Shang Real Properties Corp vs. St Francis Development, G.R. No. 190706, July 21, 2014 [Second Division] [Perlas-Bernabe] Case Digest

 

Shang Real Properties Corp vs. St Francis Development,

G.R. No. 190706               July 21, 2014

[Second Division] [Perlas-Bernabe]

  

Facts:

            Respondent – a domestic corporation engaged in the real estate business and the developer of the St. Francis Square Commercial Center, built sometime in 1992, located at Ortigas Center, Mandaluyong City, Metro Manila (Ortigas Center) – filed separate complaints against petitioners before the IPO - Bureau of Legal Affairs (BLA), namely: (a) an intellectual property violation case for unfair competition, false or fraudulent declaration, and damages arising from petitioners’ use and filing of applications for the registration of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE," and (b) an inter partes case opposing the petitioners’ application for registration of the mark "THE ST. FRANCIS TOWERS" for use relative to the latter’s business, particularly the construction of permanent buildings or structures for residential and office purposes and (c) an inter partes case opposing the petitioners’ application for registration of the mark "THE ST. FRANCIS SHANGRI-LA PLACE."

                In its complaints, respondent alleged that it has used the mark "ST. FRANCIS" to identify its numerous property development projects located at Ortigas Center, such as the aforementioned St. Francis Square Commercial Center, a shopping mall called the "St. Francis Square," and a mixed-use realty project plan thatincludes the St. Francis Towers. Respondent added that as a result of its continuous use of the mark "ST. FRANCIS" in its real estate business,it has gained substantial goodwill with the public that consumers and traders closely identify the said mark with its property development projects. Accordingly, respondent claimed that petitioners could not have the mark "THE ST. FRANCIS TOWERS" registered in their names, and that petitioners’ use of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" in their own real estate development projects constitutes unfair competition as well as false or fraudulent declaration.

                Petitioners denied committing unfair competition and false or fraudulent declaration, maintaining that they could register the mark "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" under their names. They contended that respondent is barred from claiming ownership and exclusive use ofthe mark "ST. FRANCIS" because the same is geographically descriptive ofthe goods or services for which it is intended to be used. This is because respondent’s as well as petitioners’ real estate development projects are locatedalong the streets bearing the name "St. Francis," particularly, St. FrancisAvenue and St. Francis Street (now known as Bank Drive), both within the vicinity of the Ortigas Center.

                BLA  found that petitioners committed acts of unfair competition against respondent by its use of the mark "THE ST. FRANCIS TOWERS" but not with its use of the mark "THE ST. FRANCIS SHANGRI-LA PLACE." It, however, refused to award damages in the latter’s favor, considering that there was no evidence presented to substantiate the amount of damages it suffered due to the former’s acts. The BLA found that "ST. FRANCIS," being a name of a Catholic saint, may be considered as an arbitrary mark capable of registration when used in real estate development projects as the name has no direct connection or significance when used in association with real estate. The BLA neither deemed "ST. FRANCIS" as a geographically descriptive mark, opiningthat there is no specific lifestyle, aura, quality or characteristic that the real estate projects possess except for the fact that they are located along St. Francis Avenueand St. Francis Street (now known as Bank Drive), Ortigas Center. In this light, the BLA found that while respondent’s use of the mark "ST. FRANCIS" has not attained exclusivity considering that there are other real estate development projects bearing the name "St. Francis" in other areas, it must nevertheless be pointed out that respondent has been known to be the only real estate firm to transact business using such name within the Ortigas Center vicinity. Accordingly, the BLA considered respondent to have gained goodwill and reputation for its mark, which therefore entitles it to protection against the use by other persons, at least, to those doing business within the Ortigas Center.

                IPO Director-General Adrian S. Cristobal, Jr. affirmedthe rulings of the BLA. CA found petitioners guilty of unfair competition not only withrespect to their use of the mark "THE ST. FRANCIS TOWERS" but alsoof the mark "THE ST. FRANCIS SHANGRI-LA PLACE." Accordingly, itordered petitioners to cease and desist from using "ST. FRANCIS" singly or as part of a composite mark, as well as to jointly and severally pay respondent a fine in the amount of ₱200,000.00.

 

Issue:

            Whether or not petitioners are guilty of unfair competition in using the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE."

 

Held:

            No; the Court finds the element of fraud to be wanting; hence, there can be no unfair competition. The CA’s contrary conclusion was faultily premised on its impression that respondent had the right to the exclusive use of the mark "ST. FRANCIS," for which the latter had purportedly established considerable goodwill. What the CA appears to have disregarded or been mistaken in its disquisition, however, is the geographically descriptive nature of the mark "ST. FRANCIS" which thus bars its exclusive appropriability, unless a secondary meaning is acquired. As deftly explained in the U.S. case of Great Southern Bank v. First Southern Bank: "descriptive geographical terms are in the ‘public domain’ in the sense that every seller should have the right to inform customers of the geographical origin of his goods. A ‘geographically descriptive term’ is any noun or adjective that designates geographical location and would tend to be regarded by buyers as descriptive of the geographic location of origin of the goods or services. A geographically descriptive term can indicate any geographic location on earth, such as continents, nations, regions, states, cities, streets and addresses, areas of cities, rivers, and any other location referred to by a recognized name. In order to determine whether or not the geographic term in question is descriptively used, the following question is relevant: (1) Is the mark the name of the place or region from which the goods actually come? If the answer is yes, then the geographic term is probably used in a descriptive sense, and secondary meaning is required for protection."

            In Burke-Parsons-Bowlby Corporation v. Appalachian Log Homes, Inc., it was held that secondary meaning is established when a descriptive mark no longer causes the public to associate the goods with a particular place, but to associate the goods with a particular source. In other words, it is not enough that a geographically-descriptive mark partakes of the name of a place known generally to the public to be denied registration as it is also necessary to show that the public would make a goods/place association – that is, to believe that the goods for which the mark is sought to be registered originate in that place. To hold such a belief, it is necessary, of course, that the purchasers perceive the mark as a place name, from which the question of obscurity or remoteness then comes to the fore. The more a geographical area is obscure and remote, it becomes less likely that the public shall have a goods/place association with such area and thus, the mark may not be deemed as geographically descriptive. However, where there is no genuine issue that the geographical significance of a term is its primary significance and where the geographical place is neither obscure nor remote, a public association of the goods with the place may ordinarily be presumed from the fact that the applicant’s own goods come from the geographical place named in the mark.

            Under Section 123.2 of the IP Code, specific requirements have to be met in order to conclude that a geographically-descriptive mark has acquired secondary meaning, to wit: (a) the secondary meaning must have arisen as a result of substantial commercial use of a mark in the Philippines; (b) such use must result in the distinctiveness of the mark insofar as the goods or the products are concerned; and (c) proof of substantially exclusive and continuous commercial use in the Philippines for five (5) years before the date on which the claim of distinctiveness is made. Unless secondary meaning has been established, a geographically-descriptive mark, due to its general public domain classification, is perceptibly disqualified from trademark registration.

           

            Respondent was not able to prove its compliance with the requirements stated in Section 123.2 of the IP Code to be able to conclude that it acquired a secondary meaning – and, thereby, an exclusive right – to the "ST. FRANCIS" mark, which is, as the IPO Director-General correctly pointed out, geographically-descriptive of the location in which its realty developments have been built, i.e., St. Francis Avenue and St. Francis Street (now known as "Bank Drive"). Verily, records would reveal that while it is true that respondent had been using the mark "ST. FRANCIS" since 1992, its use thereof has been merely confined to its realty projects within the Ortigas Center, as specifically mentioned. As its use of the mark is clearly limited to a certain locality, it cannot be said that there was substantial commercial use of the same recognized all throughout the country. Neither is there any showing of a mental recognition in buyers’ and potential buyers’ minds that products connected with the mark "ST. FRANCIS" are associated with the same source – that is, the enterprise of respondent. Thus, absent any showing that there exists a clear goods/service-association between the realty projects located in the aforesaid area and herein respondent as the developer thereof, the latter cannot be said to have acquired a secondary meaning as to its use of the "ST. FRANCIS" mark.

            In fact, even on the assumption that secondary meaning had been acquired, said finding only accords respondents protectional qualification under Section 168.1 of the IP Code as above quoted. Again, this does not automatically trigger the concurrence of the fraud element required under Section 168.2 of the IP Code, as exemplified by the acts mentioned in Section 168.3 of the same. Ultimately, as earlier stated, there can be no unfair competition without this element. In this respect, considering too the notoriety of the Shangri-La brand in the real estate industry which dilutes petitioners' propensity to merely ride on respondent's goodwill, the more reasonable conclusion is that the former's use of the marks "THE ST. FRANCIS TOWERS" and "THE ST. FRANCIS SHANGRI-LA PLACE" was meant only to identify, or at least associate, their real estate project/s with its geographical location.

            WHEREFORE, the petition is GRANTED. The Decision dated December 18, 2009 of the Court of Appeals in CA-G.R. SP No. 105425 is hereby REVERSED and SET ASIDE. Accordingly, the Decision dated September 3, 2008 of the Intellectual Property Office-Director General is REINSTATED.