Emzee Foods vs. Elarfoods,
G.R. No. 220558, February 17, 2021
[First Division] [GAERLAN, J.:]
Facts:
Sometime in 1970, spouses Jose and Leonor Lontoc (spouses Lontoc) established a business of selling Filipino food and roasted pigs, which they marketed under the name "ELARS Lechon." Desiring to leave a legacy, in 1989, the spouses Lontoc incorporated their food business. Thus, on May 19, 1989, Elarfoods, Inc. (respondent) was granted a Certificate of Registration by the SEC.
However, without respondent's knowledge and permission, petitioner sold and distributed roasted pigs using the marks "ELARZ LECHON", "ELAR LECHON," "PIG DEVICE" and "ON A BAMBOO TRAY", thereby making it appear that petitioner was a branch or franchisee of the respondent.
On September 25, 2001, respondent filed with the IPO an application for registration of the trademark "ELARS LECHON." Thereafter, on October 1, 2001, respondent filed two more applications for the marks "ON A BAMBOO TRAY" and "ROASTED PIG DEVICE" (collectively, subject marks). The mark "ROASTED PIG DEVICE" is a design or representation of a roasted pig on a bamboo stick placed on top of a bamboo tray.
Respondent sent the petitioner a Cease and Desist Letter urging the latter to stop using the subject marks or any variations thereof. However, petitioner ignored the demand and continued selling its roasted pigs under the marks "ELARZLECHON," "ELAR LECHON," "PIG DEVICE," and "ON A BAMBOO TRAY," thereby causing confusion as to the source and origin of the products.
Thereafter, respondent filed three separate complaints for unfair competition and violation of intellectual property rights against petitioner for the latter's use of the former's trademarks "ELARS LECHON" "ROASTED PIG DEVICE," and "ON A BAMBOO TRAY." Respondent claimed that petitioner unfairly rode on its fame, goodwill and reputation, causing its sales and profits to be diverted to petitioner.
Petitioner filed an Answer, where it countered that the respondent is not the owner of the subject marks. Rather, respondent is a mere alter ego or business conduit of the spouses Lontoc who have proprietary rights over the marks. Petitioner related that the mark "Elar" stands for "L.R.," which are the initials of the spouses Lontoc-Rodriguez's family names. In fact, since 1967, the spouses Lontoc have used "Elar" for their other corporations, such as Elar Development (ELARDEV) for their livestock business; Casa Elar Incorporated (CASA ELAR) for their restaurant business; and Elar Foods (Elarfoods) for their meat business. Petitioner further narrated that Jose Lontoc (Jose) himself designed the logo which became the symbol and mark of "ELARS LECHON." The phrase "ON A BAMBOO TRAY" was loosely used by Jose and through word of mouth, became associated with "ELARS LECHON".
BLA Director Estrelita Beltran-Abelardo (Beltran-Abelardo) dismissed the complaint. She ruled that the spouses Lontoc are the owners of the subject marks by prior commercial use. Said marks acquired popularity through their consistent use in connection with the spouses Lontoc's lechon business, even prior to the respondent's incorporation. Moreover, BLA Director Beltran-Abelardo opined that the use of the "ELAR" mark was not coined by the spouses Lontoc for the sole benefit of respondent, but for the use of the Lontoc-Rodriguez clan in their businesses. On this score, the real-party-in-interest to file a suit against the petitioner is the Estate of the spouses Lontoc. In the same vein, it is only the Estate who may apply for registration and appropriate the subject trademarks for its exclusive use.
Petitioner maintains that the Estate of the spouses Lontoc is the rightful owner of the subject trademarks. Said trademarks were created by the spouses Lontoc for the sole and exclusive use of the Lontoc-Rodriguez clan, and not for the benefit of any of the corporations. Petitioner further asserts that by virtue of succession, Manuel Enrique Zalamea (Manuel Enrique), President of petitioner corporation, his brother, Manuel Jose Zalamea (Manuel Jose), and the other heirs of the deceased spouses Lontoc are the co-owners of said trademarks.
Meanwhile, during the pendency of the proceedings before the BLA, particularly on February 10, 2005, April 28, 2006, and October 2, 2006, the IPO issued Certificates of Registration in favor of the respondent for the marks "ON A BAMBOO TRAY," "ELARS LECHON" and "ROASTED PIG DEVICE," respectively.
IPO Director General Ricardo R. Blancaflor reversed the BLA. He stated that there was no need for a written assignment of the subject trademarks because the spouses Lontoc themselves, in their desire to leave a legacy, incorporated and registered respondent with the SEC. As a result, all rights and interests of the spouses Lontoc, including the subject trademarks were transferred to respondent. In fact, the spouses Lontoc actively managed respondent and represented to the public that they were its owners. Even petitioner admitted that respondent is an alter ego of the spouses Lontoc, implying that the rights and interests of respondent are identical and inseparable from those of the spouses Lontoc. CA affirmed the ruling of IPO Director General Blancaflor.
Issue:
Whether petitioner's is liable for damages for violating the respondent's intellectual property rights.
Held:
YES; a mark pertains to "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." Particularly, 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." A trademark is an intellectual property that deserves protection under the law.
In the recent case of Zuneca Pharmaceutical, et al. v. Natrapharm, Inc.,59 the Court exhaustively discussed the manner of acquiring ownership of a particular trademark which, over the years, vacillated between registration and actual use. The ponencia elaborately surveyed all the intellectual property laws passed in our country, beginning from the Spanish Royal Decree of October 26, 1888, which required business entities to obtain a certificate before using a particular trademark. This rule, however, changed in 1903, when Act No. 666 was enacted and required actual use of the mark as a means of obtaining ownership thereof. Then, in 1947, R.A. No. 166 (Trademark Law) was passed which strengthened the rule of actual use, while imposing non-abandonment of the mark as an additional prerequisite for registration. Fast-forward to 1998, the IP Code was passed and the manner of acquiring ownership of a trademark reverted to registration, subject to the rule that the first-to-file shall be prioritized to the exclusion of all other applicants/users.
Essentially, Zuneca clarified that, as the rule now stands, the lawful owner of the mark shall be the person or entity who first registers it in good faith.
It must be noted that respondent filed applications for the registration of the subject trademarks "ON A BAMBOO TRAY," "ELARS LECHON" and "ROASTED PIG DEVICE."63 Recognizing their ownership of the said marks, the IPO granted the respondent Certificates of Registration valid for a period of 10 years. Indeed, the registration of the marks gives rise to a presumption of the validity of registration, the registrant's ownership of the marks, and the right to its exclusive use. Petitioner failed to overcome said presumption. Furthermore, according to the database of the IPO, the respondent's right to use the subject trademarks has been renewed for another 10 years. Thus, as of date, the respondent unequivocally enjoys the exclusive right to use the subject trademarks.
It likewise bears stressing that even prior to the registration of the subject trademarks, the respondent has been consistently using said marks since its incorporation in 1989. Hence, even under the law applicable at that time, namely, Section 2-A of R.A. No. 166, respondent's consistent use of the subject trademarks confirms its ownership thereof.
It cannot be gainsaid that respondent corporation is a creation of the spouses Lontoc themselves. In 1989, the spouses Lontoc wanted to leave their legacy, and thus incorporated the respondent to ensure the continuation of their lechon and food business. From that moment, the spouses Lontoc transferred to the respondent the ownership of ELARS Lechon and the subject marks in connection with the sale of its roasted pigs and other products. Moreover, all throughout their lives, the spouses Lontoc actively managed respondent and consistently used the subject trademarks in promoting the latter's goods. Certainly, the spouses Lontoc's overt acts of incorporating respondent, actively managing it, and consistently representing to the public that ELARS Lechon is operating under the respondent, conclusively prove that indeed the "ELARS LECHON" brand has been transferred to, and is owned by respondent. As such, the respondent has the exclusive right to use the name ELARS LECHON to the exclusion of all other parties, including the descendants of the spouses Lontoc.
Indeed, Jose's unqualified representation that Elar's Lechon is the business of respondent confirms that even without a formal assignment, exclusive ownership of the mark "ELARS LECHON" and its adjunct trademarks have been vested on respondent. Actually, even the petitioner admitted that respondent is an "alter ego of the spouses Lontoc," implying that the rights and interests of respondent are identical and inseparable from those of the spouses Lontoc.
Similarly, respondent's prior adoption and continuous use of the subject trademarks since 1990 are bolstered by documents consisting of various commercial sales invoices from November 1990 to February 1995.
Notably, this lacuna was filled by IPO Director General Blancaflor who explained that the fact of the transfer may not be disproven by the absence of a written assignment. A trademark, like any incorporeal right may be disposed of not only by way of formal assignment. More importantly, the subject trademarks were not yet registered when respondent started doing business under the Elar's Lechon brand. Neither was there a pending application for the said trademarks. Besides, under Article 1624 of the Civil Code, in relation to Article 1475 of the same Code, the assignment of incorporeal rights, like an unregistered mark, is perfected by mere consent without need of a written contract. Thus, what matters is that from the time of respondent's incorporation until present, respondent has used and exclusively appropriated the subject trademarks as its own.
On this score, the Court finds that petitioner's use of the marks "ELARZ LECHON," "ELAR LECHON," "PIG DEVICE," and "ON A BAMBOO TRAY," which are substantially identical to the respondents' marks, constitute unfair competition.
The IP Code defines unfair competition as: Section 168. Unfair Competition, Rights, Regulation and Remedies. - 168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.
168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:
(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who otherwise clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose;
(b) Any person who by any artifice, or device, or who employs any other means calculated to induce the false belief that such person is offering the services of another who has identified such services in the mind of the public;
The Court agrees with the CA that petitioner is liable for unfair competition for the following reasons: Here, petitioner's product is lechon which is also the product of respondent. Since petitioner uses "ELARZ LECHON", "ELAR LECHON", "PIG DEVICE", and "ON A BAMBOO TRAY" on their packaging materials and signages in the same manner like respondent uses "ELAR'S LECHON" mark on its lechon products, petitioner has obviously clothed its product the general appearance of respondent's product itself. More, there is no notice to the buying public that "ELARZ LECHON" is not respondent's product, albeit it is the latter that has the exclusive right to the trademark "ELAR'S LECHON." There is indeed a clear intent to deceive the public on petitioner's part.
Remarkably, in UFC Philippines, Inc. vs. Barrio Fiesta Manufacturing Corporation, the Court enumerated the kinds of confusion caused by similar marks, and the tests that aid in determining the likelihood of confusion: There are two tests used in jurisprudence to determine likelihood of confusion, namely the dominancy test used by the IPO, and the holistic test adopted by the Court of Appeals. In Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading Corp., we held: The essential element of infringement under R.A. No. 8293 is that the infringing mark is likely to cause confusion. In determining similarity and likelihood of confusion, jurisprudence has developed tests - the 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.
Relative to the question on confusion of marks and trade names, jurisprudence has noted two (2) types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product, and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent.
In Wilton Dy and/or Philites Electronics & Lighting Products v. Koninklijke Philips Electronics. N. V., the Court used the dominancy test to conclude that the competing marks bear an uncanny resemblance that may confuse the consumers: On one hand, 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.
Applying the dominancy test to this case requires us to look only at the mark submitted by petitioner in its application, while we give importance to the aural and visual impressions the mark is likely to create in the minds of the buyers. We agree with the findings of the CA that the mark "PHILITES" bears an uncanny resemblance or confusing similarity with respondent's mark "PHILIPS. Applying the dominancy test in the instant case, it shows the uncanny resemblance or confusing similarity between the trademark applied for by respondent with that of petitioner's registered trademark. An examination of the trademarks shows that their dominant or prevalent feature is the five-letter "PHILI", "PHILIPS" for petitioner, and "PHILITES" for respondent. The marks are confusingly similar with each other such that an ordinary purchaser can conclude an association or relation between the marks. The consuming public does not have the luxury of time to ruminate the phonetic sounds of the trademarks, to find out which one has a short or long vowel sound. At bottom, the letters "PHILI" visually catch the attention of the consuming public and the use of respondent's trademark will likely deceive or cause confusion. Most importantly, both trademarks are used in the sale of the same goods, which are light bulbs.
In the same vein, in McDonald's Corp. v. L.C. Big Mak Burger, Inc., the Court also applied the dominancy test in determining the likelihood of confusion between the two competing marks: This Court, however, has relied on the dominancy test rather than the holistic test. The dominancy test considers the dominant features in the competing marks in determining whether they are confusingly similar. Under the dominancy test, courts give greater weight to the similarity of the appearance of the product arising from 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. 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 in "Mak" while a "k" sounds the same as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k" replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan." In short, aurally the two marks are the same, with the first word of both marks phonetically the same, and the second word of both marks also phonetically the same. Visually, the two marks have both two words and six letters, with the first word of both marks having the same letters and the second word having the same first two letters. In spelling, considering the Filipino language, even the last letters of both marks are the same. Clearly, respondents have adopted in "Big Mak" not only the dominant but also almost all the features of "Big Mac." Applied to the same food product of hamburgers, the two marks will likely result in confusion in the public mind.
Applying the dominancy test to the case at bar, it is very obvious that the petitioner's marks "ELARZ LECHON" and "ELAR LECHON" bear an indubitable likeness with respondent's "ELARS LECHON." As can easily be seen, both marks use the essential and dominant word "ELAR". The only difference between the petitioner's mark from that of respondent's are the last letters Z and S, respectively. However, the letters Z and S sound similar when pronounced. Thus, both marks are not only visually similar, but are phonetically and aurally similar as well. To top it all off, both marks are used in selling lechon products. Verily, there exists a high likelihood that the consumers may conclude an association or relation between the products. Likewise, the uncanny resemblance between the marks may even lead purchasers to believe that the petitioner and respondent are the same entity.
In fine, petitioner's use of marks similar to those of the respondent's constitutes a violation of the latter's intellectual property rights. It is high time for petitioner to desist from conveniently latching on to the good will and reputation built by the respondent over the years. To fully protect the respondent's rights, it is imperative to order the petitioner to cease and desist from using the former's marks. This remedy is recognized under Section 156.4 of the IP Code, which grants the complainant the right to demand an injunction, upon proper showing of its entitlement thereto. A similar redress was granted in the case of Asia Pacific Resources International Holdings, Ltd. v. Paperone, Inc., where the Court affirmed the orders of the BLA and the IPO Director General commanding the party guilty of unfair competition to cease and desist from using the complainant's marks.
Court affirms the award of damages granted by the IPO Director General and the CA in favor of the respondent. Likewise, as affirmed in In-N-Out Burger, Inc. v. Sehwani Incorporated and/or Benita's Frites, Inc., exemplary damages may be imposed if the accountable party deliberately engaged in unfair competition. This is to provide an example or correction for the public good, enhance the protection accorded to intellectual property, and to prevent similar acts of unfair competition. Viewed in this light, the Court finds that an award of P400,000.00 as exemplary damages is commensurate with the respondent's injury. The Court further notes that the petitioner's officers acted in bad faith, considering that its president and incorporators were former employees of respondent corporation. They clearly had knowledge that the subject trademarks belong to the respondent, and have been consistently and continuously used by the latter since 1989.