Philip Morris, Inc. vs. Fortune Tobacco Corporation

A foreign corporation’s Philippine trademark registration, unaccompanied by proof of actual commercial use of the mark in the country, confers only standing to sue for infringement, not entitlement to the substantive protection of exclusive rights; actual use remains the “perfecting ingredient” of trademark ownership, and without it the statutory elements of infringement cannot be satisfied.

Petitioners Philip Morris, Inc. (Virginia, U.S.A.), Benson & Hedges (Canada), Inc., and Fabriques de Tabac Reunies, S.A. (Switzerland, now Philip Morris Products S.A.) each held Philippine registrations for cigarette trademarks: “MARK VII” (Certificate No. 18723, issued 1973), “MARK TEN” (Certificate No. 11147), and “LARK” (assigned under Certificate No. 19053). Respondent Fortune Tobacco Corporation, a Philippine company, manufactured and sold cigarettes under the brand “MARK.” The trademarks of both sides used the word “MARK,” with petitioners adding numerals or a phonetic variant. The dispute emerged against the backdrop of the Philippines’ accession to the Paris Convention for the Protection of Industrial Property and the pre-Intellectual Property Code regime of Republic Act No. 166, as amended.

• The Parties and Their Marks: Petitioners Philip Morris, Inc. (U.S.A.), Benson & Hedges (Canada), Inc., and Fabriques de Tabac Reunies, S.A. (Switzerland) are foreign corporations not licensed to do business in the Philippines. They owned Philippine trademark registrations for “MARK VII” (Reg. No. 18723), “MARK TEN” (Reg. No. 11147), and “LARK” (Reg. No. 19053, assigned), all used on cigarettes. Respondent Fortune Tobacco Corporation is a Philippine company manufacturing and selling cigarettes under the mark “MARK.”

• Filing of the Infringement Suit: Alleging that respondent’s “MARK” was identical or confusingly similar to their registered marks and that respondent acted in bad faith, petitioners filed a complaint for infringement and damages on August 18, 1982. They prayed for a permanent injunction and invoked the Paris Convention, asserting that foreign nationals from Union countries enjoy the same protection as Philippine nationals without needing a license to do business locally.

• Trial Court’s Findings: The RTC denied preliminary injunction. After trial, it dismissed the complaint. It found that petitioners failed to present evidence that their home countries granted reciprocal privileges to Philippine corporations, thus barring the suit under Section 133 of the Corporation Code. On the merits, it held that the words “MARK,” “TEN,” “LARK,” and the Roman numeral “VII,” alone or combined, did not distinctly point to petitioners as the origin of the goods; no secondary meaning was shown; and no witness or publication attested to local consumer recognition. The trial court saw no likelihood of confusion and declined to award damages.

• Appellate Court’s Findings: The CA recognized petitioners’ capacity to sue under Section 21-A of R.A. No. 166 and the Paris Convention but found that petitioners had admitted not doing business in the country and failed to prove actual local use—no sales invoices, advertisements in Philippine periodicals, or evidence that the marks were well-known locally were presented. The CA held that the competing marks, viewed in their entirety, were sufficiently dissimilar and that the ordinary cigarette purchaser would not be confused. Infringement was not established, and the trial court’s dismissal was affirmed.

• Standing to Sue and Protection: Petitioners argued that as corporate nationals of Paris Union member-countries, they could sue for infringement in Philippine courts and were entitled to protection of their registered marks without obtaining a local business license and without actually doing business, pursuant to Section 21-A of R.A. No. 166 and Article 2 of the Paris Convention. They maintained that registration alone evidenced actual use: “MARK TEN” and “LARK” were registered on the basis of a two-month pre-registration use under Sections 2-A and 5(a), while “MARK VII” was registered under Section 37, which does not require an allegation of prior use.

• Actual Use Through Importers and Distributors: Petitioners contended that even if they were not directly doing business in the Philippines, their cigarettes were available and sold locally through importers and distributors, relying on Converse Rubber Corporation v. Universal Rubber Products, Inc. to assert that goodwill could be acquired without direct local operations.

• Well-Known Marks Under IP Code and TRIPS: Petitioners further asserted that their marks, having acquired fame through international promotion and advertising, deserved protection without proof of actual local use, invoking the Philippines’ adherence to the TRIPS Agreement and the enactment of the Intellectual Property Code (R.A. No. 8293).

• Infringement and Likelihood of Confusion: On the merits, petitioners insisted that respondent’s “MARK” was confusingly or deceptively similar to their “MARK VII,” “MARK TEN,” and “LARK.” They pressed for application of the dominancy test, under which the common predominant feature “MARK” would cause confusion as to source or origin. They argued that Section 22 of R.A. No. 166 did not require prior actual use; mere registration and confusing similarity sufficed for liability.

• Procedural Objection — Questions of Fact: Respondent objected that the petition improperly raised questions of fact, which are not reviewable under Rule 45.

• Commonality and Distinctiveness of “MARK”: Respondent argued that “MARK” is a common word that cannot particularly identify petitioners’ products and that no secondary meaning had been acquired in the Philippines.

• Absence of Likelihood of Confusion: Respondent maintained that the overall appearance of the respective cigarette packages and marks precluded confusion; the ordinary cigarette buyer, being brand-conscious and discriminating, would not mistake respondent’s “MARK” for petitioners’ brands.

• Lack of Actual Use and Well-Known Status: Respondent pointed to petitioners’ judicial admission that they were not doing business in the country and the total absence of evidence of local advertising or sales, which negated both the claim of actual use and any assertion that the marks were well-known in the Philippines.

• Entitlement to Trademark Protection: Whether foreign corporate registrants of Philippine trademarks may enforce exclusive rights and obtain protection against infringement in the absence of proof of actual commercial use of their marks in the country.

• Requirement of Actual Use: Whether actual use of a trademark in local commerce is an indispensable element of a successful infringement claim under R.A. No. 166, as amended.

• Effect of the Paris Convention and Reciprocity: Whether compliance with the reciprocity provision of Section 21-A and the Paris Convention dispenses with the statutory requirement of actual use in the Philippines.

• Likelihood of Confusion: Whether respondent’s use of “MARK” on cigarettes likely causes confusion or deception vis-à-vis petitioners’ registered marks “MARK VII,” “MARK TEN,” and “LARK,” applying both the dominancy and holistic tests.

• Applicability of IP Code and TRIPS Agreement: Whether the Intellectual Property Code and the TRIPS Agreement, which afford protection to well-known marks without requiring local use, apply retroactively to an infringement suit filed in 1982.

• Entitlement to Trademark Protection: Philippine registration alone does not vest an absolute right in a trademark. The certificates of registration constitute only prima facie evidence of ownership; that presumption was rebutted by petitioners’ admission that they did not do business in the Philippines. Trademark ownership is a creation of use; registration is a mere administrative confirmation, while actual use is the perfecting ingredient. Without proof of actual local commercial use, petitioners could not claim exclusive ownership or entitlement to protection, even though they had standing to sue.

• Requirement of Actual Use: Actual use of the trademark in Philippine commerce is a prerequisite for obtaining redress in an infringement suit. Citing Mighty Corporation v. E & J Gallo Winery, the Court enumerated the essential elements of infringement under R.A. No. 166: (a) a trademark actually used in commerce in the Philippines and registered; (b) use by another likely to cause confusion; (c) use on identical or similar goods; and (d) use without consent. Because petitioners failed to prove the very first element—actual local use—the infringement claim necessarily failed.

• Effect of the Paris Convention and Reciprocity: Although the Philippines, as a signatory to the Paris Convention, is obliged to accord foreign nationals treatment comparable to that given its own citizens, such protection is subject to the limitations of Philippine law. Under the incorporation doctrine, rules of international law are given a standing equal, not superior, to national legislative enactments. Sections 2 and 2-A of R.A. No. 166 explicitly require actual use in local commerce before a mark may be registered and ownership acquired. The Paris Convention does not override this domestic statutory command, and the reciprocity mechanism under Section 21-A concerns only the capacity to sue, not the substantive requisites of protection.

• Likelihood of Confusion: Neither the holistic nor the dominancy test produced a finding of confusing similarity. Under the holistic test, a comparison of the competing marks as they appear on their respective products—labels, packaging, and overall get-up—revealed striking dissimilarities sufficient to warn any purchaser that the goods originate from different sources. Under the dominancy test, the word “MARK,” whether standing alone or paired with “TEN” or the Roman numeral “VII,” did not distinctively point to petitioners as the source of the cigarettes. The “ordinary purchaser” of cigarettes is not the unwary customer but one accustomed to buying and familiar with the product; such a buyer is discriminating and unlikely to mistake respondent’s “MARK” for petitioners’ brands. The total absence of local commercial exposure of petitioners’ marks eliminated any possibility of confusion among the Philippine public.

• Applicability of IP Code and TRIPS Agreement: The Intellectual Property Code (R.A. No. 8293) took effect only on January 1, 1998, and the TRIPS Agreement became effective in the Philippines on December 16, 1994. The complaint was filed in 1982 and tried under R.A. No. 166. Neither the IP Code nor the TRIPS Agreement contains retroactive application provisions; hence, they were inapplicable to the case.

• Actual Use as Perfecting Ingredient — Trademark ownership is a creation of use; registration under the law is merely an administrative confirmation of an existing right, while actual use of the mark in commerce is the act that perfects and completes that right. A certificate of registration, without proof of use, raises only a prima facie presumption of ownership that may be overcome by contrary evidence, such as an admission of non-use. (Applied to bar petitioners from claiming an exclusive right to their registered marks.)

• Incorporation Doctrine and Equality of International Law — Rules of international law, once incorporated into domestic law through treaty accession, operate with a standing equal, not superior, to national legislative enactments. Where a municipal statute imposes a specific requirement—such as actual use of a trademark—an international convention like the Paris Convention cannot supplant it in proceedings before a domestic tribunal. (Applied to hold that the Paris Convention does not dispense with the actual-use mandate of R.A. No. 166.)

• Holistic and Dominancy Tests in Infringement — Two tests determine confusing similarity: (a) the dominancy test focuses on the prevalent features of the competing marks that might cause confusion or deception; (b) the holistic test considers the entirety of the marks as applied to the products, including labels and packaging. Both may be used, but the peculiar circumstances of each case dictate the appropriate approach. (The holistic test was applied to find the marks dissimilar; the dominancy test was also considered and yielded no confusion.)

• Ordinary Purchaser Standard — The ordinary purchaser is not a completely unwary customer but an ordinarily intelligent buyer accustomed to purchasing the class of goods in question. For cigarettes, the ordinary buyer is particularly brand-conscious and discriminating, reducing the likelihood of confusion. (Applied to negate confusion between “MARK” and petitioners’ marks.)

• Elements of Trademark Infringement under R.A. No. 166 — Infringement requires: (a) a trademark actually used in Philippine commerce and registered; (b) use by another in connection with the sale, offering for sale, or advertising of goods in a manner likely to cause confusion, mistake, or deception as to source or origin; (c) use on identical or similar goods; and (d) use without consent of the registrant or assignee. (Petitioners’ failure to establish the first element proved fatal.)

• “trademark is a creation of use and therefore actual use is a pre-requisite to exclusive ownership; registration is only an administrative confirmation of the existence of the right of ownership of the mark, but does not perfect such right; actual use thereof is the perfecting ingredient.” — Defines the foundational relationship between use and registration in Philippine trademark law.

• “Under the doctrine of incorporation as applied in most countries, rules of International Law are given a standing equal, not superior, to national legislative enactments.” — Clarifies the hierarchy between treaty obligations and domestic statutes in municipal litigation.

• “The general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade and giving the attention such purchasers usually give in buying that class of goods is the touchstone.” — States the controlling standard for assessing likelihood of confusion.

• “the ‘ordinary purchaser’ in this case means ‘one accustomed to buy, and therefore to some extent familiar with, the goods in question.’” — Adapts the ordinary-purchaser test to the specific characteristics of the cigarette market.

• Philip Morris, Inc. v. Court of Appeals, G.R. No. 91332, July 16, 1993 — The prior declaratory relief case between the same principal parties. The Supreme Court had already ruled that foreign registrants may have personality to sue but must prove actual local use to be entitled to trademark protection. This precedent was controlling.

• Emerald Garment Mfg. Corp. v. Court of Appeals, G.R. No. 100098, December 29, 1995 — Reiterated the supremacy of the actual-use requirement over Paris Convention provisions, emphasizing that a foreign corporation’s capacity to sue does not equate to an exclusive right in the absence of commercial use. Followed.

• Mighty Corporation v. E & J Gallo Winery, G.R. No. 154342, July 14, 2004 — Enumerated the elements of trademark infringement under R.A. No. 166, including the requirement of actual use in commerce in the Philippines. Applied as the framework for analyzing infringement.

• Converse Rubber Corporation v. Universal Rubber Products, Inc., G.R. No. L-27906, January 8, 1987 — Distinguished. There, the foreign trademark owner presented evidence of actual sales and local goodwill; here, no comparable proof existed.

• Shangri-La International Hotel Management, Ltd. v. Development Group of Companies, Inc., G.R. No. 159938, March 31, 2006 — Reiterated that trademark is a creation of use and that actual use perfects ownership. Cited as controlling authority on the nature of trademark rights.

• Leviton Industries v. Salvador, G.R. No. L-40163, June 19, 1982 and Puma Sportschufabriken Rudolf Dassler, K.G. v. Intermediate Appellate Court, G.R. No. 75067, February 26, 1988 — Addressed the reciprocity requirement under Section 21-A; held that an allegation of suit under the Paris Convention suffices to satisfy the reciprocity condition. Referenced in passing on the issue of standing.

• Sections 2 and 2-A, R.A. No. 166 (Trademark Law, as amended) — Mandate that trademarks must be actually in use in local commerce for at least two months before filing an application for registration, and that ownership is acquired by actual use. Applied to defeat petitioners’ claim of protection absent proof of such use.

• Section 21-A, R.A. No. 166 — Allows foreign corporations to sue for infringement without a Philippine business license, provided the foreign country grants reciprocal privileges. Basis for petitioners’ standing but not for substantive protection.

• Section 22, R.A. No. 166 — Defines trademark infringement. The provision’s elements, as elaborated in Mighty Corporation, were not satisfied because actual use was unproven.

• Section 20, R.A. No. 166 — Provides that a certificate of registration is prima facie evidence of validity, ownership, and the exclusive right to use. Applied to hold that the presumption had been rebutted.

• Section 37, R.A. No. 166 — Governs the rights of foreign registrants from convention countries; held not to excuse the actual-use requirement.

• Article 2, Paris Convention for the Protection of Industrial Property — Grants foreign nationals the same protection and remedies as nationals, subject to compliance with domestic conditions and formalities. Interpreted to require compliance with the actual-use mandate of Philippine law.

• Article 6bis, Paris Convention — Obligates member-states to protect well-known marks. Held inapplicable because petitioners failed to prove that their marks were well-known in the Philippines.

• Intellectual Property Code (R.A. No. 8293) and TRIPS Agreement — Held inapplicable for lack of retroactivity; the governing law remained R.A. No. 166 as amended.

Associate Justices Reynato S. Puno (Chairperson), Angelina Sandoval-Gutierrez, Renato C. Corona, and Adolfo S. Azcuna concurred. No separate opinions were filed.