SECOND DIVISION

G.R. No. 172276. August 9, 2010.

SOCIETE DES PRODUITS NESTLE, S.A., petitioner, vs. MARTIN T. DY, JR., respondent.

Intellectual Property Code of the Philippines; Trademarks; Trademark Infringement; The element of
likelihood of confusion is the gravamen of trademark infringement; Two types of confusion in trademark
infringement: confusion of goods and confusion of business; two types of confusion distinguished.
Among the elements, the element of likelihood of confusion is the gravamen of trademark
in-fringement. There are two types of confusion in trademark infringe--ment: confusion of goods and
confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,
27 SCRA 1214 (1969), the Court distinguished the two types of confusion: Callman notes two types of
confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be
induced to purchase one product in the belief that he was purchasing the other. In which case,
defendants goods are then bought as the plaintiffs, and the poorer quality of the former reflects
adversely on the plaintiffs reputation. The other is the confusion of business: Here though the goods
of the parties are different, the defendants product is such as might reasonably be assumed to originate
with the plaintiff, and the public would then be deceived either into that belief or into the belief that
there is some connection between the plaintiff and defendant which, in fact, does not exist.

Same; Same; Same; Two Tests to Determine Likelihood of Confusion; the Dominancy test and Holistic
Test.There are two tests to determine likelihood of confusion: the dominancy test and holistic test.
The dominancy test focuses on the similarity of the main, prevalent or essential features of the
competing trademarks that might cause confusion. Infringement takes place when the com-peting
trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary.
The question is whether the use of the marks is likely to cause confusion or deceive purchasers. The
holistic test considers the entirety of the marks, including labels and packaging, in determining confusing
similarity. The focus is not only on the predominant words but also on the other features appearing on
the labels.

Same; Same; Same; Dominancy test is applicable in the present case.In the light of the facts of the
present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual
milieus, the Court has consistently applied the dominancy test. In Prosource International, Inc., the
Court applied the dominancy test in holding that PCO-GENOLS is confusingly similar to
PYCNOGENOL.

Same; Same; Same; Court finds that NANNY is confusingly similar to NAN.Applying the dominancy
test in the present case, the Court finds that NANNY is confusingly similar to NAN. NAN is the
prevalent feature of Nestles line of infant powdered milk products. It is written in bold letters and used
in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly, NANNY contains
the prevalent feature NAN. The first three letters of NANNY are exactly the same as the letters of
NAN. When NAN and NANNY are pronounced, the aural effect is confusingly similar.
Same; Same; Same; In determining the issue of confusing similarity, the Court takes into account the
AURAL effect of the letters contained in the marks.In determining the issue of confusing similarity, the
Court takes into account the aural effect of the letters contained in the marks. In Marvex Commercial
Company, Inc. v. Petra Hawpia & Company, 18 SCRA 1178 (1966), the Court held: It is our considered
view that the trademarks SALONPAS and LIONPAS are confusingly similar in sound. Both these
words have the same suffix, PAS, which is used to denote a plaster that adheres to the body with
curative powers. PAS, being merely descriptive, furnishes no indication of the origin of the article and
therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966)
and may properly become the subject of a trademark by combination with another word or phrase.

Same; Same; Same; The scope of protection extends to protection from infringers with related goods,
and to market areas that are the normal expansion of business of the registered trademark owners.
The scope of protection afforded to registered trademark owners is not limited to protection from
infringers with identical goods. The scope of protection extends to protection from infringers with
related goods, and to market areas that are the normal expansion of business of the registered
trademark owners.

Same; Same; Same; Factors in Determining whether Goods are Related.In Mighty Corporation v. E. &
J. Gallo Winery, 434 SCRA 473 (2004), the Court held that, Non-competing goods may be those which,
though they are not in actual competition, are so related to each other that it can reasonably be
assumed that they originate from one manufacturer, in which case, confusion of business can arise out
of the use of similar marks. In that case, the Court enumerated factors in determining whether goods
are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical
attributes or essential characteristics of the goods, with reference to their form, composition, texture or
quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed
and sold.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Sapalo, Velez, Bundang and Bulilan Law Offices for petitioner.

Frederick Bustamante for respondent.

CARPIO, J.:

The Case

This is a petition1 for review on certiorari under Rule 45 of the Rules of Court. The petition challenges
the 1 September 2005 Decision2 and 4 April 2006 Resolution3 of the Court of Appeals in CA-G.R. CV No.
62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The Court of
Appeals reversed the 18 September 1998 Decision4 of the Regional Trial Court (RTC), Judicial Region 7,
Branch 9, Cebu City, in Civil Case No. CEB-19345.
The Facts

Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the laws of
Switzerland. It manufactures food products and beverages. As evidenced by Certificate of Registration
No. R-146215 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and Technology
Transfer, Nestle owns the NAN trademark for its line of infant powdered milk products, consisting of
PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6diatetic preparations for
infant feeding.

Nestle distributes and sells its NAN milk products all over the Philippines. It has been investing
tremendous amounts of resources to train its sales force and to promote the NAN milk products through
advertisements and press releases.

Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the
powdered milk into three sizes of plastic packs bearing the name NANNY. The packs weigh 80, 180
and 450 grams and are sold for P8.90, P17.50 and P39.90, respectively. NANNY is also classified under
Class 6full cream milk for adults in [sic] all ages. Dy, Jr. distributes and sells the powdered milk in
Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao.

In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using NANNY and to
undertake that he would stop infringing the NAN trademark. Dy, Jr. did not act on Nestles request.
On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a
complaint6 against Dy, Jr. for infringement. Dy, Jr. filed a motion7 to dismiss alleging that the complaint
did not state a cause of action. In its 4 June 1990 order,8 the trial court dismissed the complaint. Nestle
appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of
Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further
proceedings.

Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion9
to transfer the case to the RTC, Judicial Region 7, Branch 9, Cebu City, which was designated as a special
court for intellectual property rights.

The RTCs Ruling

In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court
held:

If determination of infringement shall only be limited on whether or not the mark used would likely
cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the
most considered view of this forum would be highly unlikely to happen in the instant case. This is
because upon comparison of the plaintiffs NAN and defendants NANNY, the following features would
reveal the absence of any deceptive tendency in defendants NANNY: (1) all NAN products are contained
tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the labels
of NAN products are blue and white, while the predominant colors in the plastic packings of NANNY are
blue and green; (3) the labels of NAN products have at the bottom portion an elliptical shaped figure
containing inside it a drawing of nestling birds, which is overlapped by the trade-name Nestle, while
the plastic packs of NANNY have a drawing of milking cows lazing on a vast green field, back-dropped
with snow covered mountains; (4) the word NAN are [sic] all in large, formal and conservative-like block
letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends; and (5)
all NAN products are milk formulas intended for use of [sic] infants, while NANNY is an instant full cream
powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use of
the test of dominancy because the deceptive tendency of the unregistered trademark NANNY is not
apparent from the essential features of the registered trademark NAN.

However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al., L-29971, Aug. 31, 1982, the Supreme
Court took the occasion of discussing what is implied in the definition of infringement when it stated:
Implicit in this definition is the concept that the goods must be so related that there is likelihood either
of confusion of goods or business. x x x But as to whether trademark infringement exists depends for the
most part upon whether or not the goods are so related that the public may be, or is actually, deceived
and misled that they came from the same maker or manufacturer. For non-competing goods may be
those which, though they are not in actual competition, are so related to each other that it might
reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be
those which, being entirely unrelated, could not reasonably be assumed to have a common source. In
the former case of related goods, confusion of business could arise out of the use of similar marks; in
the latter case of non-related goods, it could not.

Furthermore, in said case the Supreme Court as well discussed on when goods may become so related
for purposes of infringement when it stated: Goods are related when they belong to the same class or
have 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. x x x

Considering that defendants NANNY belongs to the same class as that of plaintiffs NAN because both
are food products, the defendants unregistered trade mark NANNY should be held an infringement to
plaintiffs registered trademark NAN because defendants use of NANNY would imply that it came from
the manufacturer of NAN. Furthermore, since the word nanny means a childs nurse, there might
result the not so remote probability that defendants NANNY may be confused with infant formula NAN
despite the aparent [sic] disparity between the features of the two products.10

Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals.

The Court of Appeals Ruling

In its 1 September 2005 Decision, the Court of Appeals reversed the trial courts 18 September 1998
Decision and found Dy, Jr. not liable for infringement. The Court of Appeals held:

[T]he trial court appeared to have made a finding that there is no colorable imitation of the registered
mark NAN in Dys use of NANNY for his own milk packs. Yet it did not stop there. It continued on
applying the concept of related goods.

The Supreme Court utlilized the concept of related goods in the said case of Esso Standard Easter, Inc.
versus Court of Appeals, et al. wherein two contending parties used the same trademark ESSO for two
different goods, i.e. petroleum products and cigarettes. It rules that there is infringement of trademark
involving two goods bearing the same mark or label, even if the said goods are non-competing, if and
only if they are so related that the public may be, or is actually, deceived that they originate from the
one maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow through
different trade channels, and since the possibility of confusion is unlikely in the general appearances of
each mark as a whole, the Court held in this case that they cannot be so related in the context of
infringement.

In applying the concept of related goods in the present case, the trial court haphazardly concluded that
since plaintiff-appellees NAN and defendant-appellants NANNY belong to the same class being food
products, the unregistered NANNY should be held an infringement of Nestles NAN because the use of
NANNY would imply that it came from the manufacturer of NAN. Said court went on to elaborate
further: since the word NANNY means a childs nurse, there might result the not so remote
probability that defendants NANNY may be confused with infant formula NAN despite the aparent (sic)
disparity between the features of the two products as discussed above.

The trial courts application of the doctrine laid down by the Supreme Court in the Esso Standard case
aforementioned and the cases cited therein is quite misplaced. The goods of the two contending parties
in those cases bear similar marks or labels: Esso for petroleum products and cigarettes, Selecta for
biscuits and milk, X-7 for soap and perfume, lipstick and nail polish. In the instant case, two dissimilar
marks are involvedplaintiff-appellees NAN and defendant-appellants NANNY. Obviously, the
concept of related goods cannot be utilized in the instant case in the same way that it was used in the
Esso Standard case.

In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement or
trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly
similar to or is a colorable imitation of another, precedent must be studied in the light of the facts of the
particular case. Each case must be decided on its own merits. In the more recent case of Societe Des
Produits Nestle S.A. Versus Court of Appeals, the High Court further stressed that due to the peculiarity
of the facts of each infringement case, a judicial forum should not readily apply a certain test or
standard just because of seeming similarities. The entire panoply of elements constituting the relevant
factual landscape should be comprehensively examined.

While it is true that both NAN and NANNY are milk products and that the word NAN is contained in
the word NANNY, there are more glaring dissimilarities in the entirety of their trademarks as they
appear in their respective labels and also 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. Even the trial court found these glaring dissimilarities as above-quoted. We need
not add more of these factual dissimilarities.

NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations, while
NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans and hence,
far expensive than the full cream milk NANNY sold in three (3) plastic packs containing 80, 180 and 450
grams and worth P8.90, P17.50 and P39.90 per milk pack. The labels of NAN products are of the colors
blue and white and have at the bottom portion an elliptical shaped figure containing inside it a drawing
of nestling birds, which is overlapped by the trade-name Nestle. On the other hand, the plastic packs
NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow-capped
mountains and using the predominant colors of blue and green. The word NAN are [sic] all in large,
formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style
of letters with curved ends. With these material differences apparent in the packaging of both milk
products, NANNY full cream milk cannot possibly be an infringement of NAN infant milk.

Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The
cheaper price of NANNY would give, at the very first instance, a considerable warning to the ordinary
purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory examination
of the packaging would confirm the striking differences between the products in question.

In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy therefore
cannot be held liable for infringement.11

Nestle filed a motion12 for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied
the motion for lack of merit. Hence, the present petition.

Issue

The issue is whether Dy, Jr. is liable for infringement.

The Courts Ruling

The petition is meritorious.

Section 22 of Republic Act (R.A.) No. 166, as amended, states:

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

Section 155 of R.A. No. 8293 states:

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

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

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature
thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in
connection with the sale, offering for sale, distribution, or advertising of goods or services on or in
connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be
liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided,
That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this
subsection are committed regardless of whether there is actual sale of goods or services using the
infringing material.

In Prosource International, Inc. v. Horphag Research Management SA,13 the Court laid down the
elements of infringement under R.A. Nos. 166 and 8293:

In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the
following constitute the elements of trademark infringement:

(a) A trademark actually used in commerce in the Philippines and registered in the principal register
of the Philippine Patent Office[;]

(b) [It] is used by another person in connection with the sale, offering for sale, or advertising of any
goods, business or services or in connection with which such use is likely to cause confusion or mistake
or to deceive purchasers or others as to the source or origin of such goods or services, or identity of
such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another
person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints,
packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such
goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;]

(c) [T]he trademark is used for identical or similar goods[;] and

(d) [S]uch act is done without the consent of the trademark registrant or assignee.
On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in
infringement of trade name, the same need not be registered;

(2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the
infringer;

(3) The infringing mark or trade name is used in connection with the sale, offering for sale, or
advertising of any goods, business or services; or the infringing mark or trade name is applied to labels,
signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in
connection with such goods, business or services;

(4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake
or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of
such goods or services or the idenity of such business; and

(5) It is without the consent of the trademark or trade name owner or the assignee thereof.14

Among the elements, the element of likelihood of confusion is the gravamen of trademark
infringement.15 There are two types of confusion in trademark infringement: confusion of goods and
confusion of business.16 In Sterling Products Inter-national, Inc. v. Farbenfabriken Bayer
Aktiengesellschaft,17 the Court distinguished the two types of confusion:

Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily
prudent purchaser would be induced to purchase one product in the belief that he was purchasing the
other. In which case, defendants goods are then bought as the plaintiffs, and the poorer quality of
the former reflects adversely on the plaintiffs reputation. The other is the confusion of business: Here
though the goods of the parties are different, the defendants product is such as might reasonably be
assumed to originate with the plaintiff, and the public would then be deceived either into that belief or
into the belief that there is some connection between the plaintiff and defendant which, in fact, does
not exist.18

There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The
dominancy test focuses on the similarity of the main, prevalent or essential features of the competing
trademarks that might cause confusion. Infringement takes place when the competing trade-mark
contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question
is whether the use of the marks is likely to cause confusion or deceive purchasers.19

The holistic test considers the entirety of the marks, including labels and packaging, in determining
confusing similarity. The focus is not only on the predominant words but also on the other features
appearing on the labels.20
In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided
on its own merits. Jurisprudential precedents must be studied in the light of the facts of each particular
case. In McDonalds Corporation v. MacJoy Fastfood Corporation,21 the Court held:

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

another, no set rules can be deduced because each case must be decided on its merits. In such cases,
even more than in any other litigation, precedent must be studied in the light of the facts of the
particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied
only to a case if they are specifically in point.22

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In
recent cases with similar factual milieus, the Court has consistently applied the dominancy test. In
Prosource International, Inc., the Court applied the dominancy test in holding that PCO-GENOLS is
confusingly similar to PYCNOGENOL. The Court held:

The trial and appellate courts applied the Dominancy Test in determining whether there was a
confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court
found, and the CA affirmed, that:

Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which on evidence,
appears to be merely descriptive and furnish no indication of the origin of the article and hence, open
for trademark registration by the plaintiff through combination with another word or phrase such as
PYCNOGENOL, Exhibits A to A-3. Furthermore, although the letters Y between P and C, N
between O and C and S after L are missing in the [petitioners] mark PCO-GENOLS, nevertheless, when
the two words are pronounced, the sound effects are confusingly similar not to mention that they are
both described by their manufacturers as a food supplement and thus, identified as such by their public
consumers. And although there were dissimilarities in the trademark due to the type of letters used as
well as the size, color and design employed on their individual packages/bottles, still the close
relationship of the competing products name is sounds as they were pronounced, clearly indicates that
purchasers could be misled into believing that they are the same and/or originates from a common
source and manufacturer.

We find no cogent reason to depart from such conclusion.

This is not the first time the Court takes into account the aural effects of the words and letters contained
in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra
Hawpia & Co., et al., cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held:

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims,
Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and
LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea;
Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse
and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo
Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities [sic], as coming within
the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos,
and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that
Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda,
67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the
two names is almost the same.23

In McDonalds Corporation v. MacJoy Fastfood Corpo-ration, the Court applied the dominancy test in
holding that MACJOY is confusingly similar to MCDONALDS. The Court held:

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

xxxx

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

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

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

Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably,
the respondents trademark application for the MACJOY & DEVICE trademark covers goods under
Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque,
burgers, fries, spaghetti, etc. Likewise, the petitioners trademark registration for the MCDONALDS
marks in the Philippines covers goods which are similar if not identical to those covered by the
respondents application.24

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

This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test
considers the dominant features in the competing marks in determining whether they are confusingly
similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the
product arising from the adoption of the dominant features of the registered mark, disregarding minor
differences. Courts will consider more the aural and visual im-pres-sions created by the marks in the
public mind, giving little weight to factors like prices, quality, sales outlets and market segments.
Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, the Court ruled:

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

xxxx

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

Applying the dominancy test, the Court finds that respondents use of the Big Mak mark results in
likelihood of confusion. First, Big Mak sounds exactly the same as Big Mac. Second, the first word in
Big Mak is exactly the same as the first word in Big Mac. Third, the first two letters in Mak are the
same as the first two letters in Mac. Fourth, the last letter Mak while a k sounds the same as c
when the word Mak is pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus
Caloocan is spelled Kalookan.25

In Societe Des Produits Nestle, S.A v. Court of Appeals,26 the Court applied the dominancy test in
holding that FLAVOR MASTER is confusingly similar to MASTER ROAST and MASTER BLEND. The
Court held:

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

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

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

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature
of opposers mark. The word MASTER is printed across the middle portion of the label in bold letters
almost twice the size of the printed word ROAST. Further, the word MASTER has always been given
emphasis in the TV and radio commercials and other advertisements made in promoting the product.
x x x In due time, because of these advertising schemes the mind of the buying public had come to learn
to associate the word MASTER with the opposers goods.

x x x. It is the observation of this Office that much of the dominance which the word MASTER has
acquired through Opposers advertising schemes is carried over when the same is incorporated into
respondent-applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the
trademark FLAVOR MASTER (exh. 4) ones attention is easily attracted to the word MASTER, rather than
to the dissi-mi-larities that exist. Therefore, the possibility of confusion as to the goods which bear the
competing marks or as to the origins thereof is not farfetched.27

Applying the dominancy test in the present case, the Court finds that NANNY is confusingly similar to
NAN. NAN is the prevalent feature of Nestles line of infant powdered milk products. It is written in
bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2.
Clearly, NANNY contains the prevalent feature NAN. The first three letters of NANNY are exactly
the same as the letters of NAN. When NAN and NANNY are pronounced, the aural effect is
confusingly similar.

In determining the issue of confusing similarity, the Court takes into account the aural effect of the
letters contained in the marks.28 In Marvex Commercial Company, Inc. v. Petra Hawpia & Company,29
the Court held:

It is our considered view that the trademarks SALONPAS and LIONPAS are confusingly similar in
sound.

Both these words have the same suffix, PAS, which is used to denote a plaster that adheres to the
body with curative powers. PAS, being merely descriptive, furnishes no indication of the origin of the
article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635,
March 31, 1966) and may properly become the subject of a trademark by combination with another
word or phrase.

xxxx

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims,
Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and
LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea;
Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse
and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo
Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities [sic], as coming within
the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos,
and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that
Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda,
67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the
two names is almost the same.30

The scope of protection afforded to registered trademark owners is not limited to protection from
infringers with identical goods. The scope of protection extends to protection from infringers with
related goods, and to market areas that are the normal expansion of business of the registered
trademark owners. Section 138 of R.A. No. 8293 states:

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

validity of the registration, the 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. (Emphasis supplied)

In Mighty Corporation v. E. & J. Gallo Winery,31 the Court held that, Non-competing goods may be
those which, though they are not in actual competition, are so related to each other that it can
reasonably be assumed that they originate from one manufacturer, in which case, confusion of business
can arise out of the use of similar marks.32 In that case, the Court enumerated factors in determining
whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive
properties, physical attributes or essential characteristics of the goods, with reference to their form,
composition, texture or quality; and (4) style of distribution and marketing of the goods, including how
the goods are displayed and sold.33

NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are
classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and NAN
are displayed in the same section of storesthe milk section.

The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is
intended for infants while NANNY is intended for children past their infancy and for adults; and (2) NAN
is more expensive than NANNY. However, as the registered owner of the NAN mark, Nestle should be
free to use its mark on similar products, in different segments of the market, and at different price
levels. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of
protection afforded to registered trademark owners extends to market areas that are the normal
expansion of business:

x x x

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

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

Modern law recognizes that the protection to which the owner of a trademark is entitled is not limited
to guarding his goods or business from actual market competition with identical or similar products of
the parties, but extends to all cases in which the use by a junior appropriator of a trade-mark or trade-
name is likely to lead to a confusion of source, as where prospective purchasers would be misled into
thinking that the complaining party has extended his business into the field (see 148 ALR 56 et sq; 53
Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the
normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).34 (Emphasis
supplied)

WHEREFORE, we GRANT the petition. We SET ASIDE the 1 September 2005 Decision and 4 April 2006
Resolution of the Court of Appeals in CA-G.R. CV No. 62730 and REINSTATE the 18 September 1998
Decision of the Regional Trial Court, Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345.

SO ORDERED.

Nachura, Peralta, Abad and Mendoza, JJ., concur.

Petition granted, judgment and resolution set aside.

FIRST DIVISION

G.R. No. 143993. August 18, 2004.*

MCDONALDS CORPORATION and MCGEORGE FOOD INDUSTRIES, INC., petitioners, vs. L.C. BIG MAK
BURGER, INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM B. DY, JESUS AYCARDO, ARACELI
AYCARDO, and GRACE HUERTO, respondents.

Remedial Law; Appeals; A party intending to appeal from a judgment of the Court of Appeals may file
with the Supreme Court a petition for review under Section 1 of Rule 45 raising only questions of law;
Question of Law and Question of Fact Distinguished.A party intending to appeal from a judgment of
the Court of Appeals may file with this Court a petition for review under Section 1 of Rule 45 raising only
questions of law. A question of law exists when the doubt or difference arises on what the law is on a
certain state of facts. There is a question of fact when the doubt or difference arises on the truth or
falsity of the alleged facts.

Trademarks and Trade Names; Infringement; Elements to Establish Trademark Infringement.To

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

Same; Same; A mark is valid if it is distinctive and thus not barred from registration under Section 4 of
RA 166; Once registered, not only the marks validity but also the registrants ownership of the mark is
prima facie presumed.A mark is valid if it is distinctive and thus not barred from registration under
Section 4 of RA 166. However, once registered, not only the marks validity but also the registrants
ownership of the mark is prima facie presumed.

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

Same; Same; Confusion of Goods and Confusion of Business Distinguished.Section 22 covers two types
of confusion arising from the use of similar or colorable imitation marks, namely, confusion of goods
(product confusion) and confusion of business (source or origin confusion). In Sterling Products
International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al., the Court distinguished
these two types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first is the
confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one
product in the belief that he was purchasing the other. x x x The other is the confusion of business:
Here though the goods of the parties are different, the defendants product is such as might reasonably
be assumed to originate with the plaintiff, and the public would then be deceived either into that belief
or into the belief that there is some connection between the plaintiff and defendant which, in fact, does
not exist.

Same; Same; Two Tests in Determining Likelihood of Confusion, the Dominancy Test and the Holistic
Test.In determining likelihood of confusion, jurisprudence has developed two tests, the dominancy
test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the
competing trademarks that might cause confusion. In contrast, the holistic test requires the court to
consider the entirety of the marks as applied to the products, including the labels and packaging, in
determining confusing similarity.

Same; Same; Court rejected the holistic test in Societe Des Produits Nestl S.A. vs. Court of Appeals.In
the 2001 case of Societe Des Produits Nestl, S.A. v. Court of Appeals, the Court explicitly rejected the
holistic test in this wise: [T]he totality or holistic test is contrary to the elementary postulate of the law
on trademarks and unfair competition that confusing similarity is to be determined on the basis of
visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy
as they are encountered in the realities of the marketplace.

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

Same; Unfair Competition; Essential Elements of Unfair Competition.The essential elements of an

action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2)
intent to deceive the public and defraud a competitor. The confusing similarity may or may not result
from similarity in the marks, but may result from other external factors in the packaging or presentation
of the goods. The intent to deceive and defraud may be inferred from the similarity of the appearance of
the goods as offered for sale to the public. Actual fraudulent intent need not be shown.

Same; Same; Trademark infringement is a form of unfair competition; Trademark infringement

constitutes unfair competition when there is not merely likelihood of confusion but also actual or
probable deception on the public because of the general appearance of the goods.Unfair competition
is broader than trademark infringement and includes passing off goods with or without trademark
infringement. Trademark infringement is a form of unfair competition.Trademark infringement
constitutes unfair competition when there is not merely likelihood of confusion, but also actual or
probable deception on the public because of the general appearance of the goods. There can be
trademark infringement without unfair competition as when the infringer discloses on the labels
containing the mark that he manufactures the goods, thus preventing the public from being deceived
that the goods originate from the trademark owner.
Same; Same; Passing off (or palming off) takes place where the defendant, by imitative devices on the
general appearance of the goods, misleads prospective purchasers into buying his merchandise under
the impression that they are buying that of his competitors.Passing off (or palming off) takes place
where the defendant, by imitative devices on the general appearance of the goods, misleads
prospective purchasers into buying his merchandise under the impression that they are buying that of
his competitors.Thus, the defendant gives his goods the general appearance of the goods of his
competitor with the intention of deceiving the public that the goods are those of his competitor.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Abello, Concepcion, Regala and Cruz for petitioners.

Vicente M. Joyas for respondents.

CARPIO, J.:

The Case

This is a petition for review1 of the Decision dated 26 November 1999 of the Court of Appeals2 finding
respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and
ordering petitioners to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July 2000
denying reconsideration. The Court of Appeals Decision reversed the 5 September 1994 Decision3 of
the Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak Burger, Inc. liable for
trademark infringement and unfair competition.

The Facts

Petitioner McDonalds Corporation (McDonalds) is a corporation organized under the laws of

Delaware, United States. McDonalds operates, by itself or through its franchisees, a global chain of fast-
food restaurants. McDonalds4 owns a family of marks5 including the Big Mac mark for its double-
decker hamburger sandwich.6 McDonalds registered this trademark with the United States Trademark
Registry on 16 October 1979.7 Based on this Home Registration, McDonalds applied for the registration
of the same mark in the Principal Register of the then Philippine Bureau of Patents, Trademarks and
Technology (PBPTT), now the Intellectual Property Office (IPO). Pending approval of its application,
McDonalds introduced its Big Mac hamburger sandwiches in the Philippine market in September
1981. On 18 July 1985, the PBPTT allowed registration of the Big Mac mark in the Principal Register
based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in items8 and paraphernalia9 in its
restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonalds spent P10.5 million
in advertisement for Big Mac hamburger sandwiches alone.10
Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic corporation, is McDonalds
Philippine franchisee.11

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

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

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

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

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

The Trial Courts Ruling

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

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

xxxx

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

xxxx

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

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

The answer is in the affirmative. x x x x

The x x x provision of the law concerning unfair competition is broader and more inclusive than the law
concerning the infringement of trademark, which is of more limited range, but within its narrower range
recognizes a more exclusive right derived by the adoption and registration of the trademark by the
person whose goods or services are first associated therewith. x x x Notwithstanding the distinction
between an action for trademark infringement and an action for unfair competition, however, the law
extends substantially the same relief to the injured party for both cases. (See Sections 23 and 29 of
Republic Act No. 166)

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

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs McDonalds Corporation and McGeorge Food
Industries, Inc. and against defendant L.C. Big Mak Burger, Inc., as follows:

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

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay plaintiffs actual damages in the amount of
P400,000.00, exemplary damages in the amount of P100,000.00, and attorneys fees and expenses of
litigation in the amount of P100,000.00;

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

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

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

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

xxxx

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

xxxx

x x x [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of
the product and the manner that the tradename Big Mak is being used and presented to the public. As
earlier noted, there are glaring dissimilarities between plaintiffs-appellees trademark and defendants-
appellants corporate name. Plaintiffs-appellees product carrying the trademark B[ig] M[ac] is a
double decker sandwich (depicted in the tray mat containing photographs of the various food products
xxx sold in a Styrofoam box with the McDonalds logo and trademark in red, bl[o]ck capital letters
printed thereon x x x at a price which is more expensive than the defendants-appellants comparable
food products. In order to buy a Big Mac, a customer needs to visit an air-conditioned McDonalds
restaurant usually located in a nearby commercial center, advertised and identified by its logothe
umbrella M, and its mascotRonald McDonald. A typical McDonalds restaurant boasts of a
playground for kids, a second floor to accommodate additional customers, a drive-thru to allow
customers with cars to make orders without alighting from their vehicles, the interiors of the building
are well-lighted, distinctly decorated and painted with pastel colors x x x. In buying a B[ig] M[ac], it is
necessary to specify it by its trademark. Thus, a customer needs to look for a McDonalds and enter it
first before he can find a hamburger sandwich which carry the mark Big Mac. On the other hand,
defendants-appellants sell their goods through snack vans x x x x
Anent the allegation that defendants-appellants are guilty of unfair competition, we likewise find the
same untenable.

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

To constitute unfair competition therefore it must necessarily follow that there was malice and that the
entity concerned was in bad faith.

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

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

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

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

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

B. As a trademark, respondents Big Mak is undeniably and unquestionably similar to petitioners Big
Mac trademark based on the dominancy test and the idem sonans test resulting inexorably in
confusion on the part of the consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO CONSIDER THE INHERENT SIMILARITY BETWEEN THE
MARK BIG MAK AND THE WORD MARK BIG MAC AS AN INDICATION OF RESPONDENTS INTENT TO
DECEIVE OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR COMPETITION.22
Petitioners pray that we set aside the Court of Appeals Decision and reinstate the RTC Decision.

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

The Issues

The issues are:

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

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

The Courts Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are

Proper for a Petition for Review

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

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

On the Manner Respondents Used

Big Mak in their Business

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

The evidence presented during the hearings on petitioners motion for the issuance of a writ of
preliminary injunction shows that the plastic wrappings and plastic bags used by respondents for their
hamburger sandwiches bore the words Big Mak. The other descriptive words burger and 100%
pure beef were set in smaller type, along with the locations of branches.28 Respondents cash invoices
simply refer to their hamburger sandwiches as Big Mak.29 It is respondents snack vans that carry the
words L.C. Big Mak Burger, Inc.30

It was only during the trial that respondents presented in evidence the plastic wrappers and bags for
their hamburger sandwiches relied on by the Court of Appeals.31 Respondents plastic wrappers and
bags were identical with those petitioners presented during the hearings for the injunctive writ except
that the letters L.C. and the words Burger, Inc. in respondents evidence were added above and
below the words Big Mak, respectively. Since petitioners complaint was based on facts existing before
and during the hearings on the injunctive writ, the facts established during those hearings are the
proper factual bases for the disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

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

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

Petitioners base their cause of action under the first part of Section22, i.e. respondents allegedly used,
without petitioners consent, acolorable imitation of the Big Mac mark in advertising and selling
respondents hamburger sandwiches. This likely caused confusion in the mind of the purchasing public
on the source of the hamburgers or the identity of the business.

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

On the Validity of the Big Mac Mark

and McDonalds Ownership of such Mark

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

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

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

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

On Types of Confusion

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

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

Under Act No. 666,50 the first trademark law, infringement was limited to confusion of goods only,
when the infringing mark is used on goods of a similar kind.51 Thus, no relief was afforded to the
party whose registered mark or its colorable imitation is used on different although related goods. To
remedy this situation, Congress enacted RA 166 on 20 June 1947. In defining trademark infringement,
Section 22 of RA 166 deleted the requirement in question and expanded its scope to include such use of
the mark or its colorable imitation that is likely to result in confusion on the source or origin of such
goods or services, or identity of such business.52 Thus, while there is confusion of goods when the
products are competing, confusion of business exists when the products are non-competing but related
enough to produce confusion of affiliation.53

On Whether Confusion of Goods and

Confusion of Business are Applicable

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 Phil. Nut Industry, Inc. v.
Standard Brands Inc.,62 Converse Rubber Corporation v. Universal Rubber Products, Inc.,63 and Asia
Brewery, Inc. v. Court of Appeals.64 In the 2001 case of Societe Des Produits Nestl, S.A. v. Court of
Appeals,65 the Court explicitly rejected the holistic test in this wise:
[T]he totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair
competition that confusing similarity is to be determined on the basis of visual, aural, connotative
comparisons and overall impressions engendered by the marks in controversy as they are encountered
in the realities of the marketplace. (Emphasis supplied)

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

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

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

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

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

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

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

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

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

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

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

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

On the Lack of Proof of

Actual Confusion

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

On the Issue of Unfair Competition

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

xxxx

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

In particular, and without in any way limiting the scope of unfair competition, the following shall be
deemed guilty of unfair competition:

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

(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the
false belief that such person is offering the services of another who has identified such services in the
mind of the public; or

(c) Any person who shall make any false statement in the course of trade or who shall commit any other
act contrary to good faith of a nature calculated to discredit the goods, business or services of another.
(Emphasis supplied)

The essential elements of an action for unfair competition are (1) confusing similarity in the general
appearance of the goods, and (2) intent to deceive the public and defraud a competitor.74 The
confusing similarity may or may not result from similarity in the marks, but may result from other
external factors in the packaging or presentation of the goods. The intent to deceive and defraud may
be inferred from the similarity of the appearance of the goods as offered for sale to the public.75 Actual
fraudulent intent need not be shown.76

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

To support their claim of unfair competition, petitioners allege that respondents fraudulently passed off
their hamburgers as Big Mac hamburgers. Petitioners add that respondents fraudulent intent can be
inferred from the similarity of the marks in question.79
Passing off (or palming off) takes place where the defendant, by imitative devices on the general
appearance of the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors.80 Thus, the defendant gives his goods the
general appearance of the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.

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

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

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

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

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

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

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

The Remedies Available to Petitioners

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

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

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

SO ORDERED.

Davide, Jr. (C.J., Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

Petition granted, judgment and resolution set aside. That of the trial court reinstated.
SECOND DIVISION

G.R. No. 185917. June 1, 2011.*

FREDCO MANUFACTURING CORPORATION, petitioner, vs. PRESIDENT AND FELLOWS OF HARVARD

COLLEGE (HARVARD UNIVERSITY), respondents.

Trademarks; Before a trademark can be registered, it must have been actually used in commerce for not
less than two months in the Philippines prior to the filing of an application for its registration; Harvard
Universitys Registration of the name Harvard is based on home registration which is allowed under
Section 37 of R.A. No. 166.Under Section 2 of Republic Act No. 166, as amended (R.A. No. 166), before
a trademark can be registered, it must have been actually used in commerce for not less than two
months in the Philippines prior to the filing of an application for its registration. While Harvard
University had actual prior use of its marks abroad for a long time, it did not have actual prior use in the
Philippines of the mark Harvard Veritas Shield Symbol before its application for registration of the
mark Harvard with the then Philippine Patents Office. However, Harvard Universitys registration of
the name Harvard is based on home registration which is allowed under Section 37 of R.A. No. 166.

Same; What Fredco has done in using the mark Harvard and the words Cambridge, Massachusetts,
USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill of
Harvard University without the latters consent.Section 4(a) of R.A. No. 166 is identical to Section 2(a)
of the Lanham Act, the trademark law of the United States. These provisions are intended to protect the
right of publicity of famous individuals and institutions from commercial exploitation of their goodwill by
others. What Fredco has done in using the mark Harvard and the words Cambridge, Massachusetts,
USA to evoke a desirable aura to its products is precisely to exploit commercially the goodwill of
Harvard University without the latters consent. This is a clear violation of Section 4(a) of R.A. No. 166.
Under Section 17(c) of R.A. No. 166, such violation is a ground for cancellation of Fredcos registration of
the mark Harvard because the registration was obtained in violation of Section 4 of R.A. No. 166.

Same; Paris Convention; The Philippines is obligated to assure nationals of countries of the Paris
Convention that they are afforded an effective protection against violation of their intellectual property
rights in the Philippines in the same way that their own countries are obligated to accord similar
protection to Philippine Nationals.This Court has ruled that the Philippines is obligated to assure
nationals of countries of the Paris Convention that they are afforded an effective protection against
violation of their intellectual property rights in the Philippines in the same way that their own countries
are obligated to accord similar protection to Philippine nationals.

Same; Same; Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166, Harvard
University is entitled to protection in the Philippines of its trade name Harvard even without
registration of such trade name in the Philippines.Harvard is the trade name of the world famous
Harvard University, and it is also a trademark of Harvard University. Under Article 8 of the Paris
Convention, as well as Section 37 of R.A. No. 166, Harvard University is entitled to protection in the
Philippines of its trade name Harvard even without registration of such trade name in the Philippines.
This means that no educational entity in the Philippines can use the trade name Harvard without the
consent of Harvard University. Likewise, no entity in the Philippines can claim, expressly or impliedly
through the use of the name and mark Harvard, that its products or services are authorized, approved,
or licensed by, or sourced from, Harvard University without the latters consent.

Same; Same; The essential requirement under article 6bis of the Paris Convention is that the trademark
to be protected must be well-known in the country where protection is sought; The power to
determine whether a trademark is well-known lies in the competent authority of the country of
registration or use.In Mirpuri, 318 SCRA 516 (1999), the Court ruled that the essential requirement
under Article 6bis of the Paris Convention is that the trademark to be protected must be well-known
in the country where protection is sought. The Court declared that the power to determine whether a
trademark is well-known lies in the competent authority of the country of registration or use. The Court
then stated that the competent authority would either be the registering authority if it has the power to
decide this, or the courts of the country in question if the issue comes before the courts.

Same; Same; Section 123.1(e) does not require that the well-known mark be used in commerce in the
Philippines but only that it be well-known in the Philippines.Section 123.1(e) of R.A. No. 8293 now
categorically states that a mark which is considered by the competent authority of the Philippines to be
well-known internationally and in the Philippines, whether or not it is registered here, cannot be
registered by another in the Philippines. Section 123.1(e) does not require that the well-known mark be
used in commerce in the Philippines but only that it be well-known in the Philippines.

Same; Same; While under the territoriality principle a mark must be used in commerce in the Philippines
to be entitled to protection, internationally well-known marks are the exceptions to this rule.Since
any combination of the foregoing criteria is sufficient to determine that a mark is well-known, it is
clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the
territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection,
internationally well-known marks are the exceptions to this rule.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Cordova & Associates for petitioner.

Ortega, Del Castillo, Bacorro, Odulio, Calma & Carbonell for respondent.

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 24 October 2008 Decision2 and 8 January 2009
Resolution3 of the Court of Appeals in CA-G.R. SP No. 103394.

The Antecedent Facts

On 10 August 2005, petitioner Fredco Manufacturing Corporation (Fredco), a corporation organized and
existing under the laws of the Philippines, filed a Petition for Cancellation of Registration No. 56561
before the Bureau of Legal Affairs of the Intellectual Property Office (IPO) against respondents President
and Fellows of Harvard College (Harvard University), a corporation organized and existing under the laws
of Massachusetts, United States of America. The case was docketed as Inter Partes Case No. 14-2005-
00094.

Fredco alleged that Registration No. 56561 was issued to Harvard University on 25 November 1993 for
the mark Harvard Veritas Shield Symbol for decals, tote bags, serving trays, sweatshirts, t-shirts, hats
and flying discs under Classes 16, 18, 21, 25 and 28 of the Nice International Classification of Goods and
Services. Fredco alleged that the mark Harvard for t-shirts, polo shirts, sandos, briefs, jackets and
slacks was first used in the Philippines on 2 January 1982 by New York Garments Manufacturing &
Export Co., Inc. (New York Garments), a domestic corporation and Fredcos predecessor-in-interest. On
24 January 1985, New York Garments filed for trademark registration of the mark Harvard for goods
under Class 25. The application matured into a registration and a Certificate of Registration was issued
on 12 December 1988, with a 20-year term subject to renewal at the end of the term. The registration
was later assigned to Romeo Chuateco, a member of the family that owned New York Garments.

Fredco alleged that it was formed and registered with the Securities and Exchange Commission on 9
November 1995 and had since then handled the manufacture, promotion and marketing of Harvard
clothing articles. Fredco alleged that at the time of issuance of Registration No. 56561 to Harvard
University, New York Garments had already registered the mark Harvard for goods under Class 25.
Fredco alleged that the registration was cancelled on 30 July 1998 when New York Garments
inadvertently failed to file an affidavit of use/non-use on the fifth anniversary of the registration but the
right to the mark Harvard remained with its predecessor New York Garments and now with Fredco.

Harvard University, on the other hand, alleged that it is the lawful owner of the name and mark
Harvard in numerous countries worldwide, including the Philippines. Among the countries where
Harvard University has registered its name and mark Harvard are:

1. Argentina 26. South Korea

2. Benelux4 27. Malaysia

3. Brazil 28. Mexico

4. Canada 29. New Zealand

5. Chile 30. Norway

6. China P.R. 31. Peru

7. Colombia 32. Philippines

8. Costa Rica 33. Poland

9. Cyprus 34. Portugal

10. Czech Republic 35. Russia

11. Denmark 36. South Africa

12. Ecuador 37. Switzerland

13. Egypt 38. Singapore

14. Finland 39. Slovak Republic

15. France 40. Spain

16. Great Britain 41. Sweden

17. Germany 42. Taiwan

18. Greece 43. Thailand

19. Hong Kong 44. Turkey

20. India 45. United Arab Emirates

21. Indonesia 46. Uruguay

22. Ireland 47. United States of America

23. Israel 48. Venezuela

24. Italy 49. Zimbabwe

25. Japan 50. European Community5

The name and mark Harvard was adopted in 1639 as the name of Harvard College6 of Cambridge,
Massachusetts, U.S.A. The name and mark Harvard was allegedly used in commerce as early as 1872.
Harvard University is over 350 years old and is a highly regarded institution of higher learning in the
United States and throughout the world. Harvard University promotes, uses, and advertises its name
Harvard through various publications, services, and products in foreign countries, including the
Philippines. Harvard University further alleged that the name and the mark have been rated as one of
the most famous brands in the world, valued between US $750,000,000 and US $1,000,000,000.

Harvard University alleged that in March 2002, it discovered, through its international trademark watch
program, Fredcos website www.harvard-usa.com. The website advertises and promotes the brand
name Harvard Jeans USA without Harvard Universitys consent. The websites main page shows an
oblong logo bearing the mark Harvard Jeans USA, Established 1936, and Cambridge,
Massachusetts. On 20 April 2004, Harvard University filed an administrative complaint against Fredco
before the IPO for trademark infringement and/or unfair competition with damages.
Harvard University alleged that its valid and existing certificates of trademark registration in the
Philippines are:

1. Trademark Registration No. 56561 issued on 25 November 1993 for Harvard Veritas Shield Design
for goods and services in Classes 16, 18, 21, 25 and 28 (decals, tote bags, serving trays, sweatshirts, t-
shirts, hats and flying discs) of the Nice International Classification of Goods and Services;

2. Trademark Registration No. 57526 issued on 24 March 1994 for Harvard Veritas Shield Symbol for
services in Class 41; Trademark Registration No. 56539 issued on 25 November 1998 for Harvard for
services in Class 41; and

3. Trademark Registration No. 66677 issued on 8 December 1998 for Harvard Graphics for goods in
Class 9. Harvard University further alleged that it filed the requisite affidavits of use for the mark
Harvard Veritas Shield Symbol with the IPO.

Further, on 7 May 2003 Harvard University filed Trademark Application No. 4-2003-04090 for Harvard
Medical International & Shield Design for services in Classes 41 and 44. In 1989, Harvard University
established the Harvard Trademark Licensing Program, operated by the Office for Technology and
Trademark Licensing, to oversee and manage the worldwide licensing of the Harvard name and
trademarks for various goods and services. Harvard University stated that it never authorized or licensed
any person to use its name and mark Harvard in connection with any goods or services in the
Philippines.

In a Decision7 dated 22 December 2006, Director Estrellita Beltran-Abelardo of the Bureau of Legal
Affairs, IPO cancelled Harvard Universitys registration of the mark Harvard under Class 25, as follows:

WHEREFORE, premises considered, the Petition for Cancellation is hereby GRANTED. Consequently,
Trademark Registration Number 56561 for the trademark HARVARD VE RI TAS SHIELD SYMBOL
issued on November 25, 1993 to PRESIDENT AND FELLOWS OF HARVARD COLLEGE (HARVARD
UNIVERSITY) should be CANCELLED only with respect to goods falling under Class 25. On the other hand,
considering that the goods of Respondent-Registrant falling under Classes 16, 18, 21 and 28 are not
confusingly similar with the Petitioners goods, the Respondent-Registrant has acquired vested right
over the same and therefore, should not be cancelled.

Let the filewrapper of the Trademark Registration No. 56561 issued on November 25, 1993 for the
trademark HARVARD VE RI TAS SHIELD SYMBOL, subject matter of this case together with a copy of
this Decision be forwarded to the Bureau of Trademarks (BOT) for appropriate action.

SO ORDERED.8

Harvard University filed an appeal before the Office of the Director General of the IPO. In a Decision9
dated 21 April 2008, the Office of the Director General, IPO reversed the decision of the Bureau of Legal
Affairs, IPO.
The Director General ruled that more than the use of the trademark in the Philippines, the applicant
must be the owner of the mark sought to be registered. The Director General ruled that the right to
register a trademark is based on ownership and when the applicant is not the owner, he has no right to
register the mark. The Director General noted that the mark covered by Harvard Universitys
Registration No. 56561 is not only the word Harvard but also the logo, emblem or symbol of Harvard
University. The Director General ruled that Fredco failed to explain how its predecessor New York
Garments came up with the mark Harvard. In addition, there was no evidence that Fredco or New
York Garments was licensed or authorized by Harvard University to use its name in commerce or for any
other use.

The dispositive portion of the decision of the Office of the Director General, IPO reads:

WHEREFORE, premises considered, the instant appeal is GRANTED. The appealed decision is hereby
REVERSED and SET ASIDE. Let a copy of this Decision as well as the trademark application and records be
furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also
the Directors of the Bureau of Trademarks and the Administrative, Financial and Human Resources
Development Services Bureau, and the library of the Documentation, Information and Technology
Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes.

SO ORDERED.10

Fredco filed a petition for review before the Court of Appeals assailing the decision of the Director
General.

The Decision of the Court of Appeals

In its assailed decision, the Court of Appeals affirmed the decision of the Office of the Director General
of the IPO.

The Court of Appeals adopted the findings of the Office of the Director General and ruled that the latter
correctly set aside the cancellation by the Director of the Bureau of Legal Affairs of Harvard Universitys
trademark registration under Class 25. The Court of Appeals ruled that Harvard University was able to
substantiate that it appropriated and used the marks Harvard and Harvard Veritas Shield Symbol in
Class 25 way ahead of Fredco and its predecessor New York Garments. The Court of Appeals also ruled
that the records failed to disclose any explanation for Fredcos use of the name and mark Harvard and
the words USA, Established 1936, and Cambridge, Massachusetts within an oblong device, US
Legend and Europes No. 1 Brand. Citing Shangri-La International Hotel Management, Ltd. v.
Developers Group of Companies, Inc.,11 the Court of Appeals ruled:

One who has imitated the trademark of another cannot bring an action for infringement, particularly
against the true owner of the mark, because he would be coming to court with unclean hands. Priority is
of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not
merely take advantage of the goodwill established by the true owner.12

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the petition for review is DENIED. The Decision dated April 21, 2008
of the Director General of the IPO in Appeal No. 14-07-09 Inter Partes Case No. 14-2005-00094 is hereby
AFFIRMED.

SO ORDERED.13

Fredco filed a motion for reconsideration.

In its Resolution promulgated on 8 January 2009, the Court of Appeals denied the motion for lack of
merit.

Hence, this petition before the Court.

The Issue

The issue in this case is whether the Court of Appeals committed a reversible error in affirming the
decision of the Office of the Director General of the IPO.

The Ruling of this Court

The petition has no merit.

There is no dispute that the mark Harvard used by Fredco is the same as the mark Harvard in the
Harvard Veritas Shield Symbol of Harvard University. It is also not disputed that Harvard University
was named Harvard College in 1639 and that then, as now, Harvard University is located in Cambridge,
Massachusetts, U.S.A. It is also unrefuted that Harvard University has been using the mark Harvard in
commerce since 1872. It is also established that Harvard University has been using the marks Harvard
and Harvard Veritas Shield Symbol for Class 25 goods in the United States since 1953. Further, there is
no dispute that Harvard University has registered the name and mark Harvard in at least 50 countries.

On the other hand, Fredcos predecessor-in-interest, New York Garments, started using the mark
Harvard in the Philippines only in 1982. New York Garments filed an application with the Philippine
Patent Office in 1985 to register the mark Harvard, which application was approved in 1988. Fredco
insists that the date of actual use in the Philippines should prevail on the issue of who has the better
right to register the marks.

Under Section 2 of Republic Act No. 166,14 as amended (R.A. No. 166), before a trademark can be
registered, it must have been actually used in commerce for not less than two months in the Philippines
prior to the filing of an application for its registration. While Harvard University had actual prior use of
its marks abroad for a long time, it did not have actual prior use in the Philippines of the mark Harvard
Veritas Shield Symbol before its application for registration of the mark Harvard with the then
Philippine Patents Office. However, Harvard Universitys registration of the name Harvard is based on
home registration which is allowed under Section 37 of R.A. No. 166.15 As pointed out by Harvard
University in its Comment:
Although Section 2 of the Trademark law (R.A. 166) requires for the registration of trademark that the
applicant thereof must prove that the same has been actually in use in commerce or services for not less
than two (2) months in the Philippines before the application for registration is filed, where the
trademark sought to be registered has already been registered in a foreign country that is a member of
the Paris Convention, the requirement of proof of use in the commerce in the Philippines for the said
period is not necessary. An applicant for registration based on home certificate of registration need not
even have used the mark or trade name in this country.16

Indeed, in its Petition for Cancellation of Registration No. 56561, Fredco alleged that Harvard
Universitys registration is based on home registration for the mark Harvard Veritas Shield for Class
25.17

In any event, under Section 239.2 of Republic Act No. 8293 (R.A. No. 8293),18 [m]arks registered under
Republic Act No. 166 shall remain in force but shall be deemed to have been granted under this Act
x x x, which does not require actual prior use of the mark in the Philippines. Since the mark Harvard
Veritas Shield Symbol is now deemed granted under R.A. No. 8293, any alleged defect arising from the
absence of actual prior use in the Philippines has been cured by Section 239.2.19 In addition, Fredcos
registration was already cancelled on 30 July 1998 when it failed to file the required affidavit of use/non-
use for the fifth anniversary of the marks registration. Hence, at the time of Fredcos filing of the
Petition for Cancellation before the Bureau of Legal Affairs of the IPO, Fredco was no longer the
registrant or presumptive owner of the mark Harvard.

There are two compelling reasons why Fredcos petition must fail.

First, Fredcos registration of the mark Harvard and its identification of origin as Cambridge,
Massachusetts falsely suggest that Fredco or its goods are connected with Harvard University, which
uses the same mark Harvard and is also located in Cambridge, Massachusetts. This can easily be
gleaned from the following oblong logo of Fredco that it attaches to its clothing line:

Fredcos registration of the mark Harvard should not have been allowed because Section 4(a) of R.A.
No. 166 prohibits the registration of a mark which may disparage or falsely suggest a connection with
persons, living or dead, institutions, beliefs x x x. Section 4(a) of R.A. No. 166 provides:

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

(a) Consists of or comprises immoral, deceptive or scandalous manner, or matter which may disparage
or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or
bring them into contempt or disrepute;

(b) x x x (emphasis supplied)

Fredcos use of the mark Harvard, coupled with its claimed origin in Cambridge, Massachusetts,
obviously suggests a false connection with Harvard University. On this ground alone, Fredcos
registration of the mark Harvard should have been disallowed.

Indisputably, Fredco does not have any affiliation or connection with Harvard University, or even with
Cambridge, Massachusetts. Fredco or its predecessor New York Garments was not established in 1936,
or in the U.S.A. as indicated by Fredco in its oblong logo. Fredco offered no explanation to the Court of
Appeals or to the IPO why it used the mark Harvard on its oblong logo with the words Cambridge,
Massachusetts, Established in 1936, and USA. Fredco now claims before this Court that it used
these words to evoke a lifestyle or suggest a desirable aura of petitioners clothing lines. Fredcos
belated justification merely confirms that it sought to connect or associate its products with Harvard
University, riding on the prestige and popularity of Harvard University, and thus appropriating part of
Harvard Universitys goodwill without the latters consent.

Section 4(a) of R.A. No. 166 is identical to Section 2(a) of the Lanham Act,20 the trademark law of the
United States. These provisions are intended to protect the right of publicity of famous individuals and
institutions from commercial exploitation of their goodwill by others.21 What Fredco has done in using
the mark Harvard and the words Cambridge, Massachusetts, USA to evoke a desirable aura to
its products is precisely to exploit commercially the goodwill of Harvard University without the latters
consent. This is a clear violation of Section 4(a) of R.A. No. 166. Under Section 17(c)22 of R.A. No. 166,
such violation is a ground for cancellation of Fredcos registration of the mark Harvard because the
registration was obtained in violation of Section 4 of R.A. No. 166.

Second, the Philippines and the United States of America are both signatories to the Paris Convention
for the Protection of Industrial Property (Paris Convention). The Philippines became a signatory to the
Paris Convention on 27 September 1965. Articles 6bis and 8 of the Paris Convention state:

ARTICLE 6bis

(i) The countries of the Union undertake either administratively if their legislation so permits, or at
the request of an interested party, to refuse or to cancel the registration and to prohibit the use of a
trademark which constitutes a reproduction, imitation or translation, liable to create confusion or a
mark considered by the competent authority of the country as being already the mark of a person
entitled to the benefits of the present Convention and used for identical or similar goods. These
provisions shall also apply when the essential part of the mark constitutes a reproduction of any such
well-known mark or an imitation liable to create confusion therewith.

ARTICLE 8

A trade name shall be protected in all the countries of the Union without the obligation of filing or
registration, whether or not it forms part of a trademark. (Emphasis supplied)

Thus, this Court has ruled that the Philippines is obligated to assure nationals of countries of the Paris
Convention that they are afforded an effective protection against violation of their intellectual property
rights in the Philippines in the same way that their own countries are obligated to accord similar
protection to Philippine nationals.23

Article 8 of the Paris Convention has been incorporated in Section 37 of R.A. No. 166, as follows:

Section 37. Rights of foreign registrants.Persons who are nationals of, domiciled in, or have a bona
fide or effective business or commercial establishment in any foreign country, which is a party to any
international convention or treaty relating to marks or trade-names, or the repression of unfair
competition to which the Philippines may be a party, shall be entitled to the benefits and subject to the
provisions of this Act to the extent and under the conditions essential to give effect to any such
convention and treaties so long as the Philippines shall continue to be a party thereto, except as
provided in the following paragraphs of this section.

xxxx

Trade-names of persons described in the first paragraph of this section shall be protected without the
obligation of filing or registration whether or not they form parts of marks.24

x x x x (Emphasis supplied)

Thus, under Philippine law, a trade name of a national of a State that is a party to the Paris Convention,
whether or not the trade name forms part of a trademark, is protected without the obligation of filing
or registration.

Harvard is the trade name of the world famous Harvard University, and it is also a trademark of
Harvard University. Under Article 8 of the Paris Convention, as well as Section 37 of R.A. No. 166,
Harvard University is entitled to protection in the Philippines of its trade name Harvard even without
registration of such trade name in the Philippines. This means that no educational entity in the
Philippines can use the trade name Harvard without the consent of Harvard University. Likewise, no
entity in the Philippines can claim, expressly or impliedly through the use of the name and mark
Harvard, that its products or services are authorized, approved, or licensed by, or sourced from,
Harvard University without the latters consent.

Article 6bis of the Paris Convention has been administratively implemented in the Philippines through
two directives of the then Ministry (now Department) of Trade, which directives were upheld by this
Court in several cases.25 On 20 November 1980, then Minister of Trade Secretary Luis Villafuerte issued
a Memorandum directing the Director of Patents to reject, pursuant to the Paris Convention, all pending
applications for Philippine registration of signature and other world-famous trademarks by applicants
other than their original owners.36 The Memorandum states:

Pursuant to the Paris Convention for the Protection of Industrial Property to which the Philippines is a
signatory, you are hereby directed to reject all pending applications for Philippine registration of
signature and other world-famous trademarks by applicants other than its original owners or users.
The conflicting claims over internationally known trademarks involve such name brands as Lacoste,
Jordache, Vanderbilt, Sasson, Fila, Pierre Cardin, Gucci, Christian Dior, Oscar de la Renta, Calvin Klein,
Givenchy, Ralph Lauren, Geoffrey Beene, Lanvin and Ted Lapidus.

It is further directed that, in cases where warranted, Philippine registrants of such trademarks should be
asked to surrender their certificates of registration, if any, to avoid suits for damages and other legal
action by the trademarks foreign or local owners or original users.

You are also required to submit to the undersigned a progress report on the matter.

For immediate compliance.27

In a Memorandum dated 25 October 1983, then Minister of Trade and Industry Roberto Ongpin
affirmed the earlier Memorandum of Minister Villafuerte. Minister Ongpin directed the Director of
Patents to implement measures necessary to comply with the Philippines obligations under the Paris
Convention, thus:

1. Whether the trademark under consideration is well-known in the Philippines or is a mark already
belonging to a person entitled to the benefits of the CONVENTION, this should be established, pursuant
to Philippine Patent Office procedures in inter partes and ex parte cases, according to any of the
following criteria or any combination thereof:

(a) a declaration by the Minister of Trade and Industry that the trademark being considered is already
well-known in the Philippines such that permission for its use by other than its original owner will
constitute a reproduction, imitation, translation or other infringement;

(b) that the trademark is used in commerce internationally, supported by proof that goods bearing the
trademark are sold on an international scale, advertisements, the establishment of factories, sales
offices, distributorships, and the like, in different countries, including volume or other measure of
international trade and commerce;

(c) that the trademark is duly registered in the industrial property office(s) of another country or
countries, taking into consideration the dates of such registration;

(d) that the trademark has been long established and obtained goodwill and general international
consumer recognition as belonging to one owner or source;

(e) that the trademark actually belongs to a party claiming ownership and has the right to registration
under the provisions of the aforestated PARIS CONVENTION.

2. The word trademark, as used in this MEMORANDUM, shall include tradenames, service marks,
logos, signs, emblems, insignia or other similar devices used for identification and recognition by
consumers.

3. The Philippine Patent Office shall refuse all applications for, or cancel the registration of, trademarks
which constitute a reproduction, translation or imitation of a trademark owned by a person, natural or
corporate, who is a citizen of a country signatory to the PARIS CONVENTION FOR THE PROTECTION OF
INDUSTRIAL PROPERTY.

x x x x38 (Emphasis supplied)

In Mirpuri, the Court ruled that the essential requirement under Article 6bis of the Paris Convention is
that the trademark to be protected must be well-known in the country where protection is sought.39
The Court declared that the power to determine whether a trademark is well-known lies in the
competent authority of the country of registration or use.30 The Court then stated that the competent
authority would either be the registering authority if it has the power to decide this, or the courts of the
country in question if the issue comes before the courts.31

To be protected under the two directives of the Ministry of Trade, an internationally well-known mark
need not be registered or used in the Philippines.32 All that is required is that the mark is well-known
internationally and in the Philippines for identical or similar goods, whether or not the mark is registered
or used in the Philippines. The Court ruled in Sehwani, Incorporated v. In-N-Out Burger, Inc.:33

The fact that respondents marks are neither registered nor used in the Philippines is of no moment.
The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in
the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks,
wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union
agreed to a nonbinding recommendation that a well-known mark should be protected in a country even
if the mark is neither registered nor used in that country. Part I, Article 2(3) thereof provides:

(3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for
determining whether a mark is a well-known mark:

(i) that the mark has been used in, or that the mark has been registered or that an application for
registration of the mark has been filed in or in respect of, the Member State:

(ii) that the mark is well known in, or that the mark has been registered or that an application for
registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State;
or

(iii) that the mark is well known by the public at large in the Member State.34 (Italics in the original
decision; boldface supplied)

Indeed, Section 123.1(e) of R.A. No. 8293 now categorically states that a mark which is considered by
the competent authority of the Philippines to be well-known internationally and in the Philippines,
whether or not it is registered here, cannot be registered by another in the Philippines. Section
123.1(e) does not require that the well-known mark be used in commerce in the Philippines but only
that it be well-known in the Philippines. Moreover, Rule 102 of the Rules and Regulations on
Trademarks, Service Marks, Trade Names and Marked or Stamped Containers, which implement R.A.
No. 8293, provides:
Rule 102. Criteria for determining whether a mark is well-known.In determining whether a mark is
well-known, the following criteria or any combination thereof may be taken into account:

(a) the duration, extent and geographical area of any use of the mark, in particular, the duration,
extent and geographical area of any promotion of the mark, including advertising or publicity and the
presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies;

(b) the market share, in the Philippines and in other countries, of the goods and/or services to which
the mark applies;

(c) the degree of the inherent or acquired distinction of the mark;

(d) the quality-image or reputation acquired by the mark;

(e) the extent to which the mark has been registered in the world;

(f) the exclusivity of registration attained by the mark in the world;

(g) the extent to which the mark has been used in the world;

(h) the exclusivity of use attained by the mark in the world;

(i) the commercial value attributed to the mark in the world;

(j) the record of successful protection of the rights in the mark;

(k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and

(l) the presence or absence of identical or similar marks validly registered for or used on identical or
similar goods or services and owned by persons other than the person claiming that his mark is a well-
known mark. (Emphasis supplied)

Since any combination of the foregoing criteria is sufficient to determine that a mark is well-known, it
is clearly not necessary that the mark be used in commerce in the Philippines. Thus, while under the
territoriality principle a mark must be used in commerce in the Philippines to be entitled to protection,
internationally well-known marks are the exceptions to this rule.

In the assailed Decision of the Office of the Director General dated 21 April 2008, the Director General
found that:

Traced to its roots or origin, HARVARD is not an ordinary word. It refers to no other than Harvard
University, a recognized and respected institution of higher learning located in Cambridge,
Massachusetts, U.S.A. Initially referred to simply as the new college, the institution was named
Harvard College on 13 March 1639, after its first principal donor, a young clergyman named John
Harvard. A graduate of Emmanuel College, Cambridge in England, John Harvard bequeathed about four
hundred books in his will to form the basis of the college library collection, along with half his personal
wealth worth several hundred pounds. The earliest known official reference to Harvard as a university
rather than college occurred in the new Massachusetts Constitution of 1780.

Records also show that the first use of the name HARVARD was in 1638 for educational services, policy
courses of instructions and training at the university level. It has a Charter. Its first commercial use of the
name or mark HARVARD for Class 25 was on 31 December 1953 covered by UPTON Reg. No. 2,119,339
and 2,101,295. Assuming in arguendo, that the Appellate may have used the mark HARVARD in the
Philippines ahead of the Appellant, it still cannot be denied that the Appellants use thereof was
decades, even centuries, ahead of the Appellees. More importantly, the name HARVARD was the name
of a person whose deeds were considered to be a cornerstone of the university. The Appellants logos,
emblems or symbols are owned by Harvard University. The name HARVARD and the logos, emblems or
symbols are endemic and cannot be separated from the institution.35

Finally, in its assailed Decision, the Court of Appeals ruled:

Records show that Harvard University is the oldest and one of the foremost educational institutions in
the United States, it being established in 1636. It is located primarily in Cambridge, Massachusetts and
was named after John Harvard, a puritan minister who left to the college his books and half of his estate.

The mark Harvard College was first used in commerce in the United States in 1638 for educational
services, specifically, providing courses of instruction and training at the university level (Class 41). Its
application for registration with the United States Patent and Trademark Office was filed on September
20, 2000 and it was registered on October 16, 2001. The marks Harvard and Harvard Ve ri tas Shield
Symbol were first used in commerce in the United States on December 31, 1953 for athletic uniforms,
boxer shorts, briefs, caps, coats, leather coats, sports coats, gym shorts, infant jackets, leather jackets,
night shirts, shirts, socks, sweat pants, sweatshirts, sweaters and underwear (Class 25). The applications
for registration with the USPTO were filed on September 9, 1996, the mark Harvard was registered on
December 9, 1997 and the mark Harvard Ve ri tas Shield Symbol was registered on September 30,
1997.36

We also note that in a Decision37 dated 18 December 2008 involving a separate case between Harvard
University and Streetward International, Inc.,38 the Bureau of Legal Affairs of the IPO ruled that the
mark Harvard is a well-known mark. This Decision, which cites among others the numerous
trademark registrations of Harvard University in various countries, has become final and executory.

There is no question then, and this Court so declares, that Harvard is a well-known name and mark not
only in the United States but also internationally, including the Philippines. The mark Harvard is rated
as one of the most famous marks in the world. It has been registered in at least 50 countries. It has been
used and promoted extensively in numerous publications worldwide. It has established a considerable
goodwill worldwide since the founding of Harvard University more than 350 years ago. It is easily
recognizable as the trade name and mark of Harvard University of Cambridge, Massachusetts, U.S.A.,
internationally known as one of the leading educational institutions in the world. As such, even before
Harvard University applied for registration of the mark Harvard in the Philippines, the mark was
already protected under Article 6bis and Article 8 of the Paris Convention. Again, even without applying
the Paris Convention, Harvard University can invoke Section 4(a) of R.A. No. 166 which prohibits the
registration of a mark which may disparage or falsely suggest a connection with persons, living or dead,
institutions, beliefs x x x.

WHEREFORE, we DENY the petition. We AFFIRM the 24 October 2008 Decision and 8 January 2009
Resolution of the Court of Appeals in CA-G.R. SP No. 103394.

SO ORDERED.

Nachura, Peralta, Abad and Mendoza, JJ., concur.

Petition denied, judgment and resolution affirmed.

FIRST DIVISION

G.R. No. 100098. December 29, 1995.*

EMERALD GARMENT MANUFACTURING CORPORATION, petitioner, vs. HON. COURT OF APPEALS,

BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY TRANSFER and H.D. LEE COMPANY, INC.,
respondents.

Trademarks and Tradenames; The reckoning point for the filing of a petition for cancellation of
certificate of registration of trademark is not from the alleged date of use but from the date the
certificate of registration was published in the Official Gazette and issued to the registrant.Petitioner
alleges that it has been using its trademark STYLISTIC MR. LEE since 1 May 1975, yet, it was only on 18
September 1981 that private respondent filed a petition for cancellation of petitioners certificate of
registration for the said trademark. We reject petitioners contention. Petitioners trademark is
registered in the supplemental register. The Trademark Law (R.A. No. 166) provides that marks and
tradenames for the supplemental register shall not be published for or be subject to opposition, but
shall be published on registration in the Official Gazette. The reckoning point, therefore, should not be
1 May 1975, the date of alleged use by petitioner of its assailed trademark but 27 October 1980, the
date the certificate of registration SR No. 5054 was published in the Official Gazette and issued to
petitioner.

Same; Estoppel; Laches; Actions; To be barred from bringing suit on grounds of estoppel and laches, the
delay must be lengthy.Corollarily, private respondent could hardly be accused of inexcusable delay in
filing its notice of opposition to petitioners application for registration in the principal register since said
application was published only on 20 February 1984. From the time of publication to the time of filing
the opposition on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on
grounds of estoppel and laches, the delay must be lengthy.

Same; In the history of trademark cases in the Philippines, particularly in ascertaining whether one
trademark is confusingly similar to or is a colorable imitation of another, no set rules can be deduced
each case must be decided on its own merits.Practical application of the provision of Section 22 of
R.A. No. 166 (Trademark Law) is easier said than done. In the history of trademark cases in the
Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable
imitation of another, no set rules can be deduced. Each case must be decided on its own merits.

Same; Infringements; The essential element of infringement is colorable imitation.Proceeding to the

task at hand, the essential element of infringement is colorable imitation. This term has been defined as
such a close or ingenious imitation as to be calculated to deceive ordinary purchasers, or such
resemblance of the infringing mark to the original as to deceive an ordinary purchaser giving such
attention as a purchaser usually gives, and to cause him to purchase the one supposing it to be the
other.

Same; Same; In determining whether colorable imitation exists, jurisprudence has developed two kinds
of teststhe Dominancy Test and the Holistic Test.In determining whether colorable imitation exists,
jurisprudence has developed two kinds of teststhe Dominancy Test applied in Asia Brewery, Inc. v.
Court of Appeals and other cases and the Holistic Test developed in Del Monte Corporation v. Court of
Appeals and its proponent cases.

Same; Same; Dominancy Test and Holistic Test, Compared.As its title implies, the test of dominancy
focuses on the similarity of the prevalent features of the competing trademarks which might cause
confusion or deception and thus constitutes infringement. On the other side of the spectrum, the
holistic test mandates that the entirety of the marks in question must be considered in determining
confusing similarity.

Same; Same; Maong pants and jeans are not inexpensive, and as the casual buyer is predisposed to be
more cautious and discriminating in and would prefer to mull over his purchase, confusion and
deception is less likely.The products involved in the case at bar are, in the main, various kinds of jeans.
These are not your ordinary household items like catsup, soy sauce or soap which are of minimal cost.
Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more
cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception,
then, is less likely.

Same; Same; Words and Phrases; Ordinary Purchaser, Defined.The definition laid down in Dy Buncio
v. Tan Tiao Bok is better suited to the present case. There, the ordinary purchaser was defined as one
accustomed to buy, and therefore to some extent familiar with, the goods in question. The test of
fraudulent simulation is to be found in the likelihood of the deception of some persons in some measure
acquainted with an established design and desirous of purchasing the commodity with which that design
has been associated. The test is not found in the deception, or the possibility of deception, of the person
who knows nothing about the design which has been counterfeited, and who must be indifferent
between that and the other. The simulation, in order to be objectionable, must be such as appears likely
to mislead the ordinary intelligent buyer who has a need to supply and is familiar with the article that he
seeks to purchase.

Same; Same; A personal name or surname may not be monopolized as a trademark or tradename as
against others of the same name or surname.LEE is primarily a surname. Private respondent cannot,
therefore, acquire exclusive ownership over and singular use of said term . . . It has been held that a
personal name or surname may not be monopolized as a trademark or tradename as against others of
the same name or surname. For in the absence of contract, fraud, or estoppel, any man may use his
name or surname in all legitimate ways. Thus, Wellington is a surname, and its first user has no cause
of action against the junior user of Wellington as it is incapable of exclusive appropriation.

Same; Same; Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of
ownership over a trademark.In addition to the foregoing, we are constrained to agree with
petitioners contention that private respondent failed to prove prior actual commercial use of its LEE
trademark in the Philippines before filing its application for registration with the BPTTT and hence, has
not acquired ownership over said mark. Actual use in commerce in the Philippines is an essential
prerequisite for the acquisition of ownership over a trademark pursuant to Sec. 2 and 2-A of the
Philippine Trademark Law (R.A. No. 166).

Same; Same; International Law; Conflict of Laws; Paris Convention for the Protection of Industrial
Property; Following universal acquiescence and comity, our municipal law on trademarks regarding the
requirements of actual use in the Philippines must subordinate an international agreement inasmuch as
the apparent clash is being decided by a municipal tribunal.The provisions of the 1965 Paris
Convention for the Protection of Industrial Property relied upon by private respondent and Sec. 21-A of
the Trademark Law (R.A. No. 166) were sufficiently expounded upon and qualified in the recent case of
Philip Morris, Inc. v. Court of Appeals: Following universal acquiescence and comity, our municipal law
on trademarks regarding the requirement of actual use in the Philippines must subordinate an
international agreement inasmuch as the apparent clash is being decided by a municipal tribunal
(Mortisen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions, 93; Paras,
International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has
been made part of the law of the land does not by any means imply the primacy of international law
over national law in the municipal sphere. Under the doctrine of incorporation as applied in most
countries, rules of international law are given a standing equal, not superior, to national legislative
enactments.

Same; Evidence; A registration certificate serves merely as prima facie evidenceit is not conclusive but
can and may be rebutted by controverting evidence.The credibility placed on a certificate of
registration of ones trademark, or its weight as evidence of validity, ownership and exclusive use, is
qualified. A registration certificate serves merely as prima facie evidence. It is not conclusive but can and
may be rebutted by controverting evidence.

Same; Same; A supplemental register was created precisely for the registration of marks which are not
registrable on the principal register due to some defects.Moreover, the aforequoted provision applies
only to registrations in the principal register. Registrations in the supplemental register do not enjoy a
similar privilege. A supplemental register was created precisely for the registration of marks which are
not registrable on the principal register due to some defects.

Same; Same; Administrative Law; The findings of fact of the Director of Patents are conclusive upon the
Supreme Court provided they are supported by substantial evidence.The determination as to who is
the prior user of the trademark is a question of fact and it is this Courts working principle not to disturb
the findings of the Director of Patents on this issue in the absence of any showing of grave abuse of
discretion. The findings of facts of the Director of Patents are conclusive upon the Supreme Court
provided they are supported by substantial evidence.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Julio C. Contreras for petitioner.

 Sycip, Salazar, Hernandez & Gatmaitan for private respondent.

KAPUNAN, J.:

In this petition for review on certiorari under Rule 45 of the Revised Rules of Court, Emerald Garment
Manufacturing Corporation seeks to annul the decision of the Court of Appeals dated 29 November
1990 in CA-G.R. SP No. 15266 declaring petitioners trademark to be confusingly similar to that of
private respondent and the resolution dated 17 May 1991 denying petitioners motion for
reconsideration.

The record reveals the following antecedent facts:

On 18 September 1981, private respondent H.D. Lee Co., Inc., a foreign corporation organized under the
laws of Delaware, U.S.A., filed with the Bureau of Patents, Trademarks & Technology Transfer (BPTTT) a
Petition for Cancellation of Registration No. SR 5054 (Supplemental Register) for the trademark
STYLISTIC MR. LEE used on skirts, jeans, blouses, socks, briefs, jackets, jogging suits, dresses, shorts,
shirts and lingerie under Class 25, issued on 27 October 1980 in the name of petitioner Emerald
Garment Manufacturing Corporation, a domestic corporation organized and existing under Philippine
laws. The petition was docketed as Inter Partes Case No. 1558.1

Private respondent, invoking Sec. 37 of R.A. No. 166 (Trademark Law) and Art. VIII of the Paris
Convention for the Protection of Industrial Property, averred that petitioners trademark so closely
resembled its own trademark, LEE as previously registered and used in the Philippines, and not
abandoned, as to be likely, when applied to or used in connection with petitioners goods, to cause
confusion, mistake and deception on the part of the purchasing public as to the origin of the goods.2

In its answer dated 23 March 1982, petitioner contended that its trademark was entirely and
unmistakably different from that of private respondent and that its certificate of registration was legally
and validly granted.3

On 20 February 1984, petitioner caused the publication of its application for registration of the
trademark STYLISTIC MR. LEE in the Principal Register.4

On 27 July 1984, private respondent filed a notice of opposition to petitioners application for
registration also on grounds that petitioners trademark was confusingly similar to its LEE trademark.5
The case was docketed as Inter Partes Case No. 1860.

On 21 June 1985, the Director of Patents, on motion filed by private respondent dated 15 May 1985,
issued an order consolidating Inter Partes Cases Nos. 1558 and 1860 on grounds that a common
question of law was involved.6

On 19 July 1988, the Director of Patents rendered a decision granting private respondents petition for
cancellation and opposition to registration.
The Director of Patents found private respondent to be the prior registrant of the trademark LEE in
the Philippines and that it had been using said mark in the Philippines.7

Moreover, the Director of Patents, using the test of dominancy, declared that petitioners trademark
was confusingly similar to private respondents mark because it is the word Lee which draws the
attention of the buyer and leads him to conclude that the goods originated from the same
manufacturer. It is undeniably the dominant feature of the mark.8

On 3 August 1988, petitioner appealed to the Court of Appeals and on 8 August 1988, it filed with the
BPTTT a Motion to Stay Execution of the 19 July 1988 decision of the Director of Patents on grounds that
the same would cause it great and irreparable damage and injury. Private respondent submitted its
opposition on 22 August 1988.9

On 23 September 1988, the BPTTT issued Resolution No. 88-33 granting petitioners motion to stay
execution subject to the following terms and conditions:

1. That under this resolution, Respondent-Registrant is authorized only to dispose of its current stock
using the mark STYLISTIC MR. LEE;

2. That Respondent-Registrant is strictly prohibited from further production, regardless of mode and
source, of the mark in question (STYLISTIC MR. LEE) in addition to its current stock;

3. That this relief Order shall automatically cease upon resolution of the Appeal by the Court of Appeals
and, if the Respondents appeal loses, all goods bearing the mark STYLISTIC MR. LEE shall be removed
from the market, otherwise such goods shall be seized in accordance with the law.

SO ORDERED.10

On 29 November 1990, the Court of Appeals promulgated its decision affirming the decision of the
Director of Patents dated 19 July 1988 in all respects.11

In said decision the Court of Appeals expounded, thus:

xxx xxx x x x.

Whether or not a trademark causes confusion and is likely to deceive the public is a question of fact
which is to be resolved by applying the test of dominancy, meaning, if the competing trademark
contains the main or essential or dominant features of another by reason of which confusion and
deception are likely to result, then infringement takes place; that duplication or imitation is not
necessary, a similarity in the dominant features of the trademark would be sufficient.

The word LEE is the most prominent and distinctive feature of the appellants trademark and all of the
appellees LEE trademarks. It is the mark which draws the attention of the buyer and leads him to
conclude that the goods originated from the same manufacturer. While it is true that there are other
words such as STYLISTIC, printed in the appellants label, such word is printed in such small letters
over the word LEE that it is not conspicuous enough to draw the attention of ordinary buyers whereas
the word LEE is printed across the label in big, bold letters and of the same color, style, type and size
of lettering as that of the trademark of the appellee. The alleged difference is too insubstantial to be
noticeable. Even granting arguendo that the word STYLISTIC is conspicuous enough to draw attention,
the goods may easily be mistaken for just another variation or line of garments under the appellees
LEE trademarks in view of the fact that the appellee has registered trademarks which use other words
in addition to the principal mark LEE such as LEE RIDERS, LEESURES and LEE LEENS. The
likelihood of confusion is further made more probable by the fact that both parties are engaged in the
same line of business. It is well to reiterate that the determinative factor in ascertaining whether or not
the marks are confusingly similar to each other is not whether the challenged mark would actually cause
confusion or deception of the purchasers but whether the use of such mark would likely cause confusion
or mistake on the part of the buying public.

xxx xxx x x x.

The appellee has sufficiently established its right to prior use and registration of the trademark LEE in
the Philippines and is thus entitled to protection from any infringement upon the same. It is thus
axiomatic that one who has identified a peculiar symbol or mark with his goods thereby acquires a
property right in such symbol or mark, and if another infringes the trademark, he thereby invokes this
property right.

The merchandise or goods being sold by the parties are not that expensive as alleged to be by the
appellant and are quite ordinary commodities purchased by the average person and at times, by the
ignorant and the unlettered. Ordinary purchasers will not as a rule examine the small letterings printed
on the label but will simply be guided by the presence of the striking mark LEE. Whatever difference
there may be will pale in insignificance in the face of an evident similarity in the dominant features and
overall appearance of the labels of the parties.12

xxx xxx x x x.

On 19 December 1990, petitioner filed a motion for reconsideration of the above-mentioned decision of
the Court of Appeals. Private respondent opposed said motion on 8 January 1991 on grounds that it
involved an impermissible change of theory on appeal. Petitioner allegedly raised entirely new and
unrelated arguments and defenses not previously raised in the proceedings below such as laches and a
claim that private respondent appropriated the style and appearance of petitioners trademark when it
registered its LEE mark under Registration No. 44220.13

On 17 May 1991, the Court of Appeals issued a resolution rejecting petitioners motion for
reconsideration and ruled thus:

xxx xxx x x x.

A defense not raised in the trial court cannot be raised on appeal for the first time. An issue raised for
the first time on appeal and not raised timely in the proceedings in the lower court is barred by
estoppel.
The object of requiring the parties to present all questions and issues to the lower court before they can
be presented to this Court is to have the lower court rule upon them, so that this Court on appeal may
determine whether or not such ruling was erroneous. The purpose is also in furtherance of justice to
require the party to first present the question he contends for in the lower court so that the other party
may not be taken by surprise and may present evidence to properly meet the issues raised.

Moreover, for a question to be raised on appeal, the same must also be within the issues raised by the
parties in their pleadings. Consequently, when a party deliberately adopts a certain theory, and the case
is tried and decided based upon such theory presented in the court below, he will not be permitted to
change his theory on appeal. To permit him to do so would be unfair to the adverse party. A question
raised for the first time on appeal, there having opportunity to raise them in the court of origin
constitutes a change of theory which is not permissible on appeal.

In the instant case, appellants main defense pleaded in its answer dated March 23, 1982 was that there
was no confusing similarity between the competing trademark involved. On appeal, the appellant
raised a single issue, to wit:

The only issue involved in this case is whether or not respondent-registrants trademark STYLISTIC MR.
LEE is confusingly similar with the petitioners trademarks LEE or LEE RIDERS, LEE-LEENS and LEE-
SURES.

Appellants main argument in this motion for reconsideration on the other hand is that the appellee is
estopped by laches from asserting its right to its trademark. Appellant claims although belatedly that
appellee went to court with unclean hands by changing the appearance of its trademark to make it
identical to the appellants trademark.

Neither defenses were raised by the appellant in the proceedings before the Bureau of Patents.
Appellant cannot raise them now for the first time on appeal, let alone on a mere motion for
reconsideration of the decision of this Court dismissing the appellants appeal.

While there may be instances and situations justifying relaxation of this rule, the circumstance of the
instant case, equity would be better served by applying the settled rule it appearing that appellant has
not given any reason at all as to why the defenses raised in its motion for reconsideration was not
invoked earlier.14

xxx xxx x x x.

Twice rebuffed, petitioner presents its case before this Court on the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN NOT FINDING THAT PRIVATE RESPONDENT CAUSED THE ISSUANCE
OF A FOURTH LEE TRADEMARK IMITATING THAT OF THE PETITIONERS ON MAY 5, 1989 OR MORE
THAN EIGHT MONTHS AFTER THE BUREAU OF PATENTS DECISION DATED JULY 19, 1988.
II. THE COURT OF APPEALS ERRED IN RULING THAT THE DEFENSE OF ESTOPPEL BY LACHES MUST BE
RAISED IN THE PROCEEDINGS BEFORE THE BUREAU OF PATENTS, TRADEMARKS AND TECHNOLOGY
TRANSFER.

III. THE COURT OF APPEALS ERRED WHEN IT CONSIDERED PRIVATE RESPONDENTS PRIOR REGISTRATION
OF ITS TRADEMARK AND DISREGARDED THE FACT THAT PRIVATE RESPONDENT HAD FAILED TO PROVE
COMMERCIAL USE THEREOF BEFORE FILING OF APPLICATION FOR REGISTRATION.15

In addition, petitioner reiterates the issues it raised in the Court of Appeals:

I. THE ISSUE INVOLVED IN THIS CASE IS WHETHER OR NOT PETITIONERS TRADEMARK STYLISTIC MR. LEE,
IS CONFUSINGLY SIMILAR WITH THE PRIVATE RESPONDENTS TRADEMARK LEE OR LEE-RIDER, LEE-LEENS
AND LEE-SURES.

II. PETITIONERS EVIDENCES ARE CLEAR AND SUFFICIENT TO SHOW THAT IT IS THE PRIOR USER AND ITS
TRADEMARK IS DIFFERENT FROM THAT OF THE PRIVATE RESPONDENT.

III. PETITIONERS TRADEMARK IS ENTIRELY DIFFERENT FROM THE PRIVATE RESPONDENTS AND THE
REGISTRATION OF ITS TRADEMARK IS PRIMA FACIE EVIDENCE OF GOOD FAITH.

IV. PETITIONERS STYLISTIC MR. LEE TRADEMARK CANNOT BE CONFUSED WITH PRIVATE
RESPONDENTS LEE TRADEMARK.16

Petitioner contends that private respondent is estopped from instituting an action for infringement
before the BPTTT under the equitable principle of laches pursuant to Sec. 9-A of R.A. No. 166, otherwise
known as the Law on Trade-marks, Trade-names and Unfair Competition

SEC. 9-A. Equitable principles to govern proceedings.In opposition proceedings and in all other inter
partes proceedings in the patent office under this act, equitable principles of laches, estoppel, and
acquiescence, where applicable, may be considered and applied.

Petitioner alleges that it has been using its trademark STYLISTIC MR. LEE since 1 May 1975, yet, it was
only on 18 September 1981 that private respondent filed a petition for cancellation of petitioners
certificate of registration for the said trademark Similarly, private respondents notice of opposition to
petitioners application for registration in the principal register was belatedly filed on 27 July 1984.17

Private respondent counters by maintaining that petitioner was barred from raising new issues on
appeal, the only contention in the proceedings below being the presence or absence of confusing
similarity between the two trademarks in question.18

We reject petitioners contention.

Petitioners trademark is registered in the supplemental register. The Trademark Law (R.A. No. 166)
provides that marks and tradenames for the supplemental register shall not be published for or be
subject to opposition, but shall be published on registration in the Official Gazette.19 The reckoning
point, therefore, should not be 1 May 1975, the date of alleged use by petitioner of its assailed
trademark but 27 October 1980,20 the date the certificate of registration SR No. 5054 was published in
the Official Gazette and issued to petitioner.

It was only on the date of publication and issuance of the registration certificate that private respondent
may be considered officially put on notice that petitioner has appropriated or is using said mark,
which, after all, is the function and purpose of registration in the supplemental register.21 The record is
bereft of evidence that private respondent was aware of petitioners trademark before the date of said
publication and issuance. Hence, when private respondent instituted cancellation proceedings on 18
September 1981, less than a year had passed.

Corollarily, private respondent could hardly be accused of inexcusable delay in filing its notice of
opposition to petitioners application for registration in the principal register since said application was
published only on 20 February 1984.22 From the time of publication to the time of filing the opposition
on 27 July 1984 barely five (5) months had elapsed. To be barred from bringing suit on grounds of
estoppel and laches, the delay must be lengthy.23

More crucial is the issue of confusing similarity between the two trademarks. Petitioner vehemently
contends that its trademark STYLISTIC MR. LEE is entirely different from and not confusingly similar to
private respondents LEE trademark.

Private respondent maintains otherwise. It asserts that petitioners trademark tends to mislead and
confuse the public and thus constitutes an infringement of its own mark, since the dominant feature
therein is the word LEE.

The pertinent provision of R.A. No. 166 (Trademark Law) states thus:

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

Practical application, however, of the aforesaid provision is easier said than done. In the history of
trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly
similar to or is a colorable imitation of another, no set rules can be deduced. Each case must be decided
on its own merits.

In Esso Standard Eastern, Inc. v. Court of Appeals,24 we held:

. . . But likelihood of confusion is a relative concept; to be determined only according to the particular,
and sometimes peculiar, circumstances of each case. It is unquestionably true that, as stated in Coburn
vs. Puritan Mills, Inc.: In trademark cases, even more than in other litigation, precedent must be
studied in the light of the facts of the particular case.

xxx xxx x x x.

Likewise, it has been observed that:

In determining whether a particular name or mark is a colorable imitation of another, no all-

embracing rule seems possible in view of the great number of factors which must necessarily be
considered in resolving this question of fact, such as the class of product or business to which the article
belongs; the products quality, quantity, or size, including its wrapper or container; the dominant color,
style, size, form, meaning of letters, words, designs and emblems used; the nature of the package,
wrapper or container; the character of the products purchasers; location of the business; the likelihood
of deception or the mark or names tendency to confuse; etc.25

Proceeding to the task at hand, the essential element of infringement is colorable imitation. This term
has been defined as such a close or ingenious imitation as to be calculated to deceive ordinary
purchasers, or such resemblance of the infringing mark to the original as to deceive an ordinary
purchaser giving such attention as a purchaser usually gives, and to cause him to purchase the one
supposing it to be the other.26

Colorable imitation does not mean such similitude as amounts to identity. Nor does it require that all
the details be literally copied. Colorable imitation refers to such similarity in form, content, words,
sound, meaning, special arrangement, or general appearance of the trademark or tradename with that
of the other mark or tradename in their over-all presentation or in their essential, substantive and
distinctive parts as would likely mislead or confuse persons in the ordinary course of purchasing the
genuine article.27

In determining whether colorable imitation exists, jurisprudence has developed two kinds of teststhe
Dominancy Test applied in Asia Brewery, Inc. v. Court of Appeals28 and other cases29 and the Holistic
Test developed in Del Monte Corporation v. Court of Appeals30 and its proponent cases.31

As its title implies, the test of dominancy focuses on the similarity of the prevalent features of the
competing trademarks which might cause confusion or deception and thus constitutes infringement.

xxx xxx x x x.

. . . . If the competing trademark contains the main or essential or dominant features of another, and
confusion and deception is likely to result, infringement takes place. Duplication or imitation is not
necessary; nor it is necessary that the infringing label should suggest an effort to imitate. [C. Neilman
Brewing Co. v. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co., vs. Pflugh (CC)
180 Fed. 579]. The question at issue in cases of infringement of trademarks is whether the use of the
marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive
purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; x x x.)32
xxx xxx x x x.

On the other side of the spectrum, the holistic test mandates that the entirety of the marks in question
must be considered in determining confusing similarity.

xxx xxx x x x.

In determining whether the trademarks are confusingly similar, a comparison of the words is not the
only determinant 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.33

xxx xxx x x x.

Applying the foregoing tenets to the present controversy and taking into account the factual
circumstances of this case, we considered the trademarks involved as a whole and rule that petitioners
STYLISTIC MR. LEE is not confusingly similar to private respondents LEE trademark.

Petitioners trademark is the whole STYLISTIC MR. LEE. Although on its label the word LEE is
prominent, the trademark should be considered as a whole and not piecemeal. The dissimilarities
between the two marks become conspicuous, noticeable and substantial enough to matter especially in
the light of the following variables that must be factored in.

First, the products involved in the case at bar are, in the main, various kinds of jeans. These are not your
ordinary household items like catsup, soy sauce or soap which are of minimal cost. Maong pants or
jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and
discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less
likely. In Del Monte Corporation v. Court of Appeals,34 we noted that:

. . . . Among these, what essentially determines the attitudes of the purchaser, specifically his inclination
to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise
as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not
exercise as much prudence in buying an article for which he pays a few centavos as he does in
purchasing a more valuable thing. Expensive and valuable items are normally bought only after
deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use,
and matters of everyday purchase requiring frequent replacement are bought by the casual consumer
without great care . . . .

Second, like his beer, the average Filipino consumer generally buys his jeans by brand. He does not ask
the sales clerk for generic jeans but for, say, a Levis, Guess, Wrangler or even an Armani. He is,
therefore, more or less knowledgeable and familiar with his preference and will not easily be distracted.
Finally, in line with the foregoing discussions, more credit should be given to the ordinary purchaser.
Cast in this particular controversy, the ordinary purchaser is not the completely unwary consumer but
is the ordinarily intelligent buyer considering the type of product involved.

The definition laid down in Dy Buncio v. Tan Tiao Bok35 is better suited to the present case. There, the
ordinary purchaser was defined as one accustomed to buy, and therefore to some extent familiar
with, the goods in question. The test of fraudulent simulation is to be found in the likelihood of the
deception of some persons in some measure acquainted with an established design and desirous of
purchasing the commodity with which that design has been associated. The test is not found in the
deception, or the possibility of deception, of the person who knows nothing about the design which has
been counterfeited, and who must be indifferent between that and the other. The simulation, in order
to be objectionable, must be such as appears likely to mislead the ordinary intelligent buyer who has a
need to supply and is familiar with the article that he seeks to purchase.

There is no cause for the Court of Appeals apprehension that petitioners products might be mistaken
as another variation or line of garments under private respondents LEE trademark.36

As one would readily observe, private respondents variation follows a standard format LEERIDERS,
LEESURES and LEELEENS. It is, therefore, improbable that the public would immediately and naturally
conclude that petitioners STYLISTIC MR. LEE is but another variation under private respondents LEE
mark.

As we have previously intimated the issue of confusing similarity between trademarks is resolved by
considering the distinct characteristics of each case. In the present controversy, taking into account
these unique factors, we conclude that the similarities in the trademarks in question are not sufficient as
to likely cause deception and confusion tantamount to infringement.

Another way of resolving the conflict is to consider the marks involved from the point of view of what
marks are registrable pursuant to Sec. 4 of R.A. No. 166, particularly paragraph 4(e):

CHAPTER II-A.The Principal Register

(Inserted by Sec 2, Rep Act No. 638.)

SEC. 4. Registration of trade-marks, trade-names and service-marks on the principal register.There is

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

xxx xxx xxx

(e) Consists of a mark or trade-name which, when applied to or used in connection with the goods,
business or services of the applicant is merely descriptive or deceptively misdescnptive of them, or
when applied to or used in connection with the goods, business or services of the applicant is primarily
geographically descriptive or deceptively misdescriptive of them, or is primarily merely a surname;
(Italics ours.)

xxx xxx xxx

LEE is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over
and singular use of said term.

. . . . It has been held that a personal name or surname may not be monopolized as a trademark or
tradename as against others of the same name or surname For in the absence of contract, fraud, or
estoppel, any man may use his name or surname in all legitimate ways. Thus, Wellington is a surname,
and its first user has no cause of action against the junior user of Wellington as it is incapable of
exclusive appropriation.37

In addition to the foregoing, we are constrained to agree with petitioners contention that private
respondent failed to prove prior actual commercial use of its LEE trademark in the Philippines before
filing its application for registration with the BPTTT and hence, has not acquired ownership over said
mark.

Actual use in commerce in the Philippines is an essential prerequisite for the acquisition of ownership
over a trademark pursuant to Secs. 2 and 2-A of the Philippine Trademark Law (R.A. No. 166) which
explicitly provides that:

CHAPTER II. Registration of Marks and Trade-names.

Sec. 2. What are registrable.Trade-marks, trade-names, and service marks owned by persons,
corporations, partnerships or associations domiciled in the Philippines and by persons, corporations,
partnerships, or associations domiciled in any foreign country may be registered in accordance with the
provisions of this act: Provided, That said trade marks, trade names, or service marks are actually in use
in commerce and services not less than two months in the Philippines before the time the applications
for registration are filed: And Provided, further, That the country of which the applicant for registration
is a citizen grants by law substantially similar privileges to citizens of the Philippines, and such fact is
officially certified, with a certified true copy of the foreign law translated into the English language, by
the government of the foreign country to the Government of the Republic of the Philippines. (As
amended.) (Italics ours.)

SEC. 2-A. Ownership of trade marks, trade-names and service-marks, how acquired.Anyone who
lawfully produces or deals in merchandise of any kind or who engages in lawful business, or who renders
any lawful service in commerce, by actual use hereof in manufacture or trade, in business, and in the
service rendered; may appropriate to his exclusive use a trade-mark, a trade-name, or a service-mark
not so appropriated by another, to distinguish his merchandise, business or services from others. The
ownership or possession of trademark, trade-name, service-mark, heretofore or hereafter appropriated,
as in this section provided, shall be recognized and protected in the same manner and to the same
extent as are other property rights to the law. (As amended.) (Italics ours.)
The provisions of the 1965 Paris Convention for the Protection of Industrial Property38 relied upon by
private respondent and Sec. 21-A of the Trademark Law (R.A. No. 166)39 were sufficiently expounded
upon and qualified in the recent case of Philip Morris, Inc. v. Court of Appeals:40

xxx xxx x x x.

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

xxx xxx x x x.

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

xxx xxx x x x.

Undisputably, private respondent is the senior registrant, having obtained several registration
certificates for its various trademarks LEE, LEE RIDERS, and LEESURES in both the supplemental
and principal registers, as early as 1969 to 1973.41 However, registration alone will not suffice. In
Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft,42 we declared:

xxx xxx x x x.

A rule widely accepted and firmly entrenched because it has come down through the years is that actual
use in commerce or business is a prerequisite in the acquisition of the right of ownership over a
trademark.

xxx xxx x x x.

It would seem quite clear that adoption alone of a trademark would not give exclusive right thereto
Such right grows out of their actual use. Adoption is not use. One may make advertisements, issue
circulars, give out price lists on certain goods, but these alone would not give exclusive right of use. For
trademark is a creation of use. The underlying reason for all these is that purchasers have come to
understand the mark as indicating the origin of the wares. Flowing from this is the traders right to
protection in the trade he has built up and the goodwill he has accumulated from use of the trademark
Registration of a trademark, of course, has value: it is an administrative act declaratory of a pre-existing
right. Registration does not, however, perfect a trademark right. (Italics ours.)

xxx xxx x x x.

To augment its arguments that it was, not only the prior registrant, but also the prior user, private
respondent invokes Sec. 20 of the Trademark Law, thus:

SEC. 20. Certificate of registration prima facie evidence of validity.A certificate of registration of a
mark or tradename shall be a prima facie evidence of the validity of the registration, the registrants
ownership of the mark or tradename, and of the registrants exclusive right to use the same in
connection with the goods, business or services specified in the certificate, subject to any conditions and
limitations stated therein.

The credibility placed on a certificate of registration of ones trademark, or its weight as evidence of
validity, ownership and exclusive use, is qualified. A registration certificate serves merely as prima facie
evidence. It is not conclusive but can and may be rebutted by controverting evidence.

Moreover, the aforequoted provision applies only to registrations in the principal register.43
Registrations in the supplemental register do not enjoy a similar privilege. A supplemental register was
created precisely for the registration of marks which are not registrable on the principal register due to
some defects.44

The determination as to who is the prior user of the trademark is a question of fact and it is this Courts
working principle not to disturb the findings of the Director of Patents on this issue in the absence of any
showing of grave abuse of discretion. The findings of facts of the Director of Patents are conclusive upon
the Supreme Court provided they are supported by substantial evidence.45

In the case at bench, however, we reverse the findings of the Director of Patents and the Court of
Appeals. After a meticulous study of the records, we observe that the Director of Patents and the Court
of Appeals relied mainly on the registration certificates as proof of use by private respondent of the
trademark LEE which, as we have previously discussed are not sufficient. We cannot give credence to
private respondents claim that its LEE mark first reached the Philippines in the 1960s through local
sales by the Post Exchanges of the U.S. Military Bases in the Philippines46 based as it was solely on the
self-serving statements of Mr. Edward Poste, General Manager of Lee (Phils.), Inc., a wholly owned
subsidiary of the H.D. Lee, Co., Inc., U.S.A., herein private respondent.47 Similarly, we give little weight
to the numerous vouchers representing various advertising expenses in the Philippines for LEE
products.48 It is well to note that these expenses were incurred only in 1981 and 1982 by LEE (Phils.),
Inc. after it entered into a licensing agreement with private respondent on 11 May 1981.49
On the other hand, petitioner has sufficiently shown that it has been in the business of selling jeans and
other garments adopting its STYLISTIC MR. LEE trademark since 1975 as evidenced by appropriate
sales invoices to various stores and retailers.50

Our rulings in Pagasa Industrial Corp. v. Court of Appeals51 and Converse Rubber Corp. v. Universal
Rubber Products, Inc.,52 respectively, are instructive:

The Trademark Law is very clear. It requires actual commercial use of the mark prior to its registration.
There is no dispute that respondent corporation was the first registrant, yet it failed to fully substantiate
its claim that it used in trade or business in the Philippines the subject mark; it did not present proof to
invest it with exclusive, continuous adoption of the trademark which should consist among others, of
considerable sales since its first use. The invoices submitted by respondent which were dated way back
in 1957 show that the zippers sent to the Philippines were to be used as samples and of no
commercial value. The evidence for respondent must be clear, definite and free from inconsistencies.
Samples are not for sale and therefore, the fact of exporting them to the Philippines cannot be
considered to be equivalent to the use contemplated by law. Respondent did not expect income from
such samples. There were no receipts to establish sale, and no proof were presented to show that
they were subsequently sold in the Philippines.

xxx xxx x x x.

The sales invoices provide the best proof that there were actual sales of petitioners product in the
country and that there was actual use for a protracted period of petitioners trademark or part thereof
through these sales.

For lack of adequate proof of actual use of its trademark in the Philippines prior to petitioners use of its
own mark and for failure to establish confusing similarity between said trademarks, private
respondents action for infringement must necessarily fail.

WHEREFORE, premises considered, the questioned decision and resolution are hereby REVERSED and
SET ASIDE.

SO ORDERED.

Bellosillo and Hermosisima, Jr., JJ., concur.

Padilla (Chairman), J., I dissent. I vote to deny the petition; I agree with BPTTT and the CA that
petitioners trademark STYLISTIC MR. LEE is confusingly similar to private respondents earlier
registered trademarks LEE or LEE RIDER, LEE-LEENS and LEE-SURES such that the trademark
STYLISTIC MR. LEE is an infringement of the earlier registered trademarks.

Davide, Jr., J., I vote to deny the petition there being no showing of an exemption to conclusiveness
of findings of BPTTT and of CA.

Decision and resolution reversed and set aside.