protection. For, as Mr. Justice
Frankfurter observed in Mishawaka Mfg. Co. v. Kresge Co.:

The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is true that we live
by symbols, it is no less true that we purchase goods by them. A trade-mark is a merchandising short-cut which
induces a purchaser to select what he wants, or what he has been led to believe what he wants. The owner of a
mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the
drawing power of a congenial symbol. Whatever the means employed, the aim is the same - to convey through the
mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is
attained, the trade-mark owner has something of value. If another poaches upon the commercial magnetism of the
symbol he has created, the owner can obtain legal redress.

REGISTRATION: Admittedly, the registration of a trademark gives the registrant, such as petitioners, advantages
denied non-registrants or ordinary users, like respondent. But while petitioners enjoy the statutory presumptions
arising from such registration,19 i.e., as to the validity of the registration, ownership and the exclusive right to use the
registered marks, they may not successfully sue on the basis alone of their respective certificates of registration of
trademarks. For, petitioners are still foreign corporations. As such, they ought, as a condition to availment of the
rights and privileges vis-à-vis their trademarks in this country, to show proof that, on top of Philippine registration,
their country grants substantially similar rights and privileges to Filipino citizens pursuant to Section 21-A 20 of R.A.
No. 166.

In Leviton Industries v. Salvador,21 the Court further held that the aforementioned reciprocity requirement is a
condition sine qua non to filing a suit by a foreign corporation which, unless alleged in the complaint, would justify
dismissal thereof, a mere allegation that the suit is being pursued under Section 21-A of R.A. No. 166 not being
sufficient. In a subsequent case, 22 however, the Court held that where the complainant is a national of a Paris
Convention- adhering country, its allegation that it is suing under said Section 21-A would suffice, because the
reciprocal agreement between the two countries is embodied and supplied by the Paris Convention which, being
considered part of Philippine municipal laws, can be taken judicial notice of in infringement suits.23

As well, the fact that their respective home countries, namely, the United States, Switzerland and Canada, are,
together with the Philippines, members of the Paris Union does not automatically entitle petitioners to the protection
of their trademarks in this country absent actual use of the marks in local commerce and trade.

True, the Philippines’ adherence to the Paris Convention 24 effectively obligates the country to honor and enforce its
provisions25 as regards the protection of industrial property of foreign nationals in this country. However, any
protection accorded has to be made subject to the limitations of Philippine laws. 26 Hence, despite Article 2 of the
Paris Convention which substantially provides that (1) nationals of member-countries shall have in this country rights
specially provided by the Convention as are consistent with Philippine laws, and enjoy the privileges that Philippine
laws now grant or may hereafter grant to its nationals, and (2) while no domicile requirement in the country where
protection is claimed shall be required of persons entitled to the benefits of the Union for the enjoyment of any
industrial property rights,27 foreign nationals must still observe and comply with the conditions imposed by Philippine
law on its nationals.

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

ACTUAL USE - Following universal acquiescence and comity, our municipal law on trademarks regarding the
requirements of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent
clash is being decided by a municipal tribunal. Xxx. Withal, the fact that international law has been made part of the
law of the land does not by any means imply the primacy of international law over national law in the municipal
sphere. Under the doctrine of incorporation as applied in most countries, rules of International Law are given a
standing equal, not superior, to national legislative enactments.

Contrary to what petitioners suggest, the registration of trademark cannot be deemed conclusive as to the actual use
of such trademark in local commerce. As it were, registration does not confer upon the registrant an absolute right to
the registered mark. The certificate of registration merely constitutes prima facie evidence that the registrant is the
owner of the registered mark. Evidence of non-usage of the mark rebuts the presumption of trademark
ownership,34 as what happened here when petitioners no less admitted not doing business in this country.35

Most importantly, we stress that registration in the Philippines of trademarks does not ipso facto convey an absolute
right or exclusive ownership thereof. To borrow from Shangri-La International Hotel Management, Ltd. v.
Development Group of Companies, Inc.36 TRADEMARK is a creation of use and, therefore, actual use is a pre-
requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the right of
ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient.

LIKELIHOOD OF CONFUSION - The "likelihood of confusion" is the gravamen of trademark infringement.40 But

likelihood of confusion is a relative concept, the particular, and sometimes peculiar, circumstances of each case
being determinative of its existence. Thus, in trademark infringement cases, more than in other kinds of litigation,
precedents must be evaluated in the light of each particular case.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: THE DOMINANCY
TEST AND THE HOLISTIC TEST. The DOMINANCY TEST sets sight on the similarity of the prevalent features of
the competing trademarks that might cause confusion and deception, thus constitutes infringement. Under this norm,
the question at issue turns on whether the use of the marks involved would be likely to cause confusion or mistake in
the mind of the public or deceive purchasers.

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.

GENERAL CONFUSION: The question is not whether the two articles are distinguishable by their label when set side
by side but whether the general confusion made by the article upon the eye of the casual purchaser who is
unsuspicious and off his guard, is such as to likely result in his confounding it with the original. As observed in several
cases, 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 is the touchstone.

When we spoke of an "ordinary purchaser," the reference was not to the "completely unwary customer" but to the
"ordinarily intelligent buyer" considering the type of product involved.

It cannot be over-emphasized that the products involved are addicting cigarettes purchased mainly by those who are
already predisposed to a certain brand. Accordingly, the ordinary buyer thereof would be all too familiar with his
brand and discriminating as well. We, thus, concur with the CA when it held, citing a definition found in Dy Buncio v.
Tan Tiao Bok,52 that the "ordinary purchaser" in this case means "one accustomed to buy, and therefore to some
extent familiar with, the goods in question."

ISSUE OF TRADEMARK INFRINGEMENT; FACTUAL – “ Last, but not least, we must reiterate that the issue of
trademark infringement is factual, with both the trial and appellate courts having peremptorily found allegations of
infringement on the part of respondent to be without basis. As we said time and time again, factual determinations of
the trial court, concurred in by the CA, are final and binding on this Court.

For lack of convincing proof on the part of the petitioners of actual use of their registered trademarks prior to
respondent’s use of its mark and for petitioners’ failure to demonstrate confusing similarity between said trademarks,
the dismissal of their basic complaint for infringement and the concomitant plea for damages must be affirmed. The
law, the surrounding circumstances and the equities of the situation call for this disposition.”

Shangrila v. DCCI, GR No. 159938, 31 March 2006: Registration, without more, does not confer upon the registrant
an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant
is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name
by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be
declared owner in an appropriate case.
Among the effects of registration of a mark, as catalogued by the Court in Lorenzana v. Macagba, are:
1. Registration in the Principal Register gives rise to a presumption of the validity of the registration, the
registrant's ownership of the mark, and his right to the exclusive use thereof. x x x
2. Registration in the Principal Register is limited to the actual owner of the trademark and proceedings
therein pass on the issue of ownership, which may be contested through opposition or interference
proceedings, or, after registration, in a petition for cancellation. xxx

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade
or commerce. As between actual use of a mark without registration, and registration of the mark without actual use
thereof, the former prevails over the latter. For a rule widely accepted and firmly entrenched, because it has come
down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of
ownership.

While the present law on trademarks has dispensed with the requirement of prior actual use at the time of
registration, the law in force at the time of registration must be applied, and thereunder it was held that as a condition
precedent to registration of trademark, trade name or service mark, the same must have been in actual use in the
Philippines before the filing of the application for registration. Trademark is a creation of use and therefore actual use
is a pre-requisite to exclusive ownership and its registration with the Philippine Patent Office is a mere administrative
confirmation of the existence of such right.

By itself, registration is not a mode of acquiring ownership. When the applicant is not the owner of the trademark
being applied for, he has no right to apply for registration of the same. Registration merely creates a prima
facie  presumption of the validity of the registration, of the registrant's ownership of the trademark and of the exclusive
right to the use thereof.20 Such presumption, just like the presumptive regularity in the performance of official
functions, is rebuttable and must give way to evidence to the contrary.

tn: BAD FAITH IN THE REGISTRATION

Shangrila v DCCI, GR No. 159938, 22 January 2007: [MR 2006 CASE] Movant DGCI would make capital on the
alleged danger the subject Decision might wreak upon Philippine trademark law, claiming that the decision in
question would render nugatory the protection intended by the trademark law to all Philippine trademark registrants.
This assertion is a baseless and sweeping statement. The interpretation of Republic Act No. 166 in the Decision does
not in any way diminish the protection afforded to valid  trademark registrations made under said law. It was glaringly
obvious, however, from the testimony of movant's own witness that DGCI's registration of the subject mark and logo
was void  due to the existence of bad faith and the absence of the requisite 2-month prior use. Despite movant's
melodramatic imputation of an abandonment of the territoriality principle, the Decision actually upholds the principle
but found that respondent DGCI was not entitled to protection thereunder due to the double infirmity which attended
its registration of the subject mark and logo.

Birkenstock Orthopaedie GMBH and Co. KG v. Philippine Shoe Expo Marketing Corporation, G.R. No. 194307, 20
November 2013: Under Section 238 of RA 166, which is also the law governing the subject applications, in order to
register a trademark, one must be the owner thereof and must have actually used the mark in commerce in the
Philippines for two (2) months prior to the application for registration. Section 2-A 39 of the same law sets out to define
how one goes about acquiring ownership thereof. Under the 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.

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 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.

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.

NO GOOD FAITH - 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.

[ON THIS PORTION, READ ONE CASE PER SUBSECTION OF THE TOPIC ON TRADEMARK AND REVISIT THE
TOPICS LATER WHEN YOU’RE DONE WITH ALL THE TOPICS IN THE SYLLABUS]

E. REGISTRABLE MARKS

[READ THE ENTIRE CASE] UFC Philippines, Inc. v. Barrio Fiesta Manufacturing Corporation, G.R. No. 198889, 20
January 2016: 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 "PAPA," 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.

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.
RULING: 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.

Take note: 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 plaintiff s 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. Abyadang44:

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.

x x x x

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. 

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:

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.

x x x x

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.

DIFFERENCE IN PRICE: 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:

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 x.

PROTECTION OF TRADEMARKS: 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. 

CONFUSION: 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 plaintiffs, and the poorer quality of the former reflects adversely on the
plaintiffs 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.

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.

DOMINANCY 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. Honover Rubber Co., 107 F. 2d 588; x x x)

x x x x

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."

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."

TOTALITY OR HOLISTIC TEST: 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.

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.

[DOMINANCY TEST IS MAINLY USED IN OUR JURISDICTION]- 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 155.1 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 x x 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.

PAPA: 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 Liong 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]).

F. APPLICATION FOR REGISTRATION

Bata Industries v. CA, 114 SCRA 318 (1982): “We agree with the applicant-appellee that more than substantial
evidence supports the findings and conclusions of the Director of Patents. The appellant has no Philippine goodwill
that would be damaged by the registration of the mark in the appellee's favor. We agree with the decision of the
Director of Patents which sustains, on the basis of clear and convincing evidence, the right of the appellee to the
registration and protection of its industrial property, the BATA trademark.”

Mirpuri v. Court of Appeals, 318 SCRA 516 (1999): [REREAD]

G. RIGHTS CONFERRED

Levi Strauss v. Clinton Apparelle, GR No. 138900, 20 September 2005: INJUNCTION

Section 20, RA 166 as compared to Sec. 138, IPC:

Section 20. Certificate of registration prima facie evidence of validity. (RA 166) - A certificate of registration of a mark
or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark
or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or
services specified in the certificate, subject to any conditions and limitations stated therein.

SECTION 138. Certificates of Registration. - A certificate of registration of a mark shall be 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 or services and those that are related thereto specified in the certificate. (Sec. 20,
R.A. No. 165)

Yu v. CA, 217 SCRA 328 (1993): The right to perform an exclusive distributorship agreement and to reap the profits
resulting from such performance are proprietary rights which a party may protect and which may otherwise not be
diminished, nay, rendered illusory by the expedient act of utilizing or interposing a person or firm to obtain goods from
the supplier to defeat the very purpose for which the exclusive distributorship was conceptualized, at the expense of
the sole authorized distributor.

Another circumstance which respondent court overlooked was petitioner's suggestion, which was not disputed by
herein private respondent in its comment, that the House of Mayfair in England was duped into believing that the
goods ordered through the FNF Trading were to be shipped to Nigeria only, but the goods were actually sent to and
sold in the Philippines. A ploy of this character is akin to the scenario of a third person who induces a party to renege
on or violate his undertaking under a contract, thereby entitling the other contracting party to relief therefrom (Article
1314, New Civil Code). The breach caused by private respondent was even aggravated by the consequent diversion
of trade from the business of petitioner to that of private respondent caused by the latter's species of unfair
competition as demonstrated no less by the sales effected inspite of this Court's restraining order.

H. ADMINISTRATIVE REMEDIES

IN-N-Out Burger v. Sehwani, G.R. No. 179127. December 24, 2008: The Jurisdiction of the IPO: The Court now
proceeds to resolve an important issue which arose from the Court of Appeals Decision dated 18 July 2006 in CA-
G.R. SP No. 92785. In the afore-stated Decision, the Court of Appeals adjudged that the IPO Director for Legal
Affairs and the IPO Director General had no jurisdiction over the administrative proceedings below to rule on issue of
unfair competition, because Section 163 of the Intellectual Property Code confers jurisdiction over particular
provisions in the law on trademarks on regular courts exclusively. According to the said provision:
Section 163. Jurisdiction of Court.–All actions under Sections 150, 155, 164, and 166 to 169 shall be brought before
the proper courts with appropriate jurisdiction under existing laws.

The provisions referred to in Section 163 are: Section 150 on License Contracts; Section 155 on Remedies on
Infringement; Section 164 on Notice of Filing Suit Given to the Director; Section 166 on Goods Bearing Infringing
Marks or Trade Names; Section 167 on Collective Marks; Section 168 on Unfair Competition, Rights, Regulation and
Remedies; and Section 169 on False Designations of Origin, False Description or Representation.

The Court disagrees with the Court of Appeals.

Section 10 of the Intellectual Property Code specifically identifies the functions of the Bureau of Legal Affairs, thus:
Section 10. The Bureau of Legal Affairs.–The Bureau of Legal Affairs shall have the following functions:
10.1 Hear and decide opposition to the application for registration of marks; cancellation of trademarks; subject to the
provisions of Section 64, cancellation of patents and utility models, and industrial designs; and petitions for
compulsory licensing of patents;
10.2 (a) Exercise original jurisdiction in administrative complaints for violations of laws involving intellectual property
rights; Provided, That its jurisdiction is limited to complaints where the total damages claimed are not less than Two
hundred thousand pesos (P200,000): Provided, futher, That availment of the provisional remedies may be granted in
accordance with the Rules of Court. The Director of Legal Affairs shall have the power to hold and punish for
contempt all those who disregard orders or writs issued in the course of the proceedings.
(b) After formal investigation, the Director for Legal Affairs may impose one (1) or more of the following administrative
penalties:
(i) The issuance of a cease and desist order which shall specify the acts that the respondent shall cease and desist
from and shall require him to submit a compliance report within a reasonable time which shall be fixed in the order;
(ii) The acceptance of a voluntary assurance of compliance or discontinuance as may be imposed. Such voluntary
assurance may include one or more of the following:
(1) An assurance to comply with the provisions of the intellectual property law violated;
(2) An assurance to refrain from engaging in unlawful and unfair acts and practices subject of the formal investigation
(3) An assurance to recall, replace, repair, or refund the money value of defective goods distributed in commerce;
and
(4) An assurance to reimburse the complainant the expenses and costs incurred in prosecuting the case in the
Bureau of Legal Affairs.
The Director of Legal Affairs may also require the respondent to submit periodic compliance reports and file a bond to
guarantee compliance of his undertaking.
(iii) The condemnation or seizure of products which are subject of the offense. The goods seized hereunder shall be
disposed of in such manner as may be deemed appropriate by the Director of Legal Affairs, such as by sale,
donation to distressed local governments or to charitable or relief institutions, exportation, recycling into other goods,
or any combination thereof, under such guidelines as he may provide;
(iv) The forfeiture of paraphernalia and all real and personal properties which have been used in the commission of
the offense;
(v) The imposition of administrative fines in such amount as deemed reasonable by the Director of Legal Affairs,
which shall in no case be less than Five thousand pesos (P5,000) nor more than One hundred fifty thousand pesos
(P150,000). In addition, an additional fine of not more than One thousand pesos (P1,000) shall be imposed for each
day of continuing violation;
(vi) The cancellation of any permit, license, authority, or registration which may have been granted by the Office, or
the suspension of the validity thereof for such period of time as the Director of Legal Affairs may deem reasonable
which shall not exceed one (1) year;
(vii) The withholding of any permit, license, authority, or registration which is being secured by the respondent from
the Office;
(viii) The assessment of damages;
(ix) Censure; and
(x) Other analogous penalties or sanctions.
10.3 The Director General may by Regulations establish the procedure to govern the implementation of this
Section.43 (Emphasis provided.)
Unquestionably, petitioner’s complaint, which seeks the cancellation of the disputed mark in the name of respondent
Sehwani, Incorporated, and damages for violation of petitioner’s intellectual property rights, falls within the jurisdiction
of the IPO Director of Legal Affairs.
The Intellectual Property Code also expressly recognizes the appellate jurisdiction of the IPO Director General over
the decisions of the IPO Director of Legal Affairs, to wit:
Section 7. The Director General and Deputies Director General. 7.1 Fuctions.–The Director General shall exercise
the following powers and functions:
xxxx
b) Exercise exclusive appellate jurisdiction over all decisions rendered by the Director of Legal Affairs, the Director of
Patents, the Director of Trademarks, and the Director of Documentation, Information and Technology Transfer
Bureau. The decisions of the Director General in the exercise of his appellate jurisdiction in respect of the decisions
of the Director of Patents, and the Director of Trademarks shall be appealable to the Court of Appeals in accordance
with the Rules of Court; and those in respect of the decisions of the Director of Documentation, Information and
Technology Transfer Bureau shall be appealable to the Secretary of Trade and Industry;

The Court of Appeals erroneously reasoned that Section 10(a) of the Intellectual Property Code, conferring upon the
BLA-IPO jurisdiction over administrative complaints for violations of intellectual property rights, is a general provision,
over which the specific provision of Section 163 of the same Code, found under Part III thereof particularly governing
trademarks, service marks, and tradenames, must prevail. Proceeding therefrom, the Court of Appeals incorrectly
concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive
jurisdiction of civil courts.

Such interpretation is not supported by the provisions of the Intellectual Property Code. While Section 163 thereof
vests in civil courts jurisdiction over cases of unfair competition, nothing in the said section states that the regular
courts have sole jurisdiction over unfair competition cases, to the exclusion of administrative bodies. On the contrary,
Sections 160 and 170, which are also found under Part III of the Intellectual Property Code, recognize the concurrent
jurisdiction of civil courts and the IPO over unfair competition cases. These two provisions read:

Section 160. Right of Foreign Corporation to Sue in Trademark or Service Mark Enforcement Action .–Any foreign
national or juridical person who meets the requirements of Section 3 of this Act and does not engage in business in
the Philippines may bring a civil or administrative action hereunder for opposition, cancellation, infringement, unfair
competition, or false designation of origin and false description, whether or not it is licensed to do business in the
Philippines under existing laws.
xxxx
Section 170. Penalties.–Independent of the civil and administrative sanctions imposed by law, a criminal penalty of
imprisonment from two (2) years to five (5) years and a fine ranging from Fifty thousand pesos (P50,000) to Two
hundred thousand pesos (P200,000), shall be imposed on any person who is found guilty of committing any of the
acts mentioned in Section 155, Section168, and Subsection169.1.
Based on the foregoing discussion, the IPO Director of Legal Affairs had jurisdiction to decide the petitioner’s
administrative case against respondents and the IPO Director General had exclusive jurisdiction over the appeal of
the judgment of the IPO Director of Legal Affairs.

Unfair Competition
The Court will no longer touch on the issue of the validity or propriety of the 22 December 2003 Decision of the IPO
Director of Legal Affairs which: (1) directed the cancellation of the certificate of registration of respondent Sehwani,
Incorporated for the mark "IN-N-OUT" and (2) ordered respondents to permanently cease and desist from using the
disputed mark on its goods and business. Such an issue has already been settled by this Court in its final and
executory Decision dated 15 October 2007 in G.R. No. 171053, Sehwani, Incorporated v. In-N-Out
Burger,44 ultimately affirming the foregoing judgment of the IPO Director of Legal Affairs. That petitioner has the
superior right to own and use the "IN-N-OUT" trademarks vis-à-vis respondents is a finding which this Court may no
longer disturb under the doctrine of conclusiveness of judgment. In conclusiveness of judgment, any right, fact, or
matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court
in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be
litigated between the parties and their privies whether or not the claims, demands, purposes, or subject matters of the
two actions are the same.45

Thus, the only remaining issue for this Court to resolve is whether the IPO Director General correctly found
respondents guilty of unfair competition for which he awarded damages to petitioner.

THE ESSENTIAL ELEMENTS OF AN ACTION FOR UNFAIR COMPETITION are (1) confusing similarity in the
general appearance of the goods and (2) intent to deceive the public and defraud a competitor. The confusing
similarity may or may not result from similarity in the marks, but may result from other external factors in the
packaging or presentation of the goods. The intent to deceive and defraud may be inferred from the similarity of the
appearance of the goods as offered for sale to the public. Actual fraudulent intent need not be shown.46

In his Decision dated 23 December 2005, the IPO Director General ably explains the basis for his finding of the
existence of unfair competition in this case, viz:

The evidence on record shows that the [herein respondents] were not using their registered trademark but that of the
[petitioner]. [Respondent] SEHWANI, INC. was issued a Certificate of Registration for IN N OUT (with the Inside of
the Letter "O" Formed like a Star) for restaurant business in 1993. The restaurant opened only in 2000 but under the
name IN-N-OUT BURGER. Apparently, the [respondents] started constructing the restaurant only after the
[petitioner] demanded that the latter desist from claiming ownership of the mark IN-N-OUT and voluntarily cancel
their trademark registration. Moreover, [respondents] are also using [petitioner’s] registered mark Double-Double for
use on hamburger products. In fact, the burger wrappers and the French fries receptacles the [respondents] are
using do not bear the mark registered by the [respondent], but the [petitioner’s] IN-N-OUT Burger’s name and
trademark IN-N-OUT with Arrow design.

There is no evidence that the [respondents] were authorized by the [petitioner] to use the latter’s marks in the
business. [Respondents’] explanation that they are not using their own registered trademark due to the difficulty in
printing the "star" does not justify the unauthorized use of the [petitioner’s] trademark instead.
Further, [respondents] are giving their products the general appearance that would likely influence purchasers to
believe that these products are those of the [petitioner]. The intention to deceive may be inferred from the similarity of
the goods as packed and offered for sale, and, thus, action will lie to restrain such unfair competition. x x x.
xxxx

[Respondents’] use of IN-N-OUT BURGER in busineses signages reveals fraudulent intent to deceive purchasers.
Exhibit "GG," which shows the business establishment of [respondents] illustrates the imitation of [petitioner’s]
corporate name IN-N-OUT and signage IN-N-OUT BURGER. Even the Director noticed it and held:
"We also note that In-N-Out Burger is likewise, [petitioner’s] corporate name. It has used the "IN-N-OUT" Burger
name in its restaurant business in Baldwin Park, California in the United States of America since 1948. Thus it has
the exclusive right to use the tradename "In-N-Out" Burger in the Philippines and the respondents’ are unlawfully
using and appropriating the same."

The Office cannot give credence to the [respondent’s] claim of good faith and that they have openly and continuously
used the subject mark since 1982 and is (sic) in the process of expanding its business. They contend that assuming
that there is value in the foreign registrations presented as evidence by the [petitioner], the purported exclusive right
to the use of the subject mark based on such foreign registrations is not essential to a right of action for unfair
competition. [Respondents] also claim that actual or probable deception and confusion on the part of customers by
reason of respondents’ practices must always appear, and in the present case, the BLA has found none. This Office
finds the arguments untenable.

In contrast, the [respondents] have the burden of evidence to prove that they do not have fraudulent intent in using
the mark IN-N-OUT. To prove their good faith, [respondents] could have easily offered evidence of use of their
registered trademark, which they claimed to be using as early as 1982, but did not.

[Respondents] also failed to explain why they are using the marks of [petitioner] particularly DOUBLE DOUBLE, and
the mark IN-N-OUT Burger and Arrow Design. Even in their listing of menus, [respondents] used [Appellants’] marks
of DOUBLE DOUBLE and IN-N-OUT Burger and Arrow Design. In addition, in the wrappers and receptacles being
used by the [respondents] which also contained the marks of the [petitioner], there is no notice in such wrappers and
receptacles that the hamburger and French fries are products of the [respondents]. Furthermore, the receipts issued
by the [respondents] even indicate "representing IN-N-OUT." These acts cannot be considered acts in good faith. 

Administrative proceedings are governed by the "substantial evidence rule." A finding of guilt in an administrative
case would have to be sustained for as long as it is supported by substantial evidence that the respondent has
committed acts stated in the complaint or formal charge. As defined, substantial evidence is such relevant evidence
as a reasonable mind may accept as adequate to support a conclusion. 48 As recounted by the IPO Director General
in his decision, there is more than enough substantial evidence to support his finding that respondents are guilty of
unfair competition.

With such finding, the award of damages in favor of petitioner is but proper. This is in accordance with Section 168.4
of the Intellectual Property Code, which provides that the remedies under Sections 156, 157 and 161 for infringement
shall apply mutatis mutandis to unfair competition. The remedies provided under Section 156 include the right to
damages, to be computed in the following manner:

Section 156. Actions, and Damages and Injunction for Infringement.–156.1 The owner of a registered mark may
recover damages from any person who infringes his rights, and the measure of the damages suffered shall be either
the reasonable profit which the complaining party would have made, had the defendant not infringed his rights, or the
profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be
readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based
upon the amount of gross sales of the defendant or the value of the services in connection with which the mark or
trade name was used in the infringement of the rights of the complaining party.

In the present case, the Court deems it just and fair that the IPO Director General computed the damages due to
petitioner by applying the reasonable percentage of 30% to the respondents’ gross sales, and then doubling the
amount thereof on account of respondents’ actual intent to mislead the public or defraud the petitioner, 49 thus,
arriving at the amount of actual damages of P212,574.28.

Taking into account the deliberate intent of respondents to engage in unfair competition, it is only proper that
petitioner be awarded exemplary damages. Article 2229 of the Civil Code provides that such damages may be
imposed by way of example or correction for the public good, such as the enhancement of the protection accorded to
intellectual property and the prevention of similar acts of unfair competition. However, exemplary damages are not
meant to enrich one party or to impoverish another, but to serve as a deterrent against or as a negative incentive to
curb socially deleterious action.50 While there is no hard and fast rule in determining the fair amount of exemplary
damages, the award of exemplary damages should be commensurate with the actual loss or injury suffered. 51 Thus,
exemplary damages of P500,000.00 should be reduced to P250,000.00 which more closely approximates the actual
damages awarded.

In accordance with Article 2208(1) of the Civil Code, attorney’s fees may likewise be awarded to petitioner since
exemplary damages are awarded to it. Petitioner was compelled to protect its rights over the disputed mark. The
amount of P500,000.00 is more than reasonable, given the fact that the case has dragged on for more than seven
years, despite the respondent’s failure to present countervailing evidence. Considering moreover the reputation of
petitioner’s counsel, the actual attorney’s fees paid by petitioner would far exceed the amount that was awarded to
it.52

I. CIVIL REMEDIES

Republic Gas Corporation, Arnel Ty, et al., v. Petron Corporation, Pilipinas Shell Petroleum Corporation and Shell
International Petroleum Company Limited, G.R. No. 194062, 17 June 2013: 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.

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.

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.

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.
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.

J. UNFAIR COMPETITION
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)
DIFFERENCE BETWEEN INFRINGEMENT AND UNFAIR COMPETITION; TRADEMARK INFRINGEMENT VS.
UNFAIR COMPETITION:

In Del Monte Corporation vs. Court of Appeals, we distinguished trademark infringement from unfair competition:
(1) Infringement of trademark is the unauthorized use of a trademark, whereas unfair competition is the passing off of
one's goods as those of another.
(2) In infringement of trademark fraudulent intent is unnecessary, whereas in unfair competition fraudulent intent is
essential.
(3) In infringement of trademark the prior registration of the trademark is a prerequisite to the action, whereas in
unfair competition registration is not necessary.

Torres v. Perez, G.R. Nos. 188225 and 198728, 28 November 2012: 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."

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.

KEY ELEMENTS OF UNFAIR COMPETITION: We have enunciated in CCBPI v. Gomez that the key elements of
unfair competition are "deception, passing off and fraud upon the public."

UNFAIR COMPETITION: 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.

K. CRIMINAL ACTIONS

Diaz vs. People of the Philippines and Levi Strauss [Phils.], Inc., G.R. No. 180677, 18 February 2013: 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.

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.

As can be seen, the likelihood of confusion is the gravamen of the offense of trademark infringement. 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.

As to what test should be applied in a trademark infringement case, we said in McDonald’s Corporation v. Macjoy
Fastfood Corporation 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 , 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.

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.

L. TRADENAMES

Converse Rubber Corporation v. Universal Rubber Products, 117 SCRA 154 Philippine (1987): A trade name is any
individual name or surname, firm name, device or word used by manufacturers, industrialists, merchants and others
to Identify their businesses, vocations or occupations. As the trade name refers to the business and its goodwill ... the
trademark refers to the goods." The ownership of a trademark or tradename is a property right which the owner is
entitled to protect "since there is damage to him from confusion or reputation or goodwill in the mind of the public as
well as from confusion of goods. The modern trend is to give emphasis to the unfairness of the acts and to classify
and treat the issue as fraud. 

A corporation is entitled to the cancellation of a mark that is confusingly similar to its corporate name."  "Appropriation
by another of the dominant part of a corporate name is an infringement."

FOREIGN CORPORATION: “It is unfortunate that respondent Director of Patents has concluded that since the
petitioner is not licensed to do business in the country and is actually not doing business on its own in the Philippines,
it has no name to protect iN the forum and thus, it is futile for it to establish that "CONVERSE" as part of its corporate
name identifies its rubber shoes. That a foreign corporation has a right to maintain an action in the forum even if it is
not licensed to do business and is not actually doing business on its own therein has been enunciated many times by
this Court. In La Chemise Lacoste, S.A. vs. Fernandez, 129 SCRA 373, this Court, reiterating Western Equipment
and Supply Co. vs. Reyes, 51 Phil. 115, stated that:

... a foreign corporation which has never done any business in the Philippines and which is unlicensed and
unregistered to do business here, but is widely and favorably known in the Philippines through the use therein of its
products bearing its corporate and tradename, has a legal right to maintain an action in the Philippines to restrain the
residents and inhabitants thereof from organizing a corporation therein bearing the same name as the foreign
corporation, when it appears that they have personal knowledge of the existence of such a foreign corporation, and it
is apparent that the purpose of the proposed domestic corporation is to deal and trade in the same goods as those of
the foreign corporation.

We further held:
xxx xxx xxx
That company is not here seeking to enforce any legal or control rights arising from or growing out of, any business
which it has transacted in the Philippine Islands. The sole purpose of the action:

Is to protect its reputation, its corporate name, its goodwill whenever that reputation, corporate name or goodwill
have, through the natural development of its trade, established themselves.' And it contends that its rights to the use
of its corporate and trade name:

Is a property right, a right in recess which it may assert and protect against all the world, in any of the courts of the
world even in jurisdictions where it does not transact business-just the same as it may protect its tangible property,
real or personal against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and Trademarks and
cases cited; secs. 21-22, Hopkins on Trademarks, Trade Names and Unfair Competition and cases cited That point
is sustained by the authorities, and is well stated in Hanover Star Milling Co. vs. Allen and Wheeler Co. [208 Fed.,
5131, in which the syllabus says:

Since it is the trade and not the mark that is to be protected, a trademark acknowledges no territorial boundaries of
municipalities or states or nations, but extends to every market where the trader's goods have become known and
Identified by the use of the mark.”

Philips Export v. CA, 206 SCRA 457: As early as Western Equipment and Supply Co. v. Reyes, 51 Phil. 115 (1927),
the Court declared that a corporation's right to use its corporate and trade name is a property right, a right in
rem, which it may assert and protect against the world in the same manner as it may protect its tangible property, real
or personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and one which
cannot be impaired or defeated by subsequent appropriation by another corporation in the same field (Red Line
Transportation Co. vs. Rural Transit Co., September 8, 1934, 20 Phil 549).

A name is peculiarly important as necessary to the very existence of a corporation (American Steel Foundries vs.
Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National Bank
vs. Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its name is one of its attributes, an element of its existence,
and essential to its identity (6 Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each
corporation must have a name by which it is to sue and be sued and do all legal acts. The name of a corporation in
this respect designates the corporation in the same manner as the name of an individual designates the person
(Cincinnati Cooperage Co. vs. Bate. 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird. 10 NH 123);
and the right to use its corporate name is as much a part of the corporate franchise as any other privilege granted
(Federal Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese
Beneficial Association, 18 RI 165, 26 A 36).

A corporation acquires its name by choice and need not select a name identical with or similar to one already
appropriated by a senior corporation while an individual's name is thrust upon him ( See Standard Oil Co. of New
Mexico, Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a corporate name in
violation of the rights of others than an individual can use his name legally acquired so as to mislead the public and
injure another (Armington vs. Palmer, 21 RI 109. 42 A 308).

Our own Corporation Code, in its Section 18, expressly provides that:

No corporate name may be allowed by the Securities and Exchange Commission if the proposed name
is identical or deceptively or confusingly similar to that of any existing corporation or to any other name
already protected by law or is patently deceptive, confusing or contrary to existing law. Where a change in a
corporate name is approved, the commission shall issue an amended certificate of incorporation under the
amended name.

The statutory prohibition cannot be any clearer. To come within its scope, two requisites must be proven, namely:
(1) that the complainant corporation acquired a prior right over the use of such corporate name; and (2) the proposed
name is either: (a) identical; or (b) deceptively or confusingly similar to that of any existing corporation or to any other
name already protected by law; or (c) patently deceptive, confusing or contrary to existing law.

The right to the exclusive use of a corporate name with freedom from infringement by similarity is determined by
priority of adoption (1 Thompson, p. 80 citing Munn v. Americana Co., 82 N. Eq. 63, 88 Atl. 30; San Francisco Oyster
House v. Mihich, 75 Wash. 274, 134 Pac. 921). In this regard, there is no doubt with respect to Petitioners' prior
adoption of' the name ''PHILIPS" as part of its corporate name. Petitioners Philips Electrical and Philips Industrial
were incorporated on 29 August 1956 and 25 May 1956, respectively, while Respondent Standard Philips was issued
a Certificate of Registration on 12 April 1982, twenty-six (26) years later ( Rollo, p. 16). Petitioner PEBV has also used
the trademark "PHILIPS" on electrical lamps of all types and their accessories since 30 September 1922, as
evidenced by Certificate of Registration No. 1651.

Armco Steel Corporation v. SEC, 156 SCRA 822 (1987): [READ THE CASE DIGEST] The Court finds that the said
amendment in the corporate name of petitioner is not in substantial compliance with the order of February 14, 1975.
Indeed it is in contravention therewith. To repeat, the order was for the removal of the word "ARMCO" from the
corporate name of the petitioner which it failed to do. And even if this change of corporate name was erroneously
accepted and approved in the SEC it cannot thereby legalize nor change what is clearly unauthorized if not
contemptuous act of petitioner in securing the registration of a new corporate name against the very order of the
SEC of February 14, 1975. Certainly the said order of February 14, 1975 is not rendered functus oficio thereby. Had
petitioner revealed at the time of the registration of its amended corporate name that there was the said order, the
registration of the amended corporate name could not have been accepted and approved by the persons in-charge
of the registration. The actuations in this respect of petitioner are far from regular much less in good faith.

The arguments of the petitioner that the SEC had approved the registration of several other entities with one principal
word common to all as "ARMCO," and that there is no confusing similarity between the corporate names of
respondents and the new name of petitioner, would indeed in effect be reopening the final and executory order of the
SEC of February 14, 1975 which had already foreclosed the issue. Indeed, in said final order the SEC made the
following findings which are conclusive and well-taken:
The only question for resolution in this case is whether therespondent's name ARMCO STEEL CORPORATION is
similar, if not Identical with that of petitioner, ARMCO STEEL CORPORATION (of Ohio, U.S.A.) and of petitioner,
ARMCO-MARSTEEL ALLOY CORPORATION, as to create uncertainty and confusion in the minds of the public.

By mere looking at the names it is clear that the name of petitioner, ARMCO STEEL CORPORATION (of Ohio,
U.S.A.), and that of the respondent, ARMCO STEEL CORPORATION, are not only similar but Identical and the
words "of Ohio, U.S.A.," are being used only to Identify petitioner ARMCO STEEL-OHIO as a U.S. corporation.

It is indisputable that ARMCO-STEEL-OHIO, having patented the term 'Armco' as part of its trademark on its steel
products, is entitled to protection in the use thereof in the Philippines. The term "Armco" is now being used on the
products being manufactured and sold in this country by Armco-Marsteel by virtue of its tie-up with ARMCO-STEEL-
OHIO. Clearly, the two companies have the right to the exclusive use and enjoyment of said term.

ARMCO STEEL-PHILIPPINES, has not only an Identical name but also a similar line of business, as shown above,
as that of ARMCO STEEL- OHIO. People who are buying and using products bearing the trademark "Armco" might
be led to believe that such products are manufactured by the respondent, when in fact, they might actually be
produced by the petitioners. Thus, the goodwill that should grow and inure to the benefit of petitioners could be
impaired and prejudiced by the continued use of the same term by the respondent.

Obviously, the petition for review is designed to further delay if not simply evade compliance with the said final and
executory SEC order. Petitioner also seeks a review of the orders of execution of the SEC of the said February 14,
1975 order. An order or resolution granting execution of the final judgment cannot be appealed  9 otherwise there will
be no end to the litigation. 

Western Equipments & Supply Co. v. Reyes, 51 Phil 115 (1927): The sole purpose of the action: "Is to protect its
reputation, its corporate name, its goodwill, whenever that reputation, corporate name or goodwill have, through the
natural development of its trade, established themselves." And it contends that its rights to the use of its corporate
and trade name: Is a property right, a right in rem, which may assert and protect against all the world, in any of the
courts of the world — even in jurisdictions where it does not transact business — just the same as it may protect its
tangible property, real or personal, against trespass, or conversion. Citing sec. 10, Nims on Unfair Competition and
Trade-Marks and cases cited; secs. 21-22, Hopkins on Trade-Marks, Trade Names and Unfair Competition and
cases cited." That point is sustained by the authorities, and is well stated in Hanover Star Milling Co. vs. Allen and
Wheeler Co. (208 Fed., 513), in which they syllabus says:

Since it is the trade and not the mark that is to be protect, a trade-mark acknowledges no territorial boundaries of
municipalities or states or nations, but extends to every market where the trader's goods have become known and
identified by the use of the mark.

In Walter E. Olsen & Co. vs. Lambert (42 Phil., 633, 640), this court said:
In order that competition in business should be unfair in the sense necessary to justify the granting of an injunction to
restrain such competition it must appear that there has been, or is likely to be, a diversion of trade from the business
of the complainant to that of the wrongdoer, or methods generally recognized as unfair; . . . In most, if not all, of the
cases in which relief has hitherto been granted against unfair competition the means and methods adopted by the
wrongdoer in order to divert the coveted trade from his rival have been such as were calculated to deceive and
mislead the public into thinking that the goods or business of the wrongdoer are the goods or business of the rival.
Diversion of trade is really the fundamental thing here, and if diversion of trade be accomplished by any means which
according to accepted legal canons are unfair, the aggrieved party is entitled to relief.

M. COLLECTIVE MARKS
DEFINITIONS: SEC. 121.2, IPC: 121.2. “Collective mark” means 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; (Sec. 40, R.A. No. 166a)

SEC. 167,IPC: SECTION 167. Collective Marks. - 167.1. Subject to Subsections 167.2 and 167.3, Sections 122 to
164 and 166 shall apply to collective marks, except that references therein to “mark” shall be read as “collective
mark”.
167.2. (a) An application for registration of a collective mark shall designate the mark as a collective mark and shall
be accompanied by a copy of the agreement, if any, governing the use of the collective mark.
(b) The registered owner of a collective mark shall notify the Director of any changes made in respect of the
agreement referred to in paragraph (a).
167.3. In addition to the grounds provided in Section 149, the Court shall cancel the registration of a collective mark if
the person requesting the cancellation proves that only the registered owner uses the mark, or that he uses or
permits its use in contravention of the agreements referred to in Subsection 166.2 or that he uses or permits its use
in a manner liable to deceive trade circles or the public as to the origin or any other common characteristics of the
goods or services concerned.
167.4. The registration of a collective mark, or an application therefor shall not be the subject of a license contract.
(Sec. 40, R.A. No. 166a)