Facts:
- Background of the Parties
1.1. Sao Paulo Alpargatas S.A. (SPASA) is the owner and manufacturer of the “Havaianas” footwear brand.
1.2. SPASA is the registered owner of various marks, devises, and logos associated with “Havaianas” in the Philippines.
1.3. Its products are distributed locally by Terry S.A. Inc.
2.1. Kentex Manufacturing Corporation and its president, Ong King Guan, manufacture and distribute footwear under the brand name “Havana.”
2.2. Their warehouses are located in Caloocan and Valenzuela.
- The Initiation of the Dispute
1.1. On August 12, 2010, a letter-complaint was sent by SPASA’s legal counsel (Hechanova Bugay & Vilchez Law Office) to the NBI.
1.2. The complaint requested assistance in investigating and prosecuting parties allegedly engaged in sale and distribution of fake “Havaianas” products.
- Investigation Conducted by the NBI:
2.1. Agent Terrence Agustin, together with market researchers from Intellectual Property Manila, Lea Carmona and Winda San Andres Legaspi, conducted field inquiries.
2.2. The investigation uncovered establishments selling footwear marked either “Havana” or “Havaianas” with designs and logos that closely resembled SPASA’s registered trademarks (“Havaianas Rice Pattern Logo” and “Havaianas Greek Pattern Logo”).
2.3. Evidence collected included observations of delivery trucks loading/unloading products at Kentex’s Caloocan warehouse.
- Issuance and Execution of Search Warrants
1.1. On September 6, 2010, Agent Agustin filed applications for search warrants against the respondents for trademark infringement and unfair competition under Republic Act No. 8293.
1.2. During ex-parte hearings, various samples (both “Havana” and “Havaianas” footwear) and affidavits from the investigation team were presented.
- Court Orders and Seizure:
2.1. The RTC issued Search Warrant Nos. 10-16378 to 81 covering respondents’ premises in Valenzuela and Caloocan.
2.2. The execution of these warrants led to the seizure of various products belonging to the respondents.
- Subsequent Motions and Comments:
3.1. Respondents filed a Motion to Quash the search warrants and for the return of seized goods.
3.2. In support, respondents submitted documentation including a Certificate of Copyright Registration and industrial design registration applications.
3.3. SPASA replied with its own submissions, including multiple Certificates of Registration for the “Havaianas” mark and logos, and it also filed a Petition for Cancellation against the respondents’ industrial design registrations.
- Proceedings in Lower and Appellate Courts
- Regional Trial Court (RTC) Actions:
1.1. In the December 16, 2010 Order, the RTC denied the respondents’ Motion to Quash, finding probable cause based on the similarity of the respondents’ products with SPASA’s trademarks.
1.2. A subsequent Order on February 28, 2011, also denied respondents’ requests, leading to the filing of a Petition for Certiorari before the Court of Appeals (CA).
- Court of Appeals Decision:
2.1. On February 10, 2012, the CA reversed and set aside the RTC’s orders, holding that:
2.1.1. The respondents, as holders of industrial design registrations, had a legitimate right to manufacture and distribute their products.
2.1.2. The issuance of the search warrants must not be used to confiscate a legitimate means of livelihood.
2.1.3. A search warrant is an ancillary remedy and should not impinge on the business operations pending resolution of exclusive ownership disputes.
2.2. The CA’s decision included an order directing the return of the seized properties to the respondents.
2.3. SPASA then filed a motion for reconsideration, which was denied on July 10, 2012.
- Issues Raised in the Petition for Review on Certiorari
- SPASA argued that the CA’s decision was contrary to:
1.1. The record and evidence on file.
1.2. Provisions of the Intellectual Property (IP) Code, including the First-to-File rule and tests on consumer confusion.
1.3. Previous decisions and treaty obligations binding the Philippines.
- Specific contentions included:
2.1. The CA’s undue focus on the respondents’ industrial design registration rather than SPASA’s prior trademark rights.
2.2. The allegation that the respondents’ industrial design registrations lacked novelty and originality compared to SPASA’s longstanding trademark usage.
2.3. The argument that even if industrial design registrations were considered, SPASA’s trademark registrations must prevail.
2.4. The claim that the respondents improperly relied on a copyright registration to justify their continued business operations without causing consumer confusion.
- The primary legal issue was whether the issuance of the subject search warrants was valid given the conflicting intellectual property rights and proceedings.
1.1. In December 2013, the IPO issued Decisions canceling the respondents’ industrial design registrations for “Slipper” and “Sole” on the ground that SPASA’s trademarks (Greek Pattern Logo and Rice Pattern Logo) predated the respondents’ applications and were publicly known.
2.1. On March 28, 2019, SPASA and the respondents (including Ong King Guan, Mary Grace Ching, and Beato Ang) entered into an amicable settlement.
2.2. Key provisions of the Settlement Agreement included:
2.2.1. Recognition that only SPASA and its authorized dealers could sell products bearing the “Havaianas” mark in the Philippines.
2.2.2. Obligations on the part of the respondents to cease selling counterfeit or infringing products.
2.2.3. Provision for joint motions to dismiss pending criminal, civil, or administrative cases, thereby negating the need for continued litigation.
2.2.4. An undertaking by the respondents to provide evidence of any sources of counterfeits.
3.1. SPASA filed a manifestation stating that the settlement made the CA’s decision moot as the substantive dispute had been resolved by the agreement between the parties.
Issues:
- Validity of the Issuance of the Search Warrants
- Was there probable cause to issue the search warrants based on the similarities between the products and trademarks?
- Did the facts support the RTC’s finding that the respondents’ products were confusingly similar to SPASA’s registered marks?
- Interpretation and Application of Intellectual Property Rights
- Should the CA have given primacy to the respondents’ industrial design registrations over SPASA’s earlier trademark registrations?
- How should the “First-to-File” rule and the Dominancy Test be applied in cases of alleged trademark infringement and unfair competition?
- Scope of Remedies Available under the IP Code
- Is the issuance of a search warrant an appropriate remedy, given that it might jeopardize a party’s legitimate right to pursue a livelihood?
- Does reliance on a seemingly valid certificate of industrial design registration negate the existence of probable cause?
- Procedural Issues
- Whether the CA properly addressed the respondents’ argument of engaging in a legitimate business
- Whether the CA improperly dismissed evidence and findings of fact from the RTC proceedings.
- Impact of Subsequent Developments on Mootness
- Given the amicable settlement and the subsequent manifestation by SPASA, has the controversy become moot and academic?
- How does the parol evidence rule affect the enforceability of the Settlement Agreement between the parties?
Ruling:
Ratio: