THIRD DIVISION
G.R. Nos. 213365-66, December 10, 2018
ASIA PACIFIC RESOURCES INTERNATIONAL HOLDINGS, LTD., Petitioner, v. PAPERONE, INC., Respondent.
D E C I S I O N
GESMUNDO, J.:
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the November 28, 2013 Decision2 and the July 9, 2014 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP Nos. 122288 and 122535. The CA reversed and set aside the November 10, 2011 Decision4 of the Intellectual Property Office (IPO) Director General, finding Paperone, Inc. (respondent) liable for unfair competition.
I.
WHETHER RESPONDENT IS LIABLE FOR UNFAIR COMPETITION, andII.
WHETHER PETITIONER IS ENTITLED TO ACTUAL DAMAGES.
SECTION 168. Unfair Competition, Rights, Regulation and Remedies. -The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor.14 Unfair competition is always a question of fact.15 At this point, it bears to stress that findings of fact of the highly technical agency - the IPO - which has the expertise in this field, should have been given great weight by the Court of Appeals.16
168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.
168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who, otherwise, clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose.
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.The BLA Director found, as affirmed by the IPO Director General, that it was petitioner who has priority rights over PAPER ONE, thus:
x x x x
Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even p1reponderant. It is not th1e 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.24 (Emphasis supplied)
One essential factor that has led this Office to tilt the scales of justice in favor of Complainant is the latter's establishment of prior use of the word PaperOne for paper products in the Philippines. Records will show that there was prior use and adoption by Complainant of the word "PaperOne." PaperOne was filed for trademark registration on 22 March 1999 (Exhibit "D", Complainant) in the name of Complainant Asia Pacific Resources International Holdings, Ltd. and matured into registration on 10 February 2003. Respondent's corporate or trade name is Paper One, Inc. which existed and was duly registered with the Securities and Exchange Commission on 31 March 2001 (Exhibit "11", Respondent). If anyone files a suit and can prove priority of adoption, he can assert his right to the exclusive use of a corporate name with freedom from infringement by similarity (Philips Export B.V. et al. vs. CA, G.R. No. 96161). Respondent was incorporated in March 2001 by virtue of SEC registration No. A200104788 (Exhibit "11", Complainant) and was registered two (2) years thereafter as business name with the Department of Trade and Industry under DTI Business Name Registration No. 00068456 (Exhibit "13", Respondent). Complainant Asia Pacific Resources International Holdings, Ltd., APRIL for brevity, presented evidence of its use of the label PaperOne on paper products in the Philippines earlier than the date of its trademark application in 1999 when its marketing and promotion agent JND International Corporation ("JND" for brevity) licensed one of its clients, National Paper Products & Printing Corporation ("NAPPCO" for brevity) to import, sell and distribute Complainant's APRIL paper products in 1998 (par. 3, Exhibit "AA", Complainant). To support this declaration are documents evidencing transactions of NAPPCO with Complainant APRIL with the earliest documented transaction on 22 January 1999 (Exhibit "G", Complainant) bearing [I]nvoice [N]o. LCA9812133.b) intent to deceive the public and defraud a competitor
[The] fact of earlier use was not disputed by the Respondent. In point of fact, Respondent already knew of Complainant's APRIL existence prior to Respondent's incorporation as Paper One, Inc. in 2001. Most of the incorporators of National Paper Products & Printing Corporation or NAPPCO for brevity (Exhibits "H" and "H-A" to "H-H", Complainant) which in late 1990s transacted with Complainant APRIL through Invoice No. LCA9812133 dated 22 January 1999, the earliest invoice noted (Exhibit "G", Complainant) are likewise incorporators of Paper One, Inc. (Exhibit "11", Respondent) namely Tan Tian Siong, Chong Ping Tat, Thelma J. Uy, Conchita Francisco, Sy Siong Sun, to name a few. Also, NAPPCO, through Complainant's marketing and promotion agent JND International Corporation, or JND for brevity (Exhibit "AA", Complainant) expressed interest in a letter dated 19 January 2000 to work with JND and APRIL, as its exclusive distributor and we quote "to become your exclusive distributor of 'Paper One' Multi Purpose Copy Paper" (Exhibit "AA-1-d", Complainant). Worth mentioning at this point is the jurisprudence pronounced in the case of Converse Rubber Corporation vs. Universal Rubber Products, Inc. and Tiburcio S. Evalle (G.R. No. L-27906, Jan. 18, 1987) where the court said:Knowing therefore that the word "CONVERSE" belongs to and is being used by petitioner, and is in fact the dominant word in petitioner's corporate name, respondent has no right to appropriate the same for use on its products which are similar to those being produced by petitioner.25 (Emphasis supplied)
Very truly yours, (SGD) WILFREDO V. LAPITAN Division Clerk of Court |
Endnotes:
1Rollo, pp. 17-72.
2 Id. at 79-91; penned by Associate Justice Agnes Reyes-Carpio and concurred in by Associate Justices Noel G. Tijam (now Member of this Court) and Priscilla J. Baltazar-Padilla.
3 Id. at 93-94.
4 Id. at 97-109.
5 Id. at 22; Petition.
6 Id. at 118; Attachment to Annex "D" of the Petition. In rollo , pp. 22 and 87, the date February 10, 2003 appears to be the date of Registration.
7 Id. at17-72.
8 Id. at 1061-1073; Comment.
9 Id. at 356-377.
10 Id. at 355-377; Annex "K."
11 Id. at 96-109; Annex "C."
12 Id. at 79-91.
13 Republic Act No. 8293 otherwise known as "An Act Prescribing the Intellectual Property Code and Establishing the Intellectual Property Office, providing for its powers and functions, and for other purposes" (June 6, 1997).
14In-N-Out Burger, Inc. v. Sehwani, Inc. and/or Benita's Frites, Inc., 595 Phil. 1119, 1149 (2008).
15Shell Company of the Philippines, Ltd. v. Insular Petroleum Refining Co., Ltd., et al., 120 Phil. 434, 441 (1964).
16 See UFC Philippines, Inc. v. Barrio Fiesta Manufacturing Corp., 778 Phil. 763, 791 (2016).
17In-N-Out Burger, Inc. v. Sehwani, Inc. and/or Benita's Frites, Inc., supra note 14, at 1149.
18 See Canon Kabushiki Kaisha v. Court of Appeals, et al., 391 Phil. 154, 162 (2000).
19Rollo, p. 1064 (Comment); rollo, p. 370 (Decision of BLA).
20Skechers, U.S.A., Inc. v. Inter Pacific Industrial Trading Corp., et al. (Resolution), 662 Phil. 11, 19-20 (2011).
21Mcdonald's Corp., et al. v. L.C. Big Mak Burger, Inc., et al., 480 Phil. 402, 429-430 (2004).
22Rollo, p. 370.
23 647 Phil. 517 (2010).
24 Id. at 526-533.
25Rollo, pp. 368-369.
26 See NBI- Microsoft Corp. v. Hwang, et al., 499 Phil. 423, 439 (2005).
27In-N-Out Burger, Inc. v. Sehwani, Inc. and/or Benita's Frites, Inc., supra note 14, at 1149-1150.
28 Id. at 1149.
29 See American Wire & Cable Co. v. Director of Patents, 142 Phil. 523 (1970).
LEONEN, J.:
I concur in the result. Respondent should be liable for unfair competition under Section 1681 of Republic Act No. 8293, or the Intellectual Property Code of the Philippines.
I agree that we should base our decision in this case on present jurisprudence. This means, generally, that there are two types of confusion with trademarks and trade names: confusion of goods and confusion of business. A finding of confusion is highly fact-specific based on the circumstances of the case.2 In Canon Kabushiki Kaisha v. Court of Appeals:3
The likelihood of confusion of goods or business is a relative concept, to be determined only according to the particular, and sometimes peculiar, circumstances of each case. Indeed, in trademark law cases, even more than in other litigation, precedent must be studied in the light of the facts of the particular case. Contrary to petitioner's supposition, the facts of this case will show that the cases of Sta. Ana vs. Maliwat, Ang vs. Teodoro and Converse Rubber Corporation vs. Universal Rubber Products, Inc. are hardly in point. The just cited cases involved goods that were confusingly similar, if not identical, as in the case of Converse Rubber Corporation vs. Universal Rubber Products, Inc. Here, the products involved are so unrelated that the public will not be misled that there is the slightest nexus between petitioner and the goods of private respondent.My discomfort with the prevailing doctrine is that determining whether goods or services are related is left solely to the subjective evaluation of the Philippine Intellectual Property Office or the judgment of the court. It is based on ad hoc inferences of similarity in class, physical attributes or descriptive properties, purpose, or points of sale of the goods or services. Here, the Bureau of Legal Affairs of the Intellectual Property Office, as affirmed by the Director-General, found that respondent committed unfair competition based on a simplistic conclusion that "[b]oth Complainant APRIL and Respondent's main business product is paper[;] both offer papers for sale to the public."5 We should improve on the standard by which likelihood of confusion is measured, considering the advances in the study of competition and economics in general.
In cases of confusion of business or origin, the question that usually arises is whether the respective goods or services of the senior user and the junior user are so related as to likely cause confusion of business or origin, and thereby render the trademark or tradenames confusingly similar. Goods are related when they belong to the same class or have the same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture[,] or quality. They may also be related because they serve the same purpose or are sold in grocery stores.4 (Citations omitted)
One analogous body of law sheds light on the issue of direct competition between goods, namely market definition under section 2 of the Sherman Anti-Trust Act, 15 U.S.C. § 2 (1982). Professor McCarthy, in his seminal trademark treatise, states that products which are "competitive" for purposes of trademark analysis are "goods which are reasonably interchangeable by buyers for the same purposes." Determining whether products are "reasonably interchangeable" is the analysis which the Court must undertake when defining the relevant product market in an action under section 2 of the Sherman Act. The Court holds that the same analysis is helpful for determining whether the parties' goods are "directly competing" for purposes of assessing palming off liability.In short, on an examination of the current record, the Court, finds that Worthington's goods are not in the same relevant market as Kellogg's cereal. The parties' products have different uses or functions. Also, the Court has no evidence of any degree of cross-elasticity between the plaintiff's foods and the defendant's cereal.11 (Citations omitted)
A relevant product market includes all products that are either identical or available substitutes for each other. To determine whether products are "available substitutes" or "reasonably interchangeable," the Court must first scrutinize the uses of the product. It must assess whether the products can perform the same function. The second factor to weigh is consumer response, or more specifically, cross-elasticity. That is, the Court must assess to what extent consumers will choose substitutes for the parties' goods in response to price increases.
....
The second market factor to be considered is consumer response or cross-elasticity. Unfortunately, the parties did not present evidence concerning any tendency or lack of tendency of consumers to switch from the plaintiff's products to the defendant's if Worthington were to raise its prices or vice versa. Therefore, the Court cannot conclude that the plaintiff has demonstrated cross-elasticity of the parties' products indicating that their goods are in the same relevant market.
Petitioner contends that there had been a marked decrease in the volume of sales of low-grade oil of the company, for which reason it argues that the sale of respondent's low-grade oil in Shell containers was the cause. We are reluctant to share the logic of the argument. We are more inclined to believe that several factors contributed to the decrease of such sales. But let us assume, for purposes of argument, that the presence of respondent's low-grade oil in the market contributed to such decrease. May such eventuality make respondent liable for unfair competition? There is no prohibition for respondent to sell its goods, even in places where the goods of petitioner had long been sold or extensively advertised. Respondent should not be blamed if some of petitioner's dealers buy Insoil oil, as long as respondent does not deceive said dealers. If petitioner's dealers pass off Insoil oil as Shell oil, that is their responsibility. If there was any such effort to deceive the public, the dealers to whom the defendant (respondent) sold its products and not the latter, were legally responsible for such deception. The passing of said oil, therefore, as product of Shell was not performed by the respondent or its agent, but petitioner's dealers, which act respondent had no control whatsoever.17These cases illustrate the many ways by which specialized agencies and courts may objectively evaluate the relatedness of allegedly competing goods and services. An analysis that ends in a mere finding of confusing similarity in the general appearance of the goods18 should not suffice.
Protection against unfair competition is not intended to create or foster a monopoly and the court should always be careful not to interfere with free and fair competition, but should confine itself, rather, to preventing fraud and imposition resulting from some real resemblance in name or dress of goods. Nothing less than conduct tending to pass off one man's goods or business as that of another will constitute unfair competition. Actual or probable deception and confusion on the part of customers by reason of defendant's practices must always appear.22Thus, complainants bear the burden of objectively proving that the deception or fraud has actually or has probably taken place, or that the defendant had the actual or probable intent to deceive the public.23 This will require, in a future case, measurable standards to show that: (1) the goods or services belong to the same market; and (2) the likelihood of confusion or doubt is adequately and empirically demonstrated, not merely left to the subjective judgment of an administrative body or this Court.
Endnotes:
1 INTELLECTUAL PROP. CODE, sec. 168 states:
SECTION 168. Unfair Competition, Rights, Regulation and Remedies. - 168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.
168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:(a)Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;(b)Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public; or(c)Any person who shall make any false statement in the course of trade or who shall commit any other act contrary to good faith of a nature calculated to discredit the goods, business or services of another.
168.4. The remedies provided by Sections 156, 157 and 161 shall apply mutatis mutandis.
2Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd. and CA, 120 Phil. 434 (1964) [Per J. Paredes, En Banc].
3 391 Phil. 154 (2000) [Per J. Gonzaga-Reyes, Third Division].
4 Id. at 162-163.
5Rollo, p. 374. Intellectual Property Office Decision.
6 DAVID BESANKO AND RONALD BRAEUTIGAM, MICRO ECONOMICS, 92-93 (4th ed., 2010).
7 Id. at 86.
8 Id. at 52.
9 732 F. Supp. 1417 (1990).
10 Id. at 1437.
11 Id. at 1436-1438.
12 696 F.2d 544 (7th Cir. 1982).
13 615 F.2d 252 (5th Cir. 1980).
14 599 F.2d 341 (9th Cir. 1979).
15 693 F.2d 991 , 993 (9th Cir. 1982).
16 120 Phil. 434 (1964) [Per J. Paredes, En Banc].
17 Id. at 443.
18Superior Commercial Enterprises, Inc. v. Kunnan Enterprises Ltd., et al., 632 Phil. 546 (2010) [Per J. Brion, Second Division].
19Coca-Cola Bottlers, Phils., Inc., Naga Plant v. Gomez, 591 Phil. 642 (2008) [Per J. Brion, Second Division].
20E. Spinner & Co. v. Neuss Hesslein Corporation, 54 Phil. 224 (1930) [Per J . Street, En Banc].
21 27 Phil. 266 (1914) [Per J. Moreland, First Division].
22 Id. at 271.
23Shang Properties Realty Corp., et al. v. St. Francis Dev't. Corp., 739 Phil. 244 (2014) [Per J. Perlas-Bernabe, Second Division].