TOYS "Я" Us – New York

v.

Toys “R” US - Local

Intellectual Property Law

Atty. Josh Ventura

Group #3:

Yase, Jennilyn

Nosdo, Catherine

Quiles, Ranz Kevin

Rabaya, Niel Victor

Rule, Lindley
THE FACTS

TOYS "Я" Us (TRU-NY for brevity) is a registered trademark and

tradename of a foreign company whose principal office is in New York, USA
which sells toys for kids of all ages.

TRU-NY currently operates 585 stores in the United States and 716
stores in 34 other countries, with some of them under franchises or
licenses.

1981 it was able to register its trademark with the then Bureau of
Patents,Trademarks and Technology Transfer (BPTTT) and started selling
and distributing its product six months after its registration, but stopped its
operation in the Philippines for almost five years due to some financial
problems.

In 1986, a local firm, Sportshub used Toys “R” US (TRU-local for

brevity)for almost a year as its trademark for toys targeted for the masses
or the class D market prior to its application with BPTTT in 1987, which
was opposed by TRU-NY asserting that such is confusingly similar to their
own mark which is internationally-well known.

TRU-NY sued Sportshub for infringement with damages as a foreign

company not licensed to do business in the Philippines but suing on an
isolated transaction.

TRU-NY invoked the Paris Convention saying it has the legal standing
to sue and is automatically entitled to protection considering the
widespread use of its mark in various countries.

I. FOR TRU-NY

A. Provisions on the Protection of Well-Known Marks

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

Under the generally accepted principle of pacta sunt servanda, a

treaty or convention, such as the Paris convention, creates a legal and
binding obligation between the parties. The Philippines and the United
States of America, are both parties to said convention. That being said,
TRU-NY should be given the same treatment in the Philippines as those that
are available to Filipinos.

In the Philippines, such must be established pursuant to the Philippine

Patent Office inter partes and ex parte case procedures, according to the
following criteria or any combination thereof:

(a) a declaration by the Minister of Trade and Industry that the

trademark being considered is already well-known in the
Philippines such that permission for its use by other than its
original owner will constitute a reproduction, imitation,
translation or other infringement;
(b) that the trademark is used in commerce internationally,
supported by proof that goods bearing the trademark are sold
on an international scale, advertisements, the establishment of
factories, sales offices, distributorships, and the like, in different
countries, including volume or other measure of international
trade and commerce;

(c) that the trademark is duly registered in the industrial

property office(s) of another country or countries, taking into
consideration the date of such registration;

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

(e) that the trademark actually belongs to a party claiming

ownership and has the right to registration under the provisions
of the aforestated PARIS CONVENTION.
 Further, Rule 102 of the Rules and Regulations on Trademarks,
Service Marks, Tradenames and Marked or Stamped Containers 1, states the
criteria for determining whether a mark is well-known, the following
criteria or any combination thereof may be taken into account:

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

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

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

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

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

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

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

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

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

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

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

(l) the presence or absence of identical or similar marks validly

registered for or used on identical or similar goods or services and

1
PHILIPPINES RULES AND REGULATIONS ON TRADEMARKS, SERVICE MARKS,
TRADENAMES AND MARKED OR STAMPED CONTAINERS as amended by Office Order
No.49 S.2006.
https://www.jpo.go.jp/shiryou_e/s_sonota_e/fips_e/pdf/philippines_e/e_syouhyou.pdf
 owned by persons other than the person claiming that his mark is a
well-known mark.

1
PHILIPPINES RULES AND REGULATIONS ON TRADEMARKS, SERVICE MARKS,
TRADENAMES AND MARKED OR STAMPED CONTAINERS as amended by Office Order
No.49 S.2006.
https://www.jpo.go.jp/shiryou_e/s_sonota_e/fips_e/pdf/philippines_e/e_syouhyou.pdf
 On its face, a combination of the aforementioned may be established
by the facts in favour of TRU-NY as against applicant Sportshub for their
trademark TRU-local.

B. Jurisprudence

In Sehwani, Inc. v. In-N-Out Burger, Inc. (G.R. No. 171053, October

15, 2007), the current jurisprudence was set forth by the Supreme Court in
determining a mark as well-known, the fact that the mark is neither
registered nor used in the Philippines is of no consequence.

The ruling is a marked departure from the doctrines enunciated in

Kabushi Kaisha Isetan v. IAC (G.R. No. 75420, November 15, 1991) and
Philip Morris v. Court of Appeals (G.R. No. 91332, July 16, 1993), where
actual use in commerce in the Philippines was held to be an indispensable
element for the acquisition of ownership over a trademark or a tradename.2

The Court observed that the 1999 Joint Recommendation Concerning

Provisions on the Protection of Well-Known Marks expanded the scope of
protection initially afforded by Article 6bis of the Paris Convention. The
Court cited Part I, Article 2(3) of the Joint Recommendation, which
enumerates three factors to be eliminated in determining whether or not a
mark is well-known. Thus, it shall not be required:

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

b) that the mark is well known in, or that the mark has been
registered or that an application for registration of the mark has
2
R.G. Pasiliao. Recent Development in Protection of Well-Known Marks in the Philippines.
IP Views. Retrieved September 08, 2018 from http://www.iplaw.ph/views-Recent-
Development-Protection-Well-Known-Marks-Philippines.html
 been filed in or in respect of, any jurisdiction other than the
Member State; or

c) that the mark is well known by the public at large in the

Member State.

2
R.G. Pasiliao. Recent Development in Protection of Well-Known Marks in the Philippines.
IP Views. Retrieved September 08, 2018 from http://www.iplaw.ph/views-Recent-
Development-Protection-Well-Known-Marks-Philippines.html
 Accordingly, the Court declared that “the fact that respondent’s marks
are neither registered nor used in the Philippines is of no moment.”

II. FOR TRU-LOCAL

A. Republic Act 166

Prior to the effectivity of the IP Code, the governing law on trademark

registration was Republic Act No. 166 (RA 166). Trademarks registered
under RA 166 are granted for a term of twenty (20) years. In order to
maintain the trademark registration, a DAU of the mark with evidence to
that effect must be filed within the prescribed periods, as follows:

(a) within one (1) year from the 5th anniversary of registration of
the mark (5th Year DAU);
(b) within one (1) year from the 10th anniversary of registration
of the mark (10th Year DAU); and
(c) within one (1) year from the 15th anniversary of registration
of the mark (15th Year DAU).

The deadlines to file the foregoing DAUs are not extendible. Failure to
file the DAU within the prescribed periods will result in the removal of the
mark from the registry by operation of law.

Such aforementioned provisions are indispensable and verily TRU-NY

has failed to meet such requirements when they stopped their operations in
the Philippines for five years, and thus warrants its removal of mark from
the registry by operation of law. Lack of funds or financial reasons does not
excuse the non-use of marks.
B. No Infringement - No Colorable Imitation

RA 166 states that “imitation” takes place when any person who shall
use, without the consent of the registrant, any reproduction, counterfeit,
copy or colorable imitation of any registered mark or trade-name in
connection with the sale, offering for sale, or advertising of any goods,
business or services on or in connection with which such use is likely to
cause confusion or mistake or to deceive purchasers or others as to the
source or origin of such goods or services, or identity of such business; or
reproduce, counterfeit, copy or colorably imitate any such mark or trade-
name and apply such reproduction, counterfeit, copy, or colorable imitation
to labels, signs, prints, packages, wrappers, receptacles or advertisements
intended to be used upon or in connection with such goods, business or
services, shall be liable to a civil action by the registrant for any or all of the
remedies herein provided.

TRU-Local’s registration of the mark does not constitute a colorable

imitation of the TRU-NY’s mark. The former did not fraudulently pass off
their products as those of the latter’s, especially since TRU-Local’s toys are
targeted to the masses, or the Class D market, while TRU-NY’s toys are
marketed to the A and B markets.

C. Intellectual Property Code of the Philippines

Under the Intellectual Property Code of the Philippines (IP

Code) which came into force on 1 January 1998, the duration of a
trademark registration is ten (10) years. In order to maintain the
trademark registration, a declaration of actual use (DAU) of the
mark together with evidence of use of the mark must be filed with the
Intellectual Property Office (IPO) within the prescribed periods, as
follows:

(a) within three (3) years from the application date (3rd Year
DAU*);

(b) within one (1) year from the 5th anniversary of the
registration/renewal registration of the mark (5th Year DAU*);
and

(c) within one (1) year from the date of renewal

A single extension of six (6) months may be requested to file the

3rd Year DAU. However, an extension of the period to file the 5 th Year DAU is
not possible. Failure to file the DAU within
the prescribed periods will result in the refusal of the application or the
removal of the mark from the registry by operation of law.

In the current indispensable requirements set forth by the IPC, TRU-

NY has failed to file the DAY within the prescribed period and such should
result to the removal of their mark from the registry.

III. COURT DECISION

The Court gives full force and effect to the Intellectual Property Code
and to international covenants giving protection to well-known trademarks.
The ruling also recognizes the role of modern information and
communications technology in raising awareness of trademark ownership.

TRU-NY is thus protected in the Philippines by virtue of our

Intellectual Property Laws and commitment to uphold our International
Covenants. TRU-NY, thus, has the legal standing to sue Sportshub for its
trademark TRU-local. TRU-NY having a well-known mark has better rights
over such mark as against Sportshub for its TRU-local.

Although TRU-NY and TRU-local cater to different markets, the

former catering to the A and B market, and the latter to the D market,
infringement may still be considered to have taken place.

In the case of McDonalds v. Big Mak Burger Inc., the Court held that
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.

Further, the use of “Toys ‘R’ US” albeit slightly altered with the
flipped “R” and the “US” in capital letters, still bears a striking similarity to
TRU-NY’s “TOYS "Я" Us.” Reading out loud, there is absolutely no
difference between the two. Clearly, confusion is likely to result in the
public mind as to the source or affiliation of the products, especially since
both companies are engaged in the business of selling toys, causing TRU-NY
to suffer injury to their business reputation and goodwill.

The court hereby finds Sportshub guilty of infringement through its

TRU-local as against the rightful trademark owner TRU-NY.