Emzee Foods Inc. v. Elar Foods GR.

220558 Feb 17, 2021

Facts:
A business is remembered and revered by its goodwill and reputation. Hence, for a business, its mark is not
simply a random, meaningless combination of letters, phrases or symbols. Rather these emblems embody the
quality of the goods and services offered by the entity. For these reasons, the law steps in to protect its
intellectual property rights.

Sometime in 1970, spouses Jose and Leonor Lontoc (spouses Lontoc) established a business of selling Filipino
food and roasted pigs, which they marketed under the name "ELARS Lechon."[4]

Desiring to leave a legacy, in 1989, the spouses Lontoc incorporated their food business. Thus, on May 19, 1989,
Elarfoods, Inc. (respondent) was granted a Certificate of Registration by the Securities and Exchange
Commission (SEC).[5]

Since then, the spouses Lontoc actively managed the respondent corporation. Over the years, respondent used
Elarfoods, Inc. as its business name and marketed its products, particularly, its roasted pigs as "ELAR'S
LECHON ON A BAMBOO TRAY." Eventually, it rose to notoriety as the "ELAR'S LECHON" brand.[6]

However, without respondent's knowledge and permission, petitioner sold and distributed roasted pigs using the
marks "ELARZ LECHON", "ELAR LECHON," "PIG DEVICE" and "ON A BAMBOO TRAY", thereby making it
appear that petitioner was a branch or franchisee of the respondent.

On September 25, 2001, respondent filed with the IPO an application for registration of the trademark "ELARS
LECHON." Thereafter, on October 1, 2001, respondent filed two more applications for the marks "ON A
BAMBOO TRAY" and "ROASTED PIG DEVICE" (collectively, subject marks).[7] The mark "ROASTED PIG
DEVICE" is a design or representation of a roasted pig on a bamboo stick placed on top of a bamboo tray.[8]

On October 2, 2001, respondent sent the petitioner a Cease and Desist Letter[9] urging the latter to stop using the
subject marks or any variations thereof. However, petitioner ignored the demand and continued selling its roasted
pigs under the marks "ELARZLECHON," "ELAR LECHON," "PIG DEVICE," and "ON A BAMBOO TRAY,"
thereby causing confusion as to the source and origin of the products.[10]

Thereafter, respondent filed three separate complaints[11] for unfair competition and violation of intellectual
property rights against petitioner for the latter's use of the former's trademarks "ELARS LECHON" "ROASTED
PIG DEVICE," and "ON A BAMBOO TRAY." Respondent claimed that petitioner unfairly rode on its fame,
goodwill and reputation, causing its sales and profits to be diverted to petitioner.

Issue:

The main issues in the instant case revolve around the petitioner's liability for damages for violating the
respondent's intellectual property rights and the propriety of granting an injunction against the petitioner.

1
Ruling:

The petition is denied.

At the fore is a legal battle between two food corporations marketing and selling a Filipino staple - lechon.
Particularly, both parties are fighting over the right to exclusively use the marks "ELARS LECHON," "PIG
DEVICE," and "ON A BAMBOO TRAY" in their respective businesses. On the one hand, respondent claims that
it is the true and lawful owner of the subject marks, while on the other hand, petitioner avers that the rightful
owner of the said marks are the spouses Lontoc (currently, the Estate), who had originally created the marks. For
the Court to properly determine liability for damages, it must first resolve the issue of ownership of the subject
marks.

Notably, a mark pertains to "any visible sign capable of distinguishing the goods (trademark) or services (service
[55]
mark) of an enterprise and shall include a stamped or marked container of goods."  Particularly, a trademark is
"any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a
manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt
[56] [57]
by others."  A trademark is an intellectual property that deserves protection under the law.

On this score, the Intellectual Property Code (IP Code) states how a mark is obtained and, correlatively,
enumerates the rights of a trademark owner:

Section 122. How Marks are Acquired. - The rights in a mark shall be acquired through registration made
validly in accordance with the provisions of this law.

x x x x

Section 147. Rights Conferred. - 147.1. The owner of a registered mark shall have the exclusive right to
prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs
or containers for goods or services which are identical or similar to those in respect of which the trademark is
registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for
identical goods or services, a likelihood of confusion shall be presumed.

x x x x

Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has identified in
the mind of the public the goods he manufactures or deals in, his business or services from those of others,
whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or
services so identified, which will be protected in the same manner as other property rights.[58]
[59]
In the recent case of Zuneca Pharmaceutical, et al. v. Natrapharm, Inc.,  the Court exhaustively discussed the
manner of acquiring ownership of a particular trademark which, over the years, vacillated between registration
and actual use. The ponencia elaborately surveyed all the intellectual property laws passed in our country,
beginning from the Spanish Royal Decree of October 26, 1888, which required business entities to obtain a
certificate before using a particular trademark. This rule, however, changed in 1903, when Act No. 666 was
enacted and required actual use of the mark as a means of obtaining ownership thereof. Then, in 1947, R.A. No.
166 (Trademark Law) was passed which strengthened the rule of actual use, while imposing non-abandonment
of the mark as an additional prerequisite for registration. Fast-forward to 1998, the IP Code was passed and the
manner of acquiring ownership of a trademark reverted to registration, subject to the rule that the first-to-file shall
[60]
be prioritized to the exclusion of all other applicants/users.

[61]
Essentially, Zuneca  clarified that, as the rule now stands, the lawful owner of the mark shall be the person or
entity who first registers it in good faith:

Once the IP Code took effect, however, the general rule on ownership was changed and repealed. At present, as
expressed in the language of the provisions of the IP Code, prior use no longer determines the acquisition of
ownership of a mark in light of the adoption of the rule that ownership of a mark is acquired through registration
made validly in accordance with the provisions of the IP Code. Accordingly, the trademark provisions of the IP
Code use the term "owner" in relation to registrations. This fact is also apparent when comparing the provisions
of the Trademark Law, as amended, and the IP Code, x x x.[62]
It must be noted that respondent filed applications for the registration of the subject trademarks "ON A BAMBOO
[63]
TRAY," "ELARS LECHON" and "ROASTED PIG DEVICE."  Recognizing their ownership of the said marks, the
[64] [65]
IPO granted the respondent Certificates of Registration on February 10, 2005,  April 28, 2006,  and October
[66]
2, 2006,  valid for a period of 10 years. Indeed, the registration of the marks gives rise to a presumption of the

2
 [67]
validity of registration, the registrant's ownership of the marks, and the right to its exclusive use.  Petitioner
failed to overcome said presumption. Furthermore, according to the database of the IPO, the respondent's right
[68]
to use the subject trademarks has been renewed for another 10 years.  Thus, as of date, the respondent
unequivocally enjoys the exclusive right to use the subject trademarks.

It likewise bears stressing that even prior to the registration of the subject trademarks, the respondent has been
consistently using said marks since its incorporation in 1989. Hence, even under the law applicable at that time,
[69]
namely, Section 2-A of R.A. No. 166,  respondent's consistent use of the subject trademarks confirms its
ownership thereof.

Despite the overwhelming evidence in respondent's favor, petitioner staunchly insists that the owner of the
subject trademarks is the Estate of the spouses Lontoc.

This contention deserves scant consideration.

It cannot be gainsaid that respondent corporation is a creation of the spouses Lontoc themselves. In 1989, the
spouses Lontoc wanted to leave their legacy, and thus incorporated the respondent to ensure the continuation of
their lechon and food business. From that moment, the spouses Lontoc transferred to the respondent the
ownership of ELARS Lechon and the subject marks in connection with the sale of its roasted pigs and other
products.[70] Moreover, all throughout their lives, the spouses Lontoc actively managed respondent and
consistently used the subject trademarks in promoting the latter's goods. Certainly, the spouses Lontoc's overt
acts of incorporating respondent, actively managing it, and consistently representing to the public that ELARS
Lechon is operating under the respondent, conclusively prove that indeed the "ELARS LECHON" brand has been
transferred to, and is owned by respondent. As such, the respondent has the exclusive right to use the name
ELARS LECHON to the exclusion of all other parties, including the descendants of the spouses Lontoc.[71]

In fact, Jose, as then President and General Manager of respondent, eagerly promoted Elar's Lechon as the
respondent's business.[72] This was established through Jose's Letter dated October 7, 1996 under respondent's
letterhead, where he declared that "we are one of the biggest lechon producers in the country under our brand
name — "ELAR LECHON on a BAMBOO TRAY"[73] Indeed, Jose's unqualified representation that Elar's Lechon
is the business of respondent confirms that even without a formal assignment, exclusive ownership of the mark
"ELARS LECHON" and its adjunct trademarks have been vested on respondent. Actually, even the petitioner
admitted that respondent is an "alter ego of the spouses Lontoc,"[74] implying that the rights and interests of
respondent are identical and inseparable from those of the spouses Lontoc.

Similarly, respondent's prior adoption and continuous use of the subject trademarks since 1990 are bolstered by
documents consisting of various commercial sales invoices from November 1990 to February 1995.[75]

In addition, respondent invested time and money in promoting and advertising its food products and roasted pigs
"ELARS LECHON ON A BAMBOO TRAY" or popularly known by the public as "Elar's Lechon."[76] Certainly,
these cumulative acts that have been done for decades have resulted in respondent's notoriety to the public as
the source of roasted pigs bearing the subject trademarks.[77]

Interestingly, even the BLA ruled that the spouses Lontoc, by virtue of prior commercial use under Section 2-A of
R.A. No. 166 are the owners of the subject trademarks. However, it refused to recognize the transfer of
ownership to the respondent due to the absence of a written assignment in favor of the latter.

Notably, this lacuna was filled by IPO Director General Blancaflor who explained that the fact of the transfer may
not be disproven by the absence of a written assignment. A trademark, like any incorporeal right may be
disposed of not only by way of formal assignment.[78] More importantly, the subject trademarks were not yet
registered when respondent started doing business under the Elar's Lechon brand.[79] Neither was there a
pending application for the said trademarks. Besides, under Article 1624[80] of the Civil Code, in relation to Article
1475[81] of the same Code, the assignment of incorporeal rights, like an unregistered mark, is perfected by mere
consent without need of a written contract. Thus, what matters is that from the time of respondent's incorporation
until present, respondent has used and exclusively appropriated the subject trademarks as its own.

3
Here, petitioner's product is lechon which is also the product of respondent. Since petitioner uses "ELARZ
LECHON", "ELAR LECHON", "PIG DEVICE", and "ON A BAMBOO TRAY" on their packaging materials and
signages in the same manner like respondent uses "ELAR'S LECHON" mark on its lechon products, petitioner
has obviously clothed its product the general appearance of respondent's product itself. More, there is no notice
to the buying public that "ELARZ LECHON" is not respondent's product, albeit it is the latter that has the
exclusive right to the trademark "ELAR'S LECHON." There is indeed a clear intent to deceive the public on
petitioner's part, x x x[83]
[84]
Remarkably, in UFC Philippines, Inc. v. Barrio Fiesta Manufacturing Corporation,  the Court enumerated the
kinds of confusion caused by similar marks, and the tests that aid in determining the likelihood of confusion:

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

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

x x x x

Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of
confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business
(source or origin confusion), where, although the goods of the parties are different, the product, the mark of which
registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of
an earlier product, and the public would then be deceived either into that belief or into the belief that there is
some connection between the two parties, though inexistent.[85] (Citations omitted)

Applying the dominancy test to this case requires us to look only at the mark submitted by petitioner in its
application, while we give importance to the aural and visual impressions the mark is likely to create in the minds
of the buyers.

Applying the dominancy test to the case at bar, it is very obvious that the petitioner's marks "ELARZ LECHON"
and "ELAR LECHON" bear an indubitable likeness with respondent's "ELARS LECHON." As can easily be seen,
both marks use the essential and dominant word "ELAR". The only difference between the petitioner's mark from
that of respondent's are the last letters Z and S, respectively. However, the letters Z and S sound similar when
pronounced. Thus, both marks are not only visually similar, but are phonetically and aurally similar as well. To top
it all off, both marks are used in selling lechon products. Verily, there exists a high likelihood that the consumers
may conclude an association or relation between the products. Likewise, the uncanny resemblance between the
marks may even lead purchasers to believe that the petitioner and respondent are the same entity.

In fine, petitioner's use of marks similar to those of the respondent's constitutes a violation of the latter's
intellectual property rights. It is high time for petitioner to desist from conveniently latching on to the good will and
reputation built by the respondent over the years. To fully protect the respondent's rights, it is imperative to order
the petitioner to cease and desist from using the former's marks. This remedy is recognized under Section
156.4[90] of the IP Code, which grants the complainant the right to demand an injunction, upon proper showing of
its entitlement thereto. A similar redress was granted in the case of Asia Pacific Resources International
Holdings, Ltd. v. Paperone, Inc.,[91] where the Court affirmed the orders of the BLA and the IPO Director General
commanding the party guilty of unfair competition to cease and desist from using the complainant's marks.[

4
Berris v. Norvy Abyadang GR 183404 Oct 13, 2010

Facts:

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 Opposition 4  against the mark under application
cra1aw

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.

Issue:
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].

Ruling:

The basic law on trademark, infringement, and unfair competition is Republic Act
(R.A.) No. 829314  (Intellectual Property Code of the Philippines), specifically
cra1aw

Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its
effectivity, the applicable law was R.A. No. 166, 15  as amended. cra1aw

Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but
merely provided in Section 239.116  that Acts and parts of Acts inconsistent with it
cra1aw

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.17  It also defines a "collective mark" as any
cra1aw

visible sign designated as such in the application for registration and capable of
distinguishing the origin or any other common characteristic, including the quality of
goods or services of different enterprises which use the sign under the control of the
registered owner of the collective mark.18 chanroblesvirtuallawlibrary

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

5
used by a manufacturer or merchant on his goods to identify and distinguish them
from those manufactured, sold, or dealt by another.19  A trademark, being a special cra1aw

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 12220  of R.A. No. 8293 provides that the rights in a mark shall be acquired
cra1aw

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 connection with the goods or services and those that are related thereto
specified in the certificate.21  R.A. No. 8293, however, requires the applicant for
cra1aw

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.22  In other words, the prima facie presumption brought
cra1aw

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.23  Moreover, the presumption may likewise be defeated cra1aw

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.24 chanroblesvirtuallawlibrary

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.25 chanroblesvirtuallawlibrary

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, 200226  with Application No. 4-2002-0010272; (2) cra1aw

its IPO certificate of registration dated October 25, 2004, 27  with Registration No. 4- cra1aw

2002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its
packaging28  bearing the mark "D-10 80 WP"; (4) photocopies of its sales invoices
cra1aw

and official receipts;29  and (5) its notarized DAU dated April 23, 2003, 30  stating that
cra1aw cra1aw

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 packaging31  for his marketed fungicide bearing mark "NS D-10 PLUS"; (2)
cra1aw

Abyadangs Affidavit dated February 14, 2006,32  stating among others that the mark cra1aw

"NS D-10 PLUS" was his own creation derived from: N for Norvy, his name; S for
Soledad, his wifes name; D the first letter for December, his birth month; 10 for
October, the 10th month of the year, the month of his business name registration;
and PLUS to connote superior quality; that when he applied for registration, there

6
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,
200533  issued by the FPA, stating that "NS D-10 PLUS" is owned and distributed by
cra1aw

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,
200534  issued by the FPA, stating that, per monitoring among dealers in Region I
cra1aw

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 the presence or sale
of Berris product; (5) Certification dated March 14, 2006 35  issued by the FPA,
cra1aw

certifying that all pesticides must be registered with the said office pursuant to
Section 936  of Presidential Decree (P.D.) No. 114437  and Section 1, Article II of FPA
cra1aw cra1aw

Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16,
200638  issued by the FPA, certifying that the pesticide "D-10 80 WP" was registered
cra1aw

by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply 39  in La cra1aw

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, 40  and which stated that it had
cra1aw

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. 41  What is more, the cra1aw

DAU is buttressed by the Certification dated April 21, 2006 42  issued by the Bureau
cra1aw

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

7
"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

teststhe 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.43 chanroblesvirtuallawlibrary

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

8
labels so that the observer may draw conclusion on whether one is confusingly
similar to the other.44
chanroblesvirtuallawlibrary

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.45chanroblesvirtuallawlibrary

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 same 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, 46  and considering its challenge
cra1aw

by Abyadang with respect to the meaning he has given to it, what remains 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 Abyadangs
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

9
bearing the mark through actual use over a period of time, but also to safeguard the
public as consumers against confusion on these goods.47  On this matter of particular
cra1aw

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.48chanroblesvirtuallawlibrary

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.

Kolin v. kolin GR 228165 February 9, 2021

10
Facts:

On August 17, 1993, Kolin Electronics Industrial Supply (KEIS), owned by a certain Miguel Tan, filed with the
Bureau of Patents, Trademarks and Technology Transfer (BPTTT; now known as the Intellectual Property Office
or IPO) an application for registration of Trademark Application No. 87497 for KOLIN covering the following
products under Class 9: automatic voltage regulator, converter, recharger, stereo booster, AC-DC regulated
[5]
power supply, step-down transformer, and PA amplifier AC-DC.

In a Deed of Assignment of Assets dated November 20, 1995, Miguel Tan assigned in favor of KECI all the
assets. and merchandise stocks of KEIS, including its pending application for registration of the KOLIN mark.
[6]
 The trademark has been continuously used in various products under the said classification, and the products
[7]
are being offered for sale at KECI's business establishments.

On February 29, 1996, Taiwan Kolin Co., Ltd. (TKC) filed with the BPTTT Trademark Application No. 4-1996-
106310  for KOLIN initially covering the following goods: "color television, refrigerator, window-type air
[8]

[9]
conditioner, split-type air conditioner, electric fan, and water dispenser".

During the pendency of its application, TKC filed a verified Notice of Opposition on July 22, 1998 against KECI's
trademark application for KOLIN. TKC claimed that it is the owner of Taiwan registrations for KOLIN and
KOLIN SOLID SERIES and that it has a pending application for KOLIN,
[10]
 thus the grant of
the KOLIN application would cause TKC grave and irreparable damage to its business reputation and
goodwill because KOLIN is identical, if not confusingly similar, to TKC's marks. TKC further claimed that if
KECI's application for KOLIN would be granted, this would likely mislead the public as to the nature, quality,
[11]
and characteristics of its goods or products bearing the "KOLIN" trademark.

On December 27, 2002, Director Estrellita Beltran-Abelardo of the Intellectual Property Office Bureau of Legal
[12]
Affairs (IPO-BLA) rendered Decision No. 2002-46  (Inter Partes Case No. 14-1998-00050) denying TKC's
opposition and giving due course to KECI's trademark application for KOLIN.
[13]
 Premised on the factual
[14]
finding that the subject marks are "the same or almost identical,"  the IPO-BLA then opted to focus on the
[15]
discussion of the prior adopter and user of the mark.  The IPO-BLA examined the evidence presented by the
parties and concluded that KECI "is the prior adopter and user of the mark 'KOLIN' in the Philippines, having
been able to prove the date of first use of its mark in the year 1989, which is ahead of [TKC's] use in the
[16]
Philippines x x x in the year 1996."  Thus, TKC's opposition was denied and KECI's trademark application
for KOLIN was given due course.

Issue:

The main issue in this case is whether KPII should be allowed to register its kolin mark.

Ruling:

The Petition is granted. KPII is not allowed to register its kolin mark for "Televisions and DVD players."

KPII'S TRADEMARK APPLICATION IS NOT REGISTRABLE BECAUSE IT WILL CAUSE DAMAGE TO KECI

11
 [111]
In its Petition,  KECI squarely raises the issue of likelihood of confusion, arguing that KPII's trademark should
not be registered based on, among others, Section 123.1(d) of the IP Code, which reads:

SECTION 123. Registrability. - 123.1. A mark cannot be registered if it:

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

(i) The same goods or services, or

(ii) Closely related goods or services, or

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

x x x x 
In determining likelihood of confusion - which can manifest in the form of "confusion of goods" and/or "confusion
[112]
of business"  - several factors may be taken into account, such as:

a) the strength of plaintiffs mark;

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

c) the proximity of the products or services;

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

e) evidence of actual confusion;

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

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

12
h) the sophistication of the buyers.[113]

These criteria may be collectively referred to as the multifactor test. Out of these criteria, there are two which
[114] [115]
are uniformly deemed significant under the Trademark Law  and the IP Code:  the resemblance of marks
(the degree of similarity between the plaintiffs and the defendant's marks) and the relatedness of goods or
services (the proximity of products or services). Nevertheless, the other factors also contribute to the finding of
likelihood of confusion, as will be discussed.

A. Resemblance of marks

The marks involved in this dispute are KECI's KOLIN and KPII's kolin. In assessing the resemblance of
marks to determine the existence of likelihood of confusion, there are two tests prescribed by jurisprudence, viz.:

Jurisprudence has developed two tests in determining similarity and likelihood of confusion in trademark
resemblance:
(a) the Dominancy Test applied in Asia Brewery, Inc. vs. Court of Appeals and other cases, and

(b) the Holistic or Totality Test used in Del Monte Corporation vs. Court of Appeals and its preceding cases.
The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks which might
cause confusion or deception, and thus infringement. If the competing trademark contains the main, essential or
dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication
or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The
question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public
or deceive purchasers.

On the other hand, the Holistic Test requires that the entirety of the marks in question be considered in resolving
confusing similarity. Comparison of words is not the only determining factor. The trademarks in their entirety as
they appear in their respective labels or hang tags must also be considered in relation to the goods to which they
are attached. The discerning eye of the observer must focus not only on the predominant words but also on the
other features appearing in both labels in order that he may draw his conclusion whether one is confusingly
similar to the other.[116] (Emphasis supplied)
Unfortunately, jurisprudence has not been consistent in saying what test should be used under what
circumstances such that either or both tests may viably be employed by the IPO or the courts in finding
resemblance between marks. As expertly outlined by Associate Justice Marvic M.V.F. Leonen, there are
[117]
contradictory lines of jurisprudence advocating the use of the Dominancy Test alone,  the Holistic Test alone,
[118] [119] [120]
 or both tests.  There is also at least one case where the Court did not use either test.

Needless to say, the current state of jurisprudence in deciding the resemblance of marks is unclear. Out of the
two tests, however, only the Dominancy Test has been incorporated in the IP Code. This was discussed
[121]
in McDonald's Corporation v. L.C. Big Mak Burger, Inc.,  where the Court also observed its own reliance on
the dominancy test, thus:

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

x x x x

The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property
Code which defines infringement as the "colorable imitation of a registered mark x x x or a dominant feature
thereof."[122] (Emphasis supplied; italics omitted)
More than an indicator of a mere preference for the Dominancy Test, it appears that the legislative intent in
explicitly adopting the Dominancy Test was to abandon the Holistic Test altogether, as can be seen in the
legislative deliberations:

Trademarks

Part III of the Code is the new law on trademarks.

x x x x

13
To resolve the conflicting doctrines regarding what constitutes colorable imitation of a registered mark,
the Code adopts the Dominancy Test so that any person who uses in commerce any colorable imitation of [a]
registered mark or a dominant feature thereof shall be liable for damages for infringement.

x x x x

Policy Issues

We have summarized the basic features of the proposed Intellectual Property Code. Let me now try to identify
provisions of the Code that may be the focus of policy debates.

Without being exclusive, they are the following:

x x x x

Trademarks

x x x x

8. The committee notes the varying decisions of the Supreme Court regarding colorable imitation of a registered
mark. There are decisions which espouse the Dominancy Test, while there are others which use the
Holistic Test. We, therefore, recommend the adoption of the Dominancy Test to resolve once and for all
the debate.[123] (Emphasis supplied)

Considering the adoption of the Dominancy Test and the abandonment of the Holistic Test, as confirmed by the
provisions of the IP Code and the legislative deliberations, the Court hereby makes it crystal clear that the
use of the Holistic Test in determining the resemblance of marks has been abandoned.

The inapplicability of the Taiwan Kolin case in the case at bar is thus evident. As correctly pointed out by
[124]
Associate Justice Leonen,  the Taiwan Kolin case used the Holistic Test in evaluating trademark
resemblance. This is improper precedent because the Dominancy Test is what is prescribed under the law.

Using the Dominancy Test, the Court should now determine the resemblance between KOLIN and kolin in
terms of the similarity of the dominant features used. This is consistent with the basic rule in determining
resemblance of marks, which requires that the appearance, sound, meaning, and overall impressions generated
by the marks shall be considered.

Another consideration is the type of marks used. Logically, this may affect the determination of resemblance of
the marks in terms of their visual, aural, or connotative aspects, which are key areas to consider in using the
Dominancy Test.

[128]
As summarized in the IPO website,  the types of marks allowed to be registered in the Philippines are the
following: "word mark," "figurative mark," "figurative mark with words," "3D mark," and "stamped or marked
containers of goods." Notably, the IP Code and the current Trademark Regulations do not define these terms and
how they impact the finding of resemblance between marks. However, IPOPHL Memorandum Circular No. 17-
010, Rules and Regulations on Trademarks, Service Marks, Trade names and Marked or Stamped
Containers makes an explicit reference to "word marks," as follows:

RULE 402. Reproduction of the Mark. - x x x

In the case of word marks or if no special characteristics have to be shown, such as design, style of lettering,
color, diacritical marks, or unusual forms of punctuation, the mark must be represented in standard characters.
The specification of the mark to be reproduced will be indicated in the application form and/or published on the
website.

xxxx

That word marks protect the word itself stands to reason. Since there are no special characteristics to be shown
in the reproduction of the mark in the application, the word itself is the subject of protection. This understanding
of the protection given to word marks is also consistent with trademark jurisprudence in the United States, where
most of our intellectual property laws were patterned from

14
Using the persuasive logic in Cunningham together with the Dominancy Test, there is no doubt that the minor
differences between kolin and KOLIN mark should be completely disregarded. The fact that KPII's trademark
application possesses special characteristics (e.g., the italicized orange letter "i") not present in
KECI's KOLIN word mark makes no difference in terms of appearance, sound, connotation, or overall
impression because the "KOLIN" word itself is the subject of KECI's registration.

B. Relatedness of Goods/Services

The goods involved in the case at bar are as follows:

KECI's KOLIN KPII's kolin
Automatic Voltage Regulator, Converter, Televisions, DVD Players
Recharger, Stereo Booster, AC-DC Regulated
Power Supply, Step-Down Transformer, PA
Amplified AC-DC.
In assessing relatedness of goods/services to determine likelihood of confusion, Mighty Corporation provides a
list of factors that should be considered, viz.:

Non-competing goods may be those which, though they are not in actual competition, are so related to each
other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of
business can arise out of the use of similar marks. They may also be those which, being entirely unrelated,
cannot be assumed to have a common source; hence, there is no confusion of business, even though similar
marks are used. Thus, there is no trademark infringement if the public does not expect the plaintiff to make or sell
the same class of goods as those made or sold by the defendant.

In resolving whether goods are related, several factors come into play:

(a) the business (and its location) to which the goods belong

(b) the class of product to which the goods belong

(c) the product's quality, quantity, or size, including the nature of the package, wrapper or
container

(d) the nature and cost of the articles

(e) the descriptive properties, physical attributes or essential characteristics with reference to
their form, composition, texture or quality

(f) the purpose of the goods

(g) whether the article is bought for immediate consumption, that is, day-to-day household
items

15
(h) the fields of manufacture

(i) the conditions under which the article is usually purchased and

j) the channels of trade through which the goods flow, how they are distributed, marketed,
displayed and sold.
The wisdom of this approach is its recognition that each trademark infringement case presents its own unique set
of facts. No single factor is preeminent, nor can the presence or absence of one determine, without analysis of
the others, the outcome of an infringement suit. Rather, the court is required to sift the evidence relevant to each
of the criteria. This requires that the entire panoply of elements constituting the relevant factual landscape
be comprehensively examined. It is a weighing and balancing process. With reference to this ultimate question,
and from a balancing of the determinations reached on all of the factors, a conclusion is reached whether the
parties have a right to the relief sought.[132] (Emphasis supplied)

Indeed, a comprehensive examination of all these factors is needed to ensure that pronouncements on legal
relatedness are not based on skewed factual premises, especially since relatedness of goods/services
significantly impacts the finding of likelihood of confusion as mentioned above.

Too, because of the importance of relatedness of goods/services in deciding controversies involving the issue of
likelihood of confusion of marks, the Court en banc takes a closer look at one factor inconsistent with our laws
and creates problems with making precedents on legal relatedness.

Considering the foregoing discussion, the Court hereby abandons the use of product or service
classification as a factor in determining relatedness or non-relatedness.

In this light, the inapplicability of the Taiwan Kolin case as precedent in the instant controversy becomes all the
more apparent because it did not comprehensively consider all the jurisprudential factors in determining
relatedness and it included an inapposite discussion on subcategories in the NCL as an additional rationale for its
conclusion on non-relatedness.

Based on the evidence on record and reasonable inferences in accord with common experience, the factors to
determine relatedness in Mighty Corporation yields the conclusion that the goods covered
by KOLIN and kolin are related, as seen in the following table:

(d) the nature and cost of the articles Goods covered by KOLIN and kolin are
electronic m nature, relatively expensive, and
rarely bought. It will likely take several years
before consumers would make repeat
purchases of the goods involved.
(e) the descriptive properties, physical Considering that they are electronic goods,
attributes or essential characteristics with goods covered by KOLIN and kolin are
reference to their form, composition, likely made of metal. It is also likely that such
texture or quality goods cannot be easily carried around and are
usually brought back to the consumer's place
after being bought.
(f) the purpose of the goods The audiovisual goods covered
by kolin (Television and DVD players)
and KOLIN (stereo booster) marks can be
used for entertainment purposes.
(g) whether the article is bought for Goods covered by KOLIN and kolin are not
immediate consumption, that is, day-to-day bought for immediate consumption.
household items

16
(i) the conditions under which the article is Because they are relatively expensive and
usually purchased, and they last for a long time, goods covered
by KOLIN and kolin are rarely bought. They
are non-essential goods.
(j) the channels of trade through which the The goods covered
goods flow, how they are distributed, by KOLIN  and kolin marks will likely be
marketed, displayed and sold. offered in "the same channels of trade such as
department stores or appliance stores".[141]

Clearly, the goods covered by KOLIN and kolin are related, and this legal relatedness significantly impacts a
finding of likelihood of confusion.

Applying this reasoning to the herein dispute, it is clear that the goods covered by KECI's  KOLIN are
complementary to the goods covered by KPII's kolin and could thus be considered as related. This increases the
likelihood that consumers will at least think that the goods come from the same source. In other words, confusion
of business will likely arise.

C. Actual Confusion

The IPO-BLA stated that there is already actual confusion among consumers regarding the goods of KECI and
KPII:

More so, [KECPs] evidence consisting of various e-mails x x x it received from public consumers reflecting their
complaints, concerns, and other information about [KPII's] goods as televisions, air-conditioning units and DVD
players, are obvious showing of actual confusion of goods as well as confusion as to origin or source [of] goods.
These reveal factual confusion of the buying public between the marks in controversy.[144]

The presence of actual confusion is not an insignificant circumstance. Indeed, the evidence of actual confusion is
often considered the most persuasive evidence of likelihood of confusion because past confusion is frequently a
[145]
strong indicator of future confusion.

It is the Court's considered view that evidence of actual confusion should be considered as strong evidence of
likelihood of confusion, especially when there are concurrent findings of resemblance of marks and/or
relatedness of the goods/services. If "likelihood of confusion" is already abhorred by the infringement
[146]
provisions  of the law and the evidence of likelihood of confusion already creates basis to prevent another's
use of its mark, it should logically follow that actual confusion should be given more weight because
confusion among consumers is not only speculated but has actually transpired.

Parenthetically, the presence of this criterion in ascertaining the existence of likelihood of confusion in the
multifactor test is yet another reason why the Taiwan Kolin case should not be held as a binding precedent here.
[147]
In the Taiwan Kolin case, while there was evidence of actual confusion presented in the IPO-BLA,  this was
ultimately not considered in resolving the issue of likelihood of confusion.

D. Normal Potential Expansion of Business

The factor involving the "likelihood that the plaintiff will bridge the gap" pertains to the possibility that the plaintiff
[148]
will expand its product offerings to cover the product areas of the defendant.

As stated above, the goods covered by KOLIN and kolin are related. Therefore, it is likely that the goods
covered by kolin falls within the normal potential expansion of business of KECI.

E. Sophistication of the buyers

The goods covered by KOLIN and kolin are not inexpensive goods and consumers may pay more attention
in buying these goods. However, this does not eliminate the possibility of confusion, especially since most

17
consumers likely do not frequently purchase Automatic Voltage Regulators, stereo boosters, TV sets, DVD
players, etc. Unless they have jobs or hobbies that allow them to frequently purchase these electronic products, it
is not farfetched to suppose that they may only encounter the marks in the marketplace itself once they are about
to buy said goods once every five years or so.

Consequently, while consumers may concededly be familiar with these goods to some extent, such familiarity will
likely not be an intimate knowledge thereof associated with the frequent and repeated purchase of said goods.

It is not difficult to imagine that ordinary purchasers looking to buy a home entertainment set for their homes
would likely not know that the "XYZ" - branded stereo boosters and the "XYZ" - branded televisions they
encounter in the store are offered by different companies. If the consumer happens to like the "XYZ" brand for the
stereo boosters after seeing it for the first time, said consumer will most likely associate it with the "XYZ" brand
for television set and vice versa, especially since these goods are complementary to each other.

Even if sophisticated consumers are making a repeat purchase years after they first bought a "KOLIN" product,
confusion is still possible because of the degree of similarity of the subject marks. As mentioned above,
KECI's KOLIN mark is a word mark. Stated simply, the goodwill over the products will likely be associated
with the "KOLIN" word among consumers' minds, regardless of their sophistication. Thus, these consumers who
prefer KECI's products will likely go into stores asking and looking for the "KOLIN" brand, regardless of its
stylization or additional figurative features. If they happen to see KPII's "KOLIN" - branded products, they may not
readily know that the products come from another source and mistakenly purchase those products thinking that
these products are from KECL Any perceived visual differences between KECI's and KPII's "KOLIN" mark will
likely be disregarded, especially considering that it is not unusual for companies to rebrand and overhaul their
"brand image", including their logos, every so often.

Ultimately, there is no need to speculate and imagine how an average consumer would think and act in this
hypothetical situation because, as discussed, there is actual proof of confusion among consumers between
the KOLIN and kolin goods.
[155]
 It is clear that consumers have actually associated KPII's "KOLIN" -
branded products with KECI's business. To be sure, that consumers have complained about KPII's products
and associated the quality of such products with KECI's business shows that the concurrent use of "KOLIN" by
KPII had already unfairly smeared KECI's goodwill and reputation over its products.

F. Strength of the Mark

[156]
The factor on "strength of plaintiffs mark" pertains to the degree of distinctiveness of marks,  which can be
[157]
divided into five categories  enumerated in decreasing order of strength below:

1) Coined or fanciful marks - invented words or signs that have no real meaning (e.g., Google, Kodak). These
marks are the strongest and have the greatest chance of being registered.

2) Arbitrary marks[158] - words that have a meaning but have no logical relation to a product (e.g., SUNNY as a
mark covering mobile phones, APPLE in relation to computers/phones).

3) Suggestive marks[159] - marks that hint at the nature, quality or attributes of the product, without describing
these attributes (e.g., SUNNY for lamps, which would hint that the product will bring light to homes). If not
considered as bordering on descriptive, this may be allowed.

4) Descriptive marks[160] - describe the feature of the product such as quality, type, efficacy, use, shape, etc.
The registration of descriptive marks is generally not allowed under the IP Code.[161]

5) Generic marks[162] - words or signs that name the species or object to which they apply (e.g., CHAIR in
relation to chairs). They are not eligible for protection as marks under the IP Code.[163]

KECI's KOLIN mark is a fanciful or coined mark. Considering that it is highly distinctive, confusion would be
likely if someone else were to be allowed to concurrently use such mark in commerce.

18
G. Bad Faith

[164]
The discussion of bad faith in the case of Zuneca Pharmaceutical v. Natrapharm, Inc.  is instructive:

The concepts of bad faith and fraud were defined in MustangBekleidungswerke GmbH + Co. KG v. Hung Chiu
Ming, a case decided by the Office of the Director General of the IPO under the Trademark Law, as
amended, viz.:
What constitutes fraud or bad faith in trademark registration? Bad faith means that the applicant or registrant has
knowledge of prior creation, use and/or registration by another of an identical or similar trademark. In other
words, it is copying and using somebody else's trademark. Fraud, on the other hand, may be committed by
making false claims in connection with the trademark application and registration, particularly on the issues of
origin, ownership, and use of the trademark in question among other things.
The concept of 'fraud contemplated above is not a mere inaccurate claim as to the origin, ownership, and use of
the trademark. In civil law, the concept of fraud has been defined as the deliberate intention to cause damage or
prejudice. The same principle applies in the context of trademark registrations: fraud is intentionally making
false claims to take advantage of another's goodwill thereby causing damage or prejudice to another.
Indeed, the concepts of bad faith and fraud go hand-in-hand in this context. There is no distinction between the
concepts of bad faith and fraud in trademark registrations because the existence of one necessarily presupposes
the existence of the other.[165] (Emphasis supplied)
To recall, the KECI ownership case, promulgated on July 31, 2006, ruled that KECI is the owner of
the KOLIN mark under the Trademark Law, despite TKC's opposition that confusion is likely because it had
foreign registrations for "KOLIN" and a local trademark application for KOLIN. Thereafter, KPII (TKC's
affiliate) filed a trademark application for kolin covering the same goods.

[166]
While KECI had squarely alleged the issue of KPII's bad faith,  there was no explicit finding of bad faith on the
part of KPII in the decisions of the IPO-BLA, IPO-DG, and the CA. After an examination of the records, however,
the Court finds that circumstances in this case would lead a reasonable mind to conclude that KPII knew about
KECI's KOLIN registration when it made a trademark application for kolin.

First, there was a factual finding by the IPO-BLA that KPII is an instrumentality of TKC and TKC directly
participates in the management, supervision, and control of KPII, viz:

An exhaustive scrutiny of the records of the case convince[s] this Bureau to concur with the position of [KECI]
that indeed, [KPII] is an instrumentality of [TKC]. [KECI] presented substantial evidence that [KPII] is effectively
under the management, supervision and control of [TKC] manifested through the assignment of five (5) persons
to the financial and plant operations x x x; [TKC's] admission of its direct participation in the management,
supervision and control of [KPII] x x x; [TKC's] majority ownership of stocks in [KPII] x x x; and the
maintenance of one website of both companies and the admission to the same x x x.[167] (Emphasis supplied)
[168]
Second, as found by the CA,  KPII was authorized by TKC to use the "KOLIN" mark.

Third, KPII filed a trademark application for kolin barely two months after KECI was declared as the owner of
the KOLIN mark.

Fourth, KECI and KPII may be considered as being in the same line of business and it would have been highly
improbable that KPII did not know an existing KOLIN mark owned by KECI, especially since it is an affiliate of
TKC. Notably, in the case of Birkenstock Orthopaedie GmbH and Co. KG v. Phil. Shoe Expo Marketing Corp.,
[169]
 the Court agreed with the IPO's finding that the party was in bad faith because it was in the same line of
business and it was highly improbable for it to not know of the existence of BIRKENSTOCK before it appropriated
[170]
and registered this "highly distinct" mark.

Thus, there exists relevant evidence and factual findings that a reasonable mind might accept as adequate to
support the conclusion that KPII was in bad faith.

To summarize the above discussion: (1) there is resemblance between KECI's KOLIN and

KPII's kolin marks; (2) the goods covered by KECI's KOLIN are related to the goods covered by KPII's kolin;
(3) there is evidence of actual confusion between the two marks; (4) the goods covered by KPII's kolin fall within
the normal potential expansion of business of KECI; (5) sophistication of buyers is not enough to eliminate
confusion; (6) KPII's adoption of KECI's coined and fanciful mark would greatly contribute to likelihood of
confusion; and (7) KPII applied for kolin in bad faith. Thus, KPII's application for kolin should be denied because
it would cause likelihood of confusion and KECI's rights would be damaged.

19
 ***

It must also be stressed that KECI was already declared as the owner of the KOLIN mark under the
[171]
Trademark Law. Section 236  of the IP Code states that nothing in the IP Code - which, as mentioned,
logically includes registrations made pursuant thereto - shall adversely affect the rights of the enforcement of
marks acquired in good faith prior to the effective date of said law.

As seen above, the existence of likelihood of confusion is already considered as damage that would be sufficient
to sustain the opposition and rejection of KPII's trademark application. More than that, however, the Court is
likewise cognizant that, by granting this registration, KPII would acquire exclusive rights over the stylized version
[172]
of KOLIN ("kolin") for a range of goods/services,  i.e., covered goods, related goods/services, goods/services
falling within the normal potential expansion of KPII's business. Owing to the peculiar circumstances of this case,
this will effectively amount to a curtailment of KECI's right to freely use and enforce the KOLIN word mark, or any
stylized version thereof, for its own range of goods/services, especially against KPII, regardless of the
[173] [174]
existence of actual confusion. Thus, based on Section 122  vis-a-vis Section 236  of the IP Code, the
Court cannot give due course to KPII's trademark application for "kolin".

20
Zuneca v. Natrapharm Inc. GR 211850 September 8, 2020

Businesses generally thrive or perish depending on their reputation among

customers. Logically, consumers gravitate towards products and services they
believe are of a certain quality and provide perceived benefits. Thus, entrepreneurs
and businesses actively seek to set apart their reputation and goodwill from every
other enterprise with the goal of being the top-of-mind choice for the consumers. As
signs differentiating the wares or services offered by enterprises, trademarks serve
this purpose of making the products and services of each business uniquely
memorable. Trademarks have several functions: they indicate the origin or
ownership of the articles or services in which they are used; they guarantee that the
articles or services come up to a certain standard of quality; and they advertise the
articles and services they symbolize.1 Indeed, the goodwill of a business, as
symbolized and distinguished by its trademarks, helps ensure that the enterprise
stands out, stays afloat, and possibly flourish amidst the sea of commercial activity
where the consumers' continued patronage is a lifebuoy that may determine life or
death.

Faced with this intrinsic need to survive, enterprises are becoming increasingly
aware of the need to protect their goodwill and their brands. The State, too, is
interested in the protection of the intellectual property of enterprises and individuals
who have exerted effort and money to create beneficial products and services. 2 In
line with this, and considering the extent to which intellectual property rights impact
on the viability of businesses, a common controversy in the field of intellectual
property law is to whom these rights pertain.

In this case of first impression, this is precisely the issue at hand. This case concerns
trademarks which are used for different types of medicines but are admitted by both
parties to be confusingly similar. Exacerbating this controversy on the issue of
ownership, however, are conflicting interpretations on the rules on the acquisition of
ownership over trademarks, muddled by jurisprudential precedents which applied
principles inconsistent with the current law. Thus, in resolving this issue, the Court
needed to examine and ascertain the meaning and intent behind the rules that affect
trademark ownership.

21
Facts:

Petitioner Zuneca Pharmaceutical has been engaged in the importation, marketing,

and sale of various kinds of medicines and drugs in the Philippines since 1999. 9 It
imports generic drugs from Pakistan and markets them in the Philippines using
different brand names.10 Among the products it has been selling is a drug
called carbamazepine under the brand name "ZYNAPS", which is an anti-convulsant
used to control all types of seizure disorders of varied causes like
epilepsy.11 Petitioner Venus S. Arain, M.D. (Dr. Arain) was the proprietor of Zuneca
Pharmaceutical before Zuneca, Inc. was incorporated. 12 Akram Arain, meanwhile, is
the husband of Dr. Arain, who later on became the President of Zuneca, Inc. 13

Natrapharm, on the other hand, is a domestic corporation engaged in the business

of manufacturing, marketing, and distribution of pharmaceutical products for human
relief.14 One of the products being manufactured and sold by Natrapharm
is citicoline under the trademark "ZYNAPSE", which is indicated for the treatment of
cerebrovascular disease or stroke.15 The trademark "ZYNAPSE" was registered with
the Intellectual Property Office of the Philippines (IPO) on September 24, 2007 16 and
is covered by Certificate of Trademark Registration No. 4-2007-005596. 17

On November 29, 2007, Natrapharm filed with the RTC a Complaint against Zuneca
for Injunction, Trademark Infringement, Damages and Destruction with Prayer for
TRO and/or Preliminary Injunction, alleging that Zuneca's "ZYNAPS" is confusingly
similar to its registered trademark "ZYNAPSE" and the resulting likelihood of
confusion is dangerous because the marks cover medical drugs intended for different
types of illnesses.18 Consequently, Natrapharm sought to enjoin Zuneca from using
"ZYNAPS" or other variations thereof, in addition to its demand for Zuneca's
payment of Two Million Pesos (P2,000,000.00) in damages; Five Million Pesos
(P5,000,000.00) in exemplary damages; and Three Hundred Thousand Pesos
(P300,000.00) as attorney's fees, expenses of litigation, and costs of suit. 19 Further,
it prayed that all infringing goods, labels, signs, etc. of Zuneca be impounded and
destroyed without compensation.20

In its Answer (With Compulsory Counterclaim and Prayer for Preliminary Injunction),
Zuneca claimed that it has been selling carbamazepine under the mark "ZYNAPS"
since 2004 after securing a Certificate of Product Registration on April 15, 2003 from
the Bureau of Food and Drugs (BFAD, now Food and Drug Administration). 21 It
alleged that it was impossible for Natrapharm not to have known the existence of
"ZYNAPS" before the latter's registration of "ZYNAPSE" because Natrapharm had
promoted its products, such as "Zobrixol" and "Zcure", in the same publications
where Zuneca had advertised "ZYNAPS".22 Further, Zuneca pointed out that both
Natrapharm and Zuneca had advertised their respective products in identical
conventions.23 Despite its knowledge of prior use by Zuneca of "ZYNAPS",
Natrapharm had allegedly fraudulently appropriated the "ZYNAPSE" mark by
registering the same with the IPO.24 As the prior user, Zuneca argued that it is the
owner of "ZYNAPS" and the continued use by Natrapharm of "ZYNAPSE" causes it
grave and irreparable damage.

(3) If so, should Zuneca be held liable for trademark infringement?

22
Ruling:

II. Bad faith and good faith in

trademark registration and use

In a bid to invalidate Natrapharm's rights as first registrant, Zuneca further argues

that Natrapharm had registered the mark fraudulently and in bad faith. 108

The existence of bad faith in trademark registrations may be a ground for its
cancellation at any time by filing a petition for cancellation under Section 151 (b) of
the IP Code, viz.: 
ChanRoblesVirtualawlibrary

SECTION 151. Cancellation. - 151.1. A petition to cancel a registration of a

mark under this Act may be filed with the Bureau of Legal Affairs by any person
who believes that he is or will be damaged by the registration of a mark under this
Act as follows:

(a) Within five (5) years from the date of the registration of the mark under this Act.

(b) At any time, if the registered mark becomes the generic name for the goods or
services, or a portion thereof, for which it is registered, or has been abandoned,
or its registration was obtained fraudulently or contrary to the provisions of
this Act, or if the registered mark is being used by, or with the permission of, the
registrant so as to misrepresent the source of the goods or services on or in
connection with which the mark is used. If the registered mark becomes the generic
name for less than all of the goods or services for which it is registered, a petition to
cancel the registration for only those goods or services may be filed. A registered
mark shall not be deemed to be the generic name of goods or services solely
because such mark is also used as a name of or to identify a unique product or
service. The primary significance of the registered mark to the relevant public rather
than purchaser motivation shall be the test for determining whether theregistered
mark has become the generic name of goods or services on or in connection with
which it has been used, (n)

(c) At any time, if the registered owner of the mark without legitimate reason fails to
use the mark within the Philippines, or to cause it to be used in the Philippines by
virtue of a license during an uninterrupted period of three (3) years or longer.
(Emphasis supplied)
Notably, this ground for cancelling marks was already present under the Trademark
Law, as amended. The table below shows how the language in the IP Code provision
mirrors the provision under the Trademark Law, as amended:
 
Trademark Law, as amended IP Code
CHAPTER IV SECTION 151. Cancellation. -

Cancellation of Registration 151.1. A petition to cancel a

registration of a mark under this Act
SECTION 17. Grounds for may be filed with the Bureau of Legal
Cancellation. - Any person, who Affairs by any person who believes that he
believes that he is or will be is or will be damaged by the registration of

23
damaged by the registration of a a mark under this Act as follows:
mark or trade-name, may, upon x x x x
the payment of the prescribed (b) At any time, if the registered mark
fee, apply to cancel said becomes the generic name for the goods or
registration upon any of the services, or a portion thereof, for which it is
following grounds: registered, or has been abandoned, or
its registration was obtained
(a) That the registered mark or fraudulently or contrary to the
trade-name becomes the common provisions of this Act, or if the registered
descriptive name of an article or mark is being used by, or with the
substance on which the patent has permission of, the registrant so as to
expired; misrepresent the source of the goods or
(b) That it has been abandoned; services on or in connection with which the
(c) That the registration was mark is used. If the registered mark
obtained fraudulently or contrary becomes the generic name for less than all
to the provisions of section four, of the goods or services for which it is
Chanter II hereof; registered, a petition to cancel the
(d) That the registered mark or registration for only those goods or services
trade-name has been assigned, and may be filed. A registered mark shall not be
is being used by, or with the deemed to be the generic name of goods or
permission of, the assignee so as to services solely because such mark is also
misrepresent the source of the goods, used as a name of or to identify a unique
business or services in connection product or service. The primary significance
with which the mark or trade-name is of the registered mark to the relevant
used; or public rather than purchaser motivation
(e) That cancellation is authorized by shall be the test for determining whether
other provisions of this Act. the registered mark has become the
(Emphasis and underscoring generic name of goods or services on or in
supplied) connection with which it has been used.
(Emphasis and underscoring supplied)

Resultantly - unlike the rule on acquisition of ownership - the pronouncements of the

Court relative to registrations obtained in bad faith under the Trademark Law, as
amended, still subsist even after the effectivity of the IP Code. Thus, the following
cases where the Court defined bad faith and fraud, although decided under the
regime of the Trademark Law, as amended, are still applicable.

The concept of fraud contemplated above is not a mere inaccurate claim as to the
origin, ownership, and use of the trademark. In civil law, the concept of fraud has
been defined as the deliberate intention to cause damage or prejudice. 111 The same
principle applies in the context of trademark registrations: fraud is intentionally
making false claims to take advantage of another's goodwill thereby causing damage
or prejudice to another. Indeed, the concepts of bad faith and fraud go hand-in-hand
in this context. There is no distinction between the concepts of bad faith and fraud in
trademark registrations because the existence of one necessarily presupposes the
existence of the other.

Shangri-la supports the definition of bad faith in trademark registrations as

knowledge by the registrant of prior creation, use, and/or registration by another of

24
an identical or similar trademark. In said case, since respondent Developers Group
of Companies, Inc.'s (DGI) president was a previous guest at one of petitioner's
hotels, it was found that DGI was in bad faith when it appropriated and registered
the "SHANGRI-LA" mark and the "S" logo, viz.:

A perusal of the above cancellation provisions in the IP Code and the Trademark
Law, as amended, would reveal that these two grounds differ from the others in the
sense that, unlike the other grounds for cancellation, they both exist prior to the
registration. That is, one can have a registration in bad faith only if he applied for
the registration of the mark despite knowing that someone else has created, used,
or registered that mark. In the same vein, an unregistrable mark which was
mistakenly allowed to be registered was already inherently unregistrable even prior
to its registration.119 Accordingly, because these marks should not have been
registered in the first place, the presence of either of these grounds renders
them void. Thus, even if these marks subsequently became registered, the
registrations do not confer upon their owners the rights under Section 147.1 120 of
the IP Code because the marks were registered contrary to the provisions of the
same law.121

To emphasize, the presence of bad faith alone renders void the trademark
registrations. Accordingly, it follows as a matter of consequence that a mark
registered in bad faith shall be cancelled by the IPO or the courts, as the case may
be, after the appropriate proceedings.

This concept of bad faith, however, does not only exist in registrations. To the mind
of the Court, the definition of bad faith as knowledge of prior creation, use and/or
registration by another of an identical or similar trademark is also applicable in the
use of trademarks without the benefit of registration.

Accordingly, such bad faith use is also appropriately punished in the IP Code as can
be seen in its unfair competition provisions.122

It is apparent, therefore, that the law intends to deter registrations and use of
trademarks in bad faith.

Concurrent with these aims, the law also protects prior registration and prior use of
trademarks in good faith.

Being the first-to-file registrant in good faith allows the registrant to acquire all the
rights in a mark. This can be seen in Section 122 vis-a-vis the cancellation provision
in Section 155.1 of the IP Code. Reading these two provisions together, it is clear
that when there are no grounds for cancellation - especially the registration being
obtained in bad faith or contrary to the provisions of the IP Code, which render the
registration void - the first-to-file registrant acquires all the rights in a mark,
thus: ChanRoblesVirtualawlibrary

SECTION 122. How Marks are Acquired. - The rights in a mark shall be acquired

through registration made validly in accordance with the provisions of this
law. (Sec. 2-A, R.A. No. 166a)

x x x x

SECTION 151. Cancellation. - 151.1. A petition to cancel a registration of a mark

under this Act may be filed with the Bureau of Legal Affairs by any person who

25
believes that he is or will be damaged by the registration of a mark under this Act as
follows:

(a) Within five (5) years from the date of the registration of the mark under this Act.

(b) At any time, if the registered mark becomes the generic name for the goods or
services, or a portion thereof, for which it is registered, or has been abandoned, or
its  registration was obtained fraudulently or contrary to the provisions of this Act, or
if the registered mark is being used by, or with the permission of, the registrant so
as to misrepresent the source of the goods or services on or in connection with
which the mark is used. If the registered mark becomes the generic name for less
than all of the goods or services for which it is registered, a petition to cancel the
registration for only those goods or services may be filed. A registered mark shall
not be deemed to be the generic name of goods or services solely because such
mark is also used as a name of or to identify a unique product or service. The
primary significance of the registered mark to the relevant public rather than
purchaser motivation shall be the test for determining whether the registered mark
has become the generic name of goods or services on or in connection with which it
has been used,(n)

(c) At any time, if the registered owner of the mark without legitimate reason fails to
use the mark within the Philippines, or to cause it to be used in the Philippines by
virtue of a license during an uninterrupted period of three (3) years or longer.
(Emphasis and underscoring supplied)
In the same vein, prior users in good faith are also protected in the sense that they
will not be made liable for trademark infringement even if they are using a mark
that was subsequently registered by another person. This is expressed in Section
159.1 of the IP Code, which reads:  ChanRoblesVirtualawlibrary

SECTION 159. Limitations to Actions for Infringement. - Notwithstanding any other

provision of this Act, the remedies given to the owner of a right infringed under this
Act shall be limited as follows:

159.1. Notwithstanding the provisions of Section 155 hereof, a registered mark shall

have no effect against any person who, in good faith, before the filing date or the
priority date, was using the mark for the purposes of his business or
enterprise: Provided, That his right may only be transferred or assigned together
with his enterprise or business or with that part of his enterprise or business in
which the mark is used. (Underscoring supplied)

26
III. The resolution of the
controversy

At this point, it is important to highlight that the following facts were no longer
questioned by both parties: (a) Natrapharm is the registrant of the "ZYNAPSE" mark
which was registered with the IPO on September 24, 2007; 123 (b) Zuneca has been
using the "ZYNAPS" brand as early as 2004;124 and (c) "ZYNAPSE" and "ZYNAPS" are
confusingly similar125 and both are used for medicines.

In light of these settled facts, it is clear that Natrapharm is the first-to-file registrant
of "ZYNAPSE". Zuneca, on the other hand, is a prior user in good faith of a
confusingly similar mark, "ZYNAPS". What remains contentious is Natrapharm's good
or bad faith as Zuneca contends that the mark was registered in bad faith by
Natrapharm. Indeed, if Zuneca's contention turns out to be true, Natrapharm would
not be the owner of "ZYNAPSE" and it would not have the right under Section 147.1
of the IP Code to prevent other entities, including Zuneca, from using confusingly
similar marks for identical or similar goods or services. Further, Natrapharm's
infringement case would fail because its "ZYNAPSE" registration would then be
voided.

To be sure, the finding of good faith or bad faith is a matter of factual determination.
Considering that a petition for review on certiorari under Rule 45 should only raise
questions of law, it is improper to put into issue at this juncture the existence of bad
faith in Natrapharm's registration.

Further, it is a well-recognized rule that the factual findings of the RTC, its
calibration of the testimonies of the witnesses, and its assessment of their probative
weight are given high respect, if not conclusive effect, unless cogent facts and
circumstances of substance, which if considered, would alter the outcome of the
case, were ignored, misconstrued or misinterpreted. 126

Assuming, however, that the Court should still review this factual issue, it finds no
reason to depart from the findings of facts of the RTC, which findings were affirmed
by the CA. In fact, the Court also conducted a review of the testimonies and
evidence presented by the parties and finds that the RTC and the CA were correct in
their factual findings.

The RTC ruled that there was no sufficient evidence to convince it that Natrapharm
had acquired the registration in bad faith. 127 The RTC ruled as follows:  ChanRoblesVirtualawlibrary

Apparently claiming an exception to the first-to-register rule, the defendants

[Zuneca] insist that the plaintiff [Natrapharm] knew of the existence of ["ZYNAPS"]
at the time the plaintiff filed its application for registration. The defendants support
this position by presenting a copy of the Philippine Pharmaceutical Directory (PPD)
where ["ZYNAPS"] is listed on the same page as the other brand names of the
plaintiff.

However, defendant Arain admitted on cross[-]examination that even if ["ZYNAPS"]

was listed in the PPD, this does not give her complete knowledge of the brand
names of the other pharmaceuticals also listed in the same Directory. [Consistent]
with this admission, plaintiff should also be accorded the benefit of the doubt that it
could not have complete knowledge of the other brand names listed in the PPD.

27
Likewise, the defendants claim that in some medical conventions where Patriot, the
sister company of the plaintiff, attended, the ["ZYNAPS"] product of the defendants
was advertised and displayed.

It was, however, clearly shown that Patriot is not the same company as the plaintiff.
It could not be safely concluded that [the plaintiff] knew of ["ZYNAPS"] through
Patriot.

In both arguments, this Court finds no sufficient evidence to convince it that there
was bad faith in the registration made by the plaintiff 128cralawlawlibrary

The CA thereafter upheld the finding of the RTC that Natrapharm was not aware of
the existence of "ZYNAPS" prior to the registration of "ZYNAPSE". 129 The CA quoted
and affirmed the foregoing findings of the RTC.

The CA added that Natrapharm's good faith was established through the testimony
of Natraphann's witness, Ravelo, whose testimony essentially contained the
following points: (a) Natrapharm had used the BFAD and IPO databases and the
Philippine Pharmaceutical Index (PPI) - a research tool accepted by the Philippine
pharmaceutical industry which contains pharmaceutical products marketed in the
Philippines in determining whether "ZYNAPSE" was confusingly similar to an existing
brand name in the market;130 (b) only Ravelo, Mr. Gasgonia, Natraphann's Chief
Operations Officer, and Mrs. Agnes Casiding, Natraphann's Regulatory Manager,
knew about the launch of the new product;131 (c) she had based the name
"ZYNAPSE" from an internal newsletter in the Philippine Neurological Association as
well as from the neurological term "synapse" - the junction between two nerves
where they transmit nerve signals - which relates to the neurological problem of
stroke;132 (d) she had checked the PPI as far back as fourth quarter of 2004 and
found that there was no confusingly similar name; 133 and (e) she had then
submitted the name to Natrapharm's trademark lawyers who had it registered with
the IPO134 and then with the BFAD.135

The CA thus concluded that Zuneca failed to prove that Natrapharm had registered
"ZYNAPSE" in bad faith, viz.: ChanRoblesVirtualawlibrary

This Court would also like to add that even if both Zuneca and Natrapharm have
interacted with each other through a convention, it does not automatically mean
that Natrapharm already acted in bad faith in registering "ZYNAPSE". First, just like
the PPD, it is highly unlikely that the participants would remember each and every
medicine or drug exhibited during said convention. Secondly, the convention
happened two (2) years prior to the registration of "ZYNAPSE" and it is not proven
that those who attended the convention on the part of Natrapharm were the same
people who were responsible for the creation of "ZYNAPSE" or that they were still
connected with Natrapharm in 2007. As a rule, good faith is always presumed,
and upon him who alleges bad faith on the part of a possessor rests the
burden of proof. The appellants, however, miserably failed to carry that
burden.136 (Emphasis supplied)
The Court affirms the factual findings of the lower courts. Since Zuneca is making
the allegations of bad faith, it was incumbent on Zuneca to overcome the evidence
that Natrapharm was the owner of the mark "ZYNAPSE" and to show that
Natrapharm had registered "ZYNAPSE" in bad faith. However, Zuneca failed to show
that the registration was made fraudulently or in bad faith. In contrast, Natrapharm
was able to convince the lower courts, as it likewise convinces this Court, that it had
acted in good faith when it came up with the name "ZYNAPSE" and that it had no

28
knowledge of Zuneca's use of "ZYNAPS" after it had checked the PPI, BFAD, and IPO
databases.

Zuneca's evidence clearly falls short of establishing that Natrapharm had knowledge
of the prior creation or use by Zuneca of the "ZYNAPS" mark. Zuneca's evidence
only tends to prove that there was a possibility that someone from Natrapharm
might have known of Zuneca's use of "ZYNAPS" because Natrapharm and Zuneca
attended the same conferences and that Zuneca had listed "ZYNAPS" in the PPD
publication.

Such possibility is not, however, sufficient to prove bad faith, especially when
weighed against Natrapharm's evidence and explanation on how it coined
"ZYNAPSE" and the steps it took to ensure that there were no other marks that were
confusingly similar to it. Not only was Natrapharm able to explain the origin of the
name, it was also able to show that it had checked the IMS-PPI, IPO, and BFAD
databases and found that there was no brand name which was confusingly similar to
"ZYNAPSE".

Since Natrapharm was not shown to have been in bad faith, it is thus considered to
have acquired all the rights of a trademark owner under the IP Code upon the
registration of the "ZYNAPSE" mark.

Consequently, Zuneca's counterclaims against Natrapharm were correctly dismissed

by the lower courts. To be sure, Zuneca did not have any right to prevent third
parties, including Natrapharm, from using marks confusingly similar to its
unregistered "ZYNAPS" mark because it is not an "owner of a registered mark"
contemplated in Section 147.1 of the IP Code.

In any event, while Natrapharm is the owner of the "ZYNAPSE" mark, this does not,
however, automatically mean that its complaint against Zuneca for injunction,
trademark infringement, damages, and destruction with prayer for TRO and/or
preliminary injunction should be granted. The application of Section 159.1 of the IP
Code in the case at bar results in Zuneca's exemption from liability for trademark
infringement.

On the interpretation of Section 159.1 of the IP Code, Natrapharm argues that the
limitation to actions for infringement under this section means that only acts prior to
the filing and/or claim of priority of the registered mark are exempted. The good
faith prior user's use of the mark subsequent to the filing and/or registration date is,
however, no longer exempted and makes the prior user liable for
infringement.137 This echoes the CA which held that:  ChanRoblesVirtualawlibrary

Moreover, the supremacy of the prior registrant over the prior user is further
elucidated in Section 159.1 of the same law x x x.

x x x x

Based on [said] provision, it is manifest that the prior-

registrant (sic) cannot run after the prior-user (sic) for any usage before the
registration, but not after, as indicated by the helping verb "was" in the
phrase "was using the mark for the purposes of his business or
enterprise".138 (Emphasis supplied)

29
The Court believes, and so holds, that the above interpretation is erroneous.

If Section 159.1 of the IP Code is only meant to exempt from an action for
infringement the use in good faith prior to the filing or priority date of the
subsequently registered mark, then this entire provision would be rendered useless
and a mere surplusage. Stated otherwise, there is no point in adding Section 159.1
of the IP Code as an exception under "Limitations to Actions for Infringement"
because it merely repeats the general rule that, after the mark has been registered,
the registrant may file an infringement case against third parties using an identical
or confusingly similar mark in commerce without its consent, when such use results
in a likelihood of confusion.139 Even without Section 159.1 of the IP Code, a third
party's prior use of an unregistered mark, if said mark subsequently becomes
registered by another, could not be considered as trademark infringement because
there was no trademark registration - a requirement for a trademark infringement
action to prosper - when the third party was using its mark.

More importantly, the proviso of Section 159.1 of the IP Code states: "[t]hat [the
good faith prior user's] right may only be transferred or assigned together with his
enterprise or business or with that part of his enterprise or business in which the
mark is used." To adhere to the theories of the CA and Natrapharm that the prior
user's use of the identical or confusingly similar mark subsequent to the filing or
registration date of the registered mark should be considered as trademark
infringement renders this proviso useless and nugatory and logically subjects the
possible transferee or assignee to inevitable liability for trademark infringement. The
lawmakers could not have intended this absurd outcome.

Read as a whole, Section 159.1 of the IP Code clearly contemplates that a prior

user in good faith may continue to use its mark even after the registration
of the mark by the first-to-file registrant in good faith, subject to the condition
that any transfer or assignment of the mark by the prior user in good faith should be
made together with the enterprise or business or with that part of his enterprise or
business in which the mark is used. The mark cannot be
transferred independently of the enterprise and business using it.

From the provision itself, it can be gleaned that while the law recognizes the right of
the prior user in good faith to the continuous use of its mark for its enterprise or
business, it also respects the rights of the registered owner of the mark by
preventing any future use by the transferee or assignee that is not in conformity
with Section 159.1 of the IP Code. Notably, only the manner of use by the prior user
in good faith - that is, the use of its mark tied to its current enterprise or business -
is categorically mentioned as an exception to an action for infringement by the
trademark owner. The proviso in Section 159.1 of the IP Code ensures that, despite
the transfer or assignment of its mark, the future use by the assignee or transferee
will not go beyond the specific confines of such exception. Without the proviso, the
prior user in good faith would have the free hand to transfer or assign the "protected
use" of its mark for any purpose to a third person who may subsequently use the
same in a manner unduly curtailing the rights of the trademark owner. Indeed, this
unilateral expansion of the exception by a third person could not have been
intended, and is guarded against, by the legislature through the foregoing proviso.

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In any event, the application of Section 159.1 of the IP Code necessarily results in at
least two entities - the unregistered prior user in good faith or their assignee or
transferee, on one hand; and the first-to-file registrant in good faith on the other -
concurrently using identical or confusingly similar marks in the market, even if there
is likelihood of confusion. While this situation may not be ideal, as eruditely
explained in the Concurring Opinion of Justice Perlas-Bernabe, the Court is
constrained to apply Section 159.1 of the IP Code as written.

While there is no issue as to the likelihood of confusion between "ZYNAPSE" and

"ZYNAPS", the Court believes that the evil of medical switching will likely not arise,
considering that the law requires the generic names of drugs to be written in
prescriptions.

R.A.6675146 (Generics Act of 1988), as amended by R.A. 9502 147 or the Universally

Accessible Cheaper and Quality Medicines Act of 2008, reads:  ChanRoblesVirtualawlibrary

SEC. 6. Who Shall Use Generic Terminology. - (a) All government health

agencies and their personnel as well as other government agencies shall
use generic terminology or generic names in all transactions related to
purchasing, prescribing, dispensing and administering of drugs and
medicines.

(b) All medical, dental and veterinary practitioners, including private

practitioners, shall write prescriptions using the generic name. The brand
name may be included if so desired. (Emphasis supplied)

Still, even as the Generics Act of 1988, as amended, provides protection to the
consumers - and despite the Court's recognition of the respective rights under the IP
Code of the first registrant in good faith and the prior user in good faith - the Court
is nonetheless mindful of potential switching of medicines. As amply elaborated by
Justice Gesmundo in his Concurring Opinion, the issue on likelihood of confusion on
medicines may pose a significant threat to public health, hence, there is a need to
improve our intellectual property laws and the government's manner of regulation of
drug names to prevent the concurrent use in the market of confusingly similar
names for medicines.

To further reduce therefore, if not totally eliminate, the likelihood of switching in this
case, the Court hereby orders the parties to prominently state on the packaging of
their respective products, in plain language understandable by people with no
medical background or training, the medical conditions that their respective
drugs are supposed to treat or alleviate and a warning indicating what "ZYNAPS"
is not supposed to treat and what "ZYNAPSE" is not supposed to treat, given the
likelihood of confusion between the two.

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