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IP Views Recent Trend in Trademark Ownership: The Diana Story Is the rule absolute? On March 13, 2008, Director General Adrian Cristobal, Jr. handed down a decision in Appeal No. 14-06-26 ruling that “[t]he so-called ‘first-to-file rule’ could not have been intended to justify the approval of a trademark application simply because it was the first application to be filed regardless of another’s better or superior right to the mark applied for. The rule cannot be used to commit or perpetrate an unjust and unfair claim. The Director General explained the meaning of the first-to-file rule this wise: When one files a trademark application, the applicant in effect claims that it is the owner of the trademark. In a situation wherein it may be possible for two or more persons or entities to claim ownership and use of identical trademarks on identical or similar goods, a claim of ownership must be in good faith, that is, the basis of ownership is independent from or not derived from the other and absolutely, was not copying. In this ideal situation, whoever files the application first will benefit under Section 123.1(d) which embodies the “first-to-file rule.” With the foregoing pronouncement, the Director General decided that RD Tuna Canners Limited is the rightful owner of the trademark DIANA despite the fact that its competitor, Frabelle Fishing Corporation, filed its application for registration of the mark DIANA way ahead of RD Tuna’s application. The Director General noted that both RD Tuna and Frabelle are direct and actual business competitors in the seafood business in Papua New Guinea and concluded, thus – “…that it is mere coincidence that the parties, business competitors at that, came up with the same trademark for use on the same goods is too good to be true, especially when the Appellant [RD Tuna] has used the mark way ahead of the other, and the Appellee [Frabelle], well aware of the prior conduct of business by the Appellant involving the trademark DIANA, has offered no plausible explanation or story to tell on how it was able to coin the same trademark. The fair inference that can be drawn, therefore, is that the Appellee merely copied the mark from the Appellant. That the Appellee beat the Appellant in filing of the trademark application in the Philippines is of no moment…” With this ruling, recent Supreme Court decisions come to mind; the first is the case of Shangri-La International v. Developers Group (G.R. 159931, March 31, 2006 and January 22, 2007) and the second is the case of Sehwani v. In-N-Out Burger (G.R. 171053, October 15, 2007). These decisions seem to support, or at least appear to be consistent with, the DG’s ruling in the Diana case. The Shangri-La case was decided on the basis of the old trademark law, R.A. 166, under which trademark ownership was based on actual use of the mark in commerce and trademark registration required at least 2 months of prior use of the mark. The Supreme Court resolved the issue of whether Shangri-La International Hotel, etc. al. (Shangri-La Group) committed trademark infringement against Developers Group of Companies, Inc. (Developers) for its use of “SHANGRI-LA” mark and “S” device/logo. The Court ruled that Developers’ use of the “SHANGRI-LA” mark and “S” logo was in evident bad faith and cannot therefore ripen into ownership. The Court said: “...It is truly difficult to understand why, of the millions of terms and combination of letters and designs available, the respondent had to choose exactly the same mark and logo as that of petitioners, if there was no intent to take advantage of the goodwill of petitioner’s mark and logo. One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. 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... ... Under Section 2, in order to register a trademark, one must be the owner thereof and must have actually used the mark in commerce in the Philippines for 2 months prior to the application for registration. Since "ownership" of the trademark is required for registration, Section 2-A of the same law sets out to define how one goes about acquiring ownership thereof. Under Section 2-A, it is clear that actual use in commerce is also the test of ownership but the provision went further by saying that the mark must not have been so appropriated by another. Additionally, it is significant to note that Section 2-A does not require that the actual use of a trademark must be within the Philippines. Hence, under R.A. No. 166, as amended, one may be an owner of a mark due to actual use thereof but not yet have the right to register such ownership here due to failure to use it within the Philippines for two months." On January 22, 2007, the Court, in denying Developers’ Motion for Reconsideration, said: “Movant DGCI would make capital on the alleged danger the subject Decision might wreak upon Philippine trademark law, claiming that the decision in question would render nugatory the protection intended by the trademark law to all Philippine trademark registrants. This assertion is a baseless and sweeping statement. The interpretation of Republic Act No. 166 in the Decision does not in any way diminish the protection afforded to valid trademark registrations made under said law. It was glaringly obvious, however, from the testimony of movant's own witness that DGCI's registration of the subject mark and logo was void due to the existence of bad faith and the absence of the requisite 2-month prior use. Despite movant's melodramatic imputation of an abandonment of the territoriality principle, the Decision actually upholds the principle but found that respondent DGCI was not entitled to protection thereunder due to the double infirmity which attended its registration of the subject mark and logo." In Sehwani, Inc. v. In-N-Out Burger, Inc. (G.R. No. 171053, October 15, 2007), the Supreme Court held that in determining a mark as well-known, the fact that the mark is neither registered nor used in the Philippines is of no consequence. Here, the Court ruled that on the basis of “registrations in various countries around the world and its comprehensive advertisements therein,” In-N-Out Burger was declared a well-known mark. The Supreme Court observed that the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks expanded the scope of protection initially afforded by Article 6bis of the Paris Convention. In an unprecedented move, the Supreme Court ruled that “the WIPO Joint Recommendation (which is a nonbinding document!) have the force and effect of law, for under Section 2, Article II of the Constitution, the Philippines adopts the generally accepted principles of international law as part of the law of the land.” “The scope of protection initially afforded by Article 6bis of the Paris Convention has been expanded in the 1999 Joint Recommendation Concerning Provisions on the Protection of Well-Known Marks, wherein the World Intellectual Property Organization (WIPO) General Assembly and the Paris Union agreed to a nonbinding recommendation that a well-known mark should be protected in a country even if the mark is neither registered nor used in that country. Part I, Article 2 (3) thereof provides: (3) [Factors Which Shall Not Be Required] (a) A Member State shall not require, as a condition for determining whether a mark is a well-known mark: (i) that the mark has been used in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, the Member State; (ii) that the mark is well known in, or that the mark has been registered or that an application for registration of the mark has been filed in or in respect of, any jurisdiction other than the Member State; or (iii) that the mark is well known by the public at large in the Member State. Accordingly, the Court declared that “the fact that respondent’s marks are neither registered nor used in the Philippines is of no moment.” In sum, Diana, like Shangri-La, suggests that knowledge of the existence of the mark abroad results in bad faith appropriation of the same mark in the Philippines. Sehwani in turn suggests that a mark may be declared internationally well-known, and therefore protected, even if it has not been used or registered in the Philippines. These rulings are a marked departure from the doctrines enunciated in several Supreme Court rulings including Kabushi Kaisha Isetan v. lAC (G.R. No. 75420, November 15, 1991) and Philip Morris v. Court of Appeals (G.R. No. 91332, July 16, 1993), where actual use in commerce in the Philippines was held to be an indispensable element for the acquisition of ownership over a trademark or a trade name. The Diana decision, taken with the Shangri-La and In-N-Out Burger cases could be seen as the foundation of a judicial rule that bad faith appropriation of a mark does not necessarily ripen into ownership, despite the first-to-file rule. This principle might be a counterbalance to the previous strict use-based territoriality principle in acquiring trademark ownership. Along these lines, Courts should also leave room for the doctrines of abandonment, laches and estoppel to come into play. |
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