FIRST DIVISION [G.R. Nos. 160054-55. July 21, 2004] MANOLO P. SAMSON, petitioner, vs. HON. REYNALDO B.

DAWAY, in his capacity as Presiding Judge, Regional Trial Court of Quezon City, Branch 90, PEOPLE OF THE PHILIPPINES and CATERPILLAR, INC., respondents. DECISION YNARES-SANTIAGO, J.: Assailed in this petition for certiorari is the March 26, 2003 Order[1] of the Regional Trial Court of Quezon City, Branch 90, which denied petitioners (1) motion to quash the information; and (2) motion for reconsideration of the August 9, 2002 Order denying his motion to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. Petitioner also questioned its August 5, 2003 Order[2] which denied his motion for reconsideration. The undisputed facts show that on March 7, 2002, two informations for unfair competition under Section 168.3 (a), in relation to Section 170, of the Intellectual Property Code (Republic Act No. 8293), similarly worded save for the dates and places of commission, were filed against petitioner Manolo P. Samson, the registered owner of ITTI Shoes. The accusatory portion of said informations read: That on or about the first week of November 1999 and sometime prior or subsequent thereto, in Quezon City, Philippines, and within the jurisdiction of this Honorable Court, above-named accused, owner/proprietor of ITTI Shoes/Mano Shoes Manufactuirng Corporation located at Robinsons Galleria, EDSA corner Ortigas Avenue, Quezon City, did then and there willfully, unlawfully and feloniously distribute, sell and/or offer for sale CATERPILLAR products such as footwear, garments, clothing, bags, accessories and paraphernalia which are closely identical to and/or colorable imitations of the authentic Caterpillar products and likewise using trademarks, symbols and/or designs as would cause confusion, mistake or deception on the part of the buying public to the damage and prejudice of CATERPILLAR, INC., the prior adopter, user and owner of the following internationally: CATERPILLAR, CAT, CATERPILLAR & DESIGN, CAT AND DESIGN, WALKING MACHINES and TRACK-TYPE TRACTOR & DESIGN. CONTRARY TO LAW.[3] On April 19, 2002, petitioner filed a motion to suspend arraignment and other proceedings in view of the existence of an alleged prejudicial question involved in Civil Case No. Q-00-41446 for unfair competition pending with the same branch; and also in view of the pendency of a petition for review filed with the Secretary of Justice assailing the Chief State Prosecutors resolution finding probable cause to charge petitioner with unfair competition. In an Order dated August 9, 2002, the trial court denied the motion to suspend arraignment and other proceedings. On August 20, 2002, petitioner filed a twin motion to quash the informations and motion for reconsideration of the order denying motion to suspend, this time challenging the jurisdiction of the trial court over the offense charged. He contended that since under Section 170 of R.A. No. 8293, the penalty5 of imprisonment for unfair competition does not exceed six years, the offense is cognizable by the Municipal Trial Courts and not by the Regional Trial Court, per R.A. No. 7691. In its assailed March 26, 2003 Order, the trial court denied petitioners twin motions. 6 A motion for reconsideration thereof was likewise denied on August 5, 2003.

Hence, the instant petition alleging that respondent Judge gravely abused its discretion in issuing the assailed orders. The issues posed for resolution are (1) Which court has jurisdiction over criminal and civil cases for violation of intellectual property rights? (2) Did the respondent Judge gravely abuse his discretion in refusing to suspend the arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44 on the ground of (a) the existence of a prejudicial question; and (b) the pendency of a petition for review with the Secretary of Justice on the finding of probable cause for unfair competition? Under Section 170 of R.A. No. 8293, which took effect on January 1, 1998, the criminal penalty for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is imprisonment from 2 to 5 years and a fine ranging from Fifty Thousand Pesos to Two Hundred Thousand Pesos, to wit: SEC. 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 (P50,000.00) to Two hundred thousand pesos (P200,000.00), shall be imposed on any person who is found guilty of committing any of the acts mentioned in Section 155 [Infringement], Section 168 [Unfair Competition] and Section 169.1 [False Designation of Origin and False Description or Representation]. Corollarily, Section 163 of the same Code states that actions (including criminal and civil) under Sections 150, 155, 164, 166, 167, 168 and 169 shall be brought before the proper courts with appropriate jurisdiction under existing laws, thus SEC. 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 . (Emphasis supplied) The existing law referred to in the foregoing provision is Section 27 of R.A. No. 166 (The Trademark Law) which provides that jurisdiction over cases for infringement of registered marks, unfair competition, false designation of origin and false description or representation, is lodged with the Court of First Instance (now Regional Trial Court) SEC. 27. Jurisdiction of Court of First Instance. All actions under this Chapter [V Infringement] and Chapters VI [Unfair Competition] and VII [False Designation of Origin and False Description or Representation], hereof shall be brought before the Court of First Instance. We find no merit in the claim of petitioner that R.A. No. 166 was expressly repealed by R.A. No. 8293. The repealing clause of R.A. No. 8293, reads SEC. 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. (Emphasis added) Notably, the aforequoted clause did not expressly repeal R.A. No. 166 in its entirety, otherwise, it would not have used the phrases parts of Acts and inconsistent herewith; and it would have simply stated 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. It would have removed all doubts that said specific laws had been rendered without force and effect. The use of the phrases parts of Acts and inconsistent herewith only means that the repeal pertains only to provisions which are repugnant or not susceptible of harmonization with R.A. No. 8293.7 Section 27 of R.A. No. 166, however, is consistent and in harmony with Section 163 of R.A. No. 8293. Had R.A. No. 8293 intended to vest jurisdiction over

violations of intellectual property rights with the Metropolitan Trial Courts, it would have expressly stated so under Section 163 thereof. Moreover, the settled rule in statutory construction is that in case of conflict between a general law and a special law, the latter must prevail. Jurisdiction conferred by a special law to Regional Trial Courts must prevail over that granted by a general law to Municipal Trial Courts.8 In the case at bar, R.A. No. 8293 and R.A. No. 166 are special laws9 conferring jurisdiction over violations of intellectual property rights to the Regional Trial Court. They should therefore prevail over R.A. No. 7691, which is a general law.10 Hence, jurisdiction over the instant criminal case for unfair competition is properly lodged with the Regional Trial Court even if the penalty therefor is imprisonment of less than 6 years, or from 2 to 5 years and a fine ranging from P50,000.00 to P200,000.00. In fact, to implement and ensure the speedy disposition of cases involving violations of intellectual property rights under R.A. No. 8293, the Court issued A.M. No. 02-1-11-SC dated February 19, 2002 designating certain Regional Trial Courts as Intellectual Property Courts. On June 17, 2003, the Court further issued a Resolution consolidating jurisdiction to hear and decide Intellectual Property Code and Securities and Exchange Commission cases in specific Regional Trial Courts designated as Special Commercial Courts. The case of Mirpuri v. Court of Appeals,11 invoked by petitioner finds no application in the present case. Nowhere in Mirpuri did we state that Section 27 of R.A. No. 166 was repealed by R.A. No. 8293. Neither did we make a categorical ruling therein that jurisdiction over cases for violation of intellectual property rights is lodged with the Municipal Trial Courts. The passing remark in Mirpuri on the repeal of R.A. No. 166 by R.A. No. 8293 was merely a backgrounder to the enactment of the present Intellectual Property Code and cannot thus be construed as a jurisdictional pronouncement in cases for violation of intellectual property rights. Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained the denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q-02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer in his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case No. Q-00-41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial question. At any rate, there is no prejudicial question if the civil and the criminal action can, according to law, proceed independently of each other.12 Under Rule 111, Section 3 of the Revised Rules on Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In the case at bar, the common element in the acts constituting unfair competition under Section 168 of R.A. No. 8293 is fraud.13 Pursuant to Article 33 of the Civil Code, in cases of defamation, fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which as admitted14 by private respondent also relate to unfair competition, is an independent civil action under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify the suspension of the criminal cases at bar. Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure provides SEC. 11. Suspension of arraignment. Upon motion by the proper party, the arraignment shall be suspended in the following cases

xxx

xxx

xxx

(c) A petition for review of the resolution of the prosecutor is pending at either the Department of Justice, or the Office of the President; Provided, that the period of suspension shall not exceed sixty (60) days counted from the filing of the petition with the reviewing office. While the pendency of a petition for review is a ground for suspension of the arraignment, the aforecited provision limits the deferment of the arraignment to a period of 60 days reckoned from the filing of the petition with the reviewing office. It follows, therefore, that after the expiration of said period, the trial court is bound to arraign the accused or to deny the motion to defer arraignment. In the instant case, petitioner failed to establish that respondent Judge abused his discretion in denying his motion to suspend. His pleadings and annexes submitted before the Court do not show the date of filing of the petition for review with the Secretary of Justice.15 Moreover, the Order dated August 9, 2002 denying his motion to suspend was not appended to the petition. He thus failed to discharge the burden of proving that he was entitled to a suspension of his arraignment and that the questioned orders are contrary to Section 11 (c), Rule 116 of the Revised Rules on Criminal Procedure. Indeed, the age-old but familiar rule is that he who alleges must prove his allegations. In sum, the dismissal of the petition is proper considering that petitioner has not established that the trial court committed grave abuse of discretion. So also, his failure to attach documents relevant to his allegations warrants the dismissal of the petition, pursuant to Section 3, Rule 46 of the Rules of Civil Procedure, which states: SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for. It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. xxx xxx xxx

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. (Emphasis added) WHEREFORE, in view of all the foregoing, the petition is DISMISSED. SO ORDERED. Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur. FIRST DIVISION

MCDONALDS CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., Petitioners,

G.R. No. 143993

Present: Davide, Jr., C.J., Chairman, - versus Quisumbing, Ynares-Santiago, Carpio, and Azcuna, JJ.

L.C. BIG MAK BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE HUERTO, Respondents. August 18, 2004 Promulgated:

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

This is a petition for review1[1] of the Decision dated 26 November 1999 of the Court of Appeals2[2] finding respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000 denying reconsideration. The Court of Appeals Decision reversed the 5 September 1994 Decision 3[3] of the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement and unfair competition.

The Facts

Petitioner McDonalds Corporation (McDonalds) is a corporation organized under the laws of Delaware, United States. McDonalds operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonalds4[4] owns a family of marks5[5] including the Big Mac mark for its double-decker hamburger sandwich.6*6+ McDonalds registered this trademark with the United States Trademark Registry on 16 October 1979.7*7+ Based on this Home Registration, McDonalds applied for the registration of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and Technology (PBPTT), now the Intellectual Property Office (IPO). Pending approval of its application, McDonalds introduced its Big Mac

hamburger sandwiches in the Philippine market in September 1981. On 18 July 1985, the PBPTT allowed registration of the Big Mac mark in the Principal Register based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in ite ms8[8] and paraphernalia9[9] in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonalds spent P10.5 million in advertisement for Big Mac hamburger sandwiches alone. 10[10]

Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic corporation, is McDonalds Philippine franchisee.11[11]

Respondent L.C. Big Mak Burger, Inc. (respondent corporation) is a domestic corporation which operates fast-food outlets and snack vans in Metro Manila and nearby provinces.12[12+ Respondent corporations menu includes hamburger sandwiches and other food items.13[13] Respondents Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto (private respondents) are the incorporators, stockholders and directors of respondent corporation.14[14]

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

Having received no reply from respondent Dy, petitioners on 6 June 1990 sued respondents in the Regional Trial Court of Makati, Branch 137 (RTC), for trademark infringement and unfair competition. In its

Order of 11 July 1990, the RTC issued a temporary restraining order (TRO) against respondents enjoining them from using the Big Mak mark in the operation of their business in the National Capital Region.15[15] On 16 August 1990, the RTC issued a writ of preliminary injunction replacing the TRO.16[16]

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

In their Reply, petitioners denied respondents claim that McDonalds is not the exclusive owner of the Big Mac mark. Petitioners asserted that while the Isaiyas Group and Topacio did register the Big Mac mark ahead of McDonalds, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonalds disclosed that it had acquired Topacios rights to his registration in a Deed of Assignment dated 18 May 1981.18[18]

The Trial Courts Ruling

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

Undeniably, the mark B*ig+ M*ac+ is a registered trademark for plaintiff McDonalds, and as such, it is entitled [to] protection against infringement.

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

Significantly, the contending parties are both in the business of fast-food chains and restaurants. An average person who is hungry and wants to eat a hamburger sandwich may not be discriminating enough to look for a McDonalds restaurant and buy a B*ig+ M*ac+ hamburger. Once he sees a stall selling hamburger sandwich, in all likelihood, he will dip into his pocket and order a B*ig+ M*ak+ hamburger sandwich. Plaintiff McDonalds fast -food chain has attained wide popularity and acceptance by the consuming public so much so that its airconditioned food outlets and restaurants will perhaps not be mistaken by many to be the same as defendant corporations mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the B*ig+ M*ak+ hamburger sandwich he bought is a food -product of plaintiff McDonalds, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark B*ig+ M*ac+ has been infringed by defendant corporation when it used the name B*ig+ M*ak+ in its signages, wrappers, and containers in connection with its food business. xxxx Did the same acts of defendants in using the name B*ig+ M*ak+ as a trademark or tradename in their signages, or in causing the name B*ig+ M*ak+ to be printed on the wrappers and containers of their food products also constitute an act of unfair competition under Section 29 of the Trademark Law? The answer is in the affirmative. xxxx The xxx provision of the law concerning unfair competition is broader and more inclusive than the law concerning the infringement of trademark, which is of more limited range, but within its narrower range recognizes a more exclusive right derived by the adoption and registration of the trademark by the person whose goods or services are first associated therewith. xxx Notwithstanding the distinction between an action for trademark infringement and an action for unfair competition, however, the law extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of Republic Act No. 166) Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The choice of B*ig+ M*ak+ as

tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the reputation, popularity and the established goodwill of plaintiff McDonalds. For, as stated in Section 29, a person is guilty of unfair competition who in selling his goods shall give them the general appearance, of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would likely influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer. Thus, plaintiffs have established their valid cause of action against the defendants for trademark infringement and unfair competition and for damages.19[19]

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonalds Corporation and McGeorge Food Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows: 1. The writ of preliminary injunction issued in this case on [16 August 1990] is made permanent; 2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of P400,000.00, exemplary damages in the amount of P100,000.00, and attorneys fees and expenses of litigation in the amount of P100,000.00; 3. The complaint against defendants Francis B. Dy, Edna A. Dy, Rene B. Dy, Wiliam B. Dy, Jesus Aycardo, Araceli Aycardo and Grace Huerto, as well as all counter-claims, are dismissed for lack of merit as well as for insufficiency of evidence.20[20]

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

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

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name the whole L.C. B*ig+ M*ak+ B*urger+, I*nc+. which appears on their food packages, signages and advertisements is an infringement of their trademark B*ig+ M*ac+ which they use to identify *their+ double decker sandwich, sold in a Styrofoam box packaging material with the McDonalds logo of umbrella M stamped thereon, together with the printed mark in red bl[o]ck capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants use of their corporate name is a colorable imitation of their trademark Big Mac. xxxx To Our mind, however, this Court is fully convinced that no colorable imitation exists. As the definition dictates, it is not sufficient that a similarity exists in both names, but that more importantly, the over-all presentation, or in their essential, substantive and distinctive parts is such as would likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the genuine article. A careful comparison of the way the trademark B*ig+ M*ac+ is being used by plaintiffs-appellees and corporate name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily reveal that no confusion could take place, or that the ordinary purchasers would be misled by it. As pointed out by defendants-appellants, the plaintiffs-appellees trademark is used to designate only one product, a double decker sandwich sold in a Styrofoam box with the McDonalds logo. On the other hand, what the defendants-appellants corporation is using is not a trademark for its food product but a business or corporate name. They use the business name L.C. Big Mak Burger, Inc. in their restaurant business which serves diversified food items such as siopao, noodles, pizza, and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly, defendants-appellants corporate or business name appearing in the food packages and signages are written in silhouette red-orange letters with the b and m in upper case letters. Above the words Big Mak are the upper case letter L.C.. Below the words Big Mak are the words Burger, Inc. spelled out in upper case letters. Furthermore, said corporate or business name appearing in such food packages and signages is always accompanied by the company mascot, a young chubby boy named Maky who wears a red T-shirt with the upper case m appearing therein and a blue lower garment. Finally, the defendants-appellants food packages are made of plastic material. xxxx xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename Big Mak is being used and presented to the public. As earlier noted, there are glaring dissimilarities between plaintiffsappellees trademark and defendants-appellants corporate name. Plaintiffs-appellees product carrying the trademark B*ig+ M*ac+ is a double decker sandwich (depicted in the tray mat containing photographs of the various food products xxx sold in a Styrofoam box with the McDonalds logo and trademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants comparable food products. In order to buy a Big Mac, a customer needs to visit an air-conditioned McDonalds restaurant usually located in a nearby commercial center, advertised and identified by its logo - the umbrella M, and its mascot Ronald McDonald. A typical McDonalds restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers

with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a B*ig+ M*ac+, it is necessary to specify it by its trademark. Thus, a customer needs to look for a McDonalds and enter it first before he can find a hamburger sandwich which carry the mark Big Mac. On the other hand, defendants-appellants sell their goods through snack vans xxxx Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable. Unfair competition is defined as the employment of deception or any other means contrary to good faith by which a person shall pass off the goods manufactured by him or in which he deals, or his business, or service, for those of another who has already established good will for his similar good, business or services, or any acts calculated to produce the same result (Sec. 29, Rep. Act No. 166, as amended). To constitute unfair competition therefore it must necessarily follow that there was malice and that the entity concerned was in bad faith. In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants corporate name with the plaintiffs-appellees trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name M*ak+ in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. 21[21]

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

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT RESPONDENTS CORPORATE NAME L.C. BIG MAK BURGER, INC. IS NOT A COLORABLE IMITATION OF THE MCDONALDS TRADEMARK

BIG MAC, SUCH COLORABLE IMITATION BEING AN ELEMENT OF TRADEMARK INFRINGEMENT. A. Respondents use the words Big Mak as trademark for their products and not merely as their business or corporate name. As a trademark, respondents Big Mak is undeniably and unquestionably sim ilar to petitioners Big Mac trademark based on the dominancy test and the idem sonans test resulting inexorably in confusion on the part of the consuming public.

B.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE MARK BIG MAK AND THE WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS INTENT TO DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.22[22]

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

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

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper for a petition for review under Rule 45.

2. On the merits, (a) whether respondents used the words Big Mak not only as part of the corporate name L.C. Big Mak Burger, Inc. but also as a trademark for their hamburger products, and (b) whether respondent corporation is liable for trademark infringement and unfair competition.23[23]

The Courts Ruling

The petition has merit.

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

A party intending to appeal from a judgment of the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 (Section 1)24[24] raising only questions of law. A question of law exists when the doubt or difference arises on what the law is on a certain state of facts. There is a question of fact when the doubt or difference arises on the truth or falsity of the alleged facts. 25[25]

Here, petitioners raise questions of fact and law in assailing the Court of Appeals findings on respondent corporations non-liability for trademark infringement and unfair competition. Ordinarily, the Court can deny due course to such a petition. In view, however, of the contradictory findings of fact of the RTC and Court of Appeals, the Court opts to accept the petition, this being one of the recognized exceptions to Section 1.26[26] We took a similar course of action in Asia Brewery, Inc. v. Court of Appeals 27[27] which also involved a suit for trademark infringement and unfair competition in which the trial court and the Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used Big Mak in their Business

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

The contention has merit.

The evidence presented during the hearings on petitioners motion for the issuance of a writ of preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their hamburger sandwiches bore the words Big Mak. The other descriptive words burger and 100% pure beef were set in smaller type, along with the locations of branches.28*28+ Respondents cash invoices simply refer to their hamburger sandwiches as Big Mak.29*29+ It is respondents snack vans that carry the words L.C. Big Mak Burger, Inc.30[30] It was only during the trial that respondents presented in evidence the plastic wrappers and bags for their hamburger sandwiches relied on by the Court of Appeals.31*31+ Respondents plastic wrappers and bags were identical with those petitioners presented during the hearings for the injunctive writ except that the letters L.C. and the words Burger, Inc. in respondents evidence were added above and below the words Big Mak, respectively. Since petitioners complaint was based on facts existing before and during the hearings on the injunctive writ, the facts established during those hearings are the proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 (Section 22) of Republic Act No. 166, as amended (RA 166), the law applicable to this case,32[32] defines trademark infringement as follows:

Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided.33[33]

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

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. 34[34] Of these, it is the element of likelihood of confusion that is the gravamen of trademark infringement.35[35]

On the Validity of the Big MacMark and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from registration under Section 436*36+ of RA 166 (Section 4). However, once registered, not only the marks validity but also the registrants ownership of the mark is prima facie presumed.37[37]

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

The contention has no merit. The Big Mac mark, which should be treated in its entirety and not dissected word for word,39[39] is neither generic nor descriptive. Generic marks are commonly used as the name or description of a kind of goods,40*40+ such as Lite for beer41[41] or Chocolate Fudge for chocolate soda drink.42[42] Descriptive marks, on the other hand, convey the characteristics, functions, qualities or ingredients of a product to one who has never seen it or does not know it exists,43*43+ such as Arthriticare for arthritis medication.44*44+ On the contrary, Big Mac falls under the class of fanciful or arbitrary marks as it bears no logical relation to the actual characteristics of the product it represents.45[45] As such, it is highly distinctive and thus valid. Significantly, the trademark Little Debbie for snack cakes was found arbitrary or fanciful. 46[46]

The Court also finds that petitioners have duly established McDonalds exclusive ownership of the Big Mac mark. Although Topacio and the Isaiyas Group registered the Big Mac mark ahead of McDonalds, Topacio, as petitioners disclosed, had already assigned his rights to McDonalds. The Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the Principal Register, and thus not distinctive, has no real protection.47[47] Indeed, we have held that registration in the Supplemental Register is not even a prima facie evidence of the validity of the registrants exclusive right to use the mark on the goods specified in the certificate.48[48]

On Types of Confusion

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

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

Under Act No. 666,50[50] the first trademark law, infringement was limited to confusion of goods only, when the infringing mark is used on goods of a similar kind.51[51] Thus, no relief was afforded to the party whose registered mark or its colorable imitation is used on different although related goods. To remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement, Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of the mark or its colorable imitation that is likely to result in confusion on the

source or origin of such goods or services, or identity of such business. 52[52] Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation.53[53]

On Whether Confusion of Goods and Confusion of Business are Applicable

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

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

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

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

1.10. For some period of time, and without the consent of plaintiff McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs exclusive right to use and/or appropriate the McDonalds marks, defendant Big Mak Burger acting through individual defendants, has been operating Big Mak Burger, a fast food restaurant business dealing in the sale of hamburger and cheeseburger sandwiches, french fries and other food products, and has caused to be printed on the wrapper of defendants food products and incorporated in its signages the name Big Mak Burger, which is confusingly similar to and/or is a colorable imitation of the plaintiff McDonalds mark B*ig+ M*ac+, xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs. xxxx 2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonalds and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonalds marks, and which are likely to have caused confusion or deceived the public as to the true source, sponsorship or affiliation of defendants food products and restaurant business , plaintiffs have suffered and continue to suffer actual damages in the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonalds marks, in particular, the mark B*ig+ M*ac+.55[55] (Emphasis supplied)

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

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

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

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

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

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

On Whether Respondents Use of the Big Mak Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.57[57] The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion. In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.

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

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

This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences.59[59] 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 ,60[60] the Court ruled:

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

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61[61] Phil. Nut Industry, Inc. v. Standard Brands Inc.,62[62] Converse Rubber Corporation v. Universal Rubber Products, Inc.,63[63] and Asia

Brewery, Inc. v. Court of Appeals.64[64] In the 2001 case of Societe Des Produits Nestl, S.A. v. Court of Appeals,65[65] the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. (Emphasis supplied)

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

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

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

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

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

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

Certainly, Big Mac and Big Mak for hamburgers create even greater confusi on, not only aurally but also visually.

Indeed, a person cannot distinguish Big Mac from Big Mak by their sound. When one hears a Big Mac or Big Mak hamburger advertisement over the radio, one would not know whether the Mac or Mak ends with a c or a k.

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

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

[R]espondents, particularly Respondent Mr. Francis Dy, could have arrived at a more creative choice for a corporate name by using the names of his parents, especially since he was

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

Absent proof that respondents adoption of the Big Mak mark was due to honest mistake or was fortuitous,68[68] the inescapable conclusion is that respondents adopted the Big Mak mark to ride on the coattails of the more established Big Mac mark.69[69] This saves respondents much of the expense in advertising to create market recognition of their mark and hamburgers.70[70]

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

On the Lack of Proof of Actual Confusion

Petitioners failure to present proof of actual confusion does not negate their claim of trademark infringement. As noted in American Wire & Cable Co. v. Director of Patents,71[71] Section 22 requires the less stringent standard of likelihood of confusion only. While proof of actual confusion is the best evidence of infringement, its absence is inconsequential.72[72]

On the Issue of Unfair Competition

Section 29 (Section 29)73[73] of RA 166 defines unfair competition, thus: xxxx

Any person who will employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor. In particular, and without in any way limiting the scope of unfair competition, the following shall be deemed guilty of unfair competition : (a) Any person, who in selling his goods shall give them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon , or in any feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose; (b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or (c) Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another. (Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.74[74] 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.75[75] shown.76[76]

Actual fraudulent intent need not be

Unfair competition is broader than trademark infringement and includes passing off goods with or without trademark infringement. Trademark infringement is a form of unfair competition.77[77] Trademark infringement constitutes unfair competition when there is not merely likelihood of confusion, but also actual or probable deception on the public because of the general appearance of the goods. There can be trademark infringement without unfair competition as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner.78[78]

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

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

The RTC described the respective marks and the goods of petitioners and respondents in this wise:

The mark B*ig+ M*ac+ is used by plaintiff McDonalds to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonalds logo and trademark in red with block capital letters printed on it. All letters of the B*ig+ M*ac+ mark are also in red and block capital letters. On the other hand, defendants B*ig+ M*ak+ script print is in orange with only the letter B and M being capitalized and the packaging material is plastic wrapper. xxxx Further, plaintiffs logo and mascot are the umbrella M and Ronald McDonalds, respectively, compared to the mascot of defendant Corporation which is a chubby

boy called Macky displayed or printed between the words Big and Mak. 81[81] (Emphasis supplied)

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

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

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

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

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

Respondents, however, did not give such notice. We hold that as found by the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 2383[83] (Section 23) in relation to Section 29 of RA 166, a plaintiff who successfully maintains trademark infringement and unfair competition claims is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its Decision of 5 September 1994) and in ordering the payment of P400,000 actual damages in favor of petitioners. The injunctive writ is indispensable to prevent further acts of infringement by respondent corporation. Also , the amount of actual damages is a reasonable percentage (11.9%) of respondent corporations gross sales for three (1988 -1989 and 1991) of the six years (1984-1990) respondents have used the Big Mak mark. 84[84]

The RTC also did not err in awarding exemplary damages by way of correction for the public good85[85] in view of the finding of unfair competition where intent to deceive the public is essential. The award of attorneys fees and expenses of litigation is also in order.86[86]

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

SO ORDERED.

ANTONIO T. CARPIO Associate Justice WE CONCUR:

HILARIO G. DAVIDE, JR. Chief Justice Chairman

LEONARDO A. QUISUMBING Associate Justice

CONSUELO YNARES-SANTIAGO Associate Justice

ADOLFO S. AZCUNA Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

HILARIO G. DAVIDE, JR. Chief Justice FIRST DIVISION [G.R. No. 157216. November 20, 2003] 246 CORPORATION, doing business under the name and style of ROLEX MUSIC LOUNGE, petitioner, vs. HON. REYNALDO B. DAWAY, in his capacity as Presiding Judge of Branch 90 of the Regional Trial Court of Quezon City, MONTRES ROLEX S.A. and ROLEX CENTRE PHIL. LIMITED, respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure assailing the November 28, 2002 Decision87[1] of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner, as well as the Resolution88[2] dated February 13, 2003 denying its motion for reconsideration.

The undisputed facts show that on November 26, 1998, respondents Montres Rolex S.A. and Rolex Centre Phil., Limited, owners/proprietors of Rolex and Crown Device, filed against petitioner 246 Corporation the instant suit for trademark infringement and damages with prayer for the issuance of a restraining order or writ of preliminary injunction89[3] before the Regional Trial Court of Quezon City, Branch 90. Respondents alleged that sometime in July 1996, petitioner adopted and, since then, has been using without authority the mark Rolex in its business name Rolex Music Lounge as well as in its newspaper advertisements as Rolex Music Lounge, KTV, Disco & Party Club. In its answer raising special affirmative defenses, petitioner argued that respondents have no cause of action because no trademark infringement exist; that no confusion would arise from the use by petitioner of the mark Rolex considering that its entertainment business is totally unrelated to the items catered by respondents such as watches, clocks, bracelets and parts thereof. It also contended that the complaint was not properly verified and certified against forum shopping considering that Atty. Alonzo Ancheta, the counsel of record of respondents who signed the verification and certification, was not authorized to represent respondents.90[4] On July 21, 2000, petitioner filed a motion for preliminary hearing on its affirmative defenses.91[5] Subsequently, on motion of petitioner, the trial court issued a subpoena ad testificandum requiring Atty. Alonzo Ancheta to appear at the preliminary hearing.92[6] Respondents, in the meantime, filed a Comment and Opposition93[7] to the motion for preliminary hearing and a motion to quash the subpoena ad testificandum. In an Order dated October 27, 2000, the trial court quashed the subpoena ad testificandum and denied petitioners motion for preliminary hearing on affirmative defenses with motion to dismiss. 94[8] With the denial of the motion for reconsideration on March 16, 2001, petitioner filed a petition for certiorari with the Court of Appeals contending that the trial court gravely abused its discretion in issuing the October 27, 2000 and March 16, 2001 orders. On November 28, 2002, the Court of Appeals dismissed the petition. The motion for reconsideration filed by petitioner was denied. Hence, the instant petition anchored on the following grounds: I IN ISSUING THE ASSAILED DECISIONS, THE HONORABLE COURT OF APPEALS PERFUNCTORILY BRUSHED ASIDE THE CONTROLLING PRECEDENTS LAID DOWN BY THIS HONORABLE COURT IN ESSO STANDARD EASTERN, INC. VS. COURT OF APPEALS AND UNITED CIGARETTE CORPORATION AND OTHER COMPANION CASES HOLDING THAT NO TRADEMARK INFRINGEMENT CAN POSSIBLY OCCUR WHERE THE CONTENDING PARTIES DEAL WITH GOODS AND SERVICES THAT ARE TOTALLY UNRELATED AND NON-COMPETING WITH EACH OTHER.

II IN ARBITRARILY AND CAPRICIOUSLY RULING THAT THE ISSUES RAISED IN PETITIONERS CERTIORARI PETITION ARE QUESTIONS OF FACT, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS BUT ALSO THE WELL-SETTLED RULE THAT THE ALLEGATIONS OF THE COMPLAINT IS HYPOTHETICALLY ADMITTED WHEN THE MOTION TO DISMISS IS GROUNDED UPON LACK OF CAUSE OF ACTION. MOREOVER, INDEPENDENT OF THE HYPOTHETICALLY ADMITTED FACTS EMBODIED IN THE COMPLAINT A QUO, THERE ARE SELF-EVIDENT FACTS AND IMPLIEDLY ADMITTED FACTS CONTAINED IN PRIVATE RESPONDENTS PLEADINGS THAT WOULD CLEARLY AND UNMISTAKABLY SHOW PRIVATE RESPONDENTS LACK OF CAUSE OF ACTION AGAINST HEREIN PETITIONER. III THE HONORABLE COURT OF APPEALS VIOLATED PETITIONERS RIGHT TO SUBSTANTIVE DUE PROCESS WH EN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT WHAT WAS SPECIFICALLY DENIED IN THE ASSAILED OCTOBER 20, 2000 ORDER IS PETITIONERS MOTION FOR PRELIMINARY HEARING ON DEFENDANTS AFFIRMATIVE DEFENSES AND NOT PETITIONERS MOTION TO DISMISS PER SE CONSIDERING T HAT: A. THERE IS ABSOLUTELY NOTHING IN THE ORDER DATED OCTOBER 20, 2000 OF RESPONDENT JUDGE WHICH SUGGESTS THAT THE RESOLUTION OF PETITIONERS MOTION TO DISMISS PER SE WAS HELD IN ABEYANCE BY THE RESPONDENT JUDGE. HENCE THE SAID ORDER DATED OCTOBER 20, 2000 ALSO CONSTITUTES A DENIAL ON THE MERITS OF PETITIONERS MOTION TO DISMISS PER SE AND NOT MERELY OF PETITIONERS MOTION FOR PRELIMINARY HEARING THEREON. PRIVATE RESPONDENTS COMMENT AND OPPOSITION DATED 11 AUGUST 2000, WHICH WAS CITED AND SUSTAINED BY RESPONDENT JUDGE, CLEARLY TRAVERSED THE MERITS OF THE GROUNDS FOR PETITIONERS MOTION TO DISMISS PER SE. HENCE, THE SAID 20 OCTOBER 2000 ORDERS DENIAL OF PETITIONERS MOTION IS NOT LIMITED TO THE MOTION FOR PRELIMINARY HEARING BUT ALSO CONSTITUTES A DEN IAL OF PETITIONERS MOTION TO DISMISS PER SE. IV IN ARBITRARILY AND CAPRICIOUSLY RULING THAT ATTY. ALONZO ANCHETA PROPERLY VERIFIED AND CERTIFIED PRIVATE RESPONDENTS COMPLAINT A QUO, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO THE DOCTRINE OF SEPARATE CORPORATE PERSONALITY; CONSIDERING THAT THE RECORDS OF THIS CASE IS (sic) COMPLETELY BEREFT AND DEVOID OF ANY DULY EXECUTED SPECIAL POWER OF ATTORNEY, EMANATING FROM PRIVATE RESPONDENTS, WHICH EXPLICITLY AND SPECIFICALLY AUTHORIZES ATTY. ALONZO ANCHETA TO REPRESENT PRIVATE RESPONDENTS MONTRES ROLEX S.A. IN THE FILING OF THE COMPLAINT A QUO. BY REASON THEREOF, PRIVATE RESPONDENTS COULD NOT BE DEEMED TO HAVE VOLUNTARILY APPEARED BEFORE THE RESPONDENT JUDGE; CONSEQUENTLY, THE TRIAL COURT COULD NOT HAVE VALIDLY ACQUIRED JURISDICTION OVER THE PERSON OF PRIVATE RESPONDENTS. V IN ARBITRARILY AND CAPRICIOUSLY AFFIRMING RESPONDENT JUDGES QUASHAL OF THE SUBPOENA DATED 14 AUGUST 2000 DIRECTED AGAINST ATTY. ALONZO ANCHETA, THE HONORABLE COURT OF APPEALS VIOLATED NOT ONLY PETITIONERS SUBSTANTIVE DUE PROCESS RIGHTS, BUT ALSO SECTION 9, RULE 132

B.

AND SECTION 7 RULE 133 OF THE 1989 REVISED RULES ON EVIDENCE, AND THE RULING OF THIS HONORABLE COURT IN THE CASE OF PEOPLE VS. RIVERA.95[9] Simply put, the issues are as follows (1) whether the trial court denied not only petitioners motion for preliminary hearing on its affirmative defenses but its motion to dismiss as well; (2) if the answer is in the affirmative, whether or not the trial court gravely abused its discretion in denying said motions; and (3) whether the trial court gravely abused its discretion in quashing the subpoena ad testificandum issued against Atty. Ancheta. Anent the first issue, we find that what was denied in the order dated October 27, 2000 was not only the motion for preliminary hearing but the motion to dismiss as well. A reading of the dispositive portion of said order shows that the trial court neither qualified its denial nor held in abeyance the ruling on petitioners motion to dismiss thus IN VIEW OF THE FOREGOING, the aforecited Motion To Quash Subpoena Ad Testificandum is granted; and the aforecited Motion For Preliminary Hearing On Defendants Affirmative Defenses With Motion To dismiss The Instant Complaint Based On Said Affirmative Defenses is denied .96[10] (Emphasis supplied) In issuing the assailed order, the trial court ruled on the merits of petitioners Motion to Dismiss vis--vis respondents Comment and Opposition which clearly traversed the affirmative defenses raised by petitioner, to wit: After carefully going over the pleadings, this Court finds, on the first motion that the arguments raised in the said motion and the reply filed in connection thereto appear to be meritorious; and on the second motion, that the arguments raised in the comments and opposition and the rejoinder filed by the plaintiffs likewise appear to be meritorious.97[11] Moreover, it is presumed that all matters within an issue raised in a case were passed upon by the court. In the absence of evidence to the contrary, the presumption is that the court a quo discharged its task properly.98[12] In Municipality of Bian Laguna v. Court of Appeals,99[13] decided under the old Rules of Civil Procedure, it was held that a preliminary hearing permitted under Rule 16, Section 5, is not mandatory even when the same is prayed for. It rests largely on the sound discretion of the trial court, thus SEC. 5. Pleading grounds as affirmative defenses. Any of the grounds for dismissal provided for in this Rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a motion to dismiss had been filed. (Emphasis supplied) The use of the word "may" in the aforequoted provision shows that such a hearing is not a matter of right demandable from the trial court; it is not mandatory but discretionary. May is an auxiliary verb indicating liberty,

opportunity, permission and possibility.100[14] Such interpretation is specifically stated under the 1997 Rules of Civil Procedure. Rule 16, Section 6, now provides that a grant of a preliminary hearing rests on the sound discretion of the court, to wit SEC. 6. Pleading grounds as affirmative defenses. If no motion to dismiss has been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed . (Emphasis supplied) In the case at bar, the Court of Appeals did not err in finding that no abuse of discretion could be ascribed to the trial courts denial of petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss. The issue of whether or not a trademark infringement exists, is a question of fact that could best be determined by the trial court. Under the old Trademark Law101[15] where the goods for which the identical marks are used are unrelated, there can be no likelihood of confusion and there is therefore no infringement in the use by the junior user of the registered mark on the entirely different goods.102[16] This ruling, however, has been to some extent, modified by Section 123.1(f) of the Intellectual Property Code (Republic Act No. 8293), which took effect on January 1, 1998. The said section reads: Sec. 123. Registrability. 123.1. A mark cannot be registered if it: xxx xxx xxx

(f) Is identical with, or confusingly similar to, or constitutes a translation of a mark considered well-known in accordance with the preceding paragraph, which is registered in the Philippines with respect to goods or services which are not similar to those with respect to which registration is applied for: Provided, That use of the mark in relation to those goods or services would indicate a connection between those goods or services, and the owner of the registered mark: Provided, further, That the interest of the owner of the registered mark are likely to be damaged by such use; (Emphasis supplied) A junior user of a well-known mark on goods or services which are not similar to the goods or services, and are therefore unrelated, to those specified in the certificate of registration of the well-known mark is precluded from using the same on the entirely unrelated goods or services, subject to the following requisites, to wit: 1. The mark is well-known internationally and in the Philippines. Under Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers,103[17] in determining whether a mark is well known, the following criteria or any combination thereof may be taken into account:

(a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c) (d) (e) (f) (g) (h) (i) (j) (k) the degree of the inherent or acquired distinction of the mark; the quality-image or reputation acquired by the mark; the extent to which the mark has been registered in the world; the exclusivity of the registration attained by the mark in the world; the extent to which the mark has been used in the world; the exclusivity of use attained by the mark in the world; the commercial value attributed to the mark in the world; the record of successful protection of the rights in the mark; the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and

(l) the presence of absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. 2. The use of the well-known mark on the entirely unrelated goods or services would indicate a connection between such unrelated goods or services and those goods or services specified in the certificate of registration in the well known mark. This requirement refers to the likelihood of confusion of origin or business or some business connection or relationship between the registrant and the user of the mark. 3. The interests of the owner of the well-known mark are likely to be damaged. For instance, if the registrant will be precluded from expanding its business to those unrelated good or services, or if the interests of the registrant of the well-known mark will be damaged because of the inferior quality of the good or services of the user.104[18] Section 123.1(f) is clearly in point because the Music Lounge of petitioner is entirely unrelated to respondents business involving watches, clocks, bracelets, etc. However, the Court cannot yet resolve the merits of the present controversy considering that the requisites for the application of Section 123.1(f), which constitute the kernel issue at bar, clearly require determination facts of which need to be resolved at the trial court. The existence or absence of these requisites should be addressed in a full blown hearing and not on a mere preliminary hearing. The respondent must be given ample opportunity to prove its claim, and the petitioner to debunk the same.

The same is true with respect to the issue of whether Atty. Alonzo Ancheta was properly authorized to sign the verification and certification against forum shopping in behalf of respondents. This could be properly resolved during the trial together with the substantive issues raised by petitioner. Considering that the trial court correctly denied petitioners motion for preliminary hearing on its affirmative defenses with motion to dismiss, there exists no reason to compel Atty. Ancheta to testify. Hence, no abuse of discretion was committed by the trial court in quashing the subpoena ad testificandum issued against Atty. Ancheta. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as equivalent to lack of jurisdiction, or, in other words, where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. None of these was committed by the trial court; hence, the Court of Appeals correctly dismissed the petition. WHEREFORE, in view of all the foregoing, the petition for review on certiorari filed by petitioner is DENIED. The November 28, 2002 Decision and the February 13, 2003 Resolution of the Court of Appeals in CA-G.R. SP No. 64660 which dismissed the petition for certiorari filed by petitioner are AFFIRMED. SO ORDERED. Davide, Jr., C.J., (Chairman), Panganiban, Carpio and Azcuna, JJ., concu

SECOND DIVISION

COFFEE PARTNERS, INC., Petitioner,

G.R. No. 169504

Present:

CARPIO, J., Chairperson,

VELASCO, JR.,* DEL CASTILLO, - versus ABAD, and PEREZ, JJ.

SAN FRANCISCO COFFEE & ROASTERY, INC., Respondent.

Promulgated:

March 3, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

This is a petition for review105[1] of the 15 June 2005 Decision106[2] and the 1 September 2005 Resolution107[3] of the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of

Appeals set aside the 22 October 2003 Decision108[4] of the Office of the Director General-Intellectual Property Office and reinstated the 14 August 2002 Decision109[5] of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration.

The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement110[6] with Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of British Virgin Islands, for a non-exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as SAN FRANCISCO COFFEE.

Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with the SEC in May 1995. It registered the business name SAN FRANCISCO COFFEE & ROASTERY, INC. with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willys, and other coffee companies.

In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other commercial establishments in Metro Manila.

In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name SAN FRANCISCO COFFEE in Libis, Quezon City. According to respondent, petitioners shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name SAN FRANCISCO COFFEE. Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair competition with claims for damages.

In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for registration of the mark SAN FRANCISCO COFFEE & DEVICE for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused with respondents trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the trade name SAN FRANCISCO COFFEE when it formed a joint venture with B oyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from respondent.

Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr. Puyat said he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop SAN FRANCISCO COFFEE has branches in Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name SAN FRANCISCO COFFEE from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from.

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

In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark infringed on respondents trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected from infringement of its trade name.

The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary.

The BLA-IPO held that petitioners use of the trademark SAN FRANCISCO COFFEE will likely c ause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the words SAN FRANCISCO which is the dominant portion of respondents trade name and petitioners trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioner's trademark because greater weight is given to words the medium consumers use in ordering coffee products.

On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark SAN FRANCISCO COFFEE because of the authority granted to it by its franchisor. The BLA IPO held there was no evidence of intent to defraud on the part of petitioner.

The BLA-IPO also dismissed respondents claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondents claim of moral damages, but granted its claim of attorneys fees.

Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages. The BLA-IPO denied the parties partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-IPO).

The Ruling of the Office of the Director GeneralIntellectual Property Office

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioners use of the trademark SAN FRANCISCO COFFEE did not infringe on respondent's trade name. The ODG -IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter.

The Ruling of the Court of Appeals

In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODGIPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondents claim for actual damages and retained the award of attorneys fees. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration.

The Issue

The sole issue is whether petitioners use of the trademark SAN FRANCISCO COFFEE constitutes infringement of respondents trade name SAN FRANCISCO COFFEE & ROASTERY, INC., even if the trade name is not registered with the Intellectual Property Office (IPO).

The Courts Ruling

The petition has no merit.

Petitioner contends that when a trade name is not registered, a suit for infringement is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondents registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses respondents failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur between its trademark and respondents trade name because of a wide divergence in the channels of trade, petitioner serving ready -made coffee while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun San Francisco and the generic word coffee are not capable of exclusive appropriation.

Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)111[7] dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges petitioners trademark is confusingly similar to respondents trade name. Respondent stresses ordinarily prudent consumers are likely to be misled about the source, affiliation, or sponsorship of petitioners coffee.

As to the issue of alleged abandonment of trade name by respondent, the BLA-IPO found that respondent continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found that while respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-

judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court necessarily upholds such findings of fact.112[8]

Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA,113[9] this Court laid down what constitutes infringement of an unregistered trade name, thus:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered ; (2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services; (4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and (5) It is without the consent of the trademark or trade name owner or the assignee thereof.114[10] (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines.115[11]

Section 22 of Republic Act No. 166,116[12] as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit:

Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of any registered mark or trade name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied)

HOWEVER, RA 8293, WHICH TOOK EFFECT ON 1 JANUARY 1998, HAS DISPENSED WITH THE REGISTRATION REQUIREMENT. SECTION 165.2 OF RA 8293 CATEGORICALLY STATES THAT TRADE NAMES SHALL BE PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION WITH THE IPO, AGAINST ANY UNLAWFUL ACT INCLUDING ANY SUBSEQUENT USE OF THE TRADE NAME BY A THIRD PARTY, WHETHER AS A TRADE NAME OR A TRADEMARK LIKELY TO MISLEAD THE PUBLIC. THUS:

SEC. 165.2 (A) NOTWITHSTANDING ANY LAWS OR REGULATIONS PROVIDING FOR ANY OBLIGATION TO REGISTER TRADE NAMES, SUCH NAMES SHALL BE PROTECTED, EVEN PRIOR TO OR WITHOUT REGISTRATION, AGAINST ANY UNLAWFUL ACT COMMITTED BY THIRD PARTIES.

(B) IN PARTICULAR, ANY SUBSEQUENT USE OF A TRADE NAME BY A THIRD PARTY, WHETHER AS A TRADE NAME OR A MARK OR COLLECTIVE MARK, OR ANY SUCH USE OF A SIMILAR TRADE NAME OR MARK, LIKELY TO MISLEAD THE PUBLIC, SHALL BE DEEMED UNLAWFUL. (EMPHASIS SUPPLIED)

IT IS THE LIKELIHOOD OF CONFUSION THAT IS THE GRAVAMEN OF INFRINGEMENT. BUT THERE IS NO ABSOLUTE STANDARD FOR LIKELIHOOD OF CONFUSION. ONLY THE PARTICULAR, AND SOMETIMES PECULIAR, CIRCUMSTANCES OF EACH CASE CAN DETERMINE ITS EXISTENCE. THUS, IN INFRINGEMENT CASES, PRECEDENTS MUST BE EVALUATED IN THE LIGHT OF EACH PARTICULAR CASE.117[13]

IN DETERMINING SIMILARITY AND LIKELIHOOD OF CONFUSION, OUR JURISPRUDENCE HAS DEVELOPED TWO TESTS: THE DOMINANCY TEST AND THE HOLISTIC TEST. THE DOMINANCY TEST FOCUSES ON THE SIMILARITY OF THE PREVALENT FEATURES OF THE COMPETING TRADEMARKS THAT MIGHT CAUSE CONFUSION AND DECEPTION, THUS CONSTITUTING INFRINGEMENT. IF THE COMPETING TRADEMARK CONTAINS THE MAIN,

ESSENTIAL, AND DOMINANT FEATURES OF ANOTHER, AND CONFUSION OR DECEPTION IS LIKELY TO RESULT, INFRINGEMENT OCCURS. EXACT DUPLICATION OR IMITATION IS NOT REQUIRED. THE QUESTION IS WHETHER THE USE OF THE MARKS INVOLVED IS LIKELY TO CAUSE CONFUSION OR MISTAKE IN THE MIND OF THE PUBLIC OR TO DECEIVE CONSUMERS.118[14]

IN CONTRAST, THE HOLISTIC TEST ENTAILS A CONSIDERATION OF THE ENTIRETY OF THE MARKS AS APPLIED TO THE PRODUCTS, INCLUDING THE LABELS AND PACKAGING, IN DETERMINING CONFUSING SIMILARITY.119[15] THE DISCERNING EYE OF THE OBSERVER MUST FOCUS NOT ONLY ON THE PREDOMINANT WORDS BUT ALSO ON THE OTHER FEATURES APPEARING ON BOTH MARKS IN ORDER THAT THE OBSERVER MAY DRAW HIS CONCLUSION WHETHER ONE IS CONFUSINGLY SIMILAR TO THE OTHER.120[16]

APPLYING EITHER THE DOMINANCY TEST OR THE HOLISTIC TEST, PETITIONERS SAN FRANCISCO COFFEE TRADEMARK IS A CLEAR INFRINGEMENT OF RESPONDENTS SAN FRANCISCO COFFEE & ROASTERY, INC. TRADE NAME. THE DESCRIPTIVE WORDS SAN FRANCISCO COFFEE ARE PRECISELY THE DOMINANT FEATURES OF RESPONDENTS TRADE NAME. PETITIONER AND RESPONDENT ARE ENGAGED IN THE SAME BUSINESS OF SELLING COFFEE, WHETHER WHOLESALE OR RETAIL. THE LIKELIHOOD OF CONFUSION IS HIGHER IN CASES WHERE THE BUSINESS OF ONE CORPORATION IS THE SAME OR SUBSTANTIALLY THE SAME AS THAT OF ANOTHER CORPORATION. IN THIS CASE, THE CONSUMING PUBLIC WILL LIKELY BE CONFUSED AS TO THE SOURCE OF THE COFFEE BEING SOLD AT PETITIONERS COFFEE SHOPS. PETITIONERS ARGUMENT THAT SAN FRANCISCO IS JUST A PROPER NAME REFERRING TO THE FAMOUS CITY IN CALIFORNIA AND THAT COFFEE IS SIMPLY A GENERIC TERM, IS UNTENABLE. RESPONDENT HAS ACQUIRED AN EXCLUSIVE RIGHT TO THE USE OF THE TRADE NAME SAN FRANCISCO COFFEE & ROASTERY, INC. SINCE THE REGISTRATION OF THE BUSINESS NAME WITH THE DTI IN 1995. THUS, RESPONDENTS USE OF ITS TRADE NAME FROM THEN ON MUST BE FREE FROM ANY INFRINGEMENT BY SIMILARITY. OF COURSE, THIS DOES NOT MEAN THAT RESPONDENT HAS EXCLUSIVE USE OF THE GEOGRAPHIC WORD SAN FRANCISCO OR THE GENERIC WORD COFFEE. GEOGRAPHIC OR GENERIC WORDS ARE NOT, PER SE, SUBJECT TO EXCLUSIVE APPROPRIATION. IT IS ONLY THE COMBINATION OF THE WORDS SAN FRANCISCO COFFEE, WHICH IS RESPONDENTS TRADE NAME IN ITS COFFEE BUSINESS, THAT IS PROTECTED AGAINST INFRINGEMENT ON MATTERS RELATED TO THE COFFEE BUSINESS TO AVOID CONFUSING OR DECEIVING THE PUBLIC.

IN PHILIPS EXPORT B.V. V. COURT OF APPEALS,121[17] THIS COURT HELD THAT A CORPORATION HAS AN EXCLUSIVE RIGHT TO THE USE OF ITS NAME. THE RIGHT PROCEEDS FROM THE THEORY THAT IT IS A FRAUD ON THE CORPORATION WHICH HAS ACQUIRED A RIGHT TO THAT NAME AND PERHAPS CARRIED ON ITS BUSINESS THEREUNDER, THAT ANOTHER SHOULD ATTEMPT TO USE THE SAME NAME, OR THE SAME NAME WITH A SLIGHT

VARIATION IN SUCH A WAY AS TO INDUCE PERSONS TO DEAL WITH IT IN THE BELIEF THAT THEY ARE DEALING WITH THE CORPORATION WHICH HAS GIVEN A REPUTATION TO THE NAME.122[18]

THIS COURT IS NOT JUST A COURT OF LAW, BUT ALSO OF EQUITY. WE CANNOT ALLOW PETITIONER TO PROFIT BY THE NAME AND REPUTATION SO FAR BUILT BY RESPONDENT WITHOUT RUNNING AFOUL OF THE BASIC DEMANDS OF FAIR PLAY. NOT ONLY THE LAW BUT EQUITY CONSIDERATIONS HOLD PETITIONER LIABLE FOR INFRINGEMENT OF RESPONDENTS TRADE NAME.

THE COURT OF APPEALS WAS CORRECT IN SETTING ASIDE THE 22 OCTOBER 2003 DECISION OF THE OFFICE OF THE DIRECTOR GENERAL-INTELLECTUAL PROPERTY OFFICE AND IN REINSTATING THE 14 AUGUST 2002 DECISION OF THE BUREAU OF LEGAL AFFAIRS-INTELLECTUAL PROPERTY OFFICE.

WHEREFORE, WE DENY THE PETITION FOR REVIEW. WE AFFIRM THE 15 JUNE 2005 DECISION AND 1 SEPTEMBER 2005 RESOLUTION OF THE COURT OF APPEALS IN CA-G.R. SP NO. 80396.

COSTS AGAINST PETITIONER.

SO ORDERED.

ANTONIO T. CARPIO Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR. Associate Justice

MARIANO C. DEL CASTILLO Associate Justice

ROBERTO A. ABAD Associate Justice

JOSE P. PEREZ Associate Justice

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

ANTONIO T. CARPIO

Associate Justice CHAIRPERSON

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

REYNATO S. PUNO Chief Justice

Republic of the Philippines Supreme Court Manila

SECOND DIVISION

BERRIS AGRICULTURAL CO., INC., Petitioner,

G.R. No. 183404

Present:

VELASCO, JR., J.,* NACHURA,** - versus Acting Chairperson, LEONARDO-DE CASTRO,*** BRION,**** and MENDOZA, JJ.

NORVY ABYADANG, Respondent.

Promulgated:

October 13, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This petition for review123[1] on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Decision dated April 14, 2008124[2] and the Resolution dated June 18, 2008125[3] of the Court of Appeals (CA) in CA-G.R. SP No. 99928.

The antecedents

On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the Intellectual Property Office (IPO) a trademark application for the mark NS D-10 PLUS for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The application, under Application Serial No. 4-2004-00450, was given due course and was published in the IPO e-Gazette for opposition on July 28, 2005.

On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified Notice of Opposition126[4] against the mark under application allegedly because NS D -10 PLUS is similar and/or confusingly similar to its registered trademark D-10 80 WP, also used for Fungicide (Class 5) with active ingredient 80% Mancozeb. The opposition was docketed as IPC No. 14-2005-00099.

After an exchange of pleadings, on April 28, 2006, Director Estrellita Beltran-Abelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-24127[5] (BLA decision), the dispositive portion of which reads

WHEREFORE, viewed in the light of all the foregoing, this Bureau finds and so holds that Respondent-Applicants mark NS D-10 PLUS is confusingly similar to the Opposers mark and as

such, the opposition is hereby SUSTAINED. Consequently, trademark application bearing Serial No. 4-2004-00450 for the mark NS D-10 PLUS filed on January 16, 2004 by Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the International Classification of goods is, as it is hereby, REJECTED. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Administrative, Financial and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Order with a copy to be furnished the Bureau of Trademark (BOT) for information and to update its records. SO ORDERED.128[6]

Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition to the motion.

On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D)129[7] (BLA resolution), denying the motion for reconsideration and disposing as follows

IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed by the RespondentApplicant is hereby DENIED FOR LACK OF MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Bureau of Trademarks for appropriate action in accordance with this Resolution. SO ORDERED.130[8]

Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 14-06-13.

With the filing of the parties respective memoranda, Director General Adrian S. Cristobal, Jr. of the IPPDG rendered a decision dated July 20, 2007,131[9] ruling as follows

Wherefore, premises considered[,] the appeal is hereby DENIED. appealed Decision of the Director is hereby AFFIRMED.

Accordingly, the

Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.132[10]

Undeterred, Abyadang filed a petition for review133[11] before the CA.

In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held

In sum, the petition should be granted due to the following reasons: 1) petitioners mark NS D-10 PLUS is not confusingly similar with respondents trademark D -10 80 WP; 2) respondent failed to establish its ownership of the mark D-10 80 WP and 3) respondents trademark registration for D-10 80 WP may be cancelled in the present case to avoid multiplicity of suits. WHEREFORE, the petition is GRANTED. The decision dated July 20, 2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-2005-00099) is REVERSED and SET ASIDE, and a new one is entered giving due course to petitioners application for registration of the mark NS D-10 PLUS, and canceling respondents trademark registration for D -10 80 WP. SO ORDERED.134[12]

Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the CA denied the motion for lack of merit. Hence, this petition anchored on the following arguments

I.

The Honorable Court of Appeals finding that there exists no confusing similarity between Petitioners and respondents marks is based on misapprehension of facts, surmise and conjecture and not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision reversing and setting aside the technical findings of the Intellectual Property Office even without a finding or, at the very least, an allegation of grave abuse of discretion on the part of said agency is not in accord with law and earlier pronouncements of this Honorable Court [Supreme Court].

II.

III.

The Honorable Court of Appeals Decision ordering the cancellation of herein Petitioners duly registered and validly existing trademark in the absence of a properly filed Petition for Cancellation before the Intellectual Property Office is not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court].135[13]

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293136[14] (Intellectual Property Code of the Philippines), specifically Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable law was R.A. No. 166,137[15] as amended.

Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but merely provided in Section 239.1138[16] that Acts and parts of Acts inconsistent with it were repealed. In other words, only in the instances where a substantial and irreconcilable conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the provisions of the latter be deemed repealed.

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.139[17] It also defines a collective mark as any visible sign designated as such in the application for re gistration 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.140[18]

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.141[19] 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 122142[20] 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 registrants ownership of the mark, and of the registrants exclusive right to use the same in connecti on with the goods or services and those that are related thereto specified in the certificate.143[21] 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.144[22] 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.145[23] 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.146[24]

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.147[25] In the instant case, both parties have submitted proof to support their claim of ownership of their respective trademarks.

Culled from the records, Berris, as oppositor to Abyadangs application for registration of his trademark, presented the following evidence: (1) its trademark application dated November 29, 2002148[26] with Application No. 4-2002-0010272; (2) its IPO certificate of registration dated October 25, 2004,149[27] with Registration No. 42002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its packaging150[28] bearing the mark D-10 80 WP; (4) photocopies of its sales invoices and official receipts; 151[29] and (5) its notarized DAU dated April 23, 2003,152[30] stating that the mark was first used on June 20, 2002, and indicating that, as proof of actual use, copies of official receipts or sales invoices of goods using the mark were attached as Annex B.

On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of the packag ing153[31] for his marketed fungicide bearing mark NS D-10 PLUS; (2) Abyadangs Affidavit dated February 14, 2006, 154[32] stating among others that the mark NS D-10 PLUS was his own creation derived from: N for Norvy, his name; S th for Soledad, his wifes name; D the first letter for December, his birth month; 10 for October, the 10 month of the year, the month of his business name registration; and PLUS to connote superior quality; that when he applied for registration, there was nobody applying for a mark similar to NS D-10 PLUS; that he did not know of the existence of Berris or any of its products; that D -10 could not have been associated with Berris because the latter never engaged in any commercial activity to sell D -10 80 WP fungicide in the local market; and that he could not have copied Berris mark because he registered his packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3) Certification dated December 19, 2005155[33] issued by the FPA, stating that NS D-10 PLUS is owned and distributed by NS Northern Organic Fertilizer, registered with the FPA since May 26, 2003, and

had been in the market since July 30, 2003; (4) Certification dated October 11, 2005156[34] issued by the FPA, stating that, per monitoring among dealers in Region I and in the Cordillera Administrative Region registered with its office, the Regional Officer neither encountered the fungicide with mark D -10 80 WP nor did the FPA provincial officers from the same area receive any report as to t he presence or sale of Berris product; (5) Certification dated March 14, 2006157[35] issued by the FPA, certifying that all pesticides must be registered with the said office pursuant to Section 9158[36] of Presidential Decree (P.D.) No. 1144159[37] and Section 1, Article II of FPA Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16, 2006160[38] issued by the FPA, certifying that the pesticide D-10 80 WP was registered by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply161[39] in La Trinidad, Benguet of the sale of Abyadangs goods referred to as D -10 and D-10+.

Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks.

We rule in favor of Berris.

Berris was able to establish that it was using its mark D-10 80 WP since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003,162[40] and which stated that it had an attachment as Annex B sales invoices and official receipts of goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the certificate.163[41] What is more, the DAU is buttressed by the Certification dated April 21, 2006164[42] issued by the Bureau of Trademarks that Berris mark is still valid and existing.

Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Berris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark D-10 80 WP earlier than its FPA registration in 2004.

Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide D -10 80 WP within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU.

Therefore, Berris, as prior user and prior registrant, is the owner of the mark D -10 80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides

Sec. 147. Rights Conferred. 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners 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. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use.

Now, we confront the question, Is Abyadangs mark NS D-10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former?

We answer in the affirmative.

According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or 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.165[43]

In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other.166[44]

Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective packages, one cannot but notice that both have a common component which is D -10. On Berris package, the D-10 is written with a bigger font than the 80 WP. Admittedly, the D -10 is the dominant feature of the mark. The D-10, being at the beginning of the mark, is what is most remembered of it. Although, it appears in Berris certificate of registration in the same font size as the 80 WP, its dominancy in the D -10 80 WP mark stands since the difference in the form does not alter its distinctive character.167[45]

Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D -10 PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to occur. Undeniably, both marks pertain to the sam e type of goods fungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of D-10, as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present.

This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM FUNGICIDE written underneath.

Considering these striking similarities, predominantly the D-10, the buyers of both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could be an upgraded formulation of the D-10 80 WP.

Moreover, notwithstanding the finding of the IPPDG that the D -10 is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted,168[46] and considering its challenge by Abyadang with respect to the meaning he has given to it, what r emains is the fact that Berris is the owner of the mark D -10 80 WP, inclusive of its dominant feature D-10, as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadan gs application for registration of the mark NS D-10 PLUS.

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.169[47] 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.170[48]

Inasmuch as the ownership of the mark D -10 80 WP fittingly belongs to Berris, and because the same should not have been cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation.

WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14, 2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No. 99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 142005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-06-13 are REINSTATED. Costs against respondent.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA Associate Justice Acting Chairperson

WE CONCUR:

PRESBITERO J. VELASCO, JR. Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

ARTURO D. BRION Associate Justice

JOSE CATRAL MENDOZA Associate Justice

ATTESTATION

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

ANTONIO EDUARDO B. NACHURA Associate Justice Acting Chairperson, Second Division

CERTIFICATION

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

RENATO C. CORONA Chief Justice SECOND DIVISION [G.R. No. 185917, June 01, 2011] FREDCO MANUFACTURING CORPORATION, PETITIONER, VS. PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY), RESPONDENTS. DECISION CARPIO, J.: The Case Before the Court is a petition for review assailing the 24 October 2008 Decision and 8 January 2009 [3] Resolution of the Court of Appeals in CA-G.R. SP No. 103394. The Antecedent Facts On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561 before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws of Massachusetts, United States of America. The case was docketed as Inter Partes Case No. 14-2005-00094. Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for the mark "Harvard Veritas Shield Symbol" for decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and Services. Fredco alleged that the mark "Harvard" for t-shirts, polo shirts, sandos, briefs, jackets and slacks was first used in the Philippines on 2 January 1982 by New York Garments Manufacturing & Export Co., Inc. (New York Garments), a domestic corporation and Fredco's predecessor-in-interest. On 24 January 1985, New York Garments filed for trademark registration of the mark "Harvard" for goods under Class 25. The application matured into a registration and a Certificate of Registration was issued on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration was later assigned to Romeo Chuateco, a member of the family that owned New York
[1] [2]

Garments. Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9 November 1995 and had since then handled the manufacture, promotion and marketing of "Harvard" clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard University, New York Garments had already registered the mark "Harvard" for goods under Class 25. Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the right to the mark "Harvard" remained with its predecessor New York Garments and now with Fredco. Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark "Harvard" in numerous countries worldwide, including the Philippines. Among the countries where Harvard University has registered its name and mark "Harvard" are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Argentina [4] Benelux Brazil Canada Chile China P.R. Colombia Costa Rica Cyprus Czech Republic Denmark Ecuador Egypt Finland France Great Britain Germany Greece Hong Kong India Indonesia Ireland Israel Italy Japan 26. South Korea 27. Malaysia 28. Mexico 29. New Zealand 30. Norway 31. Peru 32. Philippines 33. Poland 34. Portugal 35. Russia 36. South Africa 37. Switzerland 38. Singapore 39. Slovak Republic 40. Spain 41. Sweden 42. Taiwan 43. Thailand 44. Turkey 45. United Arab Emirates 46. Uruguay 47. United States of America 48. Venezuela 49. Zimbabwe [5] 50. European Community

The name and mark "Harvard" was adopted in 1639 as the name of Harvard College of Cambridge, Massachusetts, U.S.A. The name and mark "Harvard" was allegedly used in commerce as early as 1872. Harvard University is over 350 years old and is a highly regarded institution of higher learning in the United States and throughout the world. Harvard University promotes, uses, and advertises its name "Harvard" through various publications, services, and products in foreign countries, including the Philippines. Harvard University further alleged that the name and the mark have been rated as one of the most famous brands in the world, valued between US $750,000,000 and US $1,000,000,000. Harvard University alleged that in March 2002, it discovered, through its international trademark watch program, Fredco's website www.harvard-usa.com. The website advertises and promotes the brand name "Harvard Jeans USA" without Harvard University's consent. The website's main page shows an oblong logo bearing the mark

[6]

"Harvard Jeans USA," "Established 1936," and "Cambridge, Massachusetts." On 20 April 2004, Harvard University filed an administrative complaint against Fredco before the IPO for trademark infringement and/or unfair competition with damages. Harvard University alleged that its valid and existing certificates of trademark registration in the Philippines are: 1. Trademark Registration No. 56561 issued on 25 November 1993 for "Harvard Veritas Shield Design" for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-shirts, hats and flying discs) of the Nice International Classification of Goods and Services; Trademark Registration No. 57526 issued on 24 March 1994 for "Harvard Veritas Shield Symbol" for services in Class 41; Trademark Registration No. 56539 issued on 25 November 1998 for "Harvard" for services in Class 41; and Trademark Registration No. 66677 issued on 8 December 1998 for "Harvard Graphics" for goods in Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark "Harvard Veritas Shield Symbol" with the IPO.

2.

3.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for "Harvard Medical International & Shield Design" for services in Classes 41 and 44. In 1989, Harvard University established the Harvard Trademark Licensing Program, operated by the Office for Technology and Trademark Licensing, to oversee and manage the worldwide licensing of the "Harvard" name and trademarks for various goods and services. Harvard University stated that it never authorized or licensed any person to use its name and mark "Harvard" in connection with any goods or services in the Philippines. In a Decision dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal Affairs, IPO cancelled Harvard University's registration of the mark "Harvard" under Class 25, as follows: WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently, Trademark Registration Number 56561 for the trademark "HARVARD VE RI TAS `SHIELD' SYMBOL" issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand, considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28 are not confusingly similar with the Petitioner's goods, the RespondentRegistrant has acquired vested right over the same and therefore, should not be cancelled. Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the trademark "HARVARD VE RI TAS `SHIELD' SYMBOL", subject matter of this case together with a copy of this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action. SO ORDERED.
[8] [7]

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal Affairs, IPO. The Director General ruled that more than the use of the trademark in the Philippines, the applicant must be the owner of the mark sought to be registered. The Director General ruled that the right to register a trademark is based on ownership and when the applicant is not the owner, he has no right to register the mark. The Director General noted that the mark covered by Harvard University's Registration No. 56561 is not only the word "Harvard" but also the logo, emblem or symbol of Harvard University. The Director General ruled that Fredco failed to explain how its predecessor New York Garments came up with the mark "Harvard." In addition, there was no evidence that Fredco or New York Garments was licensed or authorized by Harvard University to use its name in

[9]

commerce or for any other use. The dispositive portion of the decision of the Office of the Director General, IPO reads: WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks and the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.
[10]

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director General. The Decision of the Court of Appeals In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General of the IPO. The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard University's trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to substantiate that it appropriated and used the marks "Harvard" and "Harvard Veritas Shield Symbol" in Class 25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled that the records failed to disclose any explanation for Fredco's use of the name and mark "Harvard" and the words "USA," "Established 1936," and "Cambridge, Massachusetts" within an oblong device, "US Legend" and "Europe's No. 1 Brand." Citing Shangri-La [11] International Hotel Management, Ltd. v. Developers Group of Companies, Inc ., the Court of Appeals ruled: One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the [12] goodwill established by the true owner. The dispositive portion of the decision of the Court of Appeals reads: WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008 of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-00094 is hereby AFFIRMED. SO ORDERED.
[13]

Fredco filed a motion for reconsideration. In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of merit. Hence, this petition before the Court. The Issue The issue in this case is whether the Court of Appeals committed a reversible error in affirming the decision of the Office of the Director General of the IPO. The Ruling of this Court

The petition has no merit. There is no dispute that the mark "Harvard" used by Fredco is the same as the mark "Harvard" in the "Harvard Veritas Shield Symbol" of Harvard University. It is also not disputed that Harvard University was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge, Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark "Harvard" in commerce since 1872. It is also established that Harvard University has been using the marks "Harvard" and "Harvard Veritas Shield Symbol" for Class 25 goods in the United States since 1953. Further, there is no dispute that Harvard University has registered the name and mark "Harvard" in at least 50 countries. On the other hand, Fredco's predecessor-in-interest, New York Garments, started using the mark "Harvard" in the Philippines only in 1982. New York Garments filed an application with the Philippine Patent Office in 1985 to register the mark "Harvard," which application was approved in 1988. Fredco insists that the date of actual use in the Philippines should prevail on the issue of who has the better right to register the marks. Under Section 2 of Republic Act No. 166, as amended (R.A. No. 166), before a trademark can be registered, it must have been actually used in commerce for not less than two months in the Philippines prior to the filing of an application for its registration. While Harvard University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark "Harvard Veritas Shield Symbol" before its application for registration of the mark "Harvard" with the then Philippine Patents Office. However, Harvard University's registration of the name "Harvard" is based on home registration which is allowed under Section 37 of R.A. No. [15] 166. As pointed out by Harvard University in its Comment: Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the applicant thereof must prove that the same has been actually in use in commerce or services for not less than two (2) months in the Philippines before the application for registration is filed, where the trademark sought to be registered has already been registered in a foreign country that is a member of the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said period is not necessary. An applicant for registration based on home certificate of registration need not even have used the mark or trade name in this [16] country. Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard University's [17] registration "is based on `home registration' for the mark `Harvard Veritas Shield' for Class 25." In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293), "[m]arks registered under Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act x x x," which does not require actual prior use of the mark in the Philippines. Since the mark "Harvard Veritas Shield Symbol" is now deemed granted under R.A. No. 8293, any alleged defect arising from the absence of actual prior use in the [19] Philippines has been cured by Section 239.2. In addition, Fredco's registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-use for the fifth anniversary of the mark's registration. Hence, at the time of Fredco's filing of the Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the registrant or presumptive owner of the mark "Harvard." There are two compelling reasons why Fredco's petition must fail. First, Fredco's registration of the mark "Harvard" and its identification of origin as "Cambridge, Massachusetts" falsely suggest that Fredco or its goods are connected with Harvard University, which uses the same mark "Harvard" and is also located in Cambridge, Massachusetts. This can easily be gleaned from the following oblong logo of Fredco that it attaches to its clothing line: (see image) Fredco's registration of the mark "Harvard" should not have been allowed because Section 4(a) of R.A. No. 166
[18] [14]

prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x." Section 4(a) of R.A. No. 166 provides: Section 4. Registration of trade-marks, trade-names and service- marks on the principal register. ? There is hereby established a register of trade-mark, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, a trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt or disrepute; (b) x x x (emphasis supplied) Fredco's use of the mark "Harvard," coupled with its claimed origin in Cambridge, Massachusetts, obviously suggests a false connection with Harvard University. On this ground alone, Fredco's registration of the mark "Harvard" should have been disallowed. Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936, or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of Appeals or to the IPO why it used the mark "Harvard" on its oblong logo with the words "Cambridge, Massachusetts," "Established in 1936," and "USA." Fredco now claims before this Court that it used these words "to evoke a `lifestyle' or suggest a `desirable aura' of petitioner's clothing lines." Fredco's belated justification merely confirms that it sought to connect or associate its products with Harvard University, riding on the prestige and popularity of Harvard University, and thus appropriating part of Harvard University's goodwill without the latter's consent. Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act, the trademark law of the United States. These provisions are intended to protect the right of publicity of famous individuals and institutions from [21] commercial exploitation of their goodwill by others. What Fredco has done in using the mark "Harvard" and the words "Cambridge, Massachusetts," "USA" to evoke a "desirable aura" to its products is precisely to exploit commercially the goodwill of Harvard University without the latter's consent. This is a clear violation of Section [22] 4(a) of R.A. No. 166. Under Section 17(c) of R.A. No. 166, such violation is a ground for cancellation of Fredco's registration of the mark "Harvard" because the registration was obtained in violation of Section 4 of R.A. No. 166. Second, the Philippines and the United States of America are both signatories to the Paris Convention for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state: ARTICLE 6bis (i) The countries of the Union undertake either administratively if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a trademark which constitutes a reproduction, imitation or translation, liable to create confusion or a mark considered by the competent authority of the country as being already the mark of a person entitled to the benefits of the present Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith . ARTICLE 8 A trade name shall be protected in all the countries of the Union without the obligation of filing or registration, whether or not it forms part of a trademark. (Emphasis supplied)
[20]

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris Convention that they are afforded an effective protection against violation of their intellectual property rights in the Philippines in the same way that their own countries are obligated to accord similar protection to Philippine [23] nationals. Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows: Section 37. Rights of foreign registrants. -- Persons who are nationals of, domiciled in, or have a bona fide or effective business or commercial establishment in any foreign country, which is a party to any international convention or treaty relating to marks or trade-names, or the repression of unfair competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the provisions of this Act to the extent and under the conditions essential to give effect to any such convention and treaties so long as the Philippines shall continue to be a party thereto, except as provided in the following paragraphs of this section. xxxx Trade-names of persons described in the first paragraph of this section shall be protected without the obligation [24] of filing or registration whether or not they form parts of marks . x x x x (Emphasis supplied) Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention, whether or not the trade name forms part of a trademark, is protected "without the obligation of filing or registration." "Harvard" is the trade name of the world famous Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the Philippines of its trade name "Harvard" even without registration of such trade name in the Philippines. This means that no educational entity in the Philippines can use the trade name "Harvard" without the consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly through the use of the name and mark "Harvard," that its products or services are authorized, approved, or licensed by, or sourced from, Harvard University without the latter's consent. Article 6bis of the Paris Convention has been administratively implemented in the Philippines through two directives of the then Ministry (now Department) of Trade, which directives were upheld by this Court in several [25] cases. On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued a Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending applications for Philippine [26] registration of signature and other world-famous trademarks by applicants other than their original owners. The Memorandum states: Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a signatory, you are hereby directed to reject all pending applications for Philippine registration of signature and other worldfamous trademarks by applicants other than its original owners or users. The conflicting claims over internationally known trademarks involve such name brands as Lacoste, Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein, Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus. It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal action by the trademarks' foreign or local owners or original users. You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance.

[27]

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of Patents to implement measures necessary to comply with the Philippines' obligations under the Paris Convention, thus: 1. Whether the trademark under consideration is well-known in the Philippines or is a mark already belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the following criteria or any combination thereof: (a) a declaration by the Minister of Trade and Industry that the trademark being considered is already well-known in the Philippines such that permission for its use by other than its original owner will constitute a reproduction, imitation, translation or other infringement; (b) that the trademark is used in commerce internationally, supported by proof that goods bearing the trademark are sold on an international scale, advertisements, the establishment of factories, sales offices, distributorships, and the like, in different countries, including volume or other measure of international trade and commerce; (c) that the trademark is duly registered in the industrial property office(s) of another country or countries, taking into consideration the dates of such registration ; (d) that the trademark has been long established and obtained goodwill and general international consumer recognition as belonging to one owner or source; (e) that the trademark actually belongs to a party claiming ownership and has the right to registration under the provisions of the aforestated PARIS CONVENTION. 2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks, logos, signs, emblems, insignia or other similar devices used for identification and recognition by consumers . The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY. xxxx
[28]

3.

(Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6 bis of the Paris Convention is that the [29] trademark to be protected must be "well-known" in the country where protection is sought. The Court declared that the power to determine whether a trademark is well-known lies in the competent authority of the country of [30] registration or use. The Court then stated that the competent authority would either be the registering authority if it has the power to decide this, or the courts of the country in question if the issue comes before the [31] courts. To be protected under the two directives of the Ministry of Trade, an internationally well-known mark need not be [32] registered or used in the Philippines. All that is required is that the mark is well-known internationally and in the Philippines for identical or similar goods, whether or not the mark is registered or used in the Philippines. The [33] Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:

The fact that respondent's marks are neither registered nor used in the Philippines is of no moment . The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides: (3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark: (i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State : (ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or (iii) that the mark is well known by the public at large in the Member State. boldface supplied)
[34]

(Italics in the original decision;

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that "a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered here," cannot be registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A. No. 8293, provides: Rule 102. Criteria for determining whether a mark is well-known. In determining whether a mark is well-known, the following criteria or any combination thereof may be taken into account: (a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark; (e) the extent to which the mark has been registered in the world; (f) the exclusivity of registration attained by the mark in the world; (g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world; (i) the commercial value attributed to the mark in the world; (j) the record of successful protection of the rights in the mark; (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and

(l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that his mark is a well-known mark. (Emphasis supplied) Since "any combination" of the foregoing criteria is sufficient to determine that a mark is well-known, it is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection, internationally well-known marks are the exceptions to this rule. In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General found that: Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard University, a recognized and respected institution of higher learning located in Cambridge, Massachusetts, U.S.A. Initially referred to simply as "the new college," the institution was named "Harvard College" on 13 March 1639, after its first principal donor, a young clergyman named John Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four hundred books in his will to form the basis of the college library collection, along with half his personal wealth worth several hundred pounds. The earliest known official reference to Harvard as a "university" rather than "college" occurred in the new Massachusetts Constitution of 1780. Records also show that the first use of the name HARVARD was in 1638 for educational services, policy courses of instructions and training at the university level. It has a Charter. Its first commercial use of the name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339 and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the Philippines ahead of the Appellant, it still cannot be denied that the Appellant's use thereof was decades, even centuries, ahead of the Appellee's. More importantly, the name HARVARD was the name of a person whose deeds were considered to be a cornerstone of the university. The Appellant's logos, emblems or symbols are owned by Harvard University. The name HARVARD [35] and the logos, emblems or symbols are endemic and cannot be separated from the institution. Finally, in its assailed Decision, the Court of Appeals ruled: Records show that Harvard University is the oldest and one of the foremost educational institutions in the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and was named after John Harvard, a puritan minister who left to the college his books and half of his estate. The mark "Harvard College" was first used in commerce in the United States in 1638 for educational services, specifically, providing courses of instruction and training at the university level (Class 41). Its application for registration with the United States Patent and Trademark Office was filed on September 20, 2000 and it was registered on October 16, 2001. The marks "Harvard" and "Harvard Ve ri tas `Shield' Symbol" were first used in commerce in the the United States on December 31, 1953 for athletic uniforms, boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets, night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications for registration with the USPTO were filed on September 9, 1996, the mark "Harvard" was registered on December 9, 1997 and the mark "Harvard Ve ri tas [36] `Shield' Symbol" was registered on September 30, 1997. We also note that in a Decision dated 18 December 2008 involving a separate case between Harvard University [38] and Streetward International, Inc., the Bureau of Legal Affairs of the IPO ruled that the mark "Harvard" is a "well-known mark." This Decision, which cites among others the numerous trademark registrations of Harvard University in various countries, has become final and executory. There is no question then, and this Court so declares, that "Harvard" is a well-known name and mark not only in the United States but also internationally, including the Philippines. The mark "Harvard" is rated as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been used and promoted
[37]

extensively in numerous publications worldwide. It has established a considerable goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A., internationally known as one of the leading educational institutions in the world. As such, even before Harvard University applied for registration of the mark "Harvard" in the Philippines, the mark was already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the registration of a mark "which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs x x x." WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009 Resolution of the Court of Appeals in CA-G.R. SP No. 103394. SO ORDERED. Nachura, Peralta, Abad, and Mendoza, JJ., concur. Republic of the Philippines Supreme Court Baguio City

SECOND DIVISION

SUPERIOR COMMERCIAL ENTERPRISES, INC., Petitioner,

G.R. No. 169974

Present:

versus CARPIO, J., Chairperson, BRION, DEL CASTILLO,

ABAD, and KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., Respondents. -PEREZ, JJ.

Promulgated:

April 20, 2010

x-----------------------------------------------------------------------------------------x

DECISION BRION, J.:

We review in this petition for review on certiorari171[1] the (1) decision172[2] of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City, Branch 85 (RTC),173[3] and dismissed the petitioner Superior Commercial Enterprises, Inc.s ( SUPERIOR) complaint for trademark infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution174[4] that denied SUPERIORs subsequent motion for reconsideration. The RTC decision that the CA reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to pay SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorneys fees, and costs of the suit.

THE FACTUAL ANTECEDENTS

On February 23, 1993, SUPERIOR 175[5] filed a complaint for trademark infringement and unfair competition with preliminary injunction against KUNNAN176[6] and SPORTS CONCEPT177[7] with the RTC, docketed as Civil Case No. Q-93014888.

In support of its complaint, SUPERIOR first claimed to be the owner of the trademarks, trading styles, company names and business names178[8] KENNEX,179[9] KENNEX & DEVICE,180[10] PRO KENNEX181[11] and PRO-KENNEX (disputed trademarks).182[12] Second, it also asserted its prior use of these trademarks, presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it extensively sold and advertised sporting goods and products covered by its trademark registrations. Finally, SUPERIOR presented as evidence of its ownership of the disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982 ( Distributorship Agreement) it executed with KUNNAN, which states:

Whereas, KUNNAN intends to acquire the ownership of KENNEX trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic] Superior is desirous of having been appointed [sic+ as the sole distributor by KUNNAN in the territory of the Philippines. *Emphasis supplied.]183[13]

In its defense, KUNNAN disputed SUPERIORs claim of ownership and maintained that SUPERIOR as mere distributor from October 6, 1982 until December 31, 1991 fraudulently registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation for the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its products in different countries, including the Philippines since 1972.184[14] It created and first used PRO KENNEX, derived

from its original corporate name, as a distinctive trademark for its products in 1976. KUNNAN also alleged that it registered the PRO KENNEX trademark not only in the Philippines but also in 31 other countries, and widely promoted the KENNEX and PRO KENNEX trademarks through worldwide advertisements in print media and sponsorships of known tennis players.

On October 1, 1982, after the expiration of its initial distributorship agreement with another company, 185 [15] KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines under a Distributorship Agreement whose pertinent provisions state:186[16]

Whereas, KUNNAN intends to acquire ownership of KENNEX trademark registered by the Superior in the Philippines. Whereas, the Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines .

Now, therefore, the parties hereto agree as follows:

1.

KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in the Philippines, and this Agreement could be renewed with the consent of both parties upon the time of expiration. The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark, under the registration of Patent Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its ten (10) years contract of distributorship, and it is required that the ownership of the said trademark shall be genuine, complete as a whole and without any defects. KUNNAN will guarantee to the Superior that no other third parties will be permitted to supply the KENNEX PRODUCTS in the Philippines except only to the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX trademark shall be null and void. If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the agent in the Philippines with full power to exercise and granted the power of attorney, to pursue any case of Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory. The Superior will be granted from [sic+ KUNNANs approval before making and selling any KENNEX products made in the Philippines and the other countries, and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB as the right.

2.

3.

4.

5.

6.

Without KUNNANs permission, the Superior cannot procure other goods supply under KENNEX brand of which are not available to supply [sic] by KUNNAN. However, in connection with the sporting goods, it is permitted that the Superior can procure them under KENNEX brand of which are not available to be supplied by KUNNAN. [Emphasis supplied.]

Even though this Agreement clearly stated that SUPERIOR was obligated to assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed that the Certificate of Registration for the KENNEX trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIORs President and General Manager, misled KUNNANs officers into believing that KUNNAN was not qualified to hold the same due to the many requirements set by the Philippine Patent Office that KUNNAN could not meet. 187[17] KUNNAN further asserted that SUPERIOR deceived it into assigning its applications for registration of the PRO KENNEX trademark in favor of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent provisions state:188[18]

1. In consideration of the distributorship relationship between KUNNAN and Superior, KUNNAN, who is the seller in the distributorship relationship, agrees to assign the following trademark applications owned by itself in the Philippines to Superior who is the buyer in the distributorship relationship.

Trademark

Application Number

Class

PROKENNEX PROKENNEX PROKENNEX

49999 49998 49997

28 25 18

2. Superior shall acknowledge that KUNNAN is still the real and truthful owner of the abovementioned trademarks, and shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN .

3. Superior agrees that it will return back the abovementioned trademarks to KUNNAN without hesitation at the request of KUNNAN at any time. KUNNAN agrees that the cost for the concerned assignment of the abovementioned trademarks shall be compensated by KUNNAN.

4. Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be clean and without any incumbency.

5. Superior agrees that after the assignment of the abovementioned trademarks, it shall have no right to reassign or license the said trademarks to any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair competition case before the RTC, KUNNAN filed with the now defunct Bureau of Patents, Trademarks and Technology Transfer189[19] separate Petitions for the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101 and 4102 ( Consolidated Petitions for Cancellation) involving the KENNEX and PRO KENNEX trademarks.190[20] In essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and appropriated the disputed trademarks; as mere distributor and not as lawful owner, it obtained the registrations and assignments of the disputed trademarks in violation of the terms of the Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended.191[21]

On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor. Subsequently, KUNNAN also caused the publication of a Notice and Warning in the Manila Bulletins January 29, 1993 issue, stating that (1) it is t he owner of the disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor. This notice prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN.192[22]

The RTC Ruling

On March 31, 1998, the RTC issued its decision193[23] holding KUNNAN liable for trademark infringement and unfair competition. The RTC also issued a writ of preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed trademarks.

The RTC found that SUPERIOR sufficiently proved that it was the first user and owner of the disputed trademarks in the Philippines, based on the findings of the Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was rightfully entitled to register the mark KENNEX as user and owner thereof. It also considered the Whereas clause of the Distributorship Agreement, which categorically stated that KUN NAN intends to acquire ownership of *the+ KENNEX trademark registered by SUPERIOR in the Philippines. According to the RTC, this clause amounts to KUNNANs express recognition of SUPERIORs ownership of the KENNEX trademarks.194[24]

KUNNAN and SPORTS CONCEPT appealed the RTCs decision to the CA where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained that SUPERIOR was merely its distributor and could not be the owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and numerous valid registrations.

Intervening Developments: The IPO and CA Rulings

In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a Manifestation and Motion praying that the decision of the Bureau of Legal Affairs ( BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the Consolidated Petitions for Cancellation be made of record and be considered by the CA in resolving the case.195[25] The BLA ruled in this decision In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to the mark PRO KENNEX. It was proven t hat actual use by RespondentRegistrant is not in the concept of an owner but as a mere distributor (Exhibits I, S to S -1,

P and P-1 and Q and Q-2) and as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, a mere distributor of a product bearing a trademark, even if permitted to use said trademark has no right to and cannot register the said trademark. WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark PRO-KENNEX, the consolidated Petitions for Cancellation and the Notices of Opposition are hereby GRANTED. Consequently, the trademark PRO-KENNEX bearing Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark application Nos. 84565 and 84566, likewise for the registration of the mark PRO-KENNEX are hereby REJECTED. Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative Finance and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information and update of its record.196[26]

On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director Generals decision on appeal dated December 8, 2004, denying SUPERIORs appeal, be given weight in the disposition of the case.197[27] The dispositive portion of the decision reads:198[28] WHEREFORE, premises considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the appealed decision is hereby AFFIRMED.

We take judicial notice that SUPERIOR questioned the IPO Director Generals ruling before the Court of Appeals on a petition for review under Rule 43 of the Rules of Court, docketed as CA G.R. SP No. 87928 (Registration Cancellation Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIORs petition.199[29] On December 3, 2007, the CA decision was declared final and executory and entry of judgment was accordingly made. Hence, SUPERIORs registration of the disputed trademarks now stands effectively cancelled.

The CA Ruling

On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTCs decision of March 31, 1998.200[30] It dismissed SUPERIORs Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction on the ground that SUPERIOR failed to establish by preponderance of evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks . The CA found the Certificates of Principal and Supplemental Registrations and the whereas clause of the Distributorship Agreement insufficient to support SUPERIORs claim of ownership over the disputed trademarks.

The CA stressed that SUPERIORs possession of the aforementioned Certificates of Principal Registration does not conclusively establish its ownership of the disputed trademarks as dominion over trademarks is not acquired by the fact of registration alone;201[31] at best, registration merely raises a presumption of ownership that can be rebutted by contrary evidence. 202 [32] The CA further emphasized that the Certificates of Supplemental Registration issued in SUPERIORs name do not even enjoy the presumption of ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of the validity of registration or of the registrants exclusive right to use the trademarks in connect ion with the goods, business, or services specified in the certificate.203[33]

In contrast with the failure of SUPERIORs evidence, the CA found that KUNNAN presented sufficient evidence to rebut SUPERIORs presumption of ownership over the trademarks. KU NNAN established that SUPERIOR, far from being the rightful owner of the disputed trademarks, was merely KUNNANs exclusive distributor. This conclusion was based on three pieces of evidence that, to the CA, clearly established that SUPERIOR had no proprietary interest over the disputed trademarks.

First, the CA found that the Distributorship Agreement, considered in its entirety, positively confirmed that SUPERIOR sought to be the KUNNANs exclusive distributor. The CA based this conclusion on the fo llowing provisions of the Distributorship Agreement:

(1) that SUPERIOR was desirous of *being+ appointed as the sole distributor by KUNNAN in the territory of the Philippines; (2) that KUNNAN will appoint the sole distributorship right to Superior in the Philippines; and (3) that no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only to Superior.

The CA thus emphasized that the RTC erred in unduly relying on the first whereas clause, which states that KUNNAN intends to acquire ownership of *the+ KENNEX trademark registered by SUPERIOR in the Philippines without considering the entirety of the Distributorship Agreement indicating that SUPERIOR had been merely appointed by KUNNAN as its distributor.

Second, the CA also noted that SUPERIOR made the express undertaking in the Assignment Agreement to acknowledge that KUNNAN is still the real and truthful owner of the [PRO KENNEX] trademarks , and that it shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN. To the CA, these provisions are clearly inconsistent with SUPERIORs claim of ownership of the disputed trademarks. The CA also observed that although the Assignment Agreement was a private document, its authenticity and due execution was proven by the similarity of Mr. Tan Bon Diongs signature in the Distributorship Agreement and the Assignment Agreement.

Third, the CA also took note of SUPERIORs Letter dated Novembe r 12, 1986 addressed to Brig. Gen. Jose Almonte, identifying itself as the sole and exclusive licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX products. Attached to the letter was an agreement with KUNNAN, identifying the lat ter as the foreign manufacturer of all KENNEX products. The CA concluded that in this letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN, and even in its transactions with third persons.

Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and had no right to the registration of the disputed trademarks since the right to register a trademark is based on ownership. Citing Section 4 of Republic Act No. 166204[34] and established jurisprudence,205[35] the CA held that SUPERIOR as an exclusive distributor did not acquire any proprietary interest in the principals (KUNNANs) trademark.

The CA denied SUPERIORs motion for reconsideration for lack of merit in its Resolution dated October 4, 2005.

THE PETITION

In the present petition, SUPERIOR raises the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL OWNER OF THE TRADEMARKS KENNEX AND PRO -KENNEX IN THE PHILIPPINES II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-9314888, LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY INJUNCTION

THE COURTS RULING

We do not find the petition meritorious. On the Issue of Trademark Infringement We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decision - rendered after the CA decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) - states: As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently established the fraudulent registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew fully well that it did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines.

While Superior accepted the obligation to assign Certificates of Registration Nos. SR4730 and 33487 to Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superior however breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to Superior its (Kunnans) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any incumbency when requested by the latter. In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not the rightful owner of the subject marks. WHEREFORE, the foregoing considered, the petition is DISMISSED. The CA decided that the registration of the KENNEX and PRO KENNEX trademarks should be cancelled because SUPERIOR was not the owner of, and could not in the first place have validly registered these trademarks. Thus, as of the finality of the CA decision on December 3, 2007, these trademark registrations were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks.

Section 22 of Republic Act No. 166, as amended (RA 166),206[36] the law applicable to this case, defines trademark infringement as follows:

Section 22. Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied] Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant under the provisions of RA 166207[37] terminates when the judgment or order of cancellation has become final, viz: Section 19. Cancellation of registration. - If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate . Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.]

Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final.208[38] In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect of SUPERIORs case has been rendered moot and academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any cause of action for trademark infringement since the cancellation of registration of a trademark deprived it of protection from infringement from the moment judgment or order of cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration.209[39] With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIORs case for trademark infringement lost its legal basis and no longer presented a valid cause of action. Even assuming that SUPERIORs case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the cancellation of the registration of the disputed trademarks, SUPERIOR as a mere distributor and not the owner cannot assert any protection from trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed.210[40] Thus, the CA in the Registration Cancellation Case correctly held: As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be 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. An exclusive distributor does not acquire any proprietary interest in the principals trademark and cannot register it in his own name unless it is has been validly assigned to him. In addition, we also note that the doctrine of res judicata bars SUPERIORs present case for trademark infringement. The doctrine of res judicata embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph (c) thereof. In the present case, the second concept conclusiveness of judgment applies. Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit.211[41] Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a

different cause of action.212[42] This second branch of the principle of res judicata bars the re-litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action.213[43] Because the Registration Cancellation Case and the present case involve the same parties, litigating with respect to and disputing the same trademarks, we are bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case. To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. 214[44] Based on these elements, we find it immediately obvious that the second element the plaintiffs ownership of the mark was what the Registration Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on, the issue of ownership.215[45] In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the ruling the CA arrived at in the present petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of the issue of ownership although the current CA ruling is legally correct and can stand on its own merits becomes a pointless academic discussion. On the Issue of Unfair Competition

Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint, SUPERIOR alleged that:216[46]

17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark PRO -KENNEX. For this reason, on

January 20, 1993, the plaintiff, through counsel, wrote the defendant Sports Concept and Distributors Inc. advising said defendant that the trademark PRO-KENNEX was registered and owned by the plaintiff herein.

18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO-KENNEX which trademarks are owned by and registered in the na me of plaintiff herein as alleged hereinabove.

x x x x

27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with the commercial activities of plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiffs business and the defendants acts are likely to discredit the commercial activities and future growth of plaintiffs business.

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. The essential elements of unfair competition217[47] are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor.218[48]

Jurisprudence also formulated the following true test of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist.219[49]

In the present case, no evidence exists showing that KUNNAN ever attempted to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the manufacturer of the goods sold. In McDonalds Corporation v. L.C. Big Mak Burger, Inc.,220[50] we held that there can be trademark infringement without unfair competition such as when the infringer discloses on the labels containing the mark that he manufactures the goods, thus preventing the public from being deceived that the goods originate from the trademark owner. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at issue. Furthermore, KUNNANs January 29, 1993 notice by its terms prevents the public from being deceived that the goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the trademarks KENNEX and PRO KENNEX. This notice states in full: 221[51]

NOTICE AND WARNING Kunnan Enterprises Ltd. is the owner and first user of the internationally-renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO KENNEX trademarks. Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with Superior Commercial Enterprises, Inc. on December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and sporting goods and equipment manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX. x x x x In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured by Kunnan Enterprises Ltd . [Emphasis supplied.]

Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIORs name, the latter is left with no effective right to make a claim. In other words, with the CA s final ruling in the Registration

Cancellation Case, SUPERIORs case no longer presents a valid cause of action. For this reason, the unfair competition aspect of the SUPERIORs case likewise falls.

WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.s petition for review on certiorari for lack of merit. Cost against petitioner Superior Commercial Enterprises, Inc.

SO ORDERED. FIRST DIVISION [G.R. No. 111580. June 21, 2001] SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT LTD., SHANGRI-LA PROPERTIES, INC., MAKATI SHANGRI-LA HOTEL AND RESORT, INC. and KUOK PHILIPPINE PROPERTIES, INC., petitioners, vs. THE COURT OF APPEALS, HON. FELIX M. DE GUZMAN, as Judge, RTC of Quezon City, Branch 99 and DEVELOPERS GROUP OF COMPANIES, INC., respondents. [G.R. No. 114802. June 21, 2001] DEVELOPERS GROUP OF COMPANIES, INC., petitioner, vs. THE COURT OF APPEALS, HON. IGNACIO S. SAPALO, in his capacity as Director, Bureau of Patents, Trademarks and Technology Transfer, and SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD., respondents. DECISION YNARES-SANTIAGO, J.: On June 21, 1988, the Shangri-La International Hotel Management, Ltd., Shangri-La Properties, Inc., Makati Shangri-La Hotel and Resort, Inc. and Kuok Philippine Properties, Inc. (hereinafter collectively referred as the Shangri-La Group), filed with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) a petition, docketed as Inter Partes Case No. 3145, praying for the cancellation of the registration of the Shangri -La mark and S device/logo issued to the Developers Group of Companies, Inc., on the ground that the same was illegally and fraudulently obtained and appropriated for the latters restaurant business. The Shangri-La Group alleged that it is the legal and beneficial owners of the subject mark and logo; that it has been using the said mark and logo for its corporate affairs and business since March 1962 and caused the same to be specially designed for their international hotels in 1975, much earlier than the alleged first use thereof by the Developers Group in 1982. Likewise, the Shangri-La Group filed with the BPTTT its own application for registration of the subject mark and logo. The Developers Group filed an opposition to the application, which was docketed as Inter Partes Case No. 3529. Almost three (3) years later, or on April 15, 1991, the Developers Group instituted with the Regional Trial Court of Quezon City, Branch 99, a complaint for infringement and damages with prayer for injunction, docketed as Civil Case No. Q-91-8476, against the Shangri-La Group.

On January 8, 1992, the Shangri-La Group moved for the suspension of the proceedings in the infringement case on account of the pendency of the administrative proceedings before the BPTTT.i[1] This was denied by the trial court in a Resolution issued on January 16, 1992.ii[2] The Shangri-La Group filed a Motion for Reconsideration.iii[3] Soon thereafter, it also filed a Motion to Inhibit against Presiding Judge Felix M. de Guzman.iv[4] On July 1, 1992, the trial court denied both motions.v[5] The Shangri-La Group filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 29006.vi[6] On February 15, 1993, the Court of Appeals rendered its decision dismissing the petition for certiorari.vii[7] The Shangri-La Group filed a Motion for Reconsideration, which was denied on the ground that the same presented no new matter that warranted consideration.viii[8] Hence, the instant petition, docketed as G.R. No. 111580, based on the following grounds: THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT: I. THE INFRINGEMENT CASE SHOULD BE DISMISSED OR AT LEAST SUSPENDED; AND

II. THE HONORABLE PRESIDING JUDGE SHOULD INHIBIT HIMSELF FROM TRYING THE INFRINGEMENT CASE.ix[9] Meanwhile, on October 28, 1991, the Developers Group filed in Inter Partes Case No. 3145 an Urgent Motion to Suspend Proceedings, invoking the pendency of the infringement case it filed before the Regional Trial Court of Quezon City.x[10] On January 10, 1992, the BPTTT, through Director Ignacio S. Sapalo, issued an Order denying the Motion.xi[11] A Motion for Reconsideration was filed which was, however, denied in a Resolution dated February 11, 1992.xii[12] From the denial by the BPTTT of its Urgent Motion to Suspend Proceedings and Motion for Reconsideration, the Developers Group filed with the Court of Appeals a petition for certiorari, mandamus and prohibition, docketed as CA-G.R. SP No. 27742.xiii[13] On March 29, 1994, the Court of Appeals dismissed the petition for lack of merit.xiv[14] A petition for review was thereafter filed, docketed as G.R. No. 114802, raising the issue of: WHETHER OR NOT, GIVEN THE ESTABLISHED FACTS AND CIRCUMSTANCES ON RECORD AND THE LAW AND JURISPRUDENCE APPLICABLE TO THE MATTER, THE RESPONDENT COURT ERRED IN HOLDING THAT, INASMUCH AS BOTH THE CIVIL ACTION AND THE ADMINISTRATIVE PROCEEDINGS HERE INVOLVED MAY CO-EXIST AND THE LAW DOES NOT PROVIDE FOR ANY PREFERENCE BY ONE OVER THE OTHER, THE RESPONDENT DIRECTOR HAD JURISDICTION TO RULE AS HE DID AND HAD NOT INCURRED ANY GRAVE ABUSE OF DISCRETION CORRECTIBLE BY THE EXTRAORDINARY REMEDIES OF CERTIORARI, PROHIBITION AND MANDAMUS.xv[15] On February 2, 1998, G.R. Nos. 111580 and 114802 were ordered consolidated. The core issue is simply whether, despite the institution of an Inter Partes case for cancellation of a mark with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) by one party, the adverse party can file a subsequent action for infringement with the regular courts of justice in connection with the same registered mark. We rule in the affirmative. Section 151.2 of Republic Act No. 8293, otherwise known as the Intellectual Property Code, provides, as follows

Section 151.2. Notwithstanding the foregoing provisions, the court or the administrative agency vested with jurisdiction to hear and adjudicate any action to enforce the rights to a registered mark shall likewise exercise jurisdiction to determine whether the registration of said mark may be cancelled in accordance with this Act. The filing of a suit to enforce the registered mark with the proper court or agency shall exclude any other court or agency from assuming jurisdiction over a subsequently filed petition to cancel the same mark. On the other hand, the earlier filing of petition to cancel the mark with the Bureau of Legal Affairs shall not constitute a prejudicial question that must be resolved before an action to enforce the rights to same registered mark may be decided. (Emphasis provided) Similarly, Rule 8, Section 7, of the Regulations on Inter Partes Proceedings, provides to wit Section 7. Effect of filing of a suit before the Bureau or with the proper court . - The filing of a suit to enforce the registered mark with the proper court or Bureau shall exclude any other court or agency from assuming jurisdiction over a subsequently filed petition to cancel the same mark. On the other hand, the earlier filing of petition to cancel the mark with the Bureau shall not constitute a prejudicial question that must be resolved before an action to enforce the rights to same registered mark may be decided. (Emphasis provided) Hence, as applied in the case at bar, the earlier institution of an Inter Partes case by the Shangri-La Group for the cancellation of the Shangri-La mark and S device/logo with the BPTTT cannot effectively bar the subsequent filing of an infringement case by registrant Developers Group. The law and the rules are explicit. The rationale is plain: Certificate of Registration No. 31904, upon which the infringement case is based, remains valid and subsisting for as long as it has not been cancelled by the Bureau or by an infringement court. As such, Developers Groups Certificate of Registration in the principal register continues as prima facie evidence of the validity of the registration, the registrants ownership of the mark or trade -name, and of the registrants exclusive right to use the same in connection with the goods, business or services specified in the certificate. xvi[16] Since the certificate still subsists, Developers Group may thus file a corresponding infringement suit and recover damages from any person who infringes upon the formers rights. xvii[17] Furthermore, the issue raised before the BPTTT is quite different from that raised in the trial court. The issue raised before the BPTTT was whether the mark registered by Developers Group is subject to cancellation, as the Shangri-La Group claims prior ownership of the disputed mark. On the other hand, the issue raised before the trial court was whether the Shangri-La Group infringed upon the rights of Developers Group within the contemplation of Section 22 of Republic Act 166. The case of Conrad and Company, Inc. v. Court of Appealsxviii[18] is in point. We held: We cannot see any error in the above disquisition. It might be mentioned that while an application for the administrative cancellation of a registered trademark on any of the grounds enumerated in Section 17 of Republic Act No. 166, as amended, otherwise known as the Trade-Mark Law, falls under the exclusive cognizance of BPTTT (Sec. 19, Trade-Mark Law), an action, however, for infringement or unfair competition, as well as the remedy of injunction and relief for damages, is explicitly and unquestionably within the competence and jurisdiction of ordinary courts. xxx xxx xxx

Surely, an application with BPTTT for an administrative cancellation of a registered trade mark cannot per se have the effect of restraining or preventing the courts from the exercise of their lawfully conferred jurisdiction. A contrary rule would unduly expand the doctrine of primary jurisdiction which, simply expressed, would merely behoove regular courts, in controversies involving specialized disputes, to defer to the findings or resolutions of administrative tribunals on certain technical matters. This rule, evidently, did not escape the appellate court for it

likewise decreed that for good cause shown, the lower court, in its sound discretion, may suspend the action pending outcome of the cancellation proceedings before the BPTTT. However, while the instant Petitions have been pending with this Court, the infringement court rendered a Decision, dated March 8, 1996, in Civil Case No. Q-91-8476,xix[19] the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff Developers Group of Companies, Inc. and against defendants Shangri-La International Hotel Management, Ltd., Shangri-La Properties, Inc., Makati Shangri-La Hotel and Resort, Inc., and Kuok Philippine Properties, Inc. a) Upholding the validity of the registration of the service mark Shangri -La and S-Logo in the name of plaintiff; b) Declaring defendants use of said mark and logo as an infringement of plaintiffs right thereto;

c) Ordering defendants, their representatives, agents, licensees, assignees and other persons acting under their authority and with their permission, to permanently cease and desist from using and/or continuing to use said mark and logo, or any copy, reproduction or colorable imitation thereof, in the promotion, advertisement, rendition of their hotel and allied projects and services or in any other manner whatsoever; d) Ordering defendants to remove said mark and logo from any premises, objects, materials and paraphernalia used by them and/or destroy any and all prints, signs, advertisements or other materials bearing said mark and logo in their possession and/or under their control; and e) Ordering defendants, jointly and severally, to indemnify plaintiff in the amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as attorneys fees and expenses of litigation. Let a copy of this Decision be certified to the Director, Bureau of Patents, Trademarks and Technology Transfer, for his information and appropriate action in accordance with the provisions of Section 25, Republic Act No. 166. Costs against defendants. SO ORDERED.xx[20] The said Decision is now on appeal with respondent Court of Appeals.xxi[21] Following both law and the jurisprudence enunciated in Conrad and Company, Inc. v. Court of Appeals,xxii[22] the infringement case can and should proceed independently from the cancellation case with the Bureau so as to afford the owner of certificates of registration redress and injunctive writs. In the same light, so must the cancellation case with the BPTTT (now the Bureau of Legal Affairs, Intellectual Property Office) continue independently from the infringement case so as to determine whether a registered mark may ultimately be cancelled. However, the Regional Trial Court, in granting redress in favor of Developers Group, went further and upheld the validity and preference of the latters registration over that of the Shangri-La Group. There can be no denying that the infringement court may validly pass upon the right of registration. Section 161 of Republic Act No. 8293 provides to wit SEC. 161. Authority to Determine Right to Registration In any action involving a registered mark the court may determine the right to registration, order the cancellation of the registration, in whole or in part, and otherwise rectify the register with respect to the registration of any party to the action in the exercise of this. Judgement

and orders shall be certified by the court to the Director, who shall make appropriate entry upon the records of the Bureau, and shall be controlled thereby. (Sec. 25, R.A. No. 166a). (Emphasis provided) With the decision of the Regional Trial Court upholding the validity of the registration of the service mark Shangri La and S logo in the name of Developers Group, the cancellation case filed with the Bureau hence becomes moot. To allow the Bureau to proceed with the cancellation case would lead to a possible result contradictory to that which the Regional Trial Court has rendered, albeit the same is still on appeal. Such a situation is certainly not in accord with the orderly administration of justice. In any event, the Court of Appeals has the competence and jurisdiction to resolve the merits of the said RTC decision. We are not unmindful of the fact that in G.R. No. 114802, the only issue submitted for resolution is the correctness of the Court of Appeals decision sustaining the BPTTTs denial of the motion to suspend the proceedings before it. Yet, to provide a judicious resolution of the issues at hand, we find it apropos to order the suspension of the proceedings before the Bureau pending final determination of the infringement case, where the issue of the validity of the registration of the subject trademark and logo in the name of Developers Group was passed upon. WHEREFORE, in view of the foregoing, judgment is hereby rendered dismissing G.R. No. 111580 for being moot and academic, and ordering the Bureau of Legal Affairs, Intellectual Property Office, to suspend further proceedings in Inter Partes Case No. 3145, to await the final outcome of the appeal in Civil Case No. Q-91-8476. SO ORDERED. Davide, Jr., C.J. (Chairman), Puno and Pardo, JJ., concur. Kapunan, J., no part. FIRST DIVISION McDONALDS CORPORATION, Petitioner, G.R. No. 166115 Present:

PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, AZCUNA, - versus GARCIA, JJ.

Promulgated:

February 2, 2007 MACJOY FASTFOOD CORPORATION, Respondent. x----------------------------------------------------------------------------------------x DECISION GARCIA, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, herein petitioner McDonalds Corporation seeks the reversal and setting aside of the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 57247, to wit:

1.

Decision dated 29 July 2004222[1] reversing an earlier decision of the Intellectual Property Office (IPO) which rejected herein respondent MacJoy FastFood Corporat ions application for registration of the trademark MACJOY & DEVICE; and

2.

Resolution dated 12 November 2004 223[2] denying the petitioners motion for reconsideration.

As culled from the record, the facts are as follows:

On 14 March 1991, respondent MacJoy Fastfood Corporation, a domestic corporation engaged in the sale of fast food products in Cebu City, filed with the then Bureau of Patents, Trademarks and Technology Transfer (BPTT), now the Intellectual Property Office (IPO), an application, thereat identified as Application Serial No. 75274, for the registration of the trademark MACJOY & DEVICE for fried chicken, chicken barbeque, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo and steaks under classes 29 and 30 of the International Classification of Goods.

Petitioner McDonalds Corporation, a corporation duly organized and existing under the laws of the State of Delaware, USA, filed a verified Notice of Opposition224[3] against the respondents application claiming that the trademark MACJOY & DEVICE so resembles its corporate logo, otherwise known as the Golden Arches or M design, and its marks McDonalds, McChicken, MacFries, BigMac, McDo, McSpaghetti, McSnack, and Mc, (hereinafter collectively known as the MCDONALDS marks) such that when used on identical or related goods, the trademark applied for would confuse or deceive purchasers into believing that the goods originate from the same source or origin. Likewise, the petitioner alleged that the re spondents use and adoption in bad faith of the MACJOY & DEVICE mark would falsely tend to suggest a connection or affiliation with petitioners restaurant services and food products, thus, constituting a fraud upon the general public and further cause the dilution of the distinctiveness of petitioners registered and internationally recognized MCDONALDS marks to its prejudice and irreparable damage. The application and the opposition thereto was docketed as Inter Partes Case No. 3861.

Respondent denied the aforementioned allegations of the petitioner and averred that it has used the mark MACJOY for the past many years in good faith and has spent considerable sums of money for said marks extensive promotion in tri-media, especially in Cebu City where it has been doing business long before the petitioner opened its outlet thereat sometime in 1992; and that its use of said mark would not confuse affiliation with the petitioners restaurant services and food products because of the differences in the design and detail of the two (2) marks.

In a decision225[4] dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter M, and the prefixes Mac/Mc in both the MACJOY and the MCDONALDS marks lead to the conclusion that there is confusing similarity between them especially since both are used on almost the same products falling under classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food, sustained the petitioners opposition and rejected the respondents application, viz:

WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried chicken and chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and steaks is, as it is hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein Respondent-Applicant is REJECTED. Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial and Human Resources Development Bureau for appropriate action in accordance with this Decision, with a copy to be furnished the Bureau of Trademarks for information and to update its record. SO ORDERED.

In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order226[5] of January 14, 2000.

Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary Injunction227[6] under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-G.R. SP No. 57247.

Finding no confusing similarity between the marks MACJOY and MCDONALDS, the CA, in its herein assailed Decision228[7] dated July 29, 2004, reversed and set aside the appealed IPO decision and order, thus:

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us REVERSING and SETTING ASIDE the Decision of the IPO dated 28 December 1998 and its Order dated 14 January 2000 and ORDERING the IPO to give due course to petitioners Application Serial No. 75274.

SO ORDERED.

Explains the CA in its decision:

xxx, it is clear that the IPO brushed aside and rendered useless the glaring and drastic differences and variations in style of the two trademarks and even decreed that these pronounced differences are miniscule and considered them to have been overshadowed by the appearance of the predominant features such as M, Mc, and Mac appearing in both MCDONALDS and MACJOY marks. Instead of taking into account these differences, the IPO unreasonably shrugged off these differences in the device, letters and marks in the trademark sought to be registered. The IPO brushed aside and ignored the following irrefutable facts and circumstances showing differences between the marks of MACJOY and MCDONALDS. They are, as averred by the petitioner [now respondent]:

1.

The word MacJoy is written in round script while the word McDonalds is written in single stroke gothic; The word MacJoy comes with the picture of a chicken head with cap and bowtie and wings sprouting on both sides, while the word McDonalds comes with an arches M in gold colors, and absolutely without any picture of a chicken; The word MacJoy is set in deep pink and white color scheme while McDonalds is written in red, yellow and black color combina tion; The faade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A, show that *respondents+ restaurant is set also in the same bold, brilliant and noticeable color scheme as that of its wrappers, containers, cups, etc., while *petitioners+ restaurant is in yellow and red colors, and with the mascot of Ronald McDonald being prominently displayed therein. (Words in brackets supplied.)

2.

3.

4.

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged Resolution229[8] of November 12, 2004, the CA denied the motion, as it further held:

Whether a mark or label of a competitor resembles another is to be determined by an inspection of the points of difference and resemblance as a whole, and not merely the points of resemblance. The articles and trademarks employed and used by the [respondent] Macjoy Fastfood Corporation are so different and distinct as to preclude any probability or likelihood of confusion or deception on the part of the public to the injury of the trade or business of the *petitioner+ McDonalds Corporation. The Macjoy & Device mark is dissimilar in color, design, spelling, size, concept and appearance to the McDonalds marks. (Words in brackets supplied.)

Hence, the petitioners present recourse on the following grounds:

I. THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS MACJOY & DEVICE MARK IS NOT CONFUSINGLY SIMILAR TO PETITIONERS McDONALDS MARKS. IT FAILED TO CORRECTLY APPLY THE DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED BY THIS HONORABLE

COURT IN DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY BETWEEN COMPETING MARKS.

A.

The McDonalds Marks belong to a well-known and established family of marks distinguished by the use of the prefix Mc and/or Mac and the corporate M logo design. The prefix Mc and/or Mac is the dominant portion of both Petitioners McDonalds Marks and the Respondents Macjoy & Device mark. As such, the marks are confusingly similar under the Dominancy Test. Petitioners McDonalds Marks are well-known and world-famous marks which must be protected under the Paris Convention.

B.

C.

II.

THE COURT OF APPEALS ERRED IN RULING THAT THE DECISION OF THE IPO DATED 28 DECEMBER 1998 AND ITS ORDER DATED 14 JANUARY 2000 WERE NOT BASED ON SUBSTANTIAL EVIDENCE.

In its Comment,230[9] the respondent asserts that the petition should be dismissed outright for being procedurally defective: first, because the person who signed the certification against forum shopping in behalf of the petitioner was not specifically authorized to do so, and second, because the petition does not present a reviewable issue as what it challenges are the factual findings of the CA. In any event, the respondent insists that the CA committed no reversible error in finding no confusing similarity between the trademarks in question.

The petition is impressed with merit.

Contrary to respondents claim, the petitioners Managing Counsel, Sheila Lehr, was specifically authorized to sign on behalf of the petitioner the Verification and Certification231[10] attached to the petition. As can be gleaned from the petitioners Board of Directors Resolution dated December 5, 2002, as embodied in the Certificate of the Assistant Secretary dated December 21, 2004,232[11] Sheila Lehr was one of those authorized

and empowered to execute and deliver for and on behalf of [the petitioner] all documents as may be required in connection with x x x the protection and maintenance of any foreign patents, trademarks, trade-names, and copyrights owned now or hereafter by [the petitioner], including, but not limited to, x x x documents required to institute opposition or cancellation proceedings against conflicting trademarks, and to do such other acts and things and to execute such other documents as may be necessary and appropriate to effect and carry out the intent of this resolution. Indeed, the afore-stated authority given to Lehr necessarily includes the authority to execute and sign the mandatorily required certification of non-forum shopping to support the instant petition for review which stemmed from the opposition proceedings lodged by the petitioner before the IPO. Considering that the person who executed and signed the certification against forum shopping has the authority to do so, the petition, therefore, is not procedurally defective.

As regards the respondents argument that the petition raises only questions of fact which are not proper in a petition for review, suffice it to say that the contradictory findings of the IPO and the CA constrain us to give due course to the petition, this being one of the recognized exceptions to Section 1, Rule 45 of the Rules of Court. True, this Court is not the proper venue to consider factual issues as it is not a trier of facts.233[12] Nevertheless, when the factual findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,234[13] as here, this Court will review them.

The old Trademark Law, Republic Act (R.A.) No. 166, as amended, defines a trademark as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt in by others.235[14]

Under the same law, the registration of a trademark is subject to the provisions of Section 4 thereof, paragraph (d) of which is pertinent to this case. The provision reads:

Section 4. Registration of trademarks, trade-names and service-marks on the principal register. There is hereby established a register of trademarks, tradenames and service-marks which shall be known as the principal register. The owner of the trade-mark, trade-name or service-mark used to distinguish his goods, business or services of others shall have the right to register the same on the principal register, unless it:

xxx

xxx

xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers;

xxx

xxx

xxx

Essentially, the issue here is whether there is a confusing similarity between the MCDONALDS marks of the petitioner and the respondents MACJOY & DEVICE trademark when applied to Classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.236[15] The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception.237[16] In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.238[17] Under the latter test, a comparison of the words is not the only determinant factor.239[18]

Here, the IPO used the dominancy test in concluding that there was confusing similarity between the two (2) trademarks in question as it took note of the appearance of the predominant features M, Mc and/or Mac in both the marks. In reversing the conclusion reached by the IPO, the CA, while seemingly applying the dominancy test, in fact actually applied the holistic test. The appellate court ruled in this wise:

Applying the Dominancy test to the present case, the IPO should have taken into consideration the entirety of the two marks instead of simply fixing its gaze on the single letter M or on the combinations Mc or Mac. A mere cursory look of the subject marks will reveal that, save for the letters M and c, no other similarity exists in the subject marks.

We agree with the [respondent] that it is entirely unwarranted for the IPO to consider the prefix Mac as the predominant feature and the rest of the designs in *respondents+ mark as details. Taking into account such paramount factors as color, designs, spelling, sound, concept, sizes and audio and visual effects, the prefix Mc will appear to be the only similarity in the two completely different marks; and it is the prefix Mc that would thus appear as the miniscule detail. When pitted against each other, the two marks reflect a distinct and disparate visual impression that negates any possible confusing similarity in the mind of the buying public. (Words in brackets supplied.)

Petitioner now vigorously points out that the dominancy test should be the one applied in this case.

We agree.

In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must be decided on its merits.240[19] In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case.241[20] That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.242[21]

While we agree with the CAs detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks.243[22]

Notably, in McDonalds Corp. v. LC Big Mak Burger, Inc.,244[23] a case where the trademark Big Mak was found to be confusingly similar with the Big Mac mark of the herein the petitioner, the Court explicitly held:

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

Moreover, in Societe Des Produits Nestle, S.A. v. CA245[24] the Court, applying the dominancy test, concluded that the use by the respondent therein of the word MASTER for its coffee product FLAVOR MASTER was likely to cause confusion with therein petitioners coffee products MASTER ROAST and MASTER BLEND and further ruled:

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

Applying the dominancy test to the instant case, the Court finds that herein petitioners MCDONALDS and respondents MACJOY marks are confusingly similar with each other such that an ordinary purchaser can conclude an association or relation between the marks.

To begin with, both marks use the corporate M design logo and the prefixes Mc and/or Mac as dominant features. The first letter M in both marks puts emphasis on the prefixes Mc and/or Mac by the similar way in which they are depicted i.e. in an arch-like, capitalized and stylized manner.246[25]

For sure, it is the prefix Mc, an abbreviation of Mac, which visually and aurally catches the attention of the consuming public. Verily, the word MACJOY attracts attention the same way as did McDonalds, MacFries, McSpaghetti, McDo, Big Mac and the rest of the MCDONALDS marks which all use the prefixes Mc and/or Mac.

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

Thus, we concur with the IPOs findings that: In the case at bar, the predominant features such as the M, Mc, and Mac appearing in both McDonalds marks and the MACJOY & DEVICE easily attract the attention of would-be customers. Even non-regular customers of their fastfood restaurants would readily notice the predominance of the M design, Mc/Mac prefixes shown in both marks. Such that the common awareness or perception of customers that the trademarks McDonalds mark and MACJOY & DEVICE are one and the same, or an affiliate, or under the sponsorship of the other is not far-fetched. The differences and variations in styles as the device depicting a head of chicken with cap and bowtie and wings sprouting on both sides of the chicken head, the heart-shaped M, and the stylistic letters in MACJOY & DEVICE; in contrast to the arch -like M and the onestyled gothic letters in McDonalds marks are of no moment. These minuscule variations are overshadowed by the appearance of the predominant features mentioned hereinabove. Thus, with the predominance of the letter M, and prefixes Mac/Mc found in both marks, the inevitable conclusion is there is confusing similarity between the trademarks Mc Donalds marks and MACJOY AND DEVICE especially considering the fact that both marks are being used on almost the same products falling under Classes 29 and 30 of the International Classification of Goods i.e. Food and ingredients of food.

With the existence of confusing similarity between the subject trademarks, the resulting issue to be resolved is who, as between the parties, has the rightful claim of ownership over the said marks.

We rule for the petitioner.

A mark is valid if it is distinctive and hence not barred from registration under the Trademark Law. However, once registered, not only the marks validity but also the registrants ownership thereof is prima facie presumed.247[26]

Pursuant to Section 37248[27] of R.A. No. 166, as amended, as well as the provision regarding the protection of industrial property of foreign nationals in this country as embodied in the Paris Convention249[28] under which the Philippines and the petitioners domicile, the United St ates, are adherent-members, the petitioner was able to register its MCDONALDS marks successively, i.e., McDonalds in 04 October, 1971 250[29]; the corporate logo which is the M or the golden arches design and the McDonalds with the M or golden arches design both in 30 June 1977251[30]; and so on and so forth.252[31]

On the other hand, it is not disputed that the respondents application for registration of its trademark MACJOY & DEVICE was filed only on March 14, 1991 albeit the date of first use in the Philippines was December 7, 1987.253[32]

Hence, from the evidence on record, it is clear that the petitioner has duly established its ownership of the mark/s.

Respondents contention that it was the first user of the mark in the Philippines having used MACJOY & DEVICE on its restaurant business and food products since December, 1987 at Cebu City while the first McDonalds outlet of the petitioner thereat was opened only in 1992, is downright unmeritorious. For the requirement of actual use in commerce x x x in the Philippines before one may register a trademark, trade name and service mark under the Trademark Law254[33] pertains to the territorial jurisdiction of the Philippines and is not only confined to a certain region, province, city or barangay.

Likewise wanting in merit is the respondents claim that the petitioner cannot acquire ownership of the word Mac because it is a personal name which may not be monopolized as a trademark as against others of the same name or surname. As stated earlier, once a trademark has been registered, the validity of the mark is prima facie presumed. In this case, the respondent failed to overcome such presumption. We agree with the observations of the petitioner regarding the respondents explanation that the word MACJOY is based on the name of its presidents niece, Scarlett Yu Carcell. In the words of the petitioner:

First of all, Respondent failed to present evidence to support the foregoing claim which, at best, is a mere self-serving assertion. Secondly, it cannot be denied that there is absolutely no connection between the name Scarlett Yu Carcel and MacJoy to merit the coinage of the latter word. Even assuming that the word MacJoy was chosen as a term of endearment, fondness and affection for a certain Scarlett Yu Carcel, allegedly the niece of Respondents president, as well as to supposedly bring good luck to Respondents business, one cannot help but wonder why out of all the possible letters or combinations of letters available to Respondent, its president had to choose and adopt a mark with the prefix Mac as the dominant feature thereof. A more plausible explanation perhaps is that the niece of Respondents president was fond of the food products and services of the Respondent, but that is beside the point. 255[34]

By reason of the respondents implausible and insufficient explanation as to how and why out of the many choices of words it could have used for its trade-name and/or trademark, it chose the word MACJOY, the only logical conclusion deducible therefrom is that the respondent would want to ride high on the established reputation and goodwill of the MCDONALDs marks, which, as applied to petitioners restaurant business and food products, is undoubtedly beyond question.

Thus, the IPO was correct in rejecting and denying the respondents application for registration of the trademark MACJOY & DEVICE. As this Court ruled in Faberge Inc. v. IAC,256[35] citing Chuanchow Soy & Canning Co. v. Dir. of Patents and Villapanta:257[36]

When one applies for the registration of a trademark or label which is almost the same or very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark, this not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill. WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the Decision of the Intellectual Property Office in Inter Partes Case No. 3861 is REINSTATED.

No pronouncement as to costs.

SO ORDERED. FIRST DIVISION [G.R. No. 112012. April 4, 2001] SOCIETE DES PRODUITS NESTLE, S.A. and NESTLE PHILIPPINES, INC. petitioners, vs. COURT OF APPEALS and CFC CORPORATION. respondents. DECISION YNARES-SANTIAGO, J.: This is a petition for review assailing the Decision of the Court of Appeals in CA-G.R. SP No. 24101,xxiii[1] reversing and setting aside the decision of the Bureau of Patents, Trademarks and Technology Transfer (BPTTT),xxiv[2] which denied private respondents application for registration of the trade -mark, FLAVOR MASTER. On January 18, 1984, private respondent CFC Corporation filed with the BPTTT an application for the registration of the trademark FLAVOR MASTER for instant coffee, under Serial No. 52994. The application, as a matter of due course, was published in the July 18, 1988 issue of the BPTTTs Official Gazette. Petitioner Societe Des Produits Nestle, S.A., a Swiss company registered under Swiss laws and domiciled in Switzerland, filed an unverified Notice of Opposition,xxv[3] claiming that the trademark of private respondents product is confusingly similar to its trademarks for coffee and coffee extracts, to wit: MASTER ROAST and MASTER BLEND. Likewise, a verified Notice of Opposition was filed by Nestle Philippines, Inc., a Philippine corporation and a licensee of Societe Des Produits Nestle S.A., against CFCs application for registration of the trademark FLAVOR MASTER.xxvi[4] Nestle claimed that the use, if any, by CFC of the trademark FLAVOR MASTER and its registration would likely cause confusion in the trade; or deceive purchasers and would falsely suggest to the purchasing public a connection in the business of Nestle, as the dominant word present in the three (3) trademarks is MASTER; or that the goods of CFC might be mistaken as having originated from the latter. In answer to the two oppositions, CFC argued that its trademark, FLAVOR MASTER, is not confusingly similar with the formers trademarks, MASTER ROAST and MASTER BLEND, alleging that, except for the word MASTER (which cannot be exclusively appropriated by any person for being a descriptive or generic name), the other words that are used respectively with said word in the three trademarks are very different from each other in meaning, spelling, pronunciation, and sound. CFC further argued that its trademark, FLAVOR MASTER, is clearly ver y different from any of Nestles alleged trademarks MASTER ROAST and MASTER BLEND, especially when the marks are viewed in their entirety, by considering their pictorial representations, color schemes and the letters of their respective labels. In its Decision No. 90-47 dated December 27, 1990, the BPTTT denied CFCs application for registration. xxvii[5] CFC elevated the matter to the Court of Appeals, where it was docketed as CA-G.R. SP No. 24101. The Court of Appeals defined the issue thus: Does appellant CFCs trade dress bear a striking resemblance with appellees trademarks as to create in the purchasing publics mind the mistaken impression that both coffee products come from one and the same source? As stated above, the Court of Appeals, in the assailed decision dated September 23, 1993, reversed Decision No. 90-47 of the BPTTT and ordered the Director of Patents to approve CFCs application. The Court of Appeals ruled:

Were We to take even a lackadaisical glance at the overall appearance of the contending marks, the physical discrepancies between appellant CFCs and appellees respective logos are so ostensible that the casual purchaser cannot likely mistake one for the other. Appellant CFCs label (Exhibit 4) is predominantly a blend of dark and lighter shade of orange where the words FLAVOR MASTER, FLAVOR appearing on top of MASTER, shaded in mocha with thin white inner and outer sidings per letter and identically lettered except for the slightly protruding bottom curve of the letter S adjoining the bottom tip of the letter A in the word MASTER, are printed across the top of a simmering red coffee cup. Underneath FLAVOR MASTER appears Premium Instant Coffee printed in white, slim and slanted letters. Appellees MASTER ROAST label (Exhibit 7), however, is almost double the width of appellant CFCs. At the top is printed in brown color the word NESCAFE against a white backdrop. Occupying the center is a square-shaped configuration shaded with dark brown and picturing a heap of coffee beans, where the word MASTER is inscribed in the middle. MASTER in appellees label is printed in taller capital letters, with the letter M further capitalized. The letters are shaded with red and bounded with thin gold colored inner and outer sidings. Just above the word MASTER is a red window like portrait of what appears to be a coffee shrub clad in gold. Below the MASTER appears the word ROAST impressed in smaller, white print. And further below are the inscriptions in white: A selection of prime Arabica and Robusta coffee. With regard to appellees MASTER BLEND label (Exhibit 6) of which only a xeroxed copy is submitted, the letters are bolder and taller as compared to appellant CFCs and the word MASTER appears on top of the word BLEND and below it are the words 100% pure instant coffee printed in small letters. From the foregoing description, while the contending marks depict the same product, the glaring dissimilarities in their presentation far outweigh and dispel any aspect of similitude. To borrow the words of the Supreme Court in American Cyanamid Co. v. Director of Patents (76 SCRA 568), appellant CFCs and appellees labels are entirely different in size, background, colors, contents and pictorial arrangement; in short, the general appearances of the labels bearing the respective trademarks are so distinct from each other that appellees cannot assert that the dominant features, if any, of its trademarks were used or appropriated in appellant CFCs own. The d istinctions are so well-defined so as to foreclose any probability or likelihood of confusion or deception on the part of the normally intelligent buyer when he or she encounters both coffee products at the grocery shelf. The answer therefore to the query is a clear-cut NO.xxviii[6] Petitioners are now before this Court on the following assignment of errors: 1. RESPONDENT COURT GRAVELY ERRED IN REVERSING AND SETTING ASIDE THE DECISION (NO. 90-47) OF THE DIRECTOR OF THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER (BPTTT) DATED DECEMBER 27, 1990. 2. RESPONDENT COURT ERRED IN FINDING THAT APPELLANT CFCS TRADE DRESS IS BEYOND THE SCOPE OF THE PROSCRIPTION LAID DOWN BY JURISPRUDENCE AND THE TRADEMARK LAW. 3. RESPONDENT COURT ERRED IN HOLDING THAT THE TOTALITY RULE, RATHER THAN THE TEST OF DOMINANCY, APPLIES TO THE CASE. 4. RESPONDENT COURT ERRED IN INVOKING THE TOTALITY RULE APPLIED IN THE CASES OF BRISTOL MYERS V. DIRECTOR OF PATENTS, ET AL. (17 SCRA 128), MEAD JOHNSON & CO. V. NVJ VAN DORF LTD., (7 SCRA 768) AND AMERICAN CYANAMID CO. V. DIRECTOR OF PATENTS (76 SCRA 568). The petition is impressed with merit. A trademark has been generally defined as any word, name, symbol or device adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured and sold by others.xxix[7]

A manufacturers trademark is entitled to protection. As Mr. Justice Frankfurter observed in the case of Mishawaka Mfg. Co. v. Kresge Co.:xxx[8] The protection of trade-marks is the laws 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 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. Section 4 (d) of Republic Act No. 166 or the Trademark Law, as amended, which was in force at the time, provides thus: Registration of trade-marks, trade-names and service-marks on the principal register. - There is hereby established a register of trade-marks, trade-names and service marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: xxx xxx xxx

(d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; xxx (Emphasis supplied) The law prescribes a more stringent standard in that there should not only be confusing similarity but that it should not likely cause confusion or mistake or deceive purchasers. Hence, the question in this case is whether there is a likelihood that the trademark FLAVOR MASTER may cause confusion or mistake or may deceive purchasers that said product is the same or is manufactured by the same company. In other words, the issue is whether the trademark FLAVOR MASTER is a colorable imitation of the trademarks MASTER ROAST and MASTER BLEND. 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.xxxi[9] In determining if colorable imitation exists, jurisprudence has developed two kinds of tests - the Dominancy Test and the Holistic Test.xxxii[10] The test of dominancy focuses on the similarity of the prevalent features of the competing trademarks which might cause confusion or deception and thus constitute infringement. On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question must be considered in determining confusing similarity.xxxiii[11] In the case at bar, the Court of Appeals held that: xxx xxx

The determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. The Supreme Court in Del Monte Corporation v. CA, 181 SCRA 410, held that: The question is not whether the two articles are distinguishable by their labels when set side by side bu t 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. From this perspective, the test of similarity is to consider the two marks in their entirety, as they appear in the respective labels, in relation to the goods to which they are attached ( Bristol Myers Company v. Director of Patents, et al., 17 SCRA 128, citing Mead Johnson & Co. v. NVJ Van Dorp, Ltd., et al., 7 SCRA 768 ). The mark must be considered as a whole and not as dissected. If the buyer is deceived, it is attributable to the marks as a totality, not usually to any part of it (Del Monte Corp. v. CA, supra), as what appellees would want it to be when they essentially argue that much of the confusion springs from appellant CFCs use of the word MASTER which appellees claim to be the dominant feature of their own trademarks that captivates the prospective consumers. Be it further emphasized that the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other (Mead Johnson & Co. v. NVJ Van Dorp, Ltd., supra).xxxiv[12] The Court of Appeals applied some judicial precedents which are not on all fours with this case. It must be emphasized that in infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided on its own merits.xxxv[13] In Esso Standard, Inc. v. Court of Appeals,xxxvi[14] we ruled that the likelihood of confusion is a relative concept; to be determined only according to the particular, and sometimes peculiar, circumstances of each case. In trademark cases, even more than in any other litigation, precedent must be studied in light of the facts of the particular case. The wisdom of the likelihood of confusion test lies in its recognition that each trademark infringement case presents its own unique set of facts. Indeed, the complexities attendant to an accurate assessment of likelihood of confusion require that the entire panoply of elements constituting the relevant factual landscape be comprehensively examined.xxxvii[15] The Court of Appeals application of the case of Del Monte Corporation v. Court of Appeals xxxviii[16] is, therefore, misplaced. In Del Monte, the issue was about the alleged similarity of Del Montes logo with that of Sunshine Sauce Manufacturing Industries. Both corporations market the catsup product which is an inexpensive and common household item. Since Del Monte alleged that Sunshines logo was confusingly similar to or was a colorable imitation of the formers logo, there was a need to go into the details of the two logos as well as the shapes of the labels or marks, the brands printed on the labels, the words or lettering on the labels or marks and the shapes and colors of the labels or marks. The same criteria, however, cannot be applied in the instant petition as the facts and circumstances herein are peculiarly different from those in the Del Monte case. In the same manner, the Court of Appeals erred in applying the totality rule as defined in the cases of Bristol Myers v. Director of Patents;xxxix[17] Mead Johnson & Co. v. NVJ Van Dorf Ltd.;xl[18] and American Cyanamid Co. v. Director of Patents.xli[19] The totality rule states that the test is not simply to take their words and compare the spelling and pronunciation of said words. In determining whether two trademarks are confusingly similar, the two marks in their entirety as they appear in the respective labels must be considered in relation to the goods to which they are attached; the discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels.xlii[20]

As this Court has often declared, each case must be studied according to the peculiar circumstances of each case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point. In the above cases cited by the Court of Appeals to justify the application of the totality or holistic test to this instant case, the factual circumstances are substantially different. In the Bristol Myers case, this Court held that although both BIOFERIN and BUFFERIN are primarily used for the relief of pains such as headaches and colds, and their names are practically the same in spelling and pronunciation, both labels have strikingly different backgrounds and surroundings. In addition, one is dispensable only upon doctors prescription, while the other may be purchased over-the-counter. In the Mead Johnson case, the differences between ALACTA and ALASKA are glaring and striking to the eye. Also, ALACTA refers to Pharmaceutical Preparations which Supply Nutritional Needs, falling under Class 6 of the official classification of Medicines and Pharmaceutical Preparations to be used as prescribed by physicians. On the other hand, ALASKA refers to Foods and Ingredients of Foods falling under Class 47, and does not require medical prescription. In the American Cyanamid case, the word SULMET is distinguishable from the word SULMETINE, as the former is derived from a combination of the syllables SUL which is derived from sulfa and MET from methyl, both of which are chemical compounds present in the article manufactured by the contending parties. This Court held that the addition of the syllable INE in respondents label is sufficient to distinguish respondents product or trademark from that of petitioner. Also, both products are for medicinal veterinary use and the buyer will be more wary of the nature of the product he is buying. In any case, both products are not identical as SULMETs label indicates that it is used in a drinking water solution while that of SULMETINE indicates that they are tablets. It cannot also be said that the products in the above cases can be bought off the shelf except, perhaps, for ALASKA. The said products are not the usual common and inexpensive household items which an undiscerningly rash buyer would unthinkingly buy. In the case at bar, other than the fact that both Nestles and CFCs products are inexpensive and common household items, the similarity ends there. What is being questioned here is the use by CFC of the trademark MASTER. In view of the difficulty of applying jurisprudential precedents to trademark cases due to the peculiarity of each case, judicial fora should not readily apply a certain test or standard just because of seeming similarities. As this Court has pointed above, there could be more telling differences than similarities as to make a jurisprudential precedent inapplicable. Nestle points out that the dominancy test should have been applied to determine whether there is a confusing similarity between CFCs FLAVOR MASTER and Nestles MASTER ROAST and MASTER BLEND. We agree. As the Court of Appeals itself has stated, *t+he determination of whether two trademarks are indeed confusingly similar must be taken from the viewpoint of the ordinary purchasers who are, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and are therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. xliii[21] The basis for the Court of Appeals application of the totality or holistic test is the ordinary purchaser buying the product under normally prevalent conditions in trade and the attention such products normally elicit from said ordinary purchaser. An ordinary purchaser or buyer does not usually make such scrutiny nor does he usually have the time to do so. The average shopper is usually in a hurry and does not inspect every product on the shelf as if he were browsing in a library.xliv[22]

The Court of Appeals held that the test to be applied should be the totality or holistic test reasoning, since what is of paramount consideration is the ordinary purchaser who is, in general, undiscerningly rash in buying the more common and less expensive household products like coffee, and is therefore less inclined to closely examine specific details of similarities and dissimilarities between competing products. This Court cannot agree with the above reasoning. If the ordinary purchaser is undiscerningly rash in buying such common and inexpensive household products as instant coffee, and would therefore be less inclined to closely examine specific details of similarities and dissimilarities between the two competing products, then it would be less likely for the ordinary purchaser to notice that CFCs trademark FLAVOR MASTER carries the colors orange and mocha while that of Nestles uses red and brown. The application of the totality or holistic test is improper since the ordinary purchaser would not be inclined to notice the specific features, similarities or dissimilarities, considering that the product is an inexpensive and common household item. It must be emphasized that the products bearing the trademarks in question are inexpensive and common household items bought off the shelf by undiscerningly rash purchasers. As such, if the ordinary purchaser is undiscerningly rash, then he would not have the time nor the inclination to make a keen and perceptive examination of the physical discrepancies in the trademarks of the products in order to exercise his choice. While this Court agrees with the Court of Appeals detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace.xlv[23] The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that: From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposers mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. This can be gleaned from the fact that Robert Jaworski and Atty. Ric Puno Jr.., the personalities engaged to promote the product, are given the titles Master of the Game and Master of the Talk Show, respectively. In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposers goods. x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposers advertising schemes is carried over when the same is incorporated into respondent -applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (Exh. 4) ones attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched. x x x.xlvi[24] In addition, the word MASTER is neither a generic nor a descriptive term. As such, said term can not be invalidated as a trademark and, therefore, may be legally protected. Generic termsxlvii[25] are those which constitute the common descriptive name of an article or substance, or comprise the genus of which the particular product is a species, or are commonly used as the name or description of a kind of goods, or imply reference to every member of a genus and the exclusion of individuating characters, or refer to the basic nature

of the wares or services provided rather than to the more idiosyncratic characteristics of a particular product, and are not legally protectable. On the other hand, a term is descriptivexlviii[26] and therefore invalid as a trademark if, as understood in its normal and natural sense, it forthwith conveys the characteristics, functions, qualities or ingredients of a product to one who has never seen it and does not know what it is, or if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods, or if it clearly denotes what goods or services are provided in such a way that the consumer does not have to exercise powers of perception or imagination. Rather, the term MASTER is a suggestive term brought about by the advertising scheme of Nestle. Suggestive termsxlix[27] are those which, in the phraseology of one court, require imagination, thought and perception to reach a conclusion as to the nature of the goods. Such terms, which subtly connote something about the product, are eligible for protection in the absence of secondary meaning. While suggestive marks are capable of shedding some light upon certain characteristics of the goods or services in dispute, they nevertheless involve an element of incongruity, figurativeness, or imaginative effort on the part of the observer. This is evident from the advertising scheme adopted by Nestle in promoting its coffee products. In this case, Nestle has, over time, promoted its products as coffee perfection worthy of masters like Robert Jaworski and Ric Puno Jr. In associating its coffee products with the term MASTER and thereby impressing them with the attributes of said term, Nestle advertised its products thus: Robert Jaworski. Living Legend. A true hard court hero. Fast on his feet. Sure in every shot he makes. A master strategist. In one word, unmatched. MASTER ROAST. Equally unmatched. Rich and deeply satisfying. Made from a unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. A masterpiece only NESCAFE, the worlds coffee masters, can create. MASTER ROAST. Coffee perfection worthy of masters like Robert Jaworski.l[28] In the art of conversation, Ric Puno Jr. is master. Witty. Well-informed. Confident. In the art of coffee-making, nothing equals Master Roast, the coffee masterpiece from Nescafe, the worlds coffee masters. A unique combination of the best coffee beans - Arabica for superior taste and aroma, Robusta for strength and body. Truly distinctive and rich in flavor. Master Roast. Coffee perfection worthy of masters like Ric Puno Jr.li[29] The term MASTER, therefore, has acquired a certain connotation to mean the coffee products MASTER ROAST and MASTER BLEND produced by Nestle. As such, the use by CFC of the term MASTER in the trademark for its coffee product FLAVOR MASTER is likely to cause confusion or mistake or even to deceive the ordinary purchasers. In closing, it may not be amiss to quote the case of American Chicle Co. v. Topps Chewing Gum, Inc .,lii[30] to wit: Why it should have chosen a mark that had long been employed by [plaintiff] and had become known to the trade instead of adopting some other means of identifying its goods is hard to see unless there was a deliberate purpose to obtain some advantage from the trade that [plaintiff] had built up. Indeed, it is generally true that, as soon as we see that a second comer in a market has, for no reason that he can assign, plagiarized the make -up of an earlier comer, we need no more; . . . [W]e feel bound to compel him to exercise his ingenuity in quarters further afield.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. SP No. 24101 is REVERSED and SET ASIDE and the decision of the Bureau of Patents, Trademarks and Technology Transfer in Inter Partes Cases Nos. 3200 and 3202 is REINSTATED. SO ORDERED. Davide, Jr., C.J. (Chairman), Kapunan, and Pardo, JJ., concur. Puno J., on official leave.

SECOND DIVISION

LEVI STRAUSS & CO., & LEVI STRAUSS (PHILS.), INC., Petitioners,

G.R. No. 138900

Present:

PUNO, Chairman, - versus AUSTRIA-MARTINEZ, CALLEJO, TINGA, and CLINTON APPARELLE, INC., Respondent. Promulgated: September 20, 2005 x----------------------------------------------------------------------x NAZARIO, JJ.

DECISION

TINGA, J.:

Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure filed by Levi Strauss & Co. (LS & Co.) and Levi Strauss (Philippines), Inc. (LSPI) assailing the Court of Appeals Decision[2] and Resolution[3] respectively dated 21 December 1998 and 10 May 1999. The questioned Decision granted respondents prayer for a writ of preliminary injunction in its Petition[4] and set aside the trial courts orders dated 15 May 1998[5] and 4 June 1998[6] which respectively granted petitioners prayer for the issuance of a temporary restraining order (TRO) and application for the issuance of a writ of preliminary injunction.

This case stemmed from the Complaint[7] for Trademark Infringement, Injunction and Damages filed by petitioners LS & Co. and LSPI against respondent Clinton Apparelle, Inc.* (Clinton Aparelle) together with an alternative defendant, Olympian Garments, Inc. (Olympian Garments), before the Regional Trial Court of Quezon City, Branch 90.[8] The Complaint was docketed as Civil Case No. Q-98-34252, entitled Levi Strauss & Co. and Levi Strauss (Phils.), Inc. v. Clinton Aparelle, Inc. and/or Olympian Garments, Inc.

The Complaint alleged that LS & Co., a foreign corporation duly organized and existing under the laws of the State of Delaware, U.S.A., and engaged in the apparel business, is the owner by prior adoption and use since 1986 of the internationally famous Dockers and Design trademark. This ownership is evidenced by its valid and existing registrations in various member countries of the Paris Convention. In the Philippines, it has a Certificate of Registration No. 46619 in the Principal Register for use of said trademark on pants, shirts, blouses, skirts, shorts, sweatshirts and jackets under Class 25.[9]

The Dockers and Design trademark was first used in the Philippines in or about May 1988, by LSPI, a domestic corporation engaged in the manufacture, sale and distribution of various products bearing trademarks owned by LS & Co. To date, LSPI continues to manufacture and sell Dockers Pants with the Dockers and Design trademark.[10]

LS & Co. and LSPI further alleged that they discovered the presence in the local market of jeans under the brand name Paddocks using a device which is substantially, if not exactly, similar to the Dockers and Design trademark owned by and registered in the name of LS & Co., without its consent. Based on their information and belief, they added, Clinton Apparelle manufactured and continues to manufacture such Paddocks jeans and other apparel.

However, since LS & Co. and LSPI are unsure if both, or just one of impleaded defendants are behind the manufacture and sale of the Paddocks jeans complained of, they br ought this suit under Section 13, Rule 3[11] of the 1997 Rules of Civil Procedure.[12]

The Complaint contained a prayer that reads as follows:

1. That upon the filing of this complaint, a temporary restraining order be immediately issued restraining defendants, their officers, employees, agents, representatives, dealers, retailers or assigns from committing the acts herein complained of, and, specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using denims, jeans or pants with the design herein complained of as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark. 2. That after notice and hearing, and pending trial on the merits, a writ of preliminary injunction be issued enjoining defendants, their officers, employees, agents, dealers, retailers, or assigns from manufacturing, distributing, selling, offering for sale, advertising, jeans the design herein complained of as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark. 3. That after trial on the merits, judgment be rendered as follows: a. Affirming and making permanent the writ of preliminary injunction; b. Ordering that all infringing jeans in the possession of either or both defendants as the evidence may warrant, their officers, employees, agents, retailers, dealers or assigns, be delivered to the Honorable Court of plaintiffs, and be accordingly destroyed;[13]

Acting on the prayer for the issuance of a TRO, the trial court issued an Order[14] setting it for hearing on 5 May 1998. On said date, as respondent failed to appear despite notice and the other defendant, Olympian Garments, had yet to be notified, the hearing was re-scheduled on 14 May 1998.[15]

On 14 May 1998, neither Clinton Apparelle nor Olympian Garments appeared. Clinton Apparelle claimed that it was not notified of such hearing. Only Olympian Garments allegedly had been issued with summons. Despite the absence of the defendants, the hearing on the application for the issuance of a TRO continued.[16]

The following day, the trial court issued an Order[17] granting the TRO applied for, the pertinent portions of which state:

Considering the absence of counsel/s for the defendant/s during the summary hearing scheduled on May 5, 1998 and also during the re-scheduled summary hearing held on May 14, 1998 set for the purpose of determining whether or not a Temporary Restraining Order shall be issued, this Court allowed the counsel for the plaintiffs to present on May 14, 1998 their arguments/evidences in support of their application. After hearing the arguments presented by the counsel for the plaintiffs during the summary hearing, this Court is of the considered and humble view that grave injustice and irreparable injury to the plaintiffs would arise before the matter of whether or not the application for the issuance of a Writ of Preliminary Injunction can be heard, and that, in the interest of justice, and in the meantime, a Temporary Restraining Order be issued. WHEREFORE, let this Temporary Restraining Order be issued restraining the defendants, their officers, employees, agents, representatives, dealers, retailers or assigns from committing the acts complained of in the verified Complaint, and specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns, to cease and desist from manufacturing, distributing, selling, offering for sale, advertising or otherwise using denims, jeans or pants with the design complained of in the verified Complaint as substantially, if not exactly similar, to plaintiffs Dockers and Design trademark; until after the application/prayer for the issuance of a Writ of Preliminary Injunction is heard/resolved, or until further orders from this Court. The hearing on the application for the issuance of a Writ of Preliminary Injunction as embodied in the verified Complaint is set on May 26, 1998 (Tuesday) at 2:00 P.M. which setting is intransferable in character considering that the lifetime of this Temporary Restraining Order is twenty (20) days from date hereof.[18]

On 4 June 1998, the trial court issued another Order[19] granting the writ of preliminary injunction, to wit:

ORDER This resolves the plaintiffs application or prayer for the issuance of a w rit of preliminary injunction as embodied in the verified complaint in this case. Parenthetically, this Court earlier issued a temporary restraining order. (see Order dated May 15, 1998; see also Order dated May 26, 1998) After a careful perusal of the contents of the pleadings and documents on record insofar as they are pertinent to the issue under consideration, this Court finds that at this point in time, the plaintiffs appear to be entitled to the relief prayed for and this Court is of the considered belief and humble view that, without necessarily delving on the merits, the paramount interest of justice will be better served if the status quo shall be maintained and that an injunction bond of P2,500,000.00 appears to be in order. (see Sections 3 and 4, Rule 58, 1997 Rules of Civil Procedure) IN VIEW OF THE FOREGOING, the plaintiffs prayer for the issuance of a writ of preliminary injunction is GRANTED. Accordingly, upon the plaintiffs filing, within ten (10) days from their receipt hereof, an injunction bond of P2,500,000.00 executed to the defendants to the effect that the plaintiffs will pay all damages the defendants may sustain by reason of this injunction in case the Court should finally decide that the plaintiffs are not entitled thereto, let a writ of preliminary injunction issue enjoining or restraining the commission of the acts complained of in

the verified Complaint in this case, and specifically, for the defendants, their officers, employees, agents, representatives, dealers and retailers or assigns or persons acting in their behalf to cease and desist from manufacturing, distributing, selling, offering for sale, advertising, or otherwise using, denims, jeans or pants with the design complained of in the verified Complaint in this case, which is substantially, if not exactly, similar to plaintiffs DOCKERS and DESIGN trademark or logo as covered by the Bureau of Patents, Trademarks and Technology Transfer Certificate of Registration No. 46619, until after this case shall have been decided on the merits and/or until further orders from this Court.[20]

The evidence considered by the trial court in granting injunctive relief were as follows: (1) a certified true copy of the certificate of trademark registration for Dockers and Design; (2) a pair of DOCKERS pants bearing the Dockers and Design trademark; (3) a pair of Paddocks pants bearing respondents assailed logo; (4) the Trends MBL Survey Report purportedly proving that there was confusing similarity between two marks; (5) the affidavit of one Bernabe Alajar which recounted petitioners prior adoption, use and registration of the Dockers and Design trademark; and (6) the affidavit of one Mercedes Abad of Trends MBL, Inc. which detailed the methodology and procedure used in their survey and the results thereof.[21]

Clinton Apparelle thereafter filed a Motion to Dismiss[22] and a Motion for Reconsideration[23] of the Order granting the writ of preliminary injunction. Meantime, the trial court issued an Order[24] approving the bond filed by petitioners.

On 22 June 1998, the trial court required[25] the parties to file their respective citation of authorities/ jurisprudence/Supreme Court decisions on whether or not the trial court may issue the writ of preliminary injunction pending the resolution of the Motion for Reconsideration and the Motion to Dismiss filed by respondent.

On 2 October 1998, the trial court denied Clinton Apparelles Motion to Dismiss and Motion for Reconsideration in an Omnibus Order,[26] the pertinent portions of which provide:

After carefully going over the contents of the pleadings in relation to pertinent portions of the records, this Court is of the considered and humble view that:

On the first motion, the arguments raised in the plaintiffs aforecited Consolidated Opposition appears to be meritorious. Be that as it may, this Court would like to emphasize,

among other things, that the complaint states a cause of action as provided under paragraphs 1 to 18 thereof. On the second motion, the arguments raised in the plaintiffs aforecited Consolidated Opposition likewise appear to be impressed with merit. Besides, there appears to be no strong and cogent reason to reconsider and set aside this Courts Order dated June 4, 1998 as it has been shown so far that the trademark or logo of defendants is substantially, if not exactly, similar to plaintiffs DOCKERS and DESIGN trademark or logo as covered by BPTTT Certificate of Registration No. 46619 even as the BPTTT Certificate of Registration No. 49579 of Clinton Apparelle, Inc. is only for the mark or word PADDOCKS (see Records, p. 377) In any event, this Court had issued an Order dated June 18, 1998 for the issuance of the writ of preliminary injunction after the plaintiffs filed the required bond of P2,500,000.00.

IN VIEW OF THE FOREGOING, the aforecited Motion To Dismiss and Motion For Reconsideration are both DENIED for lack of merit, and accordingly, this Courts Order dated June 18, 1998 for the issuance of the writ of preliminary injunction is REITERATED so the writ of preliminary injunction could be implemented unless the implementation thereof is restrained by the Honorable Court of Appeals or Supreme Court.

The writ of preliminary injunction was thereafter issued on 8 October 1998.[27]

Thus, Clinton Apparelle filed with the Court of Appeals a Petition[28] for certiorari, prohibition and mandamus with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction, assailing the orders of the trial court dated 15 May 1998, 4 June 1998 and 2 October 1998.

On 20 October 1998, the Court of Appeals issued a Resolution[29] requiring herein petitioners to file their comment on the Petition and at the same time issued the prayed-for temporary restraining order.

The appellate court rendered on 21 December 1998 its now assailed Decision granting Clinton Apparelles petition. The Court of Appeals held that the trial court did not follow the procedure required by law for the issuance of a temporary restraining order as Clinton Apparelle was not duly notified of the date of the summary hearing for its issuance. Thus, the Court of Appeals ruled that the TRO had been improperly issued.[30]

The Court of Appeals also held that the issuance of the writ of preliminary injunction is questionable. In its opinion, herein petitioners failed to sufficiently establish its material and substantial right to have the writ issued. Secondly, the Court of Appeals observed that the survey presented by petitioners to support their contentions was commissioned by petitioners. The Court of Appeals remarked that affidavits taken ex-parte are generally considered to be inferior to testimony given in open court. The appellate court also considered that the injury petitioners have suffered or are currently suffering may be compensated in terms of monetary consideration, if after trial, a final judgment shall be rendered in their favor.[31]

In addition, the Court of Appeals strongly believed that the implementation of the questioned writ would effectively shut down respondents business, which in its opinion should not be san ctioned. The Court of Appeals thus set aside the orders of the trial court dated 15 May 1998 and 4 June 1998, respectively issuing a temporary restraining order and granting the issuance of a writ of preliminary injunction.

With the denial of their Motion for Reconsideration,[32] petitioners are now before this Court seeking a review of the appellate courts Decision and Resolution. LS & Co. and LSPI claim that the Court of Appeals committed serious error in: (1) disregarding the well-defined limits of the writ of certiorari that questions on the

sufficiency of evidence are not to be resolved in such a petition; (2) in holding that there was no confusion between the two marks; (3) in ruling that the erosion of petitioners trademark is not protectable by injunction; (4) in ignoring the procedure previously agreed on by the parties and which was adopted by the trial court; and (5) in declaring that the preliminary injunction issued by the trial court will lead to the closure of respondents business.

In its Comment,[33] Clinton Apparelle maintains that only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court. It asserts that the question of whether the Court of Appeals erred in: (1) disregarding the survey evidence; (2) ruling that there was no confusion between the two marks; and (c) finding that the erosion of petitioners trademark may not be protected by injunction, are issues not within the ambit of a petition for review on certiorari under Rule 45. Clinton Apparelle also contends that the Court of Appeals acted correctly when it overturned the writ of preliminary injunction issued by the trial court. It believes that the issued writ in effect disturbed the status quo and disposed of the main case without trial.

There is no merit in the petition.

At issue is whether the issuance of the writ of preliminary injunction by the trial court was proper and whether the Court of Appeals erred in setting aside the orders of the trial court.

Section 1, Rule 58 of the Rules of Court defines a preliminary injunction as an order granted at any stage of an action prior to the judgment or final order requiring a party or a court, agency or a person to refrain from a particular act or acts. Injunction is accepted as the strong arm of equity or a transcendent remedy to be used cautiously as it affects the respective rights of the parties, and only upon full conviction on the part of the court of its extreme necessity. An extraordinary remedy, injunction is designed to preserve or maintain the status quo of things and is generally availed of to prevent actual or threatened acts until the merits of the case can be heard.[34] It may be resorted to only by a litigant for the preservation or protection of his rights or interests and for no other purpose during the pendency of the principal action.[35] It is resorted to only when there is a pressing necessity to avoid injurious consequences, which cannot be remedied under any standard compensation. The resolution of an application for a writ of preliminary injunction rests upon the existence of an emergency or of a special recourse before the main case can be heard in due course of proceedings.[36]

Section 3, Rule 58, of the Rules of Court enumerates the grounds for the issuance of a preliminary injunction:

SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be granted when it is established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually;

(b) That the commission, continuance, or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

Under the cited provision, a clear and positive right especially calling for judicial protection must be shown. Injunction is not a remedy to protect or enforce contingent, abstract, or future rights; it will not issue to protect a right not in esse and which may never arise, or to restrain an act which does not give rise to a cause of action. There must exist an actual right.[37] There must be a patent showing by the complaint that there exists a right to be protected and that the acts against which the writ is to be directed are violative of said right.[38]

There are generally two kinds of preliminary injunction: (1) a prohibitory injunction which commands a party to refrain from doing a particular act; and (2) a mandatory injunction which commands the performance of some positive act to correct a wrong in the past.[39]

The Court of Appeals did not err in reviewing proof adduced by petitioners to support its application for the issuance of the writ. While the matter of the issuance of a writ of preliminary injunction is addressed to the sound discretion of the trial court, this discretion must be exercised based upon the grounds and in the manner provided by law. The exercise of discretion by the trial court in injunctive matters is generally not interfered with save in cases of manifest abuse.[40] And to determine whether there was abuse of discretion, a scrutiny must be made of the bases, if any, considered by the trial court in granting injunctive relief. Be it stressed that injunction is the strong arm of equity which must be issued with great caution and deliberation, and only in cases of great injury where there is no commensurate remedy in damages.[41]

In the present case, we find that there was scant justification for the issuance of the writ of preliminary injunction.

Petitioners anchor their legal right to Dockers and Design trademark on the Certificate of Registration issued in their favor by the Bureau of Patents, Trademarks and Technology Transfer.* According to Section 138 of Republic Act No. 8293,[42] this Certificate of Registration is prima facie evidence of the validity of the registration, the registrants ownership of the mark and of the exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. Section 147.1 of said law likewise grants the owner of the registered mark the exclusive right to prevent all third parties not having the owners consent from

using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trademark is registered if such use results in a likelihood of confusion.

However, attention should be given to the fact that petitioners registered trademark consists of two elements: (1) the word mark Dockers and (2) the wing-shaped design or logo. Notably, there is only one registration for both features of the trademark giving the impression that the two should be considered as a single unit. Clinton Apparelles trademark, on the other hand, uses the Paddocks word mark on top of a logo which according to petitioners is a slavish imitation of the Dockers design. The two trademarks apparently differ in their word marks (Dockers and Paddocks), but again according to petitioners, they employ similar or identical logos. It could thus be said that respondent only appropriates petitioners logo and not the word mark Dockers; it uses only a portion of the registered trademark and not the whole.

Given the single registration of the trademark Dockers and Design and considering that respondent only uses the assailed device but a different word mark, the right to prevent the latter from using the challenged Paddocks device is far from clear. Stated otherwise, it is not evident whether the single registration of the trademark Dockers and Design confers on the owner the right to prevent the use of a fraction thereof in the course of trade. It is also unclear whether the use without the owners consent of a port ion of a trademark registered in its entirety constitutes material or substantial invasion of the owners right.

It is likewise not settled whether the wing-shaped logo, as opposed to the word mark, is the dominant or central feature of petitioners trademarkthe feature that prevails or is retained in the minds of the public an imitation of which creates the likelihood of deceiving the public and constitutes trademark infringement.[43] In sum, there are vital matters which have yet and may only be established through a full-blown trial.

From the above discussion, we find that petitioners right to injunctive relief has not been clearly and unmistakably demonstrated. The right has yet to be determined. Petitioners also failed to show proof that there is material and substantial invasion of their right to warrant the issuance of an injunctive writ. Neither were petitioners able to show any urgent and permanent necessity for the writ to prevent serious damage.

Petitioners wish to impress upon the Court the urgent necessity for injunctive relief, urging that the erosion or dilution of their trademark is protectable. They assert that a trademark owner does not have to wait until the mark loses its distinctiveness to obtain injunctive relief, and that the mere use by an infringer of a registered mark is already actionable even if he has not yet profited thereby or has damaged the trademark owner.

Trademark dilution is the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of: (1) competition between the owner of the famous mark and other parties; or (2) likelihood of confusion, mistake or deception. Subject to the principles of equity, the owner of a famous mark is entitled to an injunction against another persons commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of

the mark. This is intended to protect famous marks from subsequent uses that blur distinctiveness of the mark or tarnish or disparage it.[44]

Based on the foregoing, to be eligible for protection from dilution, there has to be a finding that: (1) the trademark sought to be protected is famous and distinctive; (2) the use by respondent of Paddocks and Design began after the petitioners mark became famous; and (3) such subsequent use defames petitioners mark. In the case at bar, petitioners have yet to establish whether Dockers and Design has acquired a strong degree of distinctiveness and whether the other two elements are present for their cause to fall within the ambit of the invoked protection. The Trends MBL Survey Report which petitioners presented in a bid to establish that there was confusing similarity between two marks is not sufficient proof of any dilution that the trial court must enjoin.

The Court also finds that the trial courts order granting the writ did not adequately detail the reasons for the grant, contrary to our ruling in University of the Philippines v. Hon. Catungal Jr., [45] wherein we held that:

The trial court must state its own findings of fact and cite particular law to justify grant of preliminary injunction. Utmost care in this regard is demanded.[46]

The trial court in granting the injunctive relief tersely ratiocinated that the plaintiffs appear to be entitled to the relief prayed for and this Court is of the considered belief and humble view that, without necessarily delving on the merits, the paramount interest of justice will be better served if the status quo shall be maintained. Clearly, this statement falls short of the requirement laid down by the above-quoted case. Similarly, in Developers Group of Companies, Inc. v. Court of Appeals,[47] we held that it was not enough for the trial court, in its order granting the writ, to simply say that it appeared after hearing that plaintiff is entitled to the relief prayed for.

In addition, we agree with the Court of Appeals in its holding that the damages the petitioners had suffered or continue to suffer may be compensated in terms of monetary consideration. As held in Government Service Insurance System v. Florendo:[48]

a writ of injunction should never have been issued when an action for damages would adequately compensate the injuries caused. The very foundation of the jurisdiction to issue the writ of injunction rests in the probability of irreparable injury, inadequacy of pecuniary estimation and the prevention of the multiplicity of suits, and where facts are not shown to bring the case within these conditions, the relief of injunction should be refused.[49]

We also believe that the issued injunctive writ, if allowed, would dispose of the case on the merits as it would effectively enjoin the use of the Paddocks device without proof that there is basis for such action. The prevailing rule is that courts should avoid issuing a writ of preliminary injunction that would in effect dispose of the main case without trial.[50] There would be a prejudgment of the main case and a reversal of the rule on the burden of proof since it would assume the proposition which petitioners are inceptively bound to prove.[51]

Parenthetically, we find no flaw in the Court of Appeals disquisition on the consequences of the issued injunction. An exercise of caution, we believe that such reflection is necessary to weigh the alleged entitlement to the writ vis--vis its possible effects. The injunction issued in the instant case is of a serious nature as it tends to do more than to maintain the status quo. In fact, the assailed injunction if sustained would bring about the result desired by petitioners without a trial on the merits.

Then again, we believe the Court of Appeals overstepped its authority when it declared that the alleged similarity as to the two logos is hardly confusing to the public. The only issue brought before the Court of Appeals through respondents Petition under Rule 65 of the Rules of Court involved the grave abuse of discretion allegedly committed by the trial court in granting the TRO and the writ of preliminary injunction. The appellate court in making such a statement went beyond that issue and touched on the merits of the infringement case, which remains to be decided by the trial court. In our view, it was premature for the Court of Appeals to declare that there is no confusion between the two devices or logos. That matter remains to be decided on by the trial court.

Finally, we have no contention against the procedure adopted by the trial court in resolving the application for an injunctive writ and we believe that respondent was accorded due process. Due process, in essence, is simply an opportunity to be heard. And in applications for preliminary injunction, the requirement of hearing and prior notice before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction must undergo a trial-type hearing, it being a hornbook doctrine that a formal or trial-type hearing is not at all times and in all instances essential to due process. Due process simply means giving every contending party the opportunity to be heard and the court to consider every piece of evidence presented in their favor. Accordingly, this Court has in the case of Co v. Calimag, Jr.,[52] rejected a claim of denial of due process where such claimant was given the opportunity to be heard, having submitted his counter-affidavit and memorandum in support of his position.[53]

After a careful consideration of the facts and arguments of the parties, the Court finds that petitioners did not adequately prove their entitlement to the injunctive writ. In the absence of proof of a legal right and the injury sustained by the applicant, an order of the trial court granting the issuance of an injunctive writ will be set aside for having been issued with grave abuse of discretion.[54] Conformably, the Court of Appeals was correct in setting aside the assailed orders of the trial court.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of Appeals dated 21 December 1998 and its Resolution dated 10 May 1999 are AFFIRMED. Costs against petitioners.

SO ORDERED.