Zuneca Pharmaceutical vs. Natrapharm,
GR No. 211850, September 8, 2020
[En Banc] [Caguioa, [J]]
Facts:
Petitioner Zuneca
Pharmaceutical has been engaged in the importation, marketing, and sale of
various kinds of medicines and drugs in the Philippines since 1999. Zuneca imports
generic drugs from Pakistan and markets them in the Philippines using different
brand names. Among the products it has been selling is a drug called
carbamazepine under the brand name "ZYNAPS", which is an
anti-convulsant used to control all types of seizure disorders of varied causes
like epilepsy.
Natrapharm manufactured
and sold by Natrapharm is citicoline under the trademark "ZYNAPSE",
which is indicated for the treatment of cerebrovascular disease or stroke. The
trademark "ZYNAPSE" was registered with the Intellectual Property
Office of the Philippines (IPO) on September 24, 2007 and is covered by Certificate of Trademark
Registration No. 4-2007-005596.
Natrapharm filed with
the RTC a Complaint against Zuneca for Injunction, Trademark Infringement,
Damages and Destruction with Prayer for TRO and/or Preliminary Injunction,
alleging that Zuneca's "ZYNAPS" is confusingly similar to its
registered trademark "ZYNAPSE" and the resulting likelihood of
confusion is dangerous because the marks cover medical drugs intended for
different types of illnesses. Consequently, Natrapharm sought to enjoin Zuneca
from using "ZYNAPS" or other variations thereof, in addition to its
demand for Zuneca's payment of Two Million Pesos (P2,000,000.00) in damages;
Five Million Pesos (P5,000,000.00) in exemplary damages; and Three Hundred
Thousand Pesos (P300,000.00) as attorney's fees, expenses of litigation, and
costs of suit. Further, it prayed that all infringing goods, labels, signs,
etc. of Zuneca be impounded and destroyed without compensation.
In its Answer (With
Compulsory Counterclaim and Prayer for Preliminary Injunction), Zuneca claimed
that it has been selling carbamazepine under the mark "ZYNAPS" since
2004 after securing a Certificate of Product Registration on April 15, 2003
from the Bureau of Food and Drugs. It alleged that it was impossible for
Natrapharm not to have known the existence of "ZYNAPS" before the
latter's registration of "ZYNAPSE" because Natrapharm had promoted
its products, such as "Zobrixol" and "Zcure", in the same
publications where Zuneca had advertised "ZYNAPS". Further, Zuneca
pointed out that both Natrapharm and Zuneca had advertised their respective
products in identical conventions. Despite its knowledge of prior use by Zuneca
of "ZYNAPS", Natrapharm had allegedly fraudulently appropriated the
"ZYNAPSE" mark by registering the same with the IPO. As the prior
user, Zuneca argued that it is the owner of "ZYNAPS" and the
continued use by Natrapharm of "ZYNAPSE" causes it grave and
irreparable damage.
Zuneca argues that as
the prior user, following Berris and E. Y. Industrial Sales, Inc., it had
already owned the "ZYNAPS" mark prior to Natrapharm's registration of
its confusingly similar mark, thus, its rights prevail over the rights of
Natrapharm.
Subsequently, after a
summary hearing, the prayer for TRO was denied. The preliminary injunction and
counter preliminary injunction prayed for by the parties were likewise
rejected.
RTC held favor of
[Natrapharm] and against [Zuneca]. The
RTC ruled that the first filer in good faith defeats a first user in good faith
who did not file any application for registration. Hence, Natrapharm, as the
first registrant, had trademark rights over "ZYNAPSE" and it may
prevent others, including Zuneca, from registering an identical or confusingly
similar mark. Moreover, the RTC ruled that there was insufficient evidence that
Natrapharm had registered the mark "ZYNAPSE" in bad faith. The fact
that "ZYNAPS" and Natrapharm's other brands were listed in the
Philippine Pharmaceutical Directory (PPD) was not sufficient to show bad faith
since Zuneca's own witness admitted to not having complete knowledge of the
drugs listed in the PPD.
CA affirmed RTC stated
that registration, not prior use, is the mode of acquiring ownership of a
trademark.
Issue:
Whether Zuneca be held
liable for trademark infringement.
Held:
No (as provided by
prior user rule); under the law, the owner of the mark shall have the exclusive
right to prevent all third parties not having the owner's consent from using
identical or similar marks for identical or similar goods or services where
such use would result in a likelihood of confusion.
In Prosource International, Inc.
vs. Horphag Research Management, the Court held that, to establish
trademark infringement, the following elements must be proven: (l)the trademark being infringed is
registered in the IPO; (2) the trademark is reproduced, counterfeited, copied,
or colorably imitated by the infringer; (3) the infringing mark is used in
connection with the sale, offering for sale, or advertising of any goods,
business, or services; or the infringing mark 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 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 owner or the
assignee thereof.
How trademark ownership
is acquired? - The Court holds that Zuneca's argument has no merit because: (i)
the language of the IP Code provisions clearly conveys the rule that ownership
of a mark is acquired through registration; (ii) the intention of the lawmakers
was to abandon the rule that ownership of a mark is acquired through use; and
(iii) the rule on ownership
used in Berris and E.Y. Industrial Sales, Inc. is inconsistent with the IP Code
regime of acquiring ownership through registration.
---------------------------
NOTES:
è The Intellectual Property Code of the
Philippines was signed into law and became effective on January 1, 1998.
èZuneca engage in marketing since 1999
èNatrapharm registered its product on
September 2007
E.Y. Industrial Sales vs. Shen Dar Electricity and
Machinery; G.R. No. 184850; October 20, 2010 [First Division] Ã Has been abandon in this case.
In Zuneca; SC held:
Likewise, the rule on acquiring ownership discussed in
E. Y. Industrial Sales, Inc. is inconsistent with the current rule under the IP
Code. In said case, E.Y. Industrial Sales, Inc. (EYIS) imported air compressors
from Shen Dar from 1997 to 2004. In 1997, during the effectivity of the
Trademark Law, as amended, Shen Dar filed a trademark application for
"VESPA, Chinese Characters and Device" for use on air compressors and
welding machines. Subsequently, in 1999, or already during the effectivity of
the IP Code, EYIS filed a trademark application for "VESPA" for use
on air compressors. On January 18, 2004, the IPO issued the certificate of
registration for "VESPA" in favor of EYIS. Subsequently, on February
8, 2007, the certificate of registration for "VESPA, Chinese Characters
and Device" was issued in favor of Shen Dar.
Claiming to be the owner of the mark, Shen Dar filed
9887 registration. The Bureau of Legal Affairs (BLA) and the Director General
of the IPO both ruled that EYIS was the owner of the mark and likewise directed
the cancellation of Shen Dar's certificate of registration.
Notably, the Court has ruled that the prior and
continuous use of a mark may even overcome the presumptive ownership of the
registrant and be held as the owner of the mark. As aptly stated by the Court
in [Shangri-la]: Registration, without more, does not confer upon the
registrant an absolute right to the registered mark. The certificate of
registration is merely a prima facie proof that the registrant is the owner of
the registered mark or trade name. Evidence of prior and continuous use of the
mark or trade name by another can overcome the presumptive ownership of the
registrant and may very well entitle the former to be declared owner in an
appropriate case.
Berris Agricultural Co., vs. Norvy Abyadang, G.R. No.
183404; October 13, 2010 [Second Division] Ã Has been abandon in this case.
In Zuneca; SC held:
In Berris, despite the fact that Berris, Inc. was
eventually decided to be the owner of the mark consistent with the rule on
ownership under the IP Code, the Court mistakenly gave undue weight to the fact
of prior use. To be sure, it was unnecessary to also anchor Berris, Inc.'s
ownership of the mark on the fact that it was the prior user as this was
inconsistent with the express provisions of the IP Code and the legislative
intent behind the law. Stated differently, the Court's decision in Berris was
correct based on the fact that Berris, Inc. was the first to file the
application and register the mark.
Zuneca vs. Netrapharm à This case is an En Banc decision
---------------------------
Under the IP Code,
ownership of a mark is acquired through registration:
To clarify, while it is the fact of registration which
confers ownership of the mark and enables the owner thereof to exercise the
rights expressed in Section 147 of the IP Code, the first-to-file rule
nevertheless prioritizes the first filer of the trademark application and
operates to prevent any subsequent applicants from registering marks described
under Section 123.1(d) of the IP Code.
Reading together Sections 122 and 123. l(d) of the IP
Code, therefore, a registered mark or a mark with an earlier filing or priority
date generally bars the future registration of- and the future acquisition of
rights in - an identical or a confusingly similar mark, in respect of the same
or closely-related goods or services, if the resemblance will likely deceive or
cause confusion.
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 [the IP Code] 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 registrant's
ownership of the mark, and of the registrant's exclusive right to use the same
in connection with the goods or services and those that are related thereto
specified in the certificate. [The IP Code], 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 non-use 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.
To be sure, the
rule used to resolve the issue of ownership in E. Y. Industrial Sales, Inc. and
Shangri-la should not be made to apply in a situation involving marks which are
both used and/or registered after the effectivity of the IP Code. In the case
at bar, both "ZYNAPS" and "ZYNAPSE" have been used and/or
registered after the IP Code became effective. Clearly, the use or citation of
Trademark Law jurisprudence to resolve the question on acquisition of ownership
of marks in the case at bar or in cases involving marks registered or first
used under the IP Code will be irrelevant and inappropriate.
è The Intellectual Property Code of the
Philippines was signed into law and became effective on January 1, 1998.
èZuneca engage in marketing since 1999
èNatrapharm registered its product on
September 2007
In light of the foregoing, Zuneca thus erred in using
Berris and E. Y. Industrial Sales, Inc. as bases for its argument that the
prior user is the owner of the mark and its rights prevail over the rights of
the first-to-file registrant. To emphasize, for marks that are first used
and/or registered after the effectivity of the IP Code, ownership is no longer
dependent on the fact of prior use in light of the adoption of the first-to-file
rule and the rule that ownership is acquired through registration.
As to bad faith and good faith:
Resultantly - unlike the rule on
acquisition of ownership - the pronouncements of the Court relative to
registrations obtained in bad faith under the Trademark Law, as amended, still
subsist even after the effectivity of the IP Code. Thus, the following cases
where the Court defined bad faith and fraud, although decided under the regime
of the Trademark Law, as amended, are still applicable.
What constitutes fraud or bad faith in trademark
registration? Bad faith means that the applicant or registrant has knowledge of
prior creation, use and/or registration by another of an identical or similar
trademark. In other words, it is copying and using somebody else's trademark.
Fraud, on the other hand, may be committed by making false claims in connection
with the trademark application and registration, particularly, on the issues of
origin, ownership, and use of the trademark in question, among other things.
The
concept of fraud contemplated above is not a mere inaccurate claim as to the
origin, ownership, and use of the trademark. In civil law, the concept of fraud has been
defined as the deliberate intention to cause damage or prejudice. The
same principle applies in the context of trademark registrations: fraud is
intentionally making false claims to take advantage of another's goodwill
thereby causing damage or prejudice to another. Indeed, the concepts of bad
faith and fraud go hand-in-hand in this context. There is no distinction
between the concepts of bad faith and fraud in trademark registrations because
the existence of one necessarily presupposes the existence of the other.
Good faith is required in order
to ensure that a second user may not merely take advantage of the goodwill
established by the true owner."
Pagasa Industrial Corporation v. Court of Appeals
likewise supports the definition of bad faith as prior knowledge. In said case,
the Court found that Pagasa registered the "YKK" mark in bad faith
because it had previously known that there was another person using the mark.
A perusal of the above cancellation provisions in the
IP Code and the Trademark Law, as amended, would reveal that these two grounds
differ from the others in the sense that, unlike the other grounds for
cancellation, they both exist prior to the registration. That is, one can have a
registration in bad faith only if he applied for the registration of the mark
despite knowing that someone else has created, used, or registered that mark.
In the same vein, an unregistrable mark which was mistakenly allowed to be
registered was already inherently unregistrable even prior to its registration.
Accordingly, because these marks should not have been registered in the first
place, the presence of either of these grounds renders them void. Thus, even if
these marks subsequently became registered, the registrations do not confer
upon their owners the rights under Section 147.1 of the IP Code because the
marks were registered contrary to the provisions of the same law.
To emphasize, the presence of bad faith alone renders
void the trademark registrations. Accordingly, it follows as a matter of
consequence that a mark registered in bad faith shall be cancelled by the IPO
or the courts, as the case may be, after the appropriate proceedings.
Being the
first-to-file registrant in good faith allows the registrant to acquire all the
rights in a mark. This can be seen in Section 122 vis-a-vis the cancellation
provision in Section 155.1 of the IP Code. Reading these two provisions
together, it is clear that when there are no grounds for cancellation -
especially the registration being obtained in bad faith or contrary to the
provisions of the IP Code, which render the registration void - the
first-to-file registrant acquires all the rights in a mark.
In light of these settled facts, it is clear that
Natrapharm is the first-to-file registrant of "ZYNAPSE". Zuneca, on
the other hand, is a prior user in good faith of a confusingly similar mark,
"ZYNAPS". What remains contentious is Natrapharm's good or bad faith as
Zuneca contends that the mark was registered in bad faith by Natrapharm.
Indeed, if Zuneca's contention turns out to be true, Natrapharm would not be
the owner of "ZYNAPSE" and it would not have the right under Section
147.1 of the IP Code to prevent other entities, including Zuneca, from using
confusingly similar marks for identical or similar goods or services. Further,
Natrapharm's infringement case would fail because its "ZYNAPSE"
registration would then be voided.
Assuming, however, that the Court should still review this
factual issue, it finds no reason to depart from the findings of facts of the
RTC, which findings were affirmed by the CA. In fact, the Court also conducted
a review of the testimonies and evidence presented by the parties and finds
that the RTC and the CA were correct in their factual findings. The RTC ruled
that there was no sufficient evidence to convince it that Natrapharm had
acquired the registration in bad faith.
Zuneca's evidence clearly falls short of establishing
that Natrapharm had knowledge of the prior creation or use by Zuneca of the
"ZYNAPS" mark. Zuneca's evidence only tends to prove that there was a
possibility that someone from Natrapharm might have known of Zuneca's use of
"ZYNAPS" because Natrapharm and Zuneca attended the same conferences
and that Zuneca had listed "ZYNAPS" in the PPD publication. Such
possibility is not, however, sufficient to prove bad faith, especially when
weighed against Natrapharm's evidence and explanation on how it coined
"ZYNAPSE" and the steps it took to ensure that there were no other
marks that were confusingly similar to it. Not only was Natrapharm able to
explain the origin of the name, it was also able to show that it had checked
the IMS-PPI, IPO, and BFAD databases and found that there was no brand name
which was confusingly similar to "ZYNAPSE".
In any event,
while Natrapharm is the owner of the "ZYNAPSE" mark, this does not,
however, automatically mean that its complaint against Zuneca for injunction,
trademark infringement, damages, and destruction with prayer for TRO and/or
preliminary injunction should be granted. The application of Section 159.1 of
the IP Code in the case at bar results in Zuneca's exemption from liability for
trademark infringement.
Read as a
whole, Section 159.1 of the IP Code clearly contemplates that a prior user in
good faith may continue to use its mark even after the registration of the mark
by the first-to-file registrant in good faith, subject to the condition that
any transfer or assignment of the mark by the prior user in good faith should
be made together with the enterprise or business or with that part of his
enterprise or business in which the mark is used. The mark cannot be
transferred independently of the enterprise and business using it.
From the provision itself, it can be gleaned that
while the law recognizes the right of the prior user in good faith to the
continuous use of its mark for its enterprise or business, it also respects the
rights of the registered owner of the mark by preventing any future use by the
transferee or assignee that is not in conformity with Section 159.1 of the IP
Code. Notably, only the manner of use by the prior user in good faith - that
is, the use of its mark tied to its current enterprise or business - is categorically
mentioned as an exception to an action for infringement by the trademark owner.
The proviso in Section 159.1 of the IP Code ensures that, despite the transfer
or assignment of its mark, the future use by the assignee or transferee will
not go beyond the specific confines of such exception. Without the proviso, the
prior user in good faith would have the free hand to transfer or assign the
"protected use" of its mark for any purpose to a third person who may
subsequently use the same in a manner unduly curtailing the rights of the
trademark owner. Indeed, this unilateral expansion of the exception by a third
person could not have been intended, and is guarded against, by the legislature
through the foregoing proviso.
Because Zuneca is not
liable for trademark infringement under Section 159.1 of the IP Code, the Court
finds that there is no basis for the above imposition of penalties.
While Section 147.1 of
the IP Code provides that the owner of a registered mark shall have the
exclusive right to prevent third parties' use of identical or similar marks for
identical or similar goods where such use would result in a likelihood of
confusion, this provision should be interpreted in harmony with Section 159.1
of the IP Code, especially the latter's proviso which allows the transfer or
assignment of the mark together with the enterprise or business of the prior
user in good faith or with that part of his enterprise or business in which the
mark is used. The lawmakers intended for the rights of the owner of the
registered mark in Section 147.1 to be subject to the rights of a prior user in
good faith contemplated under Section 159.1. Essentially, therefore, Section
159.1 is an exception to the rights of the trademark owner in Section 147.1 of
the IP Code.
While there is no issue
as to the likelihood of confusion between "ZYNAPSE" and
"ZYNAPS", the Court believes that the evil of medical switching will
likely not arise, considering that the law requires the generic names of drugs
to be written in prescriptions.