Republic of the Philippines Supreme Court Manila SECOND DIVISION BERRIS AGRICULTURAL CO., INC., Petitioner, G.R. No.

183404 Present: VELASCO, JR., J.,* NACHURA,** Acting Chairperson, LEONARDO-DE CASTRO,*** BRION,**** and MENDOZA, JJ. Promulgated: Respondent. October 13, 2010 x------------------------------------------------------------------------------------x

- versus -

NORVY ABYADANG,

DECISION

NACHURA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Decision dated April 14, 2008 and the Resolution dated June 18, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 99928. The antecedents On January 16, 2004, respondent Norvy A. Abyadang (Abyadang), proprietor of NS Northern Organic Fertilizer, with address at No. 43 Lower QM, Baguio City, filed with the Intellectual Property Office (IPO) a trademark application for the mark NS D-10 PLUS for use in connection with Fungicide (Class 5) with active ingredient 80% Mancozeb. The application, under Application Serial No. 4-2004-00450, was given due course and was published in the IPO e-Gazette for opposition on July 28, 2005. On August 17, 2005, petitioner Berris Agricultural Co., Inc. (Berris), with business address in Barangay Masiit, Calauan, Laguna, filed with the IPO Bureau of Legal Affairs (IPO-BLA) a Verified Notice of Opposition against the mark under application allegedly because NS D-10 PLUS is similar and/or confusingly similar to its registered trademark D-10 80 WP, also used for Fungicide (Class 5) with active ingredient 80% Mancozeb. The opposition was docketed as IPC No. 14-2005-00099. After an exchange of pleadings, on April 28, 2006, Director Estrellita Beltran-Abelardo (Director Abelardo) of the IPO-BLA issued Decision No. 2006-24 (BLA decision), the dispositive portion of which reads WHEREFORE, viewed in the light of all the foregoing, this Bureau finds and so holds that RespondentApplicants mark NS D-10 PLUS is confusingly similar to the Opposers mark and as such, the opposition is hereby SUSTAINED. Consequently, trademark application bearing Serial No. 4-2004-00450 for the mark NS D-10 PLUS filed on January 16, 2004 by Norvy A. Ab[yada]ng covering the goods fungicide under Class 5 of the International Classification of goods is, as it is hereby, REJECTED. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Administrative, Financial and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Order with a copy to be furnished the Bureau of Trademark (BOT) for information and to update its records. SO ORDERED.

Abyadang filed a motion for reconsideration, and Berris, in turn, filed its opposition to the motion. On August 2, 2006, Director Abelardo issued Resolution No. 2006-09(D) (BLA resolution), denying the motion for reconsideration and disposing as follows IN VIEW OF THE FOREGOING, the Motion for Reconsideration filed by the Respondent-Applicant is hereby DENIED FOR LACK OF MERIT. Consequently, Decision No. 2006-24 dated April 28, 2006 STANDS. Let the filewrapper of the trademark NS D-10 PLUS subject matter under consideration be forwarded to the Bureau of Trademarks for appropriate action in accordance with this Resolution. SO ORDERED.

Aggrieved, Abyadang filed an appeal on August 22, 2006 with the Office of the Director General, Intellectual Property Philippines (IPPDG), docketed as Appeal No. 14-06-13. With the filing of the parties respective memoranda, Director General Adrian S. Cristobal, Jr. of the IPPDG rendered a decision dated July 20, 2007, ruling as follows

Wherefore, premises considered[,] the appeal is hereby DENIED. Accordingly, the appealed Decision of the Director is hereby AFFIRMED. Let a copy of this Decision as well as the trademark application and records be furnished and returned to the Director of Bureau of Legal Affairs for appropriate action. Further, let also the Directors of the Bureau of Trademarks, the Administrative, Financial and Human Resources Development Services Bureau, and the library of the Documentation, Information and Technology Transfer Bureau be furnished a copy of this Decision for information, guidance, and records purposes. SO ORDERED.

Undeterred, Abyadang filed a petition for review before the CA. In its Decision dated April 14, 2008, the CA reversed the IPPDG decision. It held In sum, the petition should be granted due to the following reasons: 1) petitioners mark NS D-10 PLUS is not confusingly similar with respondents trademark D-10 80 WP; 2) respondent failed to establish its ownership of the mark D-10 80 WP and 3) respondents trademark registration for D-10 80 WP may be cancelled in the present case to avoid multiplicity of suits. WHEREFORE, the petition is GRANTED. The decision dated July 20, 2007 of the IPO Director General in Appeal No. 14-06-13 (IPC No. 14-2005-00099) is REVERSED and SET ASIDE, and a new one is entered giving due course to petitioners application for registration of the mark NS D-10 PLUS, and canceling respondents trademark registration for D-10 80 WP. SO ORDERED.

Berris filed a Motion for Reconsideration, but in its June 18, 2008 Resolution, the CA denied the motion for lack of merit. Hence, this petition anchored on the following arguments I. The Honorable Court of Appeals finding that there exists no confusing similarity between Petitioners and respondents marks is based on misapprehension of facts, surmise and conjecture and not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision reversing and setting aside the technical findings of the Intellectual Property Office even without a finding or, at the very least, an allegation of grave abuse of discretion on the part of said agency is not in accord with law and earlier pronouncements of this Honorable Court [Supreme Court]. The Honorable Court of Appeals Decision ordering the cancellation of herein Petitioners duly registered and validly existing trademark in the absence of a properly filed Petition for Cancellation before the Intellectual Property Office is not in accord with the Intellectual Property Code and applicable Decisions of this Honorable Court [Supreme Court].

II.

III.

The basic law on trademark, infringement, and unfair competition is Republic Act (R.A.) No. 8293 (Intellectual Property Code of the Philippines), specifically Sections 121 to 170 thereof. It took effect on January 1, 1998. Prior to its effectivity, the applicable law was R.A. No. 166, as amended. Interestingly, R.A. No. 8293 did not expressly repeal in its entirety R.A. No. 166, but merely provided in Section 239.1 that Acts and parts of Acts inconsistent with it were repealed. In other words, only in the instances where a substantial and irreconcilable conflict is found between the provisions of R.A. No. 8293 and of R.A. No. 166 would the provisions of the latter be deemed repealed. R.A. No. 8293 defines a mark as any visible sign capable of distinguishing the goods (trademark) or services (service mark) of an enterprise and shall include a stamped or marked container of goods. It also defines a collective mark as any visible sign designated as such in the application for registration and capable of distinguishing the origin or any other common characteristic, including the quality of goods or services of different enterprises which use the sign under the control of the registered owner of the collective mark. On the other hand, R.A. No. 166 defines a trademark as any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by another. A trademark, being a special property, is afforded protection by law. But for one to enjoy this legal protection, legal protection ownership of the trademark should rightly be established. The ownership of a trademark is acquired by its registration and its actual use by the manufacturer or distributor of the goods made available to the purchasing public. Section 122 of R.A. No. 8293 provides that the rights in a mark shall be acquired by means of its valid registration with the IPO. A certificate of registration of a mark, once issued, constitutes prima facie evidence of the validity of the registration, of the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. R.A. No. 8293, however, requires the applicant for registration or the registrant to file a declaration of actual use (DAU) of the mark, with evidence to that effect, within three (3) years from the filing of the application for registration; otherwise, the application shall be refused or the mark shall be removed from the register. In other words, the prima facie presumption brought about by the registration of a mark may be challenged and overcome, in an appropriate action, by proof of the nullity of the registration or of nonuse of the mark, except when excused. Moreover, the presumption may likewise be defeated by evidence of prior use by another person, i.e., it will controvert a claim of legal appropriation or of ownership based on registration by a subsequent user. This is because a trademark is a creation of use and belongs to one who first used it in trade or commerce. The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in trade and commerce during a certain period of time. In the instant case, both parties have submitted proof to support their claim of ownership of their respective trademarks. Culled from the records, Berris, as oppositor to Abyadangs application for registration of his trademark, presented the following evidence: (1) its trademark application dated November 29, 2002 with Application No. 4-2002-0010272; (2) its IPO certificate of registration dated October 25, 2004, with Registration No. 4-2002-010272 and July 8, 2004 as the date of registration; (3) a photocopy of its packaging bearing the mark D-10 80 WP; (4) photocopies of its sales invoices and official receipts; and (5) its notarized DAU dated April 23, 2003,

stating that the mark was first used on June 20, 2002, and indicating that, as proof of actual use, copies of official receipts or sales invoices of goods using the mark were attached as Annex B. On the other hand, Abyadangs proofs consisted of the following: (1) a photocopy of the packaging for his marketed fungicide bearing mark NS D-10 PLUS; (2) Abyadangs Affidavit dated February 14, 2006, stating among others that the mark NS D-10 PLUS was his own creation derived from: N for Norvy, his name; S for Soledad, his wifes name; D the first letter for December, his birth month; 10 for October, the 10th month of the year, the month of his business name registration; and PLUS to connote superior quality; that when he applied for registration, there was nobody applying for a mark similar to NS D-10 PLUS; that he did not know of the existence of Berris or any of its products; that D-10 could not have been associated with Berris because the latter never engaged in any commercial activity to sell D-10 80 WP fungicide in the local market; and that he could not have copied Berris mark because he registered his packaging with the Fertilizer and Pesticide Authority (FPA) ahead of Berris; (3) Certification dated December 19, 2005 issued by the FPA, stating that NS D-10 PLUS is owned and distributed by NS Northern Organic Fertilizer, registered with the FPA since May 26, 2003, and had been in the market since July 30, 2003; (4) Certification dated October 11, 2005 issued by the FPA, stating that, per monitoring among dealers in Region I and in the Cordillera Administrative Region registered with its office, the Regional Officer neither encountered the fungicide with mark D-10 80 WP nor did the FPA provincial officers from the same area receive any report as to the presence or sale of Berris product; (5) Certification dated March 14, 2006 issued by the FPA, certifying that all pesticides must be registered with the said office pursuant to Section 9 of Presidential Decree (P.D.) No. 1144 and Section 1, Article II of FPA Rules and Regulations No. 1, Series of 1977; (6) Certification dated March 16, 2006 issued by the FPA, certifying that the pesticide D-10 80 WP was registered by Berris on November 12, 2004; and (7) receipts from Sunrise Farm Supply in La Trinidad, Benguet of the sale of Abyadangs goods referred to as D-10 and D-10+. Based on their proffered pieces of evidence, both Berris and Abyadang claim to be the prior user of their respective marks.

We rule in favor of Berris. Berris was able to establish that it was using its mark D-10 80 WP since June 20, 2002, even before it filed for its registration with the IPO on November 29, 2002, as shown by its DAU which was under oath and notarized, bearing the stamp of the Bureau of Trademarks of the IPO on April 25, 2003, and which stated that it had an attachment as Annex B sales invoices and official receipts of goods bearing the mark. Indeed, the DAU, being a notarized document, especially when received in due course by the IPO, is evidence of the facts it stated and has the presumption of regularity, entitled to full faith and credit upon its face. Thus, the burden of proof to overcome the presumption of authenticity and due execution lies on the party contesting it, and the rebutting evidence should be clear, strong, and convincing as to preclude all controversy as to the falsity of the certificate. What is more, the DAU is buttressed by the Certification dated April 21, 2006 issued by the Bureau of Trademarks that Berris mark is still valid and existing. Hence, we cannot subscribe to the contention of Abyadang that Berris DAU is fraudulent based only on his assumption that Berris could not have legally used the mark in the sale of its goods way back in June 2002 because it registered the product with the FPA only on November 12, 2004. As correctly held by the IPPDG in its decision on Abyadangs appeal, the question of whether or not Berris violated P.D. No. 1144, because it sold its product without prior registration with the FPA, is a distinct and separate matter from the jurisdiction and concern of the IPO. Thus, even a determination of violation by Berris of P.D. No. 1144 would not controvert the fact that it did submit evidence that it had used the mark D-10 80 WP earlier than its FPA registration in 2004. Furthermore, even the FPA Certification dated October 11, 2005, stating that the office had neither encountered nor received reports about the sale of the fungicide D-10 80 WP within Region I and the Cordillera Administrative Region, could not negate the fact that Berris was selling its product using that mark in 2002, especially considering that it first traded its goods in Calauan, Laguna, where its business office is located, as stated in the DAU. Therefore, Berris, as prior user and prior registrant, is the owner of the mark D-10 80 WP. As such, Berris has in its favor the rights conferred by Section 147 of R.A. No. 8293, which provides Sec. 147. Rights Conferred. 147.1. The owner of a registered mark shall have the exclusive right to prevent all third parties not having the owners consent from using in the course of trade identical or similar signs or containers for goods or services which are identical or similar to those in respect of which the trademark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. 147.2. The exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided, further, That the interests of the owner of the registered mark are likely to be damaged by such use. Now, we confront the question, Is Abyadangs mark NS D-10 PLUS confusingly similar to that of Berris D-10 80 WP such that the latter can rightfully prevent the IPO registration of the former? We answer in the affirmative. According to Section 123.1(d) of R.A. No. 8293, a mark cannot be registered if it is identical with a registered mark belonging to a different proprietor with an earlier filing or priority date, with respect to: (1) the same goods or services; (2) closely related goods or services; or (3) near resemblance of such mark as to likely deceive or cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed teststhe Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent or dominant features of the competing trademarks that might cause confusion, mistake, and deception in the mind of the purchasing public. Duplication or imitation is not necessary; neither is it required that the mark sought to be registered suggests an effort to imitate. Given more consideration are the aural and visual impressions created by the marks on the buyers of goods, giving little weight to factors like prices, quality, sales outlets, and market segments. In contrast, the Holistic or Totality Test necessitates a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels so that the observer may draw conclusion on whether one is confusingly similar to the other. Comparing Berris mark D-10 80 WP with Abyadangs mark NS D-10 PLUS, as appearing on their respective packages, one cannot but notice that both have a common component which is D-10. On Berris package, the D-10 is written with a bigger font than the 80 WP. Admittedly, the D-10 is the dominant feature of the mark. The D-10, being at the beginning of the mark, is what is most

remembered of it. Although, it appears in Berris certificate of registration in the same font size as the 80 WP, its dominancy in the D-10 80 WP mark stands since the difference in the form does not alter its distinctive character. Applying the Dominancy Test, it cannot be gainsaid that Abyadangs NS D-10 PLUS is similar to Berris D-10 80 WP, that confusion or mistake is more likely to occur. Undeniably, both marks pertain to the same type of goods fungicide with 80% Mancozeb as an active ingredient and used for the same group of fruits, crops, vegetables, and ornamental plants, using the same dosage and manner of application. They also belong to the same classification of goods under R.A. No. 8293. Both depictions of D-10, as found in both marks, are similar in size, such that this portion is what catches the eye of the purchaser. Undeniably, the likelihood of confusion is present. This likelihood of confusion and mistake is made more manifest when the Holistic Test is applied, taking into consideration the packaging, for both use the same type of material (foil type) and have identical color schemes (red, green, and white); and the marks are both predominantly red in color, with the same phrase BROAD SPECTRUM FUNGICIDE written underneath. Considering these striking similarities, predominantly the D-10, the buyers of both products, mainly farmers, may be misled into thinking that NS D-10 PLUS could be an upgraded formulation of the D-10 80 WP. Moreover, notwithstanding the finding of the IPPDG that the D-10 is a fanciful component of the trademark, created for the sole purpose of functioning as a trademark, and does not give the name, quality, or description of the product for which it is used, nor does it describe the place of origin, such that the degree of exclusiveness given to the mark is closely restricted, and considering its challenge by Abyadang with respect to the meaning he has given to it, what remains is the fact that Berris is the owner of the mark D-10 80 WP, inclusive of its dominant feature D-10, as established by its prior use, and prior registration with the IPO. Therefore, Berris properly opposed and the IPO correctly rejected Abyadangs application for registration of the mark NS D-10 PLUS. Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence. Inasmuch as the ownership of the mark D-10 80 WP fittingly belongs to Berris, and because the same should not have been cancelled by the CA, we consider it proper not to belabor anymore the issue of whether cancellation of a registered mark may be done absent a petition for cancellation. WHEREFORE, the petition is GRANTED. The assailed Decision dated April 14, 2008 and Resolution dated June 18, 2008 of the Court of Appeals in CA-G.R. SP No. 99928 are REVERSED and SET ASIDE. Accordingly, the Decision No. 2006-24 dated April 28, 2006 and the Resolution No. 2006-09(D) dated August 2, 2006 in IPC No. 14-2005-00099, and the Decision dated July 20, 2007 in Appeal No. 14-0613 are REINSTATED. Costs against respondent. SO ORDERED.

Republic of the Philippines Supreme Court Baguio City

SECOND DIVISION SUPERIOR COMMERCIAL ENTERPRISES, INC., Petitioner, G.R. No. 169974 Present: versus CARPIO, J., Chairperson, BRION, DEL CASTILLO, ABAD, and PEREZ, JJ.

KUNNAN ENTERPRISES LTD. AND SPORTS CONCEPT & DISTRIBUTOR, INC., Respondents. --

Promulgated: April 20, 2010 x-----------------------------------------------------------------------------------------x DECISION BRION, J.: We review in this petition for review on certiorari the (1) decision of the Court of Appeals (CA) in CA-G.R. CV No. 60777 that reversed the ruling of the Regional Trial Court of Quezon City, Branch 85 (RTC), and dismissed the petitioner Superior Commercial Enterprises, Inc.s (SUPERIOR) complaint for trademark infringement and unfair competition (with prayer for preliminary injunction) against the respondents Kunnan Enterprises Ltd. (KUNNAN) and Sports Concept and Distributor, Inc. (SPORTS CONCEPT); and (2) the CA resolution that denied SUPERIORs subsequent motion for reconsideration. The RTC decision that the CA reversed found the respondents liable for trademark infringement and unfair competition, and ordered them to pay SUPERIOR P2,000,000.00 in damages, P500,000.00 as attorneys fees, and costs of the suit. THE FACTUAL ANTECEDENTS On February 23, 1993, SUPERIOR filed a complaint for trademark infringement and unfair competition with preliminary injunction against KUNNAN and SPORTS CONCEPT with the RTC, docketed as Civil Case No. Q-93014888. In support of its complaint, SUPERIOR first claimed to be the owner of the trademarks, trading styles, company names and business names KENNEX, KENNEX & DEVICE, PRO KENNEX and PRO-KENNEX (disputed trademarks). Second, it also asserted its prior use of these trademarks, presenting as evidence of ownership the Principal and Supplemental Registrations of these trademarks in its name. Third, SUPERIOR also alleged that it extensively sold and advertised sporting goods and products covered by its trademark registrations. Finally, SUPERIOR presented as evidence of its ownership of the disputed trademarks the preambular clause of the Distributorship Agreement dated October 1, 1982 (Distributorship Agreement) it executed with KUNNAN, which states: Whereas, KUNNAN intends to acquire the ownership of KENNEX trademark registered by the [sic] Superior in the Philippines. Whereas, the [sic] Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines. [Emphasis supplied.]

In its defense, KUNNAN disputed SUPERIORs claim of ownership and maintained that SUPERIOR as mere distributor from October 6, 1982 until December 31, 1991 fraudulently registered the trademarks in its name. KUNNAN alleged that it was incorporated in 1972, under the name KENNEX Sports Corporation for the purpose of manufacturing and selling sportswear and sports equipment; it commercially marketed its products in different countries, including the Philippines since 1972. It created and first used PRO KENNEX, derived from its original corporate name, as a distinctive trademark for its products in 1976. KUNNAN also alleged that it registered the PRO KENNEX trademark not only in the Philippines but also in 31 other countries, and widely promoted the KENNEX and PRO KENNEX trademarks through worldwide advertisements in print media and sponsorships of known tennis players. On October 1, 1982, after the expiration of its initial distributorship agreement with another company, KUNNAN appointed SUPERIOR as its exclusive distributor in the Philippines under a Distributorship Agreement whose pertinent provisions state: Whereas, KUNNAN intends to acquire ownership of KENNEX trademark registered by the Superior in the Philippines. Whereas, the Superior is desirous of having been appointed [sic] as the sole distributor by KUNNAN in the territory of the Philippines. Now, therefore, the parties hereto agree as follows:

1.

KUNNAN in accordance with this Agreement, will appoint the sole distributorship right to Superior in the Philippines, and this Agreement could be renewed with the consent of both parties upon the time of expiration. The Superior, in accordance with this Agreement, shall assign the ownership of KENNEX trademark, under the registration of Patent Certificate No. 4730 dated 23 May 1980 to KUNNAN on the effects [sic] of its ten (10) years contract of distributorship, and it is required that the ownership of the said trademark shall be genuine, complete as a whole and without any defects. KUNNAN will guarantee to the Superior that no other third parties will be permitted to supply the KENNEX PRODUCTS in the Philippines except only to the Superior. If KUNNAN violates this stipulation, the transfer of the KENNEX trademark shall be null and void. If there is a necessity, the Superior will be appointed, for the protection of interest of both parties, as the agent in the Philippines with full power to exercise and granted the power of attorney, to pursue any case of Pirating, Infringement and Counterfeiting the [sic] KENNEX trade mark in the Philippine territory. The Superior will be granted from [sic+ KUNNANs approval before making and selling any KENNEX products made in the Philippines and the other countries, and if this is the situation, KUNNAN is entitled to have a royalty of 5%-8% of FOB as the right. Without KUNNANs permission, the Superior cannot procure other goods supply under KENNEX brand of which are not available to supply [sic] by KUNNAN. However, in connection with the sporting goods, it is permitted that the Superior can procure them under KENNEX brand of which are not available to be supplied by KUNNAN. [Emphasis supplied.]

2.

3.

4.

5.

6.

Even though this Agreement clearly stated that SUPERIOR was obligated to assign the ownership of the KENNEX trademark to KUNNAN, the latter claimed that the Certificate of Registration for the KENNEX trademark remained with SUPERIOR because Mariano Tan Bon Diong (Mr. Tan Bon Diong), SUPERIORs President and General Manager, misled KUNNANs officers into believing that KUNNAN was not qualified to hold the same due to the many requirements set by the Philippine Patent Office that KUNNAN could not meet. KUNNAN further asserted that SUPERIOR deceived it into assigning its applications for registration of the PRO KENNEX trademark in favor of SUPERIOR, through an Assignment Agreement dated June 14, 1983 whose pertinent provisions state: 1. In consideration of the distributorship relationship between KUNNAN and Superior, KUNNAN, who is the seller in the distributorship relationship, agrees to assign the following trademark applications owned by itself in the Philippines to Superior who is the buyer in the distributorship relationship. Trademark PROKENNEX PROKENNEX PROKENNEX Application Number 49999 49998 49997 Class 28 25 18

2. Superior shall acknowledge that KUNNAN is still the real and truthful owner of the abovementioned trademarks, and shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN. 3. Superior agrees that it will return back the abovementioned trademarks to KUNNAN without hesitation at the request of KUNNAN at any time. KUNNAN agrees that the cost for the concerned assignment of the abovementioned trademarks shall be compensated by KUNNAN. 4. Superior agrees that the abovementioned trademarks when requested by KUNNAN shall be clean and without any incumbency. 5. Superior agrees that after the assignment of the abovementioned trademarks, it shall have no right to reassign or license the said trademarks to any other parties except KUNNAN. [Emphasis supplied]

Prior to and during the pendency of the infringement and unfair competition case before the RTC, KUNNAN filed with the now defunct Bureau of Patents, Trademarks and Technology Transfer separate Petitions for the Cancellation of Registration Trademark Nos. 41032, SR 6663, 40326, 39254, 4730 and 49998, docketed as Inter Partes Cases Nos. 3709, 3710, 3811, 3812, 3813 and 3814, as well as Opposition to Application Serial Nos. 84565 and 84566, docketed as Inter Partes Cases Nos. 4101 and 4102 (Consolidated Petitions for Cancellation) involving the KENNEX and PRO KENNEX trademarks. In essence, KUNNAN filed the Petition for Cancellation and Opposition on the ground that SUPERIOR fraudulently registered and appropriated the disputed trademarks; as mere distributor and not as lawful owner, it obtained the registrations and assignments of the disputed trademarks in violation of the terms of the Distributorship Agreement and Sections 2-A and 17 of Republic Act No. 166, as amended. On December 3, 1991, upon the termination of its distributorship agreement with SUPERIOR, KUNNAN appointed SPORTS CONCEPT as its new distributor. Subsequently, KUNNAN also caused the publication of a Notice and Warning in the Manila Bulletins January 29, 1993 issue, stating that (1) it is the owner of the disputed trademarks; (2) it terminated its Distributorship Agreement with SUPERIOR; and (3) it appointed SPORTS CONCEPT as its exclusive distributor. This notice prompted SUPERIOR to file its Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction against KUNNAN. The RTC Ruling On March 31, 1998, the RTC issued its decision holding KUNNAN liable for trademark infringement and unfair competition. The RTC also issued a writ of preliminary injunction enjoining KUNNAN and SPORTS CONCEPT from using the disputed trademarks. The RTC found that SUPERIOR sufficiently proved that it was the first user and owner of the disputed trademarks in the Philippines, based on the findings of the Director of Patents in Inter Partes Case No. 1709 and 1734 that SUPERIOR was rightfully entitled to register the mark KENNEX as user and owner thereof. It also considered the Whereas clause of the Distributorship Agreement, which categorically

stated that KUNNAN intends to acquire ownership of *the+ KENNEX trademark registered by SUPERIOR in the Philippines. According to the RTC, this clause amounts to KUNNANs express recognition of SUPERIORs ownership of the KENNEX trademarks.

KUNNAN and SPORTS CONCEPT appealed the RTCs decision to the CA where the appeal was docketed as CA-G.R. CV No. 60777. KUNNAN maintained that SUPERIOR was merely its distributor and could not be the owner of the disputed trademarks. SUPERIOR, for its part, claimed ownership based on its prior use and numerous valid registrations.

Intervening Developments: The IPO and CA Rulings In the course of its appeal to the CA, KUNNAN filed on December 19, 2003 a Manifestation and Motion praying that the decision of the Bureau of Legal Affairs (BLA) of the Intellectual Property Office (IPO), dated October 30, 2003, in the Consolidated Petitions for Cancellation be made of record and be considered by the CA in resolving the case. The BLA ruled in this decision In the case at bar, Petitioner-Opposer (Kunnan) has overwhelmingly and convincingly established its rights to the mark PRO KENNEX. It was proven that actual use by Respondent-Registrant is not in the concept of an owner but as a mere distributor (Exhibits I, S to S-1, P and P-1 and Q and Q-2) and as enunciated in the case of Crisanta Y. Gabriel vs. Dr. Jose R. Perez, 50 SCRA 406, a mere distributor of a product bearing a trademark, even if permitted to use said trademark has no right to and cannot register the said trademark. WHEREFORE, there being sufficient evidence to prove that the Petitioner-Opposer (KUNNAN) is the prior user and owner of the trademark PRO-KENNEX, the consolidated Petitions for Cancellation and the Notices of Opposition are hereby GRANTED. Consequently, the trademark PRO-KENNEX bearing Registration Nos. 41032, 40326, 39254, 4730, 49998 for the mark PRO-KENNEX issued in favor of Superior Commercial Enterprises, Inc., herein Respondent-Registrant under the Principal Register and SR No. 6663 are hereby CANCELLED. Accordingly, trademark application Nos. 84565 and 84566, likewise for the registration of the mark PRO-KENNEX are hereby REJECTED. Let the file wrappers of PRO-KENNEX subject matter of these cases be forwarded to the Administrative Finance and Human Resources Development Services Bureau (AFHRDSB) for appropriate action in accordance with this Decision and a copy thereof be furnished the Bureau of Trademarks (BOT) for information and update of its record. On February 4, 2005, KUNNAN again filed another Manifestation requesting that the IPO Director Generals decision on appeal dated December 8, 2004, denying SUPERIORs appeal, be given weight in the disposition of the case. The dispositive portion of the decision reads: WHEREFORE, premises considered, there is no cogent reason to disturb Decision No. 2003-35 dated 30 October 2003 rendered by the Director of the Bureau of Legal Affairs. Accordingly, the instant appeal is DENIED and the appealed decision is hereby AFFIRMED. We take judicial notice that SUPERIOR questioned the IPO Director Generals ruling before the Court of Appeals on a petition for review under Rule 43 of the Rules of Court, docketed as CAG.R. SP No. 87928 (Registration Cancellation Case). On August 30, 2007, the CA rendered its decision dismissing SUPERIORs petition. On December 3, 2007, the CA decision was declared final and executory and entry of judgment was accordingly made. Hence, SUPERIORs registration of the disputed trademarks now stands effectively cancelled. The CA Ruling On June 22, 2005, the CA issued its decision in CA-G.R. CV No. 60777, reversing and setting aside the RTCs decision of March 31, 1998. It dismissed SUPERIORs Complaint for Infringement of Trademark and Unfair Competition with Preliminary Injunction on the ground that SUPERIOR failed to establish by preponderance of evidence its claim of ownership over the KENNEX and PRO KENNEX trademarks. The CA found the Certificates of Principal and Supplemental Registrations and the whereas clause of the Distributorship Agreement insufficient to support SUPERIORs claim of ownership over the disputed trademarks. The CA stressed that SUPERIORs possession of the aforementioned Certificates of Principal Registration does not conclusively establish its ownership of the disputed trademarks as dominion over trademarks is not acquired by the fact of registration alone; at best, registration merely raises a presumption of ownership that can be rebutted by contrary evidence. The CA further emphasized that the Certificates of Supplemental Registration issued in SUPERIORs name do not even enjoy the presumption of ownership accorded to registration in the principal register; it does not amount to a prima facie evidence of the validity of registration or of the registrants exclusive right to use the trademarks in connection with the goods, business, or services specified in the certificate. In contrast with the failure of SUPERIORs evidence, the CA found that KUNNAN presented sufficient evidence to rebut SUPERIORs presumption of ownership over the trademarks. KUNNAN established that SUPERIOR, far from being the rightful owner of the disputed trademarks, was merely KUNNANs exclusive distributor. This conclusion was based on three pieces of evidence that, to the CA, clearly established that SUPERIOR had no proprietary interest over the disputed trademarks. First, the CA found that the Distributorship Agreement, considered in its entirety, positively confirmed that SUPERIOR sought to be the KUNNANs exclusive distributor. The CA based this conclusion on the following provisions of the Distributorship Agreement: (1) that SUPERIOR was desirous of *being+ appointed as the sole distributor by KUNNAN in the territory of the Philippines; (2) that KUNNAN will appoint the sole distributorship right to Superior in the Philippines; and

(3) that no third parties will be permitted to supply KENNEX PRODUCTS in the Philippines except only to Superior. The CA thus emphasized that the RTC erred in unduly relying on the first whereas clause, which states that KUNNAN intends to acquire ownership of *the+ KENNEX trademark registered by SUPERIOR in the Philippines without considering the entirety of the Distributorship Agreement indicating that SUPERIOR had been merely appointed by KUNNAN as its distributor. Second, the CA also noted that SUPERIOR made the express undertaking in the Assignment Agreement to acknowledge that KUNNAN is still the real and truthful owner of the [PRO KENNEX] trademarks, and that it shall agree that it will not use the right of the abovementioned trademarks to do anything which is unfavourable or harmful to KUNNAN. To the CA, these provisions are clearly inconsistent with SUPERIORs claim of ownership of the disputed trademarks. The CA also observed that although the Assignment Agreement was a private document, its authenticity and due execution was proven by the similarity of Mr. Tan Bon Diongs signature in the Distributorship Agreement and the Assignment Agreement. Third, the CA also took note of SUPERIORs Letter dated November 12, 1986 addressed to Brig. Gen. Jose Almonte, identifying itself as the sole and exclusive licensee and distributor in the Philippines of all its KENNEX and PRO-KENNEX products. Attached to the letter was an agreement with KUNNAN, identifying the latter as the foreign manufacturer of all KENNEX products. The CA concluded that in this letter, SUPERIOR acknowledged its status as a distributor in its dealings with KUNNAN, and even in its transactions with third persons. Based on these reasons, the CA ruled that SUPERIOR was a mere distributor and had no right to the registration of the disputed trademarks since the right to register a trademark is based on ownership. Citing Section 4 of Republic Act No. 166 and established jurisprudence, the CA held that SUPERIOR as an exclusive distributor did not acquire any proprietary interest in the principals (KUNNANs) trademark. The CA denied SUPERIORs motion for reconsideration for lack of merit in its Resolution dated October 4, 2005. THE PETITION In the present petition, SUPERIOR raises the following issues: I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS NOT THE TRUE AND RIGHTFUL OWNER OF THE TRADEMARKS KENNEX AND PRO-KENNEX IN THE PHILIPPINES II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER SUPERIOR IS A MERE DISTRIBUTOR OF RESPONDENT KUNNAN IN THE PHILIPPINES III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE REGIONAL TRIAL COURT OF QUEZON CITY IN CIVIL CASE NO. Q-93-14888, LIFTING THE PRELIMINARY INJUNCTION ISSUED AGAINST RESPONDENTS KUNNAN AND SPORTS CONCEPT AND DISMISSING THE COMPLAINT FOR INFRINGEMENT OF TRADEMARK AND UNFAIR COMPETITION WITH PRELIMINARY INJUNCTION

THE COURTS RULING We do not find the petition meritorious. On the Issue of Trademark Infringement We first consider the effect of the final and executory decision in the Registration Cancellation Case on the present case. This decision rendered after the CA decision for trademark infringement and unfair competition in CA-G.R. CV No. 60777 (root of the present case) - states: As to whether respondent Kunnan was able to overcome the presumption of ownership in favor of Superior, the former sufficiently established the fraudulent registration of the questioned trademarks by Superior. The Certificates of Registration No. SR-4730 (Supplemental Register) and 33487 (Principal Register) for the KENNEX trademark were fraudulently obtained by petitioner Superior. Even before PROKENNEX products were imported by Superior into the Philippines, the same already enjoyed popularity in various countries and had been distributed worldwide, particularly among the sports and tennis enthusiasts since 1976. Riding on the said popularity, Superior caused the registration thereof in the Philippines under its name when it knew fully well that it did not own nor did it manufacture the PROKENNEX products. Superior claimed ownership of the subject marks and failed to disclose in its application with the IPO that it was merely a distributor of KENNEX and PROKENNEX products in the Philippines. While Superior accepted the obligation to assign Certificates of Registration Nos. SR-4730 and 33487 to Kunnan in exchange for the appointment by the latter as its exclusive distributor, Superior however breached its obligation and failed to assign the same to Kunnan. In a letter dated 13 February 1987, Superior, through Mr. Tan Bon Diong, misrepresented to Kunnan that the latter cannot own trademarks in the Philippines. Thus, Kunnan was misled into assigning to Superior its (Kunnans) own application for the disputed trademarks. In the same assignment document, however. Superior was bound to ensure that the PROKENNEX trademarks under Registration Nos. 40326, 39254, and 49998 shall be returned to Kunnan clean and without any incumbency when requested by the latter. In fine, We see no error in the decision of the Director General of the IPO which affirmed the decision of the Director of the Bureau of Legal Affairs canceling the registration of the questioned marks in the name of petitioner Superior and denying its new application for registration, upon a finding that Superior is not the rightful owner of the subject marks. WHEREFORE, the foregoing considered, the petition is DISMISSED. The CA decided that the registration of the KENNEX and PRO KENNEX trademarks should be cancelled because SUPERIOR was not the owner of, and could not in the first place have validly registered these trademarks. Thus, as of the finality of the

CA decision on December 3, 2007, these trademark registrations were effectively cancelled and SUPERIOR was no longer the registrant of the disputed trademarks. Section 22 of Republic Act No. 166, as amended (RA 166), the law applicable to this case, defines trademark infringement as follows: Section 22. Infringement, what constitutes. Any person who [1] shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or [2] reproduce, counterfeit, copy, or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. [Emphasis supplied] Essentially, Section 22 of RA 166 states that only a registrant of a mark can file a case for infringement. Corollary to this, Section 19 of RA 166 provides that any right conferred upon the registrant under the provisions of RA 166 terminates when the judgment or order of cancellation has become final, viz: Section 19. Cancellation of registration. - If the Director finds that a case for cancellation has been made out he shall order the cancellation of the registration. The order shall not become effective until the period for appeal has elapsed, or if appeal is taken, until the judgment on appeal becomes final. When the order or judgment becomes final, any right conferred by such registration upon the registrant or any person in interest of record shall terminate. Notice of cancellation shall be published in the Official Gazette. [Emphasis supplied.] Thus, we have previously held that the cancellation of registration of a trademark has the effect of depriving the registrant of protection from infringement from the moment judgment or order of cancellation has become final. In the present case, by operation of law, specifically Section 19 of RA 166, the trademark infringement aspect of SUPERIORs case has been rendered moot and academic in view of the finality of the decision in the Registration Cancellation Case. In short, SUPERIOR is left without any cause of action for trademark infringement since the cancellation of registration of a trademark deprived it of protection from infringement from the moment judgment or order of cancellation became final. To be sure, in a trademark infringement, title to the trademark is indispensable to a valid cause of action and such title is shown by its certificate of registration. With its certificates of registration over the disputed trademarks effectively cancelled with finality, SUPERIORs case for trademark infringement lost its legal basis and no longer presented a valid cause of action. Even assuming that SUPERIORs case for trademark infringement had not been rendered moot and academic, there can be no infringement committed by KUNNAN who was adjudged with finality to be the rightful owner of the disputed trademarks in the Registration Cancellation Case. Even prior to the cancellation of the registration of the disputed trademarks, SUPERIOR as a mere distributor and not the owner cannot assert any protection from trademark infringement as it had no right in the first place to the registration of the disputed trademarks. In fact, jurisprudence holds that in the absence of any inequitable conduct on the part of the manufacturer, an exclusive distributor who employs the trademark of the manufacturer does not acquire proprietary rights of the manufacturer, and a registration of the trademark by the distributor as such belongs to the manufacturer, provided the fiduciary relationship does not terminate before application for registration is filed. Thus, the CA in the Registration Cancellation Case correctly held: As a mere distributor, petitioner Superior undoubtedly had no right to register the questioned mark in its name. Well-entrenched in our jurisdiction is the rule that the right to register a trademark should be based on ownership. When the applicant is not the owner of the trademark being applied for, he has no right to apply for the registration of the same. Under the Trademark Law, only the owner of the trademark, trade name or service mark used to distinguish his goods, business or service from the goods, business or service of others is entitled to register the same. An exclusive distributor does not acquire any proprietary interest in the principals trademark and cannot register it in his own name unless it is has been validly assigned to him. In addition, we also note that the doctrine of res judicata bars SUPERIORs present case for trademark infringement. The doctrine of res judicata embraces two (2) concepts: the first is "bar by prior judgment" under paragraph (b) of Rule 39, Section 47, and the second is "conclusiveness of judgment" under paragraph (c) thereof. In the present case, the second concept conclusiveness of judgment applies. Under the concept of res judicata by conclusiveness of judgment, a final judgment or decree on the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit. Stated differently, facts and issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties, even if the latter suit may involve a different cause of action. This second branch of the principle of res judicata bars the re-litigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action. Because the Registration Cancellation Case and the present case involve the same parties, litigating with respect to and disputing the same trademarks, we are bound to examine how one case would affect the other. In the present case, even if the causes of action of the Registration Cancellation Case (the cancellation of trademark registration) differs from that of the present case (the improper or unauthorized use of trademarks), the final judgment in the Registration Cancellation Case is nevertheless conclusive on the particular facts and issues that are determinative of the present case. To establish trademark infringement, the following elements must be proven: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the mark; and (3) the use of the mark or its colorable imitation by the alleged infringer results in likelihood of confusion. Based on these elements, we find it immediately obvious that the second element the plaintiffs ownership of the mark was what the Registration Cancellation Case decided with finality. On this element depended the validity of the registrations that, on their own, only gave rise to the presumption of, but was not conclusive on, the issue of ownership. In no uncertain terms, the appellate court in the Registration Cancellation Case ruled that SUPERIOR was a mere distributor and could not have been the owner, and was thus an invalid registrant of the disputed trademarks. Significantly, these are the exact terms of the ruling the CA arrived at in the present petition now under our review. Thus, whether with one or the other, the ruling on the issue of ownership of the trademarks is the same. Given, however, the final and executory ruling in the Registration Cancellation Case on the issue of ownership that binds us and the parties, any further discussion and review of the issue of ownership although the current CA ruling is legally correct and can stand on its own merits becomes a pointless academic discussion. On the Issue of Unfair Competition

Our review of the records shows that the neither the RTC nor the CA made any factual findings with respect to the issue of unfair competition. In its Complaint, SUPERIOR alleged that: 17. In January 1993, the plaintiff learned that the defendant Kunnan Enterprises, Ltd., is intending to appoint the defendant Sports Concept and Distributors, Inc. as its alleged distributor for sportswear and sporting goods bearing the trademark PRO-KENNEX. For this reason, on January 20, 1993, the plaintiff, through counsel, wrote the defendant Sports Concept and Distributors Inc. advising said defendant that the trademark PRO-KENNEX was registered and owned by the plaintiff herein. 18. The above information was affirmed by an announcement made by the defendants in The Manila Bulletin issue of January 29, 1993, informing the public that defendant Kunnan Enterprises, Ltd. has appointed the defendant Sports Concept and Distributors, Inc. as its alleged distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO-KENNEX which trademarks are owned by and registered in the name of plaintiff herein as alleged hereinabove. x x x x 27. The acts of defendants, as previously complained herein, were designed to and are of the nature so as to create confusion with the commercial activities of plaintiff in the Philippines and is liable to mislead the public as to the nature and suitability for their purposes of plaintiffs business and the defendants acts are likely to discredit the commercial activities and future growth of plaintiffs business.

From jurisprudence, unfair competition has been defined as the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public. The essential elements of unfair competition are (1) confusing similarity in the general appearance of the goods; and (2) intent to deceive the public and defraud a competitor. Jurisprudence also formulated the following true test of unfair competition: whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates. One of the essential requisites in an action to restrain unfair competition is proof of fraud; the intent to deceive, actual or probable must be shown before the right to recover can exist. In the present case, no evidence exists showing that KUNNAN ever attempted to pass off the goods it sold (i.e. sportswear, sporting goods and equipment) as those of SUPERIOR. In addition, there is no evidence of bad faith or fraud imputable to KUNNAN in using the disputed trademarks. Specifically, SUPERIOR failed to adduce any evidence to show that KUNNAN by the above-cited acts intended to deceive the public as to the identity of the goods sold or of the manufacturer of the goods sold. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., we held that there can be trademark infringement without unfair competition such 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. In this case, no issue of confusion arises because the same manufactured products are sold; only the ownership of the trademarks is at issue. Furthermore, KUNNANs January 29, 1993 notice by its terms prevents the public from being deceived that the goods originated from SUPERIOR since the notice clearly indicated that KUNNAN is the manufacturer of the goods bearing the trademarks KENNEX and PRO KENNEX. This notice states in full: NOTICE AND WARNING Kunnan Enterprises Ltd. is the owner and first user of the internationally-renowned trademarks KENNEX and PRO KENNEX for sportswear and sporting goods and equipment. Kunnan Enterprises Ltd. has registered the trademarks KENNEX and PRO KENNEX in the industrial property offices of at least 31 countries worldwide where KUNNAN Enterprises Ltd. has been selling its sportswear and sporting goods and equipment bearing the KENNEX and PRO KENNEX trademarks. Kunnan Enterprises Ltd. further informs the public that it had terminated its Distributorship Agreement with Superior Commercial Enterprises, Inc. on December 31, 1991. As a result, Superior Commercial Enterprises, Inc. is no longer authorized to sell sportswear and sporting goods and equipment manufactured by Kunnan Enterprises Ltd. and bearing the trademarks KENNEX and PRO KENNEX. x x x x In its place, KUNNAN has appointed SPORTS CONCEPT AND DISTRIBUTORS, INC. as its exclusive Philippine distributor of sportswear and sporting goods and equipment bearing the trademarks KENNEX and PRO KENNEX. The public is advised to buy sporting goods and equipment bearing these trademarks only from SPORTS CONCEPT AND DISTRIBUTORS, INC. to ensure that the products they are buying are manufactured by Kunnan Enterprises Ltd. [Emphasis supplied.] Finally, with the established ruling that KUNNAN is the rightful owner of the trademarks of the goods that SUPERIOR asserts are being unfairly sold by KUNNAN under trademarks registered in SUPERIORs name, the latter is left with no effective right to make a claim. In other words, with the CAs final ruling in the Registration Cancellation Case, SUPERIORs case no longer presents a valid cause of action. For this reason, the unfair competition aspect of the SUPERIORs case likewise falls.

WHEREFORE, premises considered, we DENY Superior Commercial Enterprises, Inc.s petition for review on certiorari for lack of merit. Cost against petitioner Superior Commercial Enterprises, Inc. SO ORDERED.

SECOND DIVISION

SOCIETE DES PRODUITS NESTLE, S.A., Petitioner,

G.R. No. 172276

Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ.

- versus -

MARTIN T. DY, JR., Promulgated: Respondent. August 8, 2010 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION CARPIO, J.: The Case This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition challenges the 1 September 2005 Decision and 4 April 2006 Resolution of the Court of Appeals in CA-G.R. CV No. 62730, finding respondent Martin T. Dy, Jr. (Dy, Jr.) not liable for trademark infringement. The Court of Appeals reversed the 18 September 1998 Decision of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City, in Civil Case No. CEB-19345. The Facts Petitioner Societe Des Produits Nestle, S.A. (Nestle) is a foreign corporation organized under the laws of Switzerland. It manufactures food products and beverages. As evidenced by Certificate of Registration No. R-14621 issued on 7 April 1969 by the then Bureau of Patents, Trademarks and Technology Transfer, Nestle owns the NAN trademark for its line of infant powdered milk products, consisting of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. NAN is classified under Class 6 diatetic preparations for infant feeding. Nestle distributes and sells its NAN milk products all over the Philippines. It has been investing tremendous amounts of resources to train its sales force and to promote the NAN milk products through advertisements and press releases. Dy, Jr. owns 5M Enterprises. He imports Sunny Boy powdered milk from Australia and repacks the powdered milk into three sizes of plastic packs bearing the name NANNY. The packs weigh 80, 180 and 450 grams and are sold for P8.90, P17.50 and P39.90, respectively. NANNY is is also classified under Class 6 full cream milk for adults in [sic] all ages. Dy, Jr. distributes and sells the powdered milk in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao. In a letter dated 1 August 1985, Nestle requested Dy, Jr. to refrain from using NANNY and to undertake that he would stop infringing the NAN trademark. Dy, Jr. did not act on Nestles request. On 1 March 1990, Nestle filed before the RTC, Judicial Region 7, Branch 31, Dumaguete City, a complaint against Dy, Jr. for infringement. Dy, Jr. filed a motion to dismiss alleging that the complaint did not state a cause of action. In its 4 June 1990 order, the trial court dismissed the complaint. Nestle appealed the 4 June 1990 order to the Court of Appeals. In its 16 February 1993 Resolution, the Court of Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further proceedings. Pursuant to Supreme Court Administrative Order No. 113-95, Nestle filed with the trial court a motion to transfer the case to the RTC, Judicial Region 7, Branch 9, Cebu City, which was designated as a special court for intellectual property rights. The RTCs Ruling In its 18 September 1998 Decision, the trial court found Dy, Jr. liable for infringement. The trial court held: If determination of infringement shall only be limited on whether or not the mark used would likely cause confusion or mistake in the minds of the buying public or deceive customers, such in [sic] the most considered view of this forum would be highly unlikely to happen in the instant case. This is because upon comparison of the plaintiffs NAN and defendants NANNY, the following features would reveal the absence of any deceptive tendency in defendants NANNY: (1) all NAN products are contained tin cans [sic], while NANNY are contained in plastic packs; (2) the predominant colors used in the labels of NAN products are blue and white, while the predominant colors in the plastic packings of NANNY are blue and green; (3) the labels of NAN products have at the bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name Nestle, while the plastic packs of NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow covered mountains; (4) the word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends; and (5) all NAN products are milk formulas intended for use of [sic] infants, while NANNY is an instant full cream powdered milk intended for use of [sic] adults.

The foregoing has clearly shown that infringement in the instant case cannot be proven with the use of the test of dominancy because the deceptive tendency of the unregistered trademark NANNY is not apparent from the essential features of the registered trademark NAN. However, in Esso Standard Eastern, Inc. vs. Court of Appeals, et al. L-29971, Aug. 31, 1982, the Supreme Court took the occasion of discussing what is implied in the definition of infringement when it stated: Implicit in this definition is the concept that the goods must be so related that there is likelihood either of confusion of goods or business. x x x But as to whether trademark infringement exists depends for the most part upon whether or not the goods are so related that the public may be, or is actually, deceived and misled that they came from the same maker or manufacturer. For non-competing goods may be those which, though they are not in actual competition, are so related to each other that it might reasonably be assumed that they originate from one manufacturer. Non-competing goods may also be those which,

being entirely unrelated, could not reasonably be assumed to have a common source. In the former case of related goods, confusion of business could arise out of the use of similar marks; in the latter case of non-related goods, it could not. Furthermore, in said case the Supreme Court as well discussed on when goods may become so related for purposes of infringement when it stated: Goods are related when they belong to the same class or have same descriptive properties; when they possess the same physical attributes or essential characteristics with reference to their form, composition, texture or quality. They may also be related because they serve the same purpose or are sold in grocery stores. x x x Considering that defendants NANNY belongs to the same class as that of plaintiffs NAN because both are food products, the defendants unregistered trade mark NANNY should be held an infringement to plaintiffs registered trademark NAN because defendants use of NANNY would imply that it came from the manufacturer of NAN. Furthermore, since the word nanny means a childs nurse, there might result the not so remote probability that defendants NANNY may be confused with infant formula NAN despite the aparent [sic] disparity between the features of the two products. Dy, Jr. appealed the 18 September 1998 Decision to the Court of Appeals. The Court of Appeals Ruling In its 1 September 2005 Decision, the Court of Appeals reversed the trial courts 18 September 1998 Decision and found Dy, Jr. not liable for infringement. The Court of Appeals held: [T]he trial court appeared to have made a finding that there is no colorable imitation of the registered mark NAN in Dys use of NANNY for his own milk packs. Yet it did not stop there. It continued on applying the concept of related goods. The Supreme Court utlilized the concept of related goods in the said case of Esso Standard Easter, Inc. versus Court of Appeals, et al. wherein two contending parties used the same trademark ESSO for two different goods, i.e. petroleum products and cigarettes. It rules that there is infringement of trademark involving two goods bearing the same mark or label, even if the said goods are non-competing, if and only if they are so related that the public may be, or is actually, deceived that they originate from the one maker or manufacturer. Since petroleum products and cigarettes, in kind and nature, flow through different trade channels, and since the possibility of confusion is unlikely in the general appearances of each mark as a whole, the Court held in this case that they cannot be so related in the context of infringement. In applying the concept of related goods in the present case, the trial court haphazardly concluded that since plaintiff-appellees NAN and defendant-appellants NANNY belong to the same class being food products, the unregistered NANNY should be held an infringement of Nestles NAN because the use of NANNY would imply that it came from the manufacturer of NAN. Said court went on to elaborate further: since the word NANNY means a childs nurse, there might result the not so remote probability that defendants NANNY may be confused with infant formula NAN despite the aparent (sic) disparity between the features of the two products as discussed above. The trial courts application of the doctrine laid down by the Supreme Court in the Esso Standard case aforementioned and the cases cited therein is quite misplaced. The goods of the two contending parties in those cases bear similar marks or labels: Esso for petroleum products and cigarettes, Selecta for biscuits and milk, X-7 for soap and perfume, lipstick and nail polish. In the instant case, two dissimilar marks are involved plaintiff-appellees NAN and defendant-appellants NANNY. Obviously, the concept of related goods cannot be utilized in the instant case in the same way that it was used in the Esso Standard case. In the Esso Standard case, the Supreme Court even cautioned judges that in resolving infringement or trademark cases in the Philippines, particularly in ascertaining whether one trademark is confusingly similar to or is a colorable imitation of another, precedent must be studied in the light of the facts of the particular case. Each case must be decided on its own merits. In the more recent case of Societe Des Produits Nestle S.A. Versus Court of Appeals, the High Court further stressed that due to the peculiarity of the facts of each infringement case, a judicial forum should not readily apply a certain test or standard just because of seeming similarities. The entire panoply of elements constituting the relevant factual landscape should be comprehensively examined. While it is true that both NAN and NANNY are milk products and that the word NAN is contained in the word NANNY, there are more glaring dissimilarities in the entirety of their trademarks as they appear in their respective labels and also in relation to the goods to which they are attached. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing in both labels in order that he may draw his conclusion whether one is confusingly similar to the other. Even the trial court found these glaring dissimilarities as above-quoted. We need not add more of these factual dissimilarities. NAN products, which consist of Pre-NAN, NAN-H-A, NAN-1 and NAN-2, are all infant preparations, while NANNY is a full cream milk for adults in [sic] all ages. NAN milk products are sold in tin cans and hence, far expensive than the full cream milk NANNY sold in three (3) plastic packs containing 80, 180 and 450 grams and worth P8.90, P17.50 and P39.90 per milk pack. The labels of NAN products are of the colors blue and white and have at the bottom portion an elliptical shaped figure containing inside it a drawing of nestling birds, which is overlapped by the trade-name Nestle. On the other hand, the plastic packs NANNY have a drawing of milking cows lazing on a vast green field, back-dropped with snow-capped mountains and using the predominant colors of blue and green. The word NAN are [sic] all in large, formal and conservative-like block letters, while the word NANNY are [sic] all in small and irregular style of letters with curved ends. With these material differences apparent in the packaging of both milk products, NANNY full cream milk cannot possibly be an infringement of NAN infant milk. Moreover, NAN infant milk preparation is more expensive than NANNY instant full cream milk. The cheaper price of NANNY would give, at the very first instance, a considerable warning to the ordinary purchaser on whether he is buying an infant milk or a full cream milk for adults. A cursory examination of the packaging would confirm the striking differences between the products in question. In view of the foregoing, we find that the mark NANNY is not confusingly similar to NAN. Dy therefore cannot be held liable for infringement. Nestle filed a motion for reconsideration. In its 4 April 2006 Resolution, the Court of Appeals denied the motion for lack of merit. Hence, the present petition.

Issue The issue is whether Dy, Jr. is liable for infringement. The Courts Ruling The petition is meritorious. Section 22 of Republic Act (R.A.) No. 166, as amended, states: Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or trade-name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or trade-name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. Section 155 of R.A. No. 8293 states: Remedies; Infringement. Any person who shall, without the consent of the owner of the registered mark: 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material. In Prosource International, Inc. v. Horphag Research Management SA, the Court laid down the elements of infringement under R.A. Nos. 166 and 8293: In accordance with Section 22 of R.A. No. 166, as well as Sections 2, 2-A, 9-A, and 20 thereof, the following constitute the elements of trademark infringement: (a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;] (b) [It] is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;] (c) [T]he trademark is used for identical or similar goods[;] and (d) [S]uch act is done without the consent of the trademark registrant or assignee. On the other hand, the elements of infringement under R.A. No. 8293 are as follows: The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services; The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the idenity of such business; and It is without the consent of the trademark or trade name owner or the assignee thereof. Among the elements, the element of likelihood of confusion is the gravamen of trademark infringement. There are two types of confusion in trademark infringement: confusion of goods and confusion of business. In Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, the Court distinguished the two types of confusion: Callman notes two types of confusion. The first is the confusion of goods in which event the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other. In which case, defendants goods are then bought as the plaintiffs, and the poorer quality of the former reflects adversely on the plaintiffs reputation. The other is the confusion of business: Here though the goods of the parties are different, the defendants

product is such as might reasonably be assumed to originate with the plaintiff, and the public would then be deceived either into that belief or into the belief that there is some connection between the plaintiff and defendant which, in fact, does not exist. There are two tests to determine likelihood of confusion: the dominancy test and holistic test. The dominancy test focuses on the similarity of the main, prevalent or essential features of the competing trademarks that might cause confusion. Infringement takes place when the competing trademark contains the essential features of another. Imitation or an effort to imitate is unnecessary. The question is whether the use of the marks is likely to cause confusion or deceive purchasers. The holistic test considers the entirety of the marks, including labels and packaging, in determining confusing similarity. The focus is not only on the predominant words but also on the other features appearing on the labels. In cases involving trademark infringement, no set of rules can be deduced. Each case must be decided on its own merits. Jurisprudential precedents must be studied in the light of the facts of each particular case. In McDonalds Corporation v. MacJoy Fastfood Corporation, the Court held: In trademark cases, particularly in ascertaining whether one trademark is confusingly similar to another, no set rules can be deduced because each case must be decided on its merits. In such cases, even more than in any other litigation, precedent must be studied in the light of the facts of the particular case. That is the reason why in trademark cases, jurisprudential precedents should be applied only to a case if they are specifically in point.

In the light of the facts of the present case, the Court holds that the dominancy test is applicable. In recent cases with similar factual milieus, the Court has consistently applied the dominancy test. In Prosource International, Inc., the Court applied the dominancy test in holding that PCO-GENOLS is confusingly similar to PYCNOGENOL. The Court held: The trial and appellate courts applied the Dominancy Test in determining whether there was a confusing similarity between the marks PYCNOGENOL and PCO-GENOL. Applying the test, the trial court found, and the CA affirmed, that: Both the word[s] PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which on evidence, appears to be merely descriptive and furnish no indication of the origin of the article and hence, open for trademark registration by the plaintiff through combination with another word or phrase such as PYCNOGENOL, Exhibits A to A-3. Furthermore, although the letters Y between P and C, N between O and C and S after L are missing in the [petitioners] mark PCOGENOLS, nevertheless, when the two words are pronounced, the sound effects are confusingly similar not to mention that they are both described by their manufacturers as a food supplement and thus, identified as such by their public consumers. And although there were dissimilarities in the trademark due to the type of letters used as well as the size, color and design employed on their individual packages/bottles, still the close relationship of the competing products name is sounds as they were pronounced, clearly indicates that purchasers could be misled into believing that they are the same and/or originates from a common source and manufacturer. We find no cogent reason to depart from such conclusion. This is not the first time the Court takes into account the aural effects of the words and letters contained in the marks in determining the issue of confusing similarity. In Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., cited in McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held: The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities [sic], as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and LemonUp. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same. In McDonalds Corporation v. MacJoy Fastfood Corporation, the Court applied the dominancy test in holding that MACJOY is confusingly similar to MCDONALDS. The Court held: While we agree with the CAs detailed enumeration of differences between the two (2) competing trademarks herein involved, we believe that the holistic test is not the one applicable in this case, the dominancy test being the one more suitable. In recent cases with a similar factual milieu as here, the Court has consistently used and applied the dominancy test in determining confusing similarity or likelihood of confusion between competing trademarks. xxxx Applying the dominancy test to the instant case, the Court finds that herein petitioners MCDONALDS and respondents MACJOY marks are are confusingly similar with each other that an ordinary purchaser can conclude an association or relation between the marks. To begin with, both marks use the corporate M design logo and the prefixes Mc and/or Mac as dominant features. x x x For sure, it is the prefix Mc, and abbreviation of Mac, which visually and aurally catches the attention of the consuming public. Verily, the word MACJOY attracts attention the same way as did McDonalds, MacFries, McSpaghetti, McDo, Big Mac and the rest of the MCDONALDS marks which all use the prefixes Mc and/or Mac. Besides and most importantly, both trademarks are used in the sale of fastfood products. Indisputably, the respondents trademark application for the MACJOY & DEVICE trademark covers goods under Classes 29 and 30 of the International Classification of Goods, namely, fried chicken, chicken barbeque, burgers, fries, spaghetti, etc. Likewise, the

petitioners trademark registration for the MCDONALDS marks in the Philippines covers goods which are similar if not identical to those covered by the respondents application. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court applied the dominancy test in holding that BIG MAK is confusingly similar to BIG MAC. The Court held: This Court x x x has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from the adoption of the dominant features of the registered mark, disregarding minor differences. Courts will consider more the aural and visual 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, the Court ruled: x x x It has been consistently held that the question of infringement of a trademark is to be determined by the test of dominancy. Similarity in size, form and color, while relevant, is not conclusive. If the competing trademark contains the main or essential or dominant features of another, and confusion and deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of infringement of trademarks is whether the use of the marks involved would be likely to cause confusion or mistakes in the mind of the public or deceive purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d 588; x x x) xxxx The test of dominancy is now explicitly incorporated into law in Section 155.1 of the Intellectual Property Code which defines infringement as the colorable imitation of a registered mark x x x or a dominant feature thereof. Applying the dominancy test, the Court finds that respondents use of the Big Mak mark results in likelihood of confusion. First, Big Mak sounds exactly the same as Big Mac. Second, the first word in Big Mak is exactly the same as the first word in Big Mac. Third, the first two letters in Mak are the same as the first two letters in Mac. Fourth, the last letter Mak while a k sounds the same as c when the word Mak is pronounced. Fifth, in Filipino, the letter k replaces c in spelling, thus Caloocan is spelled Kalookan. In Societe Des Produits Nestle, S.A v. Court of Appeals, the Court applied the dominancy test in holding that FLAVOR MASTER is confusingly similar to MASTER ROAST and MASTER BLEND. The Court held: While this Court agrees with the Court of Appeals detailed enumeration of differences between the respective trademarks of the two coffee products, this Court cannot agree that totality test is the one applicable in this case. Rather, this Court believes that the dominancy test is more suitable to this case in light of its peculiar factual milieu. Moreover, the totality or holistic test is contrary to the elementary postulate of the law on trademarks and unfair competition that confusing similarity is to be determined on the basis of visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace. The totality or holistic test only relies on visual comparison between two trademarks whereas the dominancy test relies not only on the visual but also on the aural and connotative comparisons and overall impressions between the two trademarks. For this reason, this Court agrees with the BPTTT when it applied the test of dominancy and held that:

From the evidence at hand, it is sufficiently established that the word MASTER is the dominant feature of opposers mark. The word MASTER is printed across the middle portion of the label in bold letters almost twice the size of the printed word ROAST. Further, the word MASTER has always been given emphasis in the TV and radio commercials and other advertisements made in promoting the product. x x x In due time, because of these advertising schemes the mind of the buying public had come to learn to associate the word MASTER with the opposers goods. x x x. It is the observation of this Office that much of the dominance which the word MASTER has acquired through Opposers advertising schemes is carried over when the same is incorporated into respondent-applicants trademark FLAVOR MASTER. Thus, when one looks at the label bearing the trademark FLAVOR MASTER (exh. 4) ones attention is easily attracted to the word MASTER, rather than to the dissimilarities that exist. Therefore, the possibility of confusion as to the goods which bear the competing marks or as to the origins thereof is not farfetched. Applying the dominancy test in the present case, the Court finds that NANNY is confusingly similar to NAN. NAN is the prevalent feature of Nestles line of infant powdered milk products. It is written in bold letters and used in all products. The line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2. Clearly, NANNY contains the prevalent feature NAN. The first three letters of NANNY are exactly the same as the letters of NAN. When NAN and NANNY are pronounced, the aural effect is confusingly similar. In determining the issue of confusing similarity, the Court takes into account the aural effect of the letters contained in the marks. In Marvex Commercial Company, Inc. v. Petra Hawpia & Company, the Court held: It is our considered view that the trademarks SALONPAS and LIONPAS are confusingly similar in sound. Both these words have the same suffix, PAS, which is used to denote a plaster that adheres to the body with curative powers. PAS, being merely descriptive, furnishes no indication of the origin of the article and therefore is open for appropriation by anyone (Ethepa vs. Director of Patents, L-20635, March 31, 1966) and may properly become the subject of a trademark by combination with another word or phrase. xxxx The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete

and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities [sic], as coming within the purview of the idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of Patents, this Court unequivocally said that Celdura and Condura are confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda, 67 Phil. 795 that the name Lusolin is an infringement of the trademark Sapolin, as the sound of the two names is almost the same. The scope of protection afforded to registered trademark owners is not limited to protection from infringers with identical goods. The scope of protection extends to protection from infringers with related goods, and to market areas that are the normal expansion of business of the registered trademark owners. Section 138 of R.A. No. 8293 states: Certificates of Registration. A certificate of registration of a mark shall be prima facie evidence of validity of the registration, the registrants ownership of the mark, and of the registrants exclusive right to use the same in connection with the goods or services and those that are related thereto specified in the certificate. (Emphasis supplied) In Mighty Corporation v. E. & J. Gallo Winery, the Court held that, Non-competing goods may be those which, though they are not in actual competition, are so related to each other that it can reasonably be assumed that they originate from one manufacturer, in which case, confusion of business can arise out of the use of similar marks. In that case, the Court enumerated factors in determining whether goods are related: (1) classification of the goods; (2) nature of the goods; (3) descriptive properties, physical attributes or essential characteristics of the goods, with reference to their form, composition, texture or quality; and (4) style of distribution and marketing of the goods, including how the goods are displayed and sold. NANNY and NAN have the same classification, descriptive properties and physical attributes. Both are classified under Class 6, both are milk products, and both are in powder form. Also, NANNY and NAN are displayed in the same section of stores the milk section. The Court agrees with the lower courts that there are differences between NAN and NANNY: (1) NAN is intended for infants while NANNY is intended for children past their infancy and for adults; and (2) NAN is more expensive than NANNY. However, as the registered owner of the NAN mark, Nestle should be free to use its mark on similar products, in different segments of the market, and at different price levels. In McDonalds Corporation v. L.C. Big Mak Burger, Inc., the Court held that the scope of protection afforded to registered trademark owners extends to market areas that are the normal expansion of business: xxx 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 trademark or trade-name is likely to lead to a confusion of source, as where prospective purchasers would be misled into thinking that the complaining party has extended his business into the field (see 148 ALR 56 et sq; 53 Am. Jur. 576) or is in any way connected with the activities of the infringer; or when it forestalls the normal potential expansion of his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577). (Emphasis supplied)

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

THIRD DIVISION

PROSOURCE INTERNATIONAL, INC., Petitioner,

G.R. No. 180073 Present: CORONA, J., Chairperson, CHICO-NAZARIO, VELASCO, JR., NACHURA, and PERALTA, JJ. Promulgated: November 25, 2009

- versus -

HORPHAG RESEARCH MANAGEMENT SA, Respondent. x------------------------------------------------------------------------------------x

DECISION NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Court of Appeals (CA) Decision dated July 27, 2007 and Resolution dated October 15, 2007 in CA-G.R. CV No. 87556. The assailed decision affirmed the Regional Trial Court (RTC) Decision dated January 16, 2006 and Order dated May 3, 2006 in Civil Case No. 68048; while the assailed resolution denied petitioners motion for reconsideration.

The facts are as follows:

Respondent Horphag Research Management SA is a corporation duly organized and existing under the laws of Switzerland and the owner of trademark PYCNOGENOL, a food supplement sold and distributed by Zuellig Pharma Corporation. Respondent later discovered that petitioner Prosource International, Inc. was also distributing a similar food supplement using the mark PCO-GENOLS since 1996. This prompted respondent to demand that petitioner cease and desist from using the aforesaid mark.

Without notifying respondent, petitioner discontinued the use of, and withdrew from the market, the products under the name PCOGENOLS as of June 19, 2000. It, likewise, changed its mark from PCO-GENOLS to PCO-PLUS.

On August 22, 2000, respondent filed a Complaint for Infringement of Trademark with Prayer for Preliminary Injunction against petitioner, praying that the latter cease and desist from using the brand PCO-GENOLS for being confusingly similar with respondents trademark PYCNOGENOL. It, likewise, prayed for actual and nominal damages, as well as attorneys fees.

In its Answer, petitioner contended that respondent could not file the infringement case considering that the latter is not the registered owner of the trademark PYCNOGENOL, but one Horphag Research Limited. It, likewise, claimed that the two marks were not confusingly similar. Finally, it denied liability, since it discontinued the use of the mark prior to the institution of the infringement case. Petitioner thus prayed for the dismissal of the complaint. By way of counterclaim, petitioner prayed that respondent be directed to pay exemplary damages and attorneys fees.

During the pre-trial, the parties admitted the following:

1. Defendant [petitioner] is a corporation duly organized and existing under the laws of the Republic of the Philippines with business address at No. 7 Annapolis Street, Greenhills, San Juan, Metro Manila; 2. The trademark PYCNOGENOL of the plaintiff is duly registered with the Intellectual Property Office but not with the Bureau of Food and Drug (BFAD). 3. The defendants product PCO-GENOLS is duly registered with the BFAD but not with the Intellectual Property Office (IPO). 4. The defendant corporation discontinued the use of and had withdrawn from the market the products under the name of PCO-GENOLS as of June 19, 2000, with its trademark changed from PCO-GENOLS to PCO-PLUS. 5. Plaintiff corporation sent a demand letter to the defendant dated 02 June 2000.

On January 16, 2006, the RTC decided in favor of respondent. It observed that PYCNOGENOL and PCO-GENOLS have the same suffix GENOL which appears to be merely descriptive and thus open for trademark registration by combining it with other words. The trial court, likewise, concluded that the marks, when read, sound similar, and thus confusingly similar especially since they both refer to food supplements. The court added that petitioners liability was not negated by its act of pulling out of the market the products bearing the questioned mark since the fact remains that from 1996 until June 2000, petitioner had infringed respondents product by using the trademark PCO-GENOLS. As respondent manifested that it was no longer interested in recovering actual damages, petitioner was made to answer only for attorneys fees amounting to P50,000.00. For lack of sufficient factual and legal basis, the court dismissed petitioners counterclaim. Petitioners motion for reconsideration was likewise denied.

On appeal to the CA, petitioner failed to obtain a favorable decision. The appellate court explained that under the Dominancy or the Holistic Test, PCO-GENOLS is deceptively similar to PYCNOGENOL. It also found just and equitable the award of attorneys fees especially since respondent was compelled to litigate.

Hence, this petition, assigning the following errors:

I.

THAT THE COURT OF APPEALS ERRED IN AFFRIMING THE RULING OF THE LOWER [COURT] THAT RESPONDENTS TRADEMARK P[YC]NOGENOLS (SIC) WAS INFRINGED BY PETITIONERS PCO-GENOLS. THAT THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN FAVOR OF RESPONDENT HORPHAG RESEARCH MANAGEMENT S.A. IN THE AMOUNT OF Php50,000.00.

II.

The petition is without merit. It must be recalled that respondent filed a complaint for trademark infringement against petitioner for the latters use of the mark PCO-GENOLS which the former claimed to be confusingly similar to its trademark PYCNOGENOL. Petitioners use of the questioned mark started in 1996 and ended in June 2000. The instant case should thus be decided in light of the provisions of Republic Act (R.A.) No. 166 for the acts committed until December 31, 1997, and R.A. No. 8293 for those committed from January 1, 1998 until June 19, 2000.

A trademark is any distinctive word, name, symbol, emblem, sign, or device, or any combination thereof, adopted and used by a manufacturer or merchant on his goods to identify and distinguish them from those manufactured, sold, or dealt by others. Inarguably, a trademark deserves protection.

Section 22 of R.A. No. 166, as amended, and Section 155 of R.A. No. 8293 define what constitutes trademark infringement, as follows: Sec. 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename 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 of colorably imitate any such mark or tradename 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. Sec. 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the registered mark: 155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution, advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or 155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies hereinafter set forth: Provided, That infringement takes place at the moment any of the acts stated in Subsection 155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the infringing material.

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

(a) A trademark actually used in commerce in the Philippines and registered in the principal register of the Philippine Patent Office[;] (b) [It] is used by another person in connection with the sale, offering for sale, or advertising of any goods, business or services or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or such trademark is reproduced, counterfeited, copied or colorably imitated by another person and such reproduction, counterfeit, copy or colorable imitation is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services as to likely cause confusion or mistake or to deceive purchasers[;] (c) (d) [T]he trademark is used for identical or similar goods[;] and [S]uch act is done without the consent of the trademark registrant or assignee.

On the other hand, the elements of infringement under R.A. No. 8293 are as follows:

(1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; (2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business or services; (4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and (5) It is without the consent of the trademark or trade name owner or the assignee thereof.

In the foregoing enumeration, it is the element of likelihood of confusion that is the gravamen of trademark infringement. But likelihood of confusion is a relative concept. The particular, and sometimes peculiar, circumstances of each case are determinative of its existence. Thus, in trademark infringement cases, precedents must be evaluated in the light of each particular case.

In determining similarity and likelihood of confusion, jurisprudence has developed two tests: the Dominancy Test and the Holistic or Totality Test. The Dominancy Test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If the competing trademark contains the main, essential and dominant features of another, and confusion or deception is likely to result, infringement takes place. Duplication or imitation is not necessary; nor is it necessary that the infringing label should suggest an effort to imitate. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive purchasers. 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.

In contrast, the Holistic Test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both labels in order that the observer may draw his conclusion whether one is confusingly similar to the other.

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

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

The following random list of confusingly similar sounds in the matter of trademarks, culled from Nims, Unfair Competition and Trade Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and LIONPAS are confusingly similar in sound: Gold Dust and Gold Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash; Cascarete

and Celborite; Celluloid and Cellonite; Chartreuse and Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark Law and Practice, pp. 419-421, cities, 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. Finally, we reiterate that the issue of trademark infringement is factual, with both the trial and appellate courts finding the allegations of infringement to be meritorious. As we have consistently held, factual determinations of the trial court, concurred in by the CA, are final and binding on this Court. Hence, petitioner is liable for trademark infringement. We, likewise, sustain the award of attorneys fees in favor of respondent. Article 2208 of the Civil Code enumerates the instances when attorneys fees are awarded, viz.: Art. 2208. In the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered, except: 1. 2. When exemplary damages are awarded; When the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; In criminal cases of malicious prosecution against the plaintiff; In case of a clearly unfounded civil action or proceeding against the plaintiff; Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim; In actions for legal support; In actions for the recovery of wages of household helpers, laborers and skilled workers; In actions for indemnity under workmens compensation and employers liability laws; In a separate civil action to recover civil liability arising from a crime;

3. 4. 5.

6. 7. 8. 9.

10. When at least double judicial costs are awarded; 11. In any other case where the court deems it just and equitable that attorneys fees and expenses of litigation should be recovered. In all cases, the attorneys fees and expenses of litigation must be reasonable. As a rule, an award of attorneys fees should be deleted where the award of moral and exemplary damages is not granted. Nonetheless, attorneys fees may be awarded where the court deems it just and equitable even if moral and exemplary damages are unavailing. In the instant case, we find no reversible error in the grant of attorneys fees by the CA.

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of Appeals Decision dated July 27, 2007 and its Resolution dated October 15, 2007 in CA-G.R. CV No. 87556 are AFFIRMED.

SO ORDERED.