E. Spinner and Company vs. Neuss Hesslein Corporation

A word that is not inherently distinctive may be protected under the law of unfair competition and trademarks if, through long and exclusive use in an arbitrary sense, it has acquired a secondary meaning identifying the goods of the first user; the use of even a single word from a composite registered mark may constitute infringement, and protection extends to the casual purchaser who knows the product only by name, not merely to knowledgeable dealers.

E. Spinner & Co., a Manchester and Bombay copartnership, began exporting khaki textiles into the Philippine Islands around 1900, shortly after the American occupation. Its khaki, marketed under the “Wigan” brand name along with other grades such as “Stockport,” “Jackton,” and “Ashford,” gained a strong reputation for color fastness, consistency, and durability. All grades were sold under a common pictorial trademark consisting of two elephant heads surrounded by a garland of leaves, which was first registered in the Philippine Bureau of Patents, Copyrights, and Trade-Marks in 1905. The brand name “Wigan” was stenciled in a blank space on the label indicating quality. The Neuss Hesslein Corporation was incorporated in the Philippines in December 1922 as the local selling agent of Neuss Hesslein & Co., Inc. of New York, which had previously sold khaki in the Philippines under the “Five Soldiers” and “Four Soldiers” marks. Beginning in late 1923 or early 1924, the defendant began selling its own khaki with the word “Wigan” conspicuously stamped on the bolts.

• The Parties and Their Products: Plaintiff E. Spinner & Co. is an English copartnership based in Manchester and Bombay, represented locally by Wise & Co. It manufactured and sold textile fabrics, including several grades of khaki cloth. Defendant Neuss Hesslein Corporation is a Philippine subsidiary of a New York firm, acting as its selling agent in the Islands since approximately 1923. Plaintiff’s khaki was a premium product (sold at 70–71 centavos per yard), while defendant’s grades sold at lower price points (35–55 centavos per yard).

• Plaintiff’s Adoption and Use of “Wigan”: Since about 1900, plaintiff exported khaki into the Philippines under various grade designations: “Wigan,” “Stockport,” “Jackton,” and “Ashford.” “Wigan” denoted a particular quality. All grades bore a common pictorial trademark comprising two elephant heads within a garland frame. The label included the phrase “Quality:……….Yds.” and the brand name was inserted with a stencil in the blank space. This trademark was registered in 1905 without the word “Wigan” as part of the mark proper. The word “Wigan” was not used geographically or in the trade sense (a stiffening fabric); it was an arbitrary, artificial designation created by plaintiff to indicate quality. Over two decades of use, “Wigan” became associated in the Philippine market and in the international trade with plaintiff’s particular standard of quality.

• Defendant’s Adoption of “Wigan”: In late 1923 or early 1924, at the request of Chinese customers, the defendant began ordering its New York principal to stamp the word “Wigan” conspicuously on bolts of khaki shipped to the Philippines. Defendant claimed the word indicated a color, although the proof showed it used “Wigan” on khaki of different shades. The khaki sold by defendant under the “Wigan” designation was not manufactured in Wigan, England, and was unrelated to plaintiff’s product.

• Registration of “Wigan” as Part of the Trademark: Upon discovering defendant’s practice, plaintiff caused its trademark to be re-registered in April 1925 (Certificate No. 4807). The new registration was materially identical to the 1905 mark but expressly inserted the word “Wigan” after “Quality,” incorporating the brand name into the registered trade-mark itself.

• Trial Court Findings: The Court of First Instance found for defendant and dismissed the complaint. The Supreme Court noted that the determinative facts were substantially undisputed.

• Unfair Competition: Plaintiff contended that defendant’s use of the word “Wigan” on its khaki was intended to and did misrepresent its goods as those of the plaintiff, thereby passing them off to the public in violation of Section 7 of Act No. 666. Plaintiff argued that the term had acquired a secondary meaning exclusively identifying its product and that the likelihood of consumer deception was the controlling test, regardless of whether dealers were actually misled.

• Trademark Infringement: Plaintiff maintained that its April 1925 trademark registration, which incorporated “Wigan” as an integral part of the registered mark, gave it an exclusive property right in the word. Defendant’s continued use of that identical word on competing goods constituted infringement, even if only a single word from a composite mark was appropriated.

• Damages: Plaintiff sought damages in the amount of ₱15,000 for injury to its business due to defendant’s wrongful acts, or in the alternative, an accounting of profits.

• Descriptive/Geographical Character of “Wigan”: Defendant argued that the word “Wigan” is the name of a town in England and was used in the trade to indicate a color of khaki; consequently, under Section 2 of Act No. 666, it could not be the subject of exclusive appropriation as a trademark because it fell within the prohibition on terms relating to name, quality, description, or geographical origin.

• Absence of Deception: Defendant asserted that its use was open and without any attempt at deception, and that merchants and tailors purchasing from it were not misled. The purchasing agent of the government, according to the dissent, testified to a lack of confusion between the two products.

• No Damage Shown: Defendant argued that plaintiff’s business had shown healthy growth during the relevant period and no actual loss had been proved.

• Unfair Competition: Whether defendant’s use of the word “Wigan” on its khaki constituted unfair competition under Act No. 666, even though the word was not part of plaintiff’s originally registered trademark and defendant claimed it was used as a color descriptor.

• Trademark Infringement: Whether the defendant’s continuing use of “Wigan” after plaintiff’s 1925 registration of the composite trademark incorporating that word amounted to trademark infringement.

• Damages: Whether plaintiff was entitled to recover damages or an accounting of profits given that its sales had increased during the period of defendant’s alleged wrongful acts.

• Unfair Competition: The defendant’s use of “Wigan” constituted unfair competition. The scope of protection under Act No. 666 extends beyond technical trademark infringement to any conduct that passes off one’s goods as those of another. The test focuses on the likelihood of deceiving the casual purchaser, not merely informed dealers. The word “Wigan” had, through plaintiff’s long and exclusive use, acquired a secondary meaning in the Philippine khaki market indicating plaintiff’s quality standard. By stamping the same word on its own khaki, defendant appropriated a term likely to lead consumers to believe they were buying plaintiff’s product. Fraudulent intent could be inferred under the statute from the similarity of the goods and labeling; in this case, the fact that the use began at the request of a Chinese customer who would resell to the public supported an intent to misrepresent.

• Trademark Infringement: Before April 1925, defendant’s use of “Wigan” did not infringe a registered trademark because the word was not yet part of the registered mark. Once the 1925 certificate incorporated “Wigan” into the composite mark, however, defendant’s subsequent use of that term constituted infringement. A geographical or descriptive word used in an artificial sense to denote brand may be validly protected as a trademark once it has acquired a secondary meaning. The rule that a designation relating only to name, quality, or geographical origin cannot be a trademark (Section 2, Act No. 666) does not apply where the word is used arbitrarily and not in its ordinary geographic or descriptive sense. Moreover, the appropriation of a single word from a composite trademark may sufficiently constitute infringement, consistent with the rule in Saxlehner v. Eisner & Mendelson Co.

• Damages: No damages were awarded. Although a legal wrong was established, plaintiff elected to claim damages rather than an accounting of defendant’s profits, as permitted under Act No. 666. The evidence showed that plaintiff’s business grew during the period in question, and the record did not establish any assessable pecuniary loss. Where damages are sought and none are proved, none can be granted.

• Protection of Secondary Meaning — A word that is geographical, descriptive, or otherwise non-distinctive in ordinary usage may acquire legal protection as a trademark or trade identifier when, through long and exclusive use in an arbitrary and artificial sense, it becomes associated in the public mind with the goods of a particular manufacturer. In such a case, a competitor’s use of the same word to identify similar goods may be enjoined as unfair competition or trademark infringement, because the term no longer functions in its primary linguistic sense but as a symbol of source or quality.

• Unfair Competition Defined (Act No. 666) — Unfair competition is a tort of fraud that does not require invasion of a property right in a registered trademark. Any conduct, including the simulation of words, labels, packaging, or other features of appearance, that has the effect of passing off one person’s goods as those of another constitutes unfair competition. Liability attaches where the acts are “reasonably designed to deceive” the public or are “likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer other than the actual manufacturer or dealer.” Fraudulent intent may be inferred from the similarity of the goods and labeling.

• Standard of Deception: Protection of the Casual Purchaser — In determining whether unfair competition exists, the law does not consider only whether knowledgeable merchants or dealers are actually deceived. The paramount concern is the ultimate consumer or casual purchaser “who knows the commodity only by its name.” If the similarity is such that an ordinary buyer asking for the product by name would likely be misled, the conduct is actionable even if intermediate dealers are fully aware of the difference.

• Infringement by Use of Part of a Composite Mark — A defendant may be liable for trademark infringement by appropriating only one word or element of a composite registered mark. It is not necessary that every component of the plaintiff’s mark be copied; the unauthorized use of a distinctive part that is likely to cause confusion is sufficient. (Citing Saxlehner v. Eisner & Mendelson Co., 179 U.S. 20.)

• Election Between Damages and Accounting of Profits — Under Act No. 666, a successful plaintiff in an infringement or unfair competition action may elect between recovering its own damages for injury to business and compelling an accounting of the defendant’s profits derived from the unlawful sales. These remedies are distinct. Where the plaintiff elects to sue for damages and fails to prove any compensable loss, no damages may be awarded, and the court need not analyze the defendant’s profits.

• “Any conduct may be said to constitute unfair competition if the effect is to pass off on the public the goods of one man as the goods of another. It is not necessary that any particular means should be used to this end.” — This passage articulates the broad overarching principle that informs the specific enumeration in Section 7 of Act No. 666 and remains a frequently cited formulation of the essence of unfair competition under Philippine law.

• “The law concerns itself with the casual purchaser who knows the commodity only by its name. In obtaining what he asks for he is entitled to protection against unfair dealing.” — By emphasizing the ordinary consumer rather than the informed merchant, the Court established the relevant test for likelihood of confusion and the policy justification behind the protection of trade symbols that have acquired secondary meaning.

• “Even geographical terms can be used in an arbitrary and artificial sense, and when so used by one manufacturer the improper appropriation of the same term by another may be enjoined as an invasion of trade-mark right. Of course, if the defendant were manufacturing its khaki in the town of ‘Wigan,’ it would be entitled to use that name to indicate the place of manufacture of its goods. But such is not the case here.” — This illustrates the application of the secondary meaning doctrine to a term with a geographical origin, underscoring that the critical inquiry is the sense in which the public understands the word.

• “The misappropriation of this word by the competitor was a violation of the plaintiff’s right. It has been held … that the use of only one of the words constituting a trade-mark may be sufficient to constitute an infringement, and it is not necessary to this end that all of the words comprising the trade-mark should be appropriated.” — The Court adopts the principle of partial infringement, confirming that protection is not limited to exact duplication of a composite mark.

• Saxlehner v. Eisner & Mendelson Co., 179 U.S. 20 (1900) — Followed for the principle that infringement may arise from the unauthorized use of only one word of a composite trademark; it is not essential that every component word be appropriated.

• Barton v. Rex-Oil Co., 40 A.L.R. 424 (3d Cir.) — Followed to support the rule that the law protects the casual purchaser who knows the product only by name, and that it is immaterial that dealers are not deceived.

• Forbes, Munn & Co. v. Ang San To, 43 Phil. 724 — Cited as local precedent for treating a prayer for damages as one for assessment of compensation for business injury, and for the distinction between damages and an accounting of profits under Act No. 666.

• National Biscuit Co. v. Baker, 95 Fed. 135; Eli Lilly & Co. v. Wm. R. Warner & Co., 275 Fed. 752; William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526 — Cited in the Barton excerpt as authorities for protecting the ultimate consumer who identifies goods by their trade name.

• Act No. 666 (Trade-Mark and Unfair Competition Law), Section 2 — Codifies the rule that a designation relating only to name, quality, description, or geographical origin cannot be the subject of a trademark. Applied to exclude protection only where the term is used in its ordinary linguistic sense; held inapplicable where the word “Wigan” was used in an arbitrary, artificial manner and had acquired secondary meaning.

• Act No. 666, Section 7 — Defines unfair competition, making it unlawful to give goods “the general appearance of goods of another manufacturer or dealer, either in the wrapping of the packages … 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.” The provision also permits fraudulent intention to be inferred from similarity. Applied to hold that defendant’s use of “Wigan” on competing khaki was likely to deceive and therefore constituted unfair competition.

Ostrand, Johns, Romualdez, and Villa-Real, JJ., concurred.

• Avanceña, C.J. and Malcolm, J., dissenting — The dissenters would have affirmed the trial court’s dismissal in full. They emphasized that two different trial judges had resolved the factual question against the plaintiff “by a great preponderance of the evidence,” and that these factual findings should be respected on appeal. The dissent noted that American khaki had openly used the word “Wigan” in the Philippine market to designate a color long before plaintiff’s 1925 re-registration, and that plaintiff failed to present even one witness who was actually deceived. Because the word had become common in the trade to describe either a color (American khaki) or a quality (English khaki), the similarity was not deceitful but was merely a case of legitimate competition. The dissent concluded that the suit should be viewed as one of competition, not unfair competition.