Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 159938 March 31, 2006

SHANGRI-LA INTERNATIONAL HOTEL MANAGEMENT, LTD., SHANGRI-LA PROPERTIES, INC., MAKATI SHANGRI-LA HOTEL & RESORT, INC., AND KUOK PHILIPPINES PROPERTIES, INC., Petitioners, vs. DEVELOPERS GROUP OF COMPANIES, INC., Respondent.

D E C I S I O N

GARCIA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioners Shangri-La International Hotel Management, Ltd. (SLIHM), et al. assail and seek to set aside the Decision dated May 15, 20031 of the Court of Appeals (CA) in CA-G.R. CV No. 53351 and its Resolution2 of September 15, 2003 which effectively affirmed with modification an earlier decision of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-91-8476, an action for infringement and damages, thereat commenced by respondent Developers Group of Companies, Inc. (DGCI) against the herein petitioners.

The facts:

At the core of the controversy are the "Shangri-La" mark and "S" logo. Respondent DGCI claims ownership of said mark and logo in the Philippines on the strength of its prior use thereof within the country. As DGCI stresses at every turn, it filed on October 18, 1982 with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) pursuant to Sections 2 and 4 of Republic Act (RA) No. 166,3 as amended, an application for registration covering the subject mark and logo. On May 31, 1983, the BPTTT issued in favor of DGCI the corresponding certificate of registration therefor, i.e., Registration No. 31904. Since then, DGCI started using the "Shangri-La" mark and "S" logo in its restaurant business.

On the other hand, the Kuok family owns and operates a chain of hotels with interest in hotels and hotel-related transactions since 1969. As far back as 1962, it adopted the name "Shangri-La" as part of the corporate names of all companies organized under the aegis of the Kuok Group of Companies (the Kuok Group). The Kuok Group has used the name "Shangri-La" in all Shangri-La hotels and hotel-related establishments around the world which the Kuok Family owned.

To centralize the operations of all Shangri-la hotels and the ownership of the "Shangri-La" mark and "S" logo, the Kuok Group had incorporated in Hong Kong and Singapore, among other places, several companies that form part of the Shangri-La International Hotel Management Ltd. Group of Companies. EDSA Shangri-La Hotel and Resort, Inc., and Makati Shangri-La Hotel and Resort, Inc. were incorporated in the Philippines beginning 1987 to own and operate the two (2) hotels put up by the Kuok Group in Mandaluyong and Makati, Metro Manila.

All hotels owned, operated and managed by the aforesaid SLIHM Group of Companies adopted and used the distinctive lettering of the name "Shangri-La" as part of their trade names.

From the records, it appears that Shangri-La Hotel Singapore commissioned a Singaporean design artist, a certain Mr. William Lee, to conceptualize and design the logo of the Shangri-La hotels.

During the launching of the stylized "S" Logo in February 1975, Mr. Lee gave the following explanation for the logo, to wit:

The logo which is shaped like a "S" represents the uniquely Asean architectural structures as well as keep to the legendary Shangri-la theme with the mountains on top being reflected on waters below and the connecting centre [sic] line serving as the horizon. This logo, which is a bold, striking definitive design, embodies both modernity and sophistication in balance and thought.

Since 1975 and up to the present, the "Shangri-La" mark and "S" logo have been used consistently and continuously by all Shangri-La hotels and companies in their paraphernalia, such as stationeries, envelopes, business forms, menus, displays and receipts.

The Kuok Group and/or petitioner SLIHM caused the registration of, and in fact registered, the "Shangri-La" mark and "S" logo in the patent offices in different countries around the world.

On June 21, 1988, the petitioners filed with the BPTTT a petition, docketed as Inter Partes Case No. 3145, praying for the cancellation of the registration of the "Shangri-La" mark and "S" logo issued to respondent DGCI on the ground that the same were illegally and fraudulently obtained and appropriated for the latter's restaurant business. They also filed in the same office Inter Partes Case No. 3529, praying for the registration of the same mark and logo in their own names.

Until 1987 or 1988, the petitioners did not operate any establishment in the Philippines, albeit they advertised their hotels abroad since 1972 in numerous business, news, and/or travel magazines widely circulated around the world, all readily available in Philippine magazines and newsstands. They, too, maintained reservations and booking agents in airline companies, hotel organizations, tour operators, tour promotion organizations, and in other allied fields in the Philippines.

It is principally upon the foregoing factual backdrop that respondent DGCI filed a complaint for Infringement and Damages with the RTC of Quezon City against the herein petitioners SLIHM, Shangri-La Properties, Inc., Makati Shangri-La Hotel & Resort, Inc., and Kuok Philippine Properties, Inc., docketed as Civil Case No. Q-91-8476 and eventually raffled to Branch 99 of said court. The complaint with prayer for injunctive relief and damages alleged that DGCI has, for the last eight (8) years, been the prior exclusive user in the Philippines of the mark and logo in question and the registered owner thereof for its restaurant and allied services. As DGCI alleged in its complaint, SLIHM, et al., in promoting and advertising their hotel and other allied projects then under construction in the country, had been using a mark and logo confusingly similar, if not identical, with its mark and "S" logo. Accordingly, DGCI sought to prohibit the petitioners, as defendants a quo, from using the "Shangri-La" mark and "S" logo in their hotels in the Philippines.

In their Answer with Counterclaim, the petitioners accused DGCI of appropriating and illegally using the "Shangri-La" mark and "S" logo, adding that the legal and beneficial ownership thereof pertained to SLIHM and that the Kuok Group and its related companies had been using this mark and logo since March 1962 for all their corporate names and affairs. In this regard, they point to the Paris Convention for the Protection of Industrial Property as affording security and protection to SLIHM's exclusive right to said mark and logo. They further claimed having used, since late 1975, the internationally-known and specially-designed "Shangri-La" mark and "S" logo for all the hotels in their hotel chain.

Pending trial on the merits of Civil Case No. Q-91-8476, the trial court issued a Writ of Preliminary Injunction enjoining the petitioners from using the subject mark and logo. The preliminary injunction issue ultimately reached the Court in G.R. No. 104583 entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. In a decision4 dated March 8, 1993, the Court nullified the writ of preliminary injunction issued by the trial court and directed it to proceed with the main case and decide it with deliberate dispatch.

While trial was in progress, the petitioners filed with the court a motion to suspend proceedings on account of the pendency before the BPTTT of Inter Partes Case No. 3145 for the cancellation of DGCI's certificate of registration. For its part, respondent DGCI filed a similar motion in that case, invoking in this respect the pendency of its infringement case before the trial court. The parties' respective motions to suspend proceedings also reached the Court via their respective petitions in G.R. No. 114802, entitled Developers Group of Companies, Inc. vs. Court of Appeals, et al. and G.R. No. 111580, entitled Shangri-La International Hotel Management LTD., et al. vs. Court of Appeals, et al., which were accordingly consolidated.

In a consolidated decision5 dated June 21, 2001, the Court, limiting itself to the core issue of whether, despite the petitioners' institution of Inter Partes Case No. 3145 before the BPTTT, herein respondent DGCI "can file a subsequent action for infringement with the regular courts of justice in connection with the same registered mark," ruled in the affirmative, but nonetheless ordered the BPTTT to suspend further proceedings in said inter partes case and to await the final outcome of the main case.

Meanwhile, trial on the merits of the infringement case proceeded. Presented as DGCI's lone witness was Ramon Syhunliong, President and Chairman of DGCI's Board of Directors. Among other things, this witness testified that:

1. He is a businessman, with interest in lumber, hotel, hospital, trading and restaurant businesses but only the restaurant business bears the name "Shangri-La" and uses the same and the "S-logo" as service marks. The restaurant now known

as "Shangri-La Finest Chinese Cuisine" was formerly known as the "Carvajal Restaurant" until December 1982, when respondent took over said restaurant business.

2. He had traveled widely around Asia prior to 1982, and admitted knowing the Shangri-La Hotel in Hong Kong as early as August 1982.

3. The "S-logo" was one of two (2) designs given to him in December 1982, scribbled on a piece of paper by a jeepney signboard artist with an office somewhere in Balintawak. The unnamed artist supposedly produced the two designs after about two or three days from the time he (Syhunliong) gave the idea of the design he had in mind.

4. On October 15, 1982, or before the unknown signboard artist supposedly created the "Shangri-La" and "S" designs, DGCI was incorporated with the primary purpose of "owning or operating, or both, of hotels and restaurants".

5. On October 18, 1982, again prior to the alleged creation date of the mark and logo, DGCI filed an application for trademark registration of the mark "SHANGRI-LA FINEST CHINESE CUISINE & S. Logo" with the BPTTT. On said date, respondent DGCI amended its Articles of Incorporation to reflect the name of its restaurant, known and operating under the style and name of "SHANGRI-LA FINEST CHINESE CUISINE." Respondent DGCI obtained Certificate of Registration No. 31904 for the "Shangri-La" mark and "S" logo.

Eventually, the trial court, on the postulate that petitioners', more particularly petitioner SLIHM's, use of the mark and logo in dispute constitutes an infringement of DGCI's right thereto, came out with its decision6 on March 8, 1996 rendering judgment for DGCI, as follows:

WHEREFORE, judgment is hereby rendered in favor of [respondent DGCI] and against [SLIHM, et al.] -

a) Upholding the validity of the registration of the service mark "Shangri-la" and "S-Logo" in the name of [respondent];

b) Declaring [petitioners'] use of said mark and logo as infringement of [respondent's] right thereto;

c) Ordering [petitioners], their representatives, agents, licensees, assignees and other persons acting under their authority and with their permission, to permanently cease and desist from using and/or continuing to use said mark and logo, or any copy, reproduction or colorable imitation

thereof, in the promotion, advertisement, rendition of their hotel and allied projects and services or in any other manner whatsoever;

d) Ordering [petitioners] to remove said mark and logo from any premises, objects, materials and paraphernalia used by them and/or destroy any and all prints, signs, advertisements or other materials bearing said mark and logo in their possession and/or under their control; and

e) Ordering [petitioners], jointly and severally, to indemnify [respondent] in the amounts of P2,000,000.00 as actual and compensatory damages, P500,000.00 as attorney's fee and expenses of litigation.

Let a copy of this Decision be certified to the Director, Bureau of Patents, Trademarks and Technology Transfer for his information and appropriate action in accordance with the provisions of Section 25, Republic Act No. 166

Costs against [petitioners].

SO ORDERED. [Words in brackets added.]

Therefrom, the petitioners went on appeal to the CA whereat their recourse was docketed as CA G.R. SP No. 53351.

As stated at the threshold hereof, the CA, in its assailed Decision of May 15, 2003,7 affirmed that of the lower court with the modification of deleting the award of attorney's fees. The appellate court predicated its affirmatory action on the strength or interplay of the following premises:

1. Albeit the Kuok Group used the mark and logo since 1962, the evidence presented shows that the bulk use of the tradename was abroad and not in the Philippines (until 1987). Since the Kuok Group does not have proof of actual use in

commerce in the Philippines (in accordance with Section 2 of R.A. No. 166), it cannot claim ownership of the mark and logo in accordance with the holding in Kabushi Kaisha Isetan v. IAC8, as reiterated in Philip Morris, Inc. v. Court of Appeals.9

2. On the other hand, respondent has a right to the mark and logo by virtue of its prior use in the Philippines and the issuance of Certificate of Registration No. 31904.

3. The use of the mark or logo in commerce through the bookings made by travel agencies is unavailing since the Kuok Group did not establish any branch or regional office in the Philippines. As it were, the Kuok Group was not engaged in commerce in the Philippines inasmuch as the bookings were made through travel agents not owned, controlled or managed by the Kuok Group.

4. While the Paris Convention protects internationally known marks, R.A. No. 166 still requires use in commerce in the Philippines. Accordingly, and on the premise that international agreements, such as Paris Convention, must yield to a municipal law, the question on the exclusive right over the mark and logo would still depend on actual use in commerce in the Philippines.

Petitioners then moved for a reconsideration, which motion was denied by the CA in its equally assailed Resolution of September 15, 2003.10

As formulated by the petitioners, the issues upon which this case hinges are:

1. Whether the CA erred in finding that respondent had the right to file an application for registration of the "Shangri-La" mark and "S" logo although respondent never had any prior actual commercial use thereof;

2. Whether the CA erred in finding that respondent's supposed use of the identical "Shangri-La" mark and "S" logo of the petitioners was not evident bad faith and can actually ripen into ownership, much less registration;

3. Whether the CA erred in overlooking petitioners' widespread prior use of the "Shangri-La" mark and "S" logo in their operations;

4. Whether the CA erred in refusing to consider that petitioners are entitled to protection under both R.A. No. 166, the old trademark law, and the Paris Convention for the Protection of Industrial Property;

5. Whether the CA erred in holding that SLIHM did not have the right to legally own the "Shangri-La" mark and "S" logo by virtue of and despite their ownership by the Kuok Group;

6. Whether the CA erred in ruling that petitioners' use of the mark and logo constitutes actionable infringement;

7. Whether the CA erred in awarding damages in favor of respondent despite the absence of any evidence to support the same, and in failing to award relief in favor of the petitioners; and

8. Whether petitioners should be prohibited from continuing their use of the mark and logo in question.

There are two preliminary issues, however, that respondent DGCI calls our attention to, namely:

1. Whether the certification against forum-shopping submitted on behalf of the petitioners is sufficient;

2. Whether the issues posed by petitioners are purely factual in nature hence improper for resolution in the instant petition for review on certiorari.

DGCI claims that the present petition for review should be dismissed outright for certain procedural defects, to wit: an insufficient certification against forum shopping and raising pure questions of fact. On both counts, we find the instant petition formally and substantially sound.

In its Comment, respondent alleged that the certification against forum shopping signed by Atty. Lee Benjamin Z. Lerma on behalf and as counsel of the petitioners was insufficient, and that he was not duly authorized to execute such document. Respondent further alleged that since petitioner SLIHM is a foreign entity based in Hong Kong, the Director's Certificate executed by Mr. Madhu Rama Chandra Rao, embodying the board resolution which authorizes Atty. Lerma to act for SLIHM

and execute the certification against forum shopping, should contain the authentication by a consular officer of the Philippines in Hong Kong.

In National Steel Corporation v. CA,11 the Court has ruled that the certification on non-forum shopping may be signed, for and in behalf of a corporation, by a specifically authorized lawyer who has personal knowledge of the facts required to be disclosed in such document. The reason for this is that a corporation can only exercise its powers through its board of directors and/or its duly authorized officers and agents. Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose.12

Moreover, Rule 7, Section 5 of the Rules of Court concerning the certification against forum shopping does not require any consular certification if the petitioner is a foreign entity. Nonetheless, to banish any lingering doubt, petitioner SLIHM furnished this Court with a consular certification dated October 29, 2003 authenticating the Director's Certificate authorizing Atty. Lerma to execute the certification against forum shopping, together with petitioners' manifestation of February 9, 2004.

Respondent also attacks the present petition as one that raises pure questions of fact. It points out that in a petition for review under Rule 45 of the Rules of Court, the questions that may properly be inquired into are strictly circumscribed by the express limitation that "the petition shall raise only questions of law which must be distinctly set forth."13 We do not, however, find that the issues involved in this petition consist purely of questions of fact. These issues will be dealt with as we go through the questions raised by the petitioners one by one.

Petitioners' first argument is that the respondent had no right to file an application for registration of the "Shangri-La" mark and "S" logo because it did not have prior actual commercial use thereof. To respondent, such an argument raises a question of fact that was already resolved by the RTC and concurred in by the CA.

First off, all that the RTC found was that respondent was the prior user and registrant of the subject mark and logo in the Philippines. Taken in proper context, the trial court's finding on "prior use" can only be interpreted to mean that respondent used the subject mark and logo in the country before the petitioners did. It cannot be construed as being a factual finding that there was prior use of the mark and logo before registration.

Secondly, the question raised is not purely factual in nature. In the context of this case, it involves resolving whether a certificate of registration of a mark, and the presumption of regularity in the performance of official functions in the issuance thereof, are sufficient to establish prior actual use by the registrant. It further entails answering the question of whether prior actual use is required before there may be a valid registration of a mark.

Under the provisions of the former trademark law, R.A. No. 166, as amended, which was in effect up to December 31, 1997, hence, the law in force at the time of respondent's application for registration of trademark, the root of ownership of a trademark is actual use in commerce. Section 2 of said law requires that before a trademark can be registered, it must have been actually used in commerce and service for not less than two months in the Philippines prior to the filing of an application for its registration.

Registration, without more, does not confer upon the registrant an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the registrant is the owner of the registered mark or trade name. Evidence of prior and continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and may very well entitle the former to be declared owner in an appropriate case.14

Among the effects of registration of a mark, as catalogued by the Court in Lorenzana v. Macagba,15 are:

1. Registration in the Principal Register gives rise to a presumption of the validity of the registration, the registrant's ownership of the mark, and his right to the exclusive use thereof. x x x

2. Registration in the Principal Register is limited to the actual owner of the trademark and proceedings therein pass on the issue of ownership, which may be contested through opposition or interference proceedings, or, after registration, in a petition for cancellation. xxx

[Emphasis supplied]1avvphil.ñet

Ownership of a mark or trade name may be acquired not necessarily by registration but by adoption and use in trade or commerce. As between actual use of a mark without registration, and registration of the mark without actual use thereof,

the former prevails over the latter. For a rule widely accepted and firmly entrenched, because it has come down through the years, is that actual use in commerce or business is a pre-requisite to the acquisition of the right of ownership.16

While the present law on trademarks17 has dispensed with the requirement of prior actual use at the time of registration, the law in force at the time of registration must be applied, and thereunder it was held that as a condition precedent to registration of trademark, trade name or service mark, the same must have been in actual use in the Philippines before the filing of the application for registration.18 Trademark is a creation of use and therefore actual use is a pre-requisite to exclusive ownership and its registration with the Philippine Patent Office is a mere administrative confirmation of the existence of such right.19

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

Here, respondent's own witness, Ramon Syhunliong, testified that a jeepney signboard artist allegedly commissioned to create the mark and logo submitted his designs only in December 1982.21 This was two-and-a-half months after the filing of the respondent's trademark application on October 18, 1982 with the BPTTT. It was also only in December 1982 when the respondent's restaurant was opened for business.22 Respondent cannot now claim before the Court that the certificate of registration itself is proof that the two-month prior use requirement was complied with, what with the fact that its very own witness testified otherwise in the trial court. And because at the time (October 18, 1982) the respondent filed its application for trademark registration of the "Shangri-La" mark and "S" logo, respondent was not using these in the Philippines commercially, the registration is void.

Petitioners also argue that the respondent's use of the "Shangri-La" mark and "S" logo was in evident bad faith and cannot therefore ripen into ownership, much less registration. While the respondent is correct in saying that a finding of bad faith is factual, not legal,23 hence beyond the scope of a petition for review, there are, however, noted exceptions thereto. Among these exceptions are:

1. When the inference made is manifestly mistaken, absurd or impossible;24

2. When there is grave abuse of discretion;25

3. When the judgment is based on a misapprehension of facts;26

4. When the findings of fact are conflicting;27 and

5. When the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent.28

And these are naming but a few of the recognized exceptions to the rule.

The CA itself, in its Decision of May 15, 2003, found that the respondent's president and chairman of the board, Ramon Syhunliong, had been a guest at the petitioners' hotel before he caused the registration of the mark and logo, and surmised that he must have copied the idea there:

Did Mr. Ramon Syhunliong, [respondent's] President copy the mark and devise from one of [petitioners'] hotel (Kowloon Shangri-la) abroad? The mere fact that he was a visitor of [petitioners'] hotel abroad at one time (September 27, 1982) establishes [petitioners'] allegation that he got the idea there.29

Yet, in the very next paragraph, despite the preceding admission that the mark and logo must have been copied, the CA tries to make it appear that the adoption of the same mark and logo could have been coincidental:

The word or name "Shangri-la" and the S-logo, are not uncommon. The word "Shangri-la" refers to a (a) remote beautiful imaginary place where life approaches perfection or (b) imaginary mountain land depicted as a utopia in the novel Lost Horizon by James Hilton. The Lost Horizon was a well-read and popular novel written in 1976. It is not impossible that the parties, inspired by the novel, both adopted the mark for their business to conjure [a] place of beauty and pleasure.

The S-logo is, likewise, not unusual. The devise looks like a modified Old English print.30

To jump from a recognition of the fact that the mark and logo must have been copied to a rationalization for the possibility that both the petitioners and the respondent coincidentally chose the same name and logo is not only contradictory, but also manifestly mistaken or absurd. Furthermore, the "S" logo appears nothing like the "Old English" print that the CA makes it out to be, but is obviously a symbol with oriental or Asian overtones. At any rate, it is ludicrous to believe that the parties would come up with the exact same lettering for the word "Shangri-La" and the exact same logo to boot. As correctly observed by the petitioners, to which we are in full accord:

x x x When a trademark copycat adopts the word portion of another's trademark as his own, there may still be some doubt that the adoption is intentional. But if he copies not only the word but also the word's exact font and lettering style and in addition, he copies also the logo portion of the trademark, the slightest doubt vanishes. It is then replaced by the certainty that the adoption was deliberate, malicious and in bad faith.31

It is truly difficult to understand why, of the millions of terms and combination of letters and designs available, the respondent had to choose exactly the same mark and logo as that of the petitioners, if there was no intent to take advantage of the goodwill of petitioners' mark and logo.32

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.33 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.

This point is further bolstered by the fact that under either Section 17 of R.A. No. 166, or Section 151 of R.A. No. 8293, or Article 6bis(3) of the Paris Convention, no time limit is fixed for the cancellation of marks registered or used in bad faith.34 This is precisely why petitioners had filed an inter partes case before the BPTTT for the cancellation of respondent's registration, the proceedings on which were suspended pending resolution of the instant case.

Respondent DGCI also rebukes the next issue raised by the petitioners as being purely factual in nature, namely, whether the CA erred in overlooking petitioners' widespread prior use of the "Shangri-La" mark and "S" logo in their operations. The question, however, is not whether there had been widespread prior use, which would have been factual, but whether that prior use entitles the petitioners to use the mark and logo in the Philippines. This is clearly a question which is legal in nature.

It has already been established in the two courts below, and admitted by the respondent's president himself, that petitioners had prior widespread use of the mark and logo abroad:

There is, to be sure, an impressive mass of proof that petitioner SLIHM and its related companies abroad used the name and logo for one purpose or another x x x.35 [Emphasis supplied]

In respondent's own words, "[T]he Court of Appeals did note petitioners' use of the mark and logo but held that such use did not confer to them ownership or exclusive right to use them in the Philippines."36 To petitioners' mind, it was error for the CA to rule that their worldwide use of the mark and logo in dispute could not have conferred upon them any right thereto. Again, this is a legal question which is well worth delving into.

R.A. No. 166, as amended, under which this case was heard and decided provides:

Section 2. What are registrable. - Trademarks, 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 trademarks 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.

Section 2-A. Ownership of trademarks, trade names and service marks; how acquired. - Anyone who lawfully produces or deals in merchandise of any kind or who engages in any lawful business, or who renders any lawful service in commerce, by actual use thereof in manufacture or trade, in business, and in the service rendered, may appropriate to his exclusive use a trademark, a trade name, or a servicemark not so appropriated by another, to distinguish his merchandise, business

or service from the merchandise, business or services of others. The ownership or possession of a 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 known to this law. [Emphasis supplied]

Admittedly, the CA was not amiss in saying that the law requires the actual use in commerce of the said trade name and "S" logo in the Philippines. Hence, consistent with its finding that the bulk of the petitioners' evidence shows that the alleged use of the Shangri-La trade name was done abroad and not in the Philippines, it is understandable for that court to rule in respondent's favor. Unfortunately, however, what the CA failed to perceive is that there is a crucial difference between the aforequoted Section 2 and Section 2-A of R.A. No. 166. For, while Section 2 provides for what is registrable, Section 2-A, on the other hand, sets out how ownership is acquired. These are two distinct concepts.

Under Section 2, in order to register a trademark, one must be the owner thereof and must have actually used the mark in commerce in the Philippines for 2 months prior to the application for registration. Since "ownership" of the trademark is required for registration, Section 2-A of the same law sets out to define how one goes about acquiring ownership thereof. Under Section 2-A, it is clear that actual use in commerce is also the test of ownership but the provision went further by saying that the mark must not have been so appropriated by another. Additionally, it is significant to note that Section 2-A does not require that the actual use of a trademark must be within the Philippines. Hence, under R.A. No. 166, as amended, one may be an owner of a mark due to actual use thereof but not yet have the right to register such ownership here due to failure to use it within the Philippines for two months.

While the petitioners may not have qualified under Section 2 of R.A. No. 166 as a registrant, neither did respondent DGCI, since the latter also failed to fulfill the 2-month actual use requirement. What is worse, DGCI was not even the owner of the mark. For it to have been the owner, the mark must not have been already appropriated (i.e., used) by someone else. At the time of respondent DGCI's registration of the mark, the same was already being used by the petitioners, albeit abroad, of which DGCI's president was fully aware.

It is respondent's contention that since the petitioners adopted the "Shangri-La" mark and "S" logo as a mere corporate name or as the name of their hotels, instead of using them as a trademark or service mark, then such name and logo are not trademarks. The two concepts of corporate name or business name and trademark or service mark, are not mutually exclusive. It is common, indeed likely, that the name of a corporation or business is also a trade name, trademark or service mark. Section 38 of R.A. No. 166 defines the terms as follows:

Sec. 38. Words and terms defined and construed - In the construction of this Act, unless the contrary is plainly apparent from the context - The term "trade name" includes individual names and surnames, firm names, trade names, devices or words used by manufacturers, industrialists, merchants, agriculturists, and others to identify their business, vocations or occupations; the names or titles lawfully adopted and used by natural or juridical persons, unions, and any manufacturing, industrial, commercial, agricultural or other organizations engaged in trade or commerce.

The term "trade mark" includes any word, name, symbol, emblem, sign or device or any combination thereof adopted and used by a manufacturer or merchant to identify his goods and distinguish them from those manufactured, sold or dealt in by others.

The term "service mark" means a mark used in the sale or advertising of services to identify the services of one person and distinguish them from the services of others and includes without limitation the marks, names, symbols, titles, designations, slogans, character names, and distinctive features of radio or other advertising. [Emphasis supplied]

Clearly, from the broad definitions quoted above, the petitioners can be considered as having used the "Shangri-La" name and "S" logo as a tradename and service mark.

The new Intellectual Property Code (IPC), Republic Act No. 8293, undoubtedly shows the firm resolve of the Philippines to observe and follow the Paris Convention by incorporating the relevant portions of the Convention such that persons who may question a mark (that is, oppose registration, petition for the cancellation thereof, sue for unfair competition) include persons whose internationally well-known mark, whether or not registered, is

identical with or confusingly similar to or constitutes a translation of a mark that is sought to be registered or is actually registered.37

However, while the Philippines was already a signatory to the Paris Convention, the IPC only took effect on January 1, 1988, and in the absence of a retroactivity clause, R.A. No. 166 still applies.38 Under the prevailing law and jurisprudence at the time, the CA had not erred in ruling that:

The Paris Convention mandates that protection should be afforded to internationally known marks as signatory to the Paris Convention, without regard as to whether the foreign corporation is registered, licensed or doing business in the Philippines. It goes without saying that the same runs afoul to Republic Act No. 166, which requires the actual use in commerce in the Philippines of the subject mark or devise. The apparent conflict between the two (2) was settled by the Supreme Court in this wise -

"Following universal acquiescence and comity, our municipal law on trademarks regarding the requirement of actual use in the Philippines must subordinate an international agreement inasmuch as the apparent clash is being decided by a municipal tribunal (Mortensen vs. Peters, Great Britain, High Court of Judiciary of Scotland, 1906, 8 Sessions 93; Paras, International Law and World Organization, 1971 Ed., p. 20). Withal, the fact that international law has been made part of the law of the land does not by any means imply the primacy of international law over national law in the municipal sphere. Under the doctrine of incorporation as applied in most countries, rules of international law are given a standing equal, not superior, to national legislative enactments (Salonga and Yap, Public International Law, Fourth ed., 1974, p. 16)."39 [Emphasis supplied]

Consequently, the petitioners cannot claim protection under the Paris Convention. Nevertheless, with the double infirmity of lack of two-month prior use, as well as bad faith in the respondent's registration of the mark, it is evident that the petitioners cannot be guilty of infringement. It would be a great injustice to adjudge the petitioners guilty of infringing a mark when they are actually the originator and creator thereof.

Nor can the petitioners' separate personalities from their mother corporation be an obstacle in the enforcement of their rights as part of the Kuok Group of Companies and as official repository, manager and operator of the subject mark and logo. Besides, R.A. No. 166 did not require the party seeking relief to be the owner of the mark but "any person who believes that he is or will be damaged by the registration of a mark or trade name."40

WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals dated May 15, 2003 and September 15, 2003, respectively, and the Decision of the Regional Trial Court of Quezon City dated March 8, 1996 are hereby SET ASIDE. Accordingly, the complaint for infringement in Civil Case No. Q-91-8476 is ordered DISMISSED.

SO ORDERED.

CANCIO C. GARCIA Associate Justice

WE CONCUR:

REYNATO S. PUNO Associate Justice

Chairperson

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Asscociate Justice

ADOLFO S. AZCUNA Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO Associate Justice

Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN Chief Justice

Footnotes

1 Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Delilah Vidallon-Magtolis (now ret.) and Edgardo F. Sundiam, concurring; Rollo, pp. 71-91. 2 Id. at 92-93. 3 AN ACT TO PROVIDE FOR THE REGISTRATION AND PROTECTION OF TRADEMARKS, TRADE NAMES AND SERVICE MARKS, DEFINING UNFAIR COMPETITION AND FALSE MARKING AND PROVIDING REMEDIES AGAINST THE SAME, AND FOR OTHER PURPOSES. 4 Developers Group of Companies, Inc. vs. Court of Appeals, et al, G.R. No. 104583, March 8, 1993, 219 SCRA 715-723. 5 Developers Group of Companies, Inc. vs. Court of Appeals, et al., G.R. No. 114802 and Shangri-La International Hotel Management LTD., et al. vs. Court of Appeals, et al., .G.R. No. 111580, June 21, 2001, 359 SCRA 273-282. 6 Rollo, pp. 114-121. 7 Supra note 1. 8 G.R. No. 75420, November 15, 1991, 203 SCRA 583. 9 G.R. No. 91332, July 16, 1993, 224 SCRA 576. 10 Supra note 2. 11 G.R. No. 134468, August 29, 2002, 388 SCRA 85, 91-92. 12 BA Savings Bank v. Sia, G.R. No. 131214, July 27, 2000, 336 SCRA 484, 485. 13 Section 1, Rule 45, Rules of Court. 14 Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, G.R. No. L-19906, April 30, 1969, 27 SCRA 1214; Chung Te v. Ng Kian Giab, G.R. No. L-23791, November 23, 1966, 18 SCRA 747. 15 G.R. No. 33773, October 22, 1987, 154 SCRA 728-729. 16 Emerald Garments Mfg. Corp. v. Court of Appeals, G.R. No. 100098, December 29, 1995, 251 SCRA 600; Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, G.R. No. L-19906, April 30, 1969, 27 SCRA 1214. 17 Section 124 of Republic No. Act 8293, The Intellectual Property Code. 18 Heirs of Crisanta Y. Gabrielle-Almoradie v. CA, G.R. No. L-91385, January 4, 1994, 229 SCRA 15. 19 Marvex Commercial v. Petra Hawpia & Co., G.R. No. L-19297, December 22, 1966, 18 SCRA 1178. 20 Unno Commercial Enterprises, Inc. v.General Milling Corporation, G.R. No. L-28554, February 28, 1983, 120 SCRA 804. 21 TSN, April 13, 1994, pp. 12, 13. 22 Ibid. 23 Cheesman v. Internediate Appellate Court, G.R. No. 74833, January 21, 1991, 193 SCRA 100. 24 Luna v. Linatoc, 74 Phil. 15 (1942). 25 Buyco v. People, 95 Phil. 453 (1954). 26 Cruz v. Sosing and Court of Appeals, 94 Phil. 26 (1953). 27 Casica v. Villaseca, 101 Phil. 1205 (1957). 28 Garcia v. Court of Appeals, G.R. No. L-26490, June 30, 1970, 33 SCRA 622; Alsua-Betts v. Court of Appeals, G.R. Nos. L-46430-31, July 30, 1979, 92 SCRA 332. 29 Court of Appeals Decision; Rollo, p. 87; Annex "A" of Petition. 30 Ibid. 31 Petitioner's Memorandum, pp. 1-2; Rollo, pp. 448-449. 32 American Wire & Cable Co. v. Director of Patents, G.R. No. L-26557, February 18, 1970, 31 SCRA 544, 551. 33 Ubeda v. Zialcita, 13 Phil. 11, 19 (1909). 34 American Cyanamid Company v. Director of Patents, G.R. No. L-23954, April 29, 1977, 76 SCRA 568; La Estrella Distillery v. Director of Patents, 105 Phil. 1213 (1959). 35 Respondent's Comment at p. 21 thereof; Rollo, pp. 150-201, at p. 170. 36 Ibid, p. 21; Rollo, p. 170. 37 Secs. 123(3) and 131.3, Intellectual Property Code, RA No. 9283. 38 Article 4, The Civil Code: "Laws shall have no retroactive effect, unless the contrary is provided." 39 Philip Morris, et al. v. CA, et al., G.R. No. 91332, 593, July 16, 1993, 224 SCRA 576. 40 Section 17, RA No. 166.

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 143993 August 18, 2004

MCDONALD'S 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.

D E C I S I O N

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 McDonald's Corporation ("McDonald's") is a corporation organized under the laws of Delaware, United States. McDonald's operates, by itself or through its franchisees, a global chain of fast-food restaurants. McDonald's4 owns a family of marks5 including the "Big Mac" mark for its "double-decker hamburger sandwich."6McDonald's registered this trademark with the United States Trademark Registry on 16 October 1979.7 Based on this Home Registration, McDonald's 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, McDonald's 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, McDonald's displays the "Big Mac" mark in items8 and paraphernalia9 in its restaurants, and in its outdoor and indoor signages. From 1982 to 1990, McDonald's spent P10.5 million in advertisement for "Big Mac" hamburger sandwiches alone.10

Petitioner McGeorge Food Industries ("petitioner McGeorge"), a domestic corporation, is McDonald's 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 corporation's 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. McDonald's opposed respondent corporation's application on the ground that "Big Mak" was a colorable imitation of its registered "Big Mac" mark for the same food products. McDonald's 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 McDonald's 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 McDonald's 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 McDonald's 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 McDonald's, the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such registration does not provide any protection. McDonald's disclosed that it had acquired Topacio's rights to his registration in a Deed of Assignment dated 18 May 1981.18

The Trial Court's 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 McDonald's, 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 McDonald's 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 McDonald's 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 corporation's mobile snack vans located along busy streets or highways. But the thing is that what is being sold by both contending parties is a food item – a hamburger sandwich which is for immediate consumption, so that a buyer may easily be confused or deceived into thinking that the "B[ig] M[ak]" hamburger sandwich he bought is a food-product of plaintiff McDonald's, or a subsidiary or allied outlet thereof. Surely, defendant corporation has its own secret ingredients to make its hamburger sandwiches as palatable and as tasty as the other brands in the market, considering the keen competition among mushrooming hamburger stands and multinational fast-food chains and restaurants. Hence, the trademark "B[ig] M[ac]" has been infringed by defendant corporation when it

used the name "B[ig] M[ak]" in its signages, wrappers, and containers in connection with its food business. xxxx

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

The answer is in the affirmative. xxxx

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

Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. The choice of "B[ig] M[ak]" as tradename by defendant corporation is not merely for sentimental reasons but was clearly made to take advantage of the reputation, popularity and the established goodwill of plaintiff McDonald's. 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 McDonald's 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 ofP400,000.00, exemplary damages in the amount of P100,000.00, and attorney's 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 asfor 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 McDonald's to pay respondents P1,600,000 as actual and compensatory damages and P300,000 as moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this Court that the use of defendants-appellants of its corporate name – the whole "L.C. B[ig] M[ak] B[urger], I[nc]." which appears on their food packages, signages and advertisements is an infringement of their trademark "B[ig] M[ac]" which they use to identify [their] double decker sandwich, sold in a Styrofoam box packaging material with the McDonald's logo of umbrella "M" stamped thereon, together with the printed mark in red bl[o]ck

capital letters, the words being separated by a single space. Specifically, plaintiffs-appellees argue that defendants-appellants' use of their corporate name is a colorable imitation of their trademark "Big Mac".

xxxx

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

xxxx

xxx [I]t is readily apparent to the naked eye that there appears a vast difference in the appearance of the product and the manner that the tradename "Big Mak" is being used and presented to the public. As earlier noted, there are glaring dissimilarities between 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 "McDonald's" logo and trademark in red, bl[o]ck capital letters printed thereon xxx at a price which is more expensive than the defendants-appellants' comparable food products. In order to buy a "Big Mac", a customer needs to visit an air-conditioned "McDonald's" restaurant usually located in a nearby commercial center, advertised and identified by its logo - the umbrella "M", and its mascot – "Ronald McDonald". A typical McDonald's restaurant boasts of a playground for kids, a second floor to accommodate additional customers, a drive-thru to allow customers with cars to make orders without alighting from their vehicles, the interiors of the building are well-lighted, distinctly decorated and painted with pastel colors xxx. In buying a "B[ig] M[ac]", it is necessary to specify it by its trademark. Thus, a customer needs to look for a "McDonald's" and enter it first before he can find a hamburger sandwich which carry the mark "Big Mac". On the other hand, defendants-appellants sell their goods through snack vans xxxx

Anent the allegation that defendants-appellants are guilty of unfair competition, We likewise find the same untenable.

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

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

In the case at bar, We find no sufficient evidence adduced by plaintiffs-appellees that defendants-appellants deliberately tried to pass off the goods manufactured by them for those of plaintiffs-appellees. The mere suspected similarity in the sound of the defendants-appellants' corporate name with the plaintiffs-appellees' trademark is not sufficient evidence to conclude unfair competition. Defendants-appellants explained that the name "M[ak]" in their corporate name was derived from both the first names of the mother and father of defendant Francis Dy, whose names are Maxima and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to prove bad faith on the part of defendants-appellants. It is a settled rule that the law always presumes good faith such that any person who seeks to be awarded damages due toacts 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 MCDONALD'S 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 Court's 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 corporation's 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 Appeals27 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,32defines trademark infringement as follows:

Infringement, what constitutes. — Any person who [1] shall use, without the consent of the registrant, anyreproduction, 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 withwhich 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 usedupon 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 Section 22, i.e. respondents allegedly used, without petitioners' consent, a colorable imitation of the "Big Mac" mark in advertising and selling respondents' hamburger sandwiches. This likely caused confusion in the mind of the purchasing public on the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be shown: (1) the validity of plaintiff's mark; (2) the plaintiff's 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 McDonald's 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 mark's validity but also the registrant's 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 akind 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 McDonald's exclusive ownership of the "Big Mac" mark. Although Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to McDonald's. The Isaiyas Group, on the other hand, registered its trademark only in the Supplemental Register. A mark which is not registered in the PrincipalRegister, 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 registrant's 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." xxx The other is the confusion of business: "Here though the goods of the parties are different, the defendant's product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist."

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."52Thus, 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 McDonald's 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 McDonald's nor its licensee/franchisee, plaintiff McGeorge, and in clear violation of plaintiffs' exclusive right to use and/or appropriate the McDonald's 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 defendant's 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 McDonald's mark "B[ig] M[ac]", xxx. Defendant Big Mak Burger has thus unjustly created the impression that its business is approved and sponsored by, or affiliated with, plaintiffs. xxxx

2.2 As a consequence of the acts committed by defendants, which unduly prejudice and infringe upon the property rights of plaintiffs McDonald's and McGeorge as the real owner and rightful proprietor, and the licensee/franchisee, respectively, of the McDonald's 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 damagesin the form of injury to their business reputation and goodwill, and of the dilution of the distinctive quality of the McDonald's 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 "McDonald's" 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 sufficientthat 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 theadoption 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:

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

of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; xxx) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,61 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 Nestlé, 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 encounteredin the realities of the marketplace. (Emphasis supplied)

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

Applying the dominancy test, the Court finds that respondents' use of the "Big Mak" mark results in likelihood of confusion. First, "Big Mak" sounds exactly the same as "Big Mac." Second, the first word in "Big Mak" is exactlythe 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. Thisincreases 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 Dy's 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 father's name ahead of his mother's, as is usually done in this patriarchal society, and derived letters from said names in that order. Or, he could have taken an equalnumber of letters (i.e., two) from each name, as is the more usual thing done. Surely, the more plausible reason behind Respondents' choice of the word "M[ak]", especially when taken in conjunction with the word "B[ig]", was their intent to take advantage of Petitioners' xxx "B[ig] M[ac]" trademark, with their allegedsentiment-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 McDonald's to identify its double decker hamburger sandwich. The packaging material is a styrofoam box with the McDonald's logo and trademark in red with block capital letters printed on it. All letters of the "B[ig] M[ac]" mark are also in red and block capital letters. On the other hand, defendants' "B[ig] M[ak]" script print is in orange with only the letter "B" and "M" being capitalized and the packaging material is plastic wrapper. xxxx Further, plaintiffs' logo and mascot are the umbrella "M" and "Ronald McDonald's", 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 wordsthat 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

petitioner's 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.82Respondents, 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 corporation's 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 ofthe finding of unfair competition where intent to deceive the public is essential. The award of attorney's 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, C.J. (Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur.

Footnotes 1 Under Rule 45 of the 1997 Rules of Civil Procedure. 2 Penned by Associate Justice Eloy R. Bello, Jr. with Presiding Justice Jainal D. Rasul and Associate Justice Ruben T. Reyes concurring. 3 Penned by Judge Santiago Ranada, Jr. 4 Itself a registered service mark. 5 Some of McDonald's registered marks representing food items (f) and services (s) are: McDONALD'S HAMBURGERS (s); McDONALD'S (f); RONALD McDONALD (s); McDONALDLAND (s); McCHEESE & DESIGN (f); EGG McMUFFIN (s); EGG McMUFFIN (f); McDONALDLAND (f); McDONALD'S & ARCHES (s); McFEAST (f); McCHICKEN (f); McDONALD'S & ARCHES (f); McDONUTS (f); McPIZZA (f); McPIZZA (s); McHAPPY DAY (s); MINI MAC (s); McDOUBLE (f); TOGETHER-McDONALD'S & YOU (s); CHICKEN McNUGGETS (f); McDONALD'S & YOU (s); SUPER MAC (f); McSNACK (s); MAC FRIES (f); McRIB (f); MAPLE McCRISP (f); LITE MAC (f); BIG MAC (s); CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T. (f). (McDonald's Corporation v. McBagel's, Inc., 649 F.Supp. 1268 [1986]). 6 Aside from Big Mac sandwiches, McDonald's menu includes cheeseburgers, special sandwiches, fried french potatoes, chicken nuggets, fried fish sandwiches, shakes, hot pies, sundaes, softdrinks, and other beverages. 7 Certificate of Registration No. 1,126,102. 8 Table napkins, tray liners, cups and food wrappers.

9 Labels, promotional items and packages. 10 TSN (Arlene Manalo), 26 July 1990, pp. 34-35. 11 McDonald's and petitioner McGeorge are referred to as petitioners. 12 Rizal, Laguna, Bulacan and Quezon. 13 E.g. pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers, fruit juices, softdrinks and other beverages. 14 Respondent corporation and private respondents are referred to as respondents. 15 Records, p. 37. 16 Ibid., pp. 457-458. 17 Ibid., pp. 414-426. 18 Ibid., pp. 460-463. 19 Rollo, pp. 149-154. 20 Records, pp. 1431-1432. 21 Rollo, pp. 233-237 (Capitalization in the original). 22 Ibid., p. 24. 23 While petitioners seek to hold liable respondent corporation only, the Court's opinion will refer not only to the latter but also to all the respondents as all of them filed the pleadings in this petition. 24 This provision states: "Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth." 25 Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967). 26 Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983). 27 G.R. No. 103543, 5 July 1993, 224 SCRA 437. 28 Exhibits E-1 to 2, F-1 to 2 and G-1 to 2. 29 Exhibits E, F and G. 30 Exhibits L-10, L-16 to 27. 31 Exhibits 34, 36-37. 32 RA 166 has been superseded by Republic Act No. 8293 ("RA 8293"), the Intellectual Property Code of the Philippines, which took effect on 1 January 1998. Section 22 is substantially identical with Section 16 of the United States' 1946 Trademark Act ("Lanham Act"). 33 Superseded by Section 155 of RA 8293 ("Section 155"). 34 See A & H Sportswear Co. v. Victoria's Secret Stores, Inc., 167 F.Supp.2d 770 (2001). 35 Shaley's Inc. v. Covalt, 704 F.2d 426 (1983). Also referred to as the "lynchpin" (Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 [1999]) or "touchstone" (VMG Enterprises, Inc. v. F. Quesada and Franco, Inc., 788 F. Supp. 648 [1992]) of trademark infringement. 36 This provision states: "Registration of trade-marks, trade-names and service-marks on the principal register. — There is hereby established a register of trade-marks, trade-names and service-marks which shall be known as the principal register. The owner of a trade-mark, trade-name or service-mark used to distinguish his goods, business or services from the goods, business or services of others shall have the right to register the same on the principal register, unless it: (a) Consists of or comprises immoral, deceptive or scandalous matter; 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) Consists of or comprises the flag or coat of arms or other insignia of the Philippines or any of its political subdivisions, or of any foreign nation, or any simulation thereof; (c) Consists of or comprises a name, portrait, or signature identifying a particular living individual except by his written consent, or the name, signature, or portrait of a deceased President of the Philippines, during the life of his widow, if any, except by the written consent of the widow; (d) Consists of or comprises a mark or trade-name which so resembles a mark or trade-name registered in the Philippines or a mark or a trade-name previously used in the Philippines by another and not abandoned, as to be likely, when applied to or used in connection with the goods, business or services of the applicant, to cause confusion or mistake or to deceive purchasers; or (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 misdescriptive 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; (f) Except as expressly excluded in paragraphs (a), (b), (c) and (d) of this section nothing herein shall prevent the registration of a mark or trade-name used by the applicant which has become distinctive of the applicant's goods, business or services. The Director may accept as prima facie evidence that the mark or trade-name has become distinctive, as applied to or used in connection with the applicant's goods, business or services, proof of substantially exclusive and continuous use thereof as a mark or trade-name by

the applicant in connection with the sale of goods, business or services for five years next preceding the date of the filing of the application for its registration." This has been superseded by Section 123 of RA 8293. 37 Section 20, RA 166. This provision states: "Certificate of registration prima facie evidence of validity. — A certificate of registration of a mark or trade-name shall be prima facie evidence of the validity of the registration, the registrant's ownership of the mark or trade-name, and of the registrant's exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein." This has been superseded by Section 138 of RA 8293. Neither RA 166 nor RA 8293 provides when the presumption of validity and ownership becomes indubitable. In contrast, under the Lanham Act, as amended, (15 United States Code § 1065), such takes place once the trademark has become "incontestable" i.e. after the mark owner files affidavits stating that the mark is registered and has been in continuous use for five consecutive years; that there is no pending proceeding; and that there has been no adverse decision concerning the registrant's ownership or right to registration (See Luis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d 556 [2002]). However, both RA 166 (Section 12) and RA 8293 (Section 145) require the filing of the affidavit attesting to the continuous use of the mark for five years and, under Section 145, failure to file such affidavit will result in the removal of the mark from the Register. 38 Rollo, pp. 525-527. 39 Societe Des Produits Nestlé, S.A. v. Court of Appeals, G.R. No. 112012, 4 April 2001, 356 SCRA 207; McKee Baking Co. v. Interstate Brands Corporation, 738 F. Supp. 1272 (1990). 40 Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39; Miller Brewing Co. v. Heileman Brewing Co., 561 F.2d 75 (1977). 41 Miller Brewing Co. v. Heileman Brewing Co., supra note 40. 42 A. J. Canfield Co. v. Honickman, 808 F.2d 291 (1986). 43 Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39 citing § 43(A) of the Lanham Act, as amended. 44 Bernard v. Commerce Drug Co., 964 F.2d 1338 (1992). 45 Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1980). 46 McKee Baking Co. v. Interstate Brands Corporation, supra note 39. 47 See A. Miller and M. Davis, Intellectual Property, Patents, Trademarks and Copyright in a Nutshell 177-178 (1983). 48 See Lorenzana v. Macagba, No. L-33773, 22 October 1987, 154 SCRA 723; La Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA 8293 no longer provides for a Supplemental Register and instead mandates a single registry system (Section 137). Under Section 239, marks registered in the Supplemental Register under RA 166 will remain in force but are no longer subject to renewal. 49 137 Phil. 838 (1969). 50 Enacted on 6 March 1903. 51 Section 3 of Act No. 666 provides: "The ownership or possession of a trade-mark, heretofore or hereafter appropriated, as in the foregoing section provided, shall be recognized and protected in the same manner and to the same extent, as are other property rights known to the law. To this end any person entitled to the exclusive use of a trade-mark to designate the origin or ownership of goods he has made or deals in may recover damages in a civil action from any person who has sold goods of a similar kind, bearing such trade-mark, and the measure of the damages suffered, at the option of the complaining party, shall be either the reasonable profit which the complaining party would have made had the defendant not sold the goods with the trade-mark aforesaid, or the profit which the defendant actually made out of the sale of the goods with the trade-mark, and in cases where actual intent to mislead the public or to defraud the owner of the trade-mark shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may have a preliminary injunction, restraining the defendant temporarily from use of the trade-mark pending the hearing, to be granted or dissolved in the manner provided in the Code of Civil Procedure, and such injunction upon final hearing, if the complainant's property in the trade-mark and the defendant's violation thereof shall be fully established, shall be made perpetual, and this injunction shall be part of the judgment for damages to be rendered in the same cause as above provided." (Emphasis supplied) 52 The United States Congress had introduced the same amendment to the Lanham Act in 1946. In 1962, the US Congress again amended Section 16 of the Lanham Act ("Sec. 43(A)") by deleting the phrase "the source or origin of such goods or services, or identity of such business" in the definition of trademark infringement. This led courts in that jurisdiction to hold that post-sale confusion by the public at large (Esercizio v. Roberts, 944 F.2d 1235 [1991]. See also Koppers Company, Inc. v. Krup-Koppers, 517 F.Supp. 836 [1981]) or "subliminal confusion," defined as confusion on a subliminal or subconscious level, causing the consumer to identify the properties and reputation of one product with those of another, although he can identify the particular manufacturer of each, (Ortho Pharmaceutical Corporation v. American Cyanamid Company, 361 F.Supp. 1032 [1973]. See also Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291 (1990); Dreyfus Fund Incorporated v. Royal Bank of Canada, 525 F. Supp. 1108 [1981]) are sufficient to sustain a trademark infringement claim. Section 155 substantially reproduces Sec. 43(A). 53 Agpalo, The Law on Trademark, Infringement and Unfair Competition 45-46 (2000). 54 Records, p. 5. 55 Ibid., pp. 4, 6-7. 56 Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968). 57 Societe Des Produits Nestlé, S.A. v. Court of Appeals, supra note 39; Emerald Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, 29 December 1995, 251 SCRA 600.

58 V. Amador, Trademarks Under The Intellectual Property Code 260 (1999). 59 Ibid., p. 263. 60 95 Phil. 1 (1954). 61 100 Phil. 214 (1956). 62 No. L-23035, 31 July 1975, 65 SCRA 575. 63 No. L-27906, 8 January 1987, 147 SCRA 154. 64 Supra note 27. 65 Supra note 39. 66 125 Phil. 295 (1966). 67 Rollo, pp. 588-589. 68 Time v. Life Television Co. of St. Paul, 123 F. Supp. 470 (1954); 69 Conde Nast Publications v. Vogue School of Fashion Modelling, 105 F. Supp. 325 (1952); Hanson v. Triangle Publications, 163 F.2d 74 (1947). 70 See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466 (1994). 71 No. L-26557, 18 February 1970, 31 SCRA 544. 72 PACCAR Inc. v. Tele Scan Technologies, L.L.C., 319 F.3d 243 (2003). 73 Reiterated in Section 168 of RA 8293. 74 V. Amador, supra note 58 at 278. 75 Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd., 120 Phil. 434 (1964); "La Insular" v. Jao Oge, 42 Phil. 366 (1921). 76 Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266 (1914). 77 Co Tiong Sa v. Director of Patents, supra note 60; Clarke v. Manila Candy Co., 36 Phil. 100 (1917). 78 See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp 845 (1952). 79 Rollo, pp. 40-45. 80 Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 (1999). 81 Rollo, pp. 148-149. 82 See Q-Tips, Inc. v. Johnson & Johnson, supra note 78. 83 This provision reads: "Actions, and damages and injunction for infringement. — Any person entitled to the exclusive use of a registered mark or trade-name may recover damages in a civil action from any person who infringes his rights, and the measure of the damages suffered shall be either the reasonable profit which the complaining party would have made, had the defendant not infringed his said rights, or the profit which the defendant actually made out of the infringement, or in the event such measure of damages cannot be readily ascertained with reasonable certainty, then the court may award as damages a reasonable percentage based upon the amount of gross sales of the defendant of the value of the services in connection with which the mark or trade-name was used in the infringement of the rights of the complaining party. In cases where actual intent to mislead the public or to defraud the complaining party shall be shown, in the discretion of the court, the damages may be doubled. The complaining party, upon proper showing, may also be granted injunction." 84 TSN, (Francis Dy), 15 March 1993, p. 32; TSN (Francis Dy), 22 March 1993, pp. 1-2. 85 Article 2229, Civil Code. 86 Article 2208(1), Civil Code.

Republic of the Philippines SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 166115 February 2, 2007

McDONALD’S CORPORATION, Petitioner, vs. MACJOY FASTFOOD CORPORATION, Respondent.

D E C I S I O N

GARCIA, J.:

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

1. Decision dated 29 July 20041 reversing an earlier decision of the Intellectual Property Office (IPO) which rejected herein respondent MacJoy FastFood Corporation’s application for registration of the trademark "MACJOY & DEVICE"; and

2. Resolution dated 12 November 20042 denying the petitioner’s motion for reconsideration.

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

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

Petitioner McDonald’s Corporation, a corporation duly organized and existing under the laws of the State of Delaware, USA, filed a verified Notice of Opposition3 against the respondent’s application claiming that the trademark "MACJOY & DEVICE" so resembles its corporate logo, otherwise known as the Golden Arches or "M" design, and its marks "McDonalds," McChicken," "MacFries," "BigMac," "McDo," "McSpaghetti," "McSnack," and "Mc," (hereinafter collectively known as the MCDONALD’S marks) such that when used on identical or related goods, the trademark applied for would confuse or deceive purchasers into believing that the goods originate from the same source or origin. Likewise, the petitioner alleged that the respondent’s use and adoption in bad faith of the "MACJOY & DEVICE" mark would falsely tend to suggest a connection or affiliation with petitioner’s restaurant services and food products, thus, constituting a fraud upon the general public and further cause the dilution of the distinctiveness of petitioner’s registered and internationally recognized MCDONALD’S marks to its prejudice and irreparable damage. The application and the opposition thereto was docketed as Inter Partes Case No. 3861.

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

In a decision4 dated December 28, 1998, the IPO, ratiocinating that the predominance of the letter "M," and the prefixes "Mac/Mc" in both the "MACJOY" and the "MCDONALDS" marks lead to the conclusion that there is confusing

similarity between them especially since both are used on almost the same products falling under classes 29 and 30 of the International Classification of Goods, i.e., food and ingredients of food, sustained the petitioner’s opposition and rejected the respondent’s application, viz:

WHEREFORE, the Opposition to the registration of the mark MACJOY & DEVICE for use in fried chicken and chicken barbecue, burgers, fries, spaghetti, palabok, tacos, sandwiches, halo-halo, and steaks is, as it is hereby, SUSTAINED. Accordingly, Application Serial No. 75274 of the herein Respondent-Applicant is REJECTED.

Let the filewrapper of MACJOY subject matter of this case be sent to the Administrative, Financial and Human Resources Development Bureau for appropriate action in accordance with this Decision, with a copy to be furnished the Bureau of Trademarks for information and to update its record.

SO ORDERED.

In time, the respondent moved for a reconsideration but the IPO denied the motion in its Order5 of January 14, 2000.

Therefrom, the respondent went to the CA via a Petition for Review with prayer for Preliminary Injunction6 under Rule 43 of the Rules of Court, whereat its appellate recourse was docketed as CA-G.R. SP No. 57247.

Finding no confusing similarity between the marks "MACJOY" and "MCDONALD’S," the CA, in its herein assailed Decision7 dated July 29, 2004, reversed and set aside the appealed IPO decision and order, thus:

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

SO ORDERED.

Explains the CA in its decision:

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

1. The word "MacJoy" is written in round script while the word "McDonald’s" is written in single stroke gothic;

2. The word "MacJoy" comes with the picture of a chicken head with cap and bowtie and wings sprouting on both sides, while the word "McDonald’s" comes with an arches "M" in gold colors, and absolutely without any picture of a chicken;

3. The word "MacJoy" is set in deep pink and white color scheme while "McDonald’s" is written in red, yellow and black color combination;

4. The façade of the respective stores of the parties are entirely different. Exhibits 1 and 1-A, show that [respondent’s] restaurant is set also in the same bold, brilliant and noticeable color scheme as that of its wrappers, containers, cups, etc., while [petitioner’s] restaurant is in yellow and red colors, and with the mascot of "Ronald McDonald" being prominently displayed therein." (Words in brackets supplied.)

Petitioner promptly filed a motion for reconsideration. However, in its similarly challenged Resolution8 of November 12, 2004, the CA denied the motion, as it further held:

Whether a mark or label of a competitor resembles another is to be determined by an inspection of the points of difference and resemblance as a whole, and not merely the points of resemblance. The articles and trademarks

employed and used by the [respondent] Macjoy Fastfood Corporation are so different and distinct as to preclude any probability or likelihood of confusion or deception on the part of the public to the injury of the trade or business of the [petitioner] McDonald’s Corporation. The "Macjoy & Device" mark is dissimilar in color, design, spelling, size, concept and appearance to the McDonald’s marks. (Words in brackets supplied.)

Hence, the petitioner’s present recourse on the following grounds:

I.

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENT’S "MACJOY & DEVICE" MARK IS NOT CONFUSINGLY SIMILAR TO PETITIONER’S "McDONALD’S MARKS." IT FAILED TO CORRECTLY APPLY THE DOMINANCY TEST WHICH HAS BEEN CONSISTENTLY APPLIED BY THIS HONORABLE COURT IN DETERMINING THE EXISTENCE OF CONFUSING SIMILARITY BETWEEN COMPETING MARKS.

A. The McDonald’s Marks belong to a well-known and established "family of marks" distinguished by the use of the prefix "Mc" and/or "Mac" and the corporate "M" logo design.

B. The prefix "Mc" and/or "Mac" is the dominant portion of both Petitioner’s McDonald’s Marks and the Respondent’s "Macjoy & Device" mark. As such, the marks are confusingly similar under the Dominancy Test.

C. Petitioner’s McDonald’s Marks are well-known and world-famous marks which must be protected under the Paris Convention.

II.

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

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

The petition is impressed with merit.

Contrary to respondent’s claim, the petitioner’s Managing Counsel, Sheila Lehr, was specifically authorized to sign on behalf of the petitioner the Verification and Certification10 attached to the petition. As can be gleaned from the petitioner’s Board of Director’s Resolution dated December 5, 2002, as embodied in the Certificate of the Assistant Secretary dated December 21, 2004,11 Sheila Lehr was one of those authorized and empowered "to execute and deliver for and on behalf of [the petitioner] all documents as may be required in connection with x x x the protection and maintenance of any foreign patents, trademarks, trade-names, and copyrights owned now or hereafter by [the petitioner], including, but not limited to, x x x documents required to institute opposition or cancellation proceedings against conflicting trademarks, and to do such other acts and things and to execute such other documents as may be necessary and appropriate to effect and carry out the intent of this resolution." Indeed, the afore-stated authority given to Lehr necessarily includes the authority to execute and sign the mandatorily required certification of non-forum shopping to support the instant petition for review which stemmed from the "opposition proceedings" lodged by the petitioner before the IPO. Considering that the person who executed and signed the certification against forum shopping has the authority to do so, the petition, therefore, is not procedurally defective.

As regards the respondent’s argument that the petition raises only questions of fact which are not proper in a petition for review, suffice it to say that the contradictory findings of the IPO and the CA constrain us to give due course to the petition, this being one of the recognized exceptions to Section 1, Rule 45 of the Rules of Court. True, this Court is not the proper venue to consider factual issues as it is not a trier of facts.12 Nevertheless, when the factual findings

of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the court of origin,13 as here, this Court will review them.

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

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

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

xxx xxx xxx

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

xxx xxx xxx

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

In determining similarity and likelihood of confusion, jurisprudence has developed two tests, the dominancy test and the holistic test.15 The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion or deception.16 In contrast, the holistic test requires the court to consider the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.17 Under the latter test, a comparison of the words is not the only determinant factor.18 1awphi 1.net

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

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

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

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

We agree.

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

While we agree with the CA’s 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.22

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

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

Moreover, in Societe Des Produits Nestle, S.A. v. CA24 the Court, applying the dominancy test, concluded that the use by the respondent therein of the word "MASTER" for its coffee product "FLAVOR MASTER" was likely to cause confusion with therein petitioner’s coffee products’ "MASTER ROAST" and "MASTER BLEND" and further ruled:

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

Applying the dominancy test to the instant case, the Court finds that herein petitioner’s "MCDONALD’S" and respondent’s "MACJOY" marks are confusingly similar with each other such that an ordinary purchaser can conclude an association or relation between the marks.

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

For sure, it is the prefix "Mc," an abbreviation of "Mac," which visually and aurally catches the attention of the consuming public. Verily, the word "MACJOY" attracts attention the same way as did "McDonalds," "MacFries," "McSpaghetti," "McDo," "Big Mac" and the rest of the MCDONALD’S 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 respondent’s 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 petitioner’s trademark registration for the MCDONALD’S marks in the Philippines covers goods which are similar if not identical to those covered by the respondent’s application.

Thus, we concur with the IPO’s findings that:

In the case at bar, the predominant features such as the "M," "Mc," and "Mac" appearing in both McDonald’s marks and the MACJOY & DEVICE" easily attract the attention of would-be customers. Even non-regular customers of their fastfood restaurants would readily notice the predominance of the "M" design, "Mc/Mac" prefixes shown in both marks. Such that the common awareness or perception of customers that the trademarks McDonalds mark and MACJOY & DEVICE are one and the same, or an affiliate, or under the sponsorship of the other is not far-fetched.

The differences and variations in styles as the device depicting a head of chicken with cap and bowtie and wings sprouting on both sides of the chicken head, the heart-shaped "M," and the stylistic letters in "MACJOY & DEVICE;" in contrast to the arch-like "M" and the one-styled gothic letters in McDonald’s marks are of no moment. These minuscule variations are overshadowed by the appearance of the predominant features mentioned hereinabove.

Thus, with the predominance of the letter "M," and prefixes "Mac/Mc" found in both marks, the inevitable conclusion is there is confusing similarity between the trademarks Mc Donald’s marks and "MACJOY AND DEVICE" especially considering the fact that both marks are being used on almost the same products falling under Classes 29 and 30 of the International Classification of Goods i.e. Food and ingredients of food.

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

We rule for the petitioner.

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

Pursuant to Section 3727 of R.A. No. 166, as amended, as well as the provision regarding the protection of industrial property of foreign nationals in this country as embodied in the Paris Convention28 under which the Philippines and the petitioner’s domicile, the United States, are adherent-members, the petitioner was able to register its MCDONALD’S marks successively, i.e., "McDonald’s" in 04 October, 197129 ; the corporate logo which is the "M" or the golden arches design and the "McDonald’s" with the "M" or golden arches design both in 30 June 197730 ; and so on and so forth.31

On the other hand, it is not disputed that the respondent’s application for registration of its trademark "MACJOY & DEVICE" was filed only on March 14, 1991 albeit the date of first use in the Philippines was December 7, 1987.32

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

Respondent’s contention that it was the first user of the mark in the Philippines having used "MACJOY & DEVICE" on its restaurant business and food products since December, 1987 at Cebu City while the first McDonald’s outlet of the petitioner thereat was opened only in 1992, is downright unmeritorious. For the requirement of "actual use in commerce x x x in the Philippines" before one may register a trademark, trade-name and service mark under the Trademark Law33 pertains to the territorial jurisdiction of the Philippines and is not only confined to a certain region, province, city or barangay.

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

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

By reason of the respondent’s implausible and insufficient explanation as to how and why out of the many choices of words it could have used for its trade-name and/or trademark, it chose the word "MACJOY," the only logical conclusion deducible therefrom is that the respondent would want to ride high on the established reputation and

goodwill of the MCDONALD’s marks, which, as applied to petitioner’s restaurant business and food products, is undoubtedly beyond question.

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

When one applies for the registration of a trademark or label which is almost the same or very closely resembles one already used and registered by another, the application should be rejected and dismissed outright, even without any opposition on the part of the owner and user of a previously registered label or trademark, this not only to avoid confusion on the part of the public, but also to protect an already used and registered trademark and an established goodwill.

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP NO. 57247, are REVERSED and SET ASIDE and the Decision of the Intellectual Property Office in Inter Partes Case No. 3861 is REINSTATED.

No pronouncement as to costs.

SO ORDERED.

CANCIO C. GARCIA Associate Justice

WE CONCUR:

REYNATO S. PUNO Chief Justice Chairperson

ANGELINA SANDOVAL-GUTIERREZ Associate Justice

RENATO C. CORONA Asscociate Justice

ADOLFO S. AZCUNA Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO Chief Justice

Footnotes

1 Penned by Associate Justice Isaias P. Dicdican and concurred in by Associate Justices Elvi John S. Asuncion and Ramon Bato, Jr.; Rollo, pp. 209-219. 2 Id. at 256-257. 3 Id. at 77-81. 4 Id. at 114-122. 5 Id. at 139-142. 6 Id. at 144-159. 7 Supra note 1. 8 Supra note 2. 9 Rollo, pp. 291-306. 10 Id. at 72. 11 Id. at 74 & 76

12 Moomba Mining Exploration Co. v. CA, G.R. No. 108846, October 26, 99, 317 SCRA 38, 397. 13 Smith Kline Beckman Corporation v. CA, G.R. No. 126627, August 14, 2003, 409 SCRA 33, 39. 14 Section 38, R.A. 166, as amended 15 Mighty Corporation v. E & J Gallo Winery, G.R. No. 154342, July 14, 2004, 434 SCRA 473, 506. 16 McDonald’s Corporation v. L.C. Big Mak Burger, Inc., supra 17 Id. 18 Emerald Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, December 29, 1995, 251 SCRA 600, 615-616. 19 Societe Des Produits Nestle, S.A. v. CA, GR No. 112012, April 4, 2001, 356 SCRA 207, 217. 20 Id. 21 Id. at p. 218. 22 Applied in McDonald’s Corp. v. L.C. Big Mak Burger, Inc., supra; Societe Des Produits Nestle, S.A. v. CA, supra; Asia Brewery, Inc. v. CA, G.R. No. 103543, July 5, 1993, 224 SCRA 437; Converse Rubber Corp. v. Universal Rubber Products, Inc., G.R. No. L-27906, January 8, 1987, 147 SCRA 154; Phil. Nut Industry Inc. v. Standard Brands, Inc., G.R. No. L-23035, July 31, 1975, 65 SCRA 575. 23 Supra note 14, at 32. 24 Supra note 23. 25 "MacJoy" mark, Rollo p. 297 and "MCDONALDS" marks, Rollo, pp. 86, 89 & 91. 26 McDonald’s Corporation v L.C. Big Mak Burger Inc., supra note 14; SEC. 20. Certificate of registration prima facie evidence of validity. - A certificate of registration of a mark or trade name shall be prima facie evidence of the validity of the registration, the registrant’s ownership of the mark or trade name, and of the registrant’s exclusive right to use the same in connection with the goods, business or services specified in the certificate, subject to any conditions and limitations stated therein. 27 Sec. 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 an international convention or treaty relating to marks or tradenames on 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 . . . x x x "Tradenames 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." 28 The Paris Convention is essentially a compact among the various member countries to accord in their own countries to citizens of the other contracting parties’ trademarks and other rights comparable to those accorded their own citizens by their domestic laws. The underlying principle is that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens. In addition, the Convention sought to create uniformity in certain respects by obligating each nation to assure to nationals of countries of the Union an effective protection against unfair competition. Article 2 of the Paris Convention provides that: ART. 2. Nationals of each of the countries of the Union shall, as regards the protection of industrial property, enjoy in all the other countries of the Union the advantages that their respective laws now grant, or may hereafter grant, to nationals, without prejudice to the rights specially provided by the present Convention. Consequently, they shall have the same protection as the latter, and the same legal remedy against any infringement of their rights, provided they observe the conditions and formalities imposed upon nationals. 29 Rollo, p. 86 30 Id. at 89 & 91 31 Registration No. 31966, dated June 24, 1983 for the mark "McChicken", Id. at 93; Registration No. 34065, dated March 06, 1985, for the mark "McDonald’s with "corporate logo"arches design, Id. at 94; Registration No. 34065, dated July 18, 1985 for the mark "Big Mac", Id. at 97; Registration No. 39988, dated July 14, 1988 for the mark "MacFries", Id. at 99; Registration No. 45583, dated July 14, 1988, for the mark "McSpaghetti", Id. at 101; Registration No. 50987, dated July 24, 1991, for the servicemark "McDo" , Id. at 100; Registration No. 32009, dated June 24, 1983 for the trademark "Big Mac" and Circle Design Rollo, p. 106; Registration No. 48491, dated June 25, 1990 for the service mark "McSnack" Id. at 105; Registration No. 51789, dated December 02, 1991, for the trademark "Mc" (Id. at 107). 32 IPO Decision; Rollo, pp. 120-121. 33 Section 2 of R.A. 166, as amended, provides: Sec. 2. What are registrable. – Trademarks, tradenames 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 trademarks, tradenames, 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 by R.A. No. 865). 34 Rollo, pp. 55-56. 35 G.R. No. 71189, November 4, 1992. 36 G.R. No. L-13947, 108 Phil. 833, 836.