Case Summary (G.R. No. 213365-66)
Key Dates
Petitioner filed for the PAPERONE trademark on March 22, 1999; registration matured (recorded) in 2003 (dates in the record show February 10, 2003 and February 10/10 February 2003 references). Respondent incorporated and registered with the SEC on March 30/31, 2001 and later registered its business name with DTI. IPO/BLA decision issued November 10, 2011; IPO Director General affirmed with modification; CA reversed the IPO on November 28, 2013 and issued a resolution July 9, 2014; Supreme Court decision reinstating the IPO was rendered in the G.R. Nos. entry (decision reported in 845 Phil. 85 and OG entry dated December 2, 2019).
Applicable Law and Constitutional Basis
Primary statutory basis: Republic Act No. 8293, the Intellectual Property Code (specifically Section 168 on unfair competition). Given the decision date (post-1990), the 1987 Philippine Constitution is the constitutional framework applicable to this decision. Relevant jurisprudence on unfair competition, priority of use, and deference to specialized administrative findings also informed the ruling.
Procedural History
Petitioner filed a complaint before the IPO seeking relief for unfair competition, trademark infringement, and damages. The BLA found respondent liable for unfair competition and awarded injunctive relief and monetary damages (temperate, exemplary, and attorneys’ fees). The IPO Director General affirmed the BLA’s decision but increased attorneys’ fees. Both parties appealed to the CA, which reversed and set aside the IPO decision, finding the essential elements of unfair competition unproven. Petitioner then sought certiorari review before the Supreme Court under Rule 45.
Facts Material to the Dispute
Petitioner alleged that PAPER ONE had been used and promoted internationally, enjoyed goodwill, and that respondent’s adoption of PAPERONE in its corporate name was in bad faith, intended to ride on petitioner’s goodwill, and likely to mislead the public as to source or sponsorship. Respondent countered that it was properly registered with SEC and DTI, denied knowledge of petitioner’s trademark use in the Philippines at the time of incorporation, asserted it did not use the corporate name as a trademark on products, and maintained its products were distinct in presentation, thereby negating confusion.
BLA and IPO Findings of Fact
The BLA found respondent liable for unfair competition, concluding petitioner established prior use of PAPERONE in the Philippines (evidence of distribution via NAPPCO and invoices dating to January 1999) and that respondent had knowledge of petitioner’s activities. The BLA reasoned co-existence of respondent’s corporate name in the same line of business (paper products) would likely cause consumer confusion as to the source of goods and divert sales. The IPO Director General affirmed these findings and increased attorneys’ fees.
Court of Appeals Ruling
The CA reversed the IPO, holding petitioner failed to prove confusing similarity in the general appearance of goods and failed to establish respondent’s intent to deceive or defraud. The CA emphasized differences in presentation and that respondent did not use its corporate name as a mark on its products.
Legal Standard for Unfair Competition
Section 168 of the Intellectual Property Code recognizes a property right in goodwill and proscribes passing off, deception, and acts calculated to pass goods or business for those of the owner of established goodwill. The essential elements of unfair competition are (1) confusing similarity in the general appearance of the goods and (2) intent to deceive the public and defraud a competitor. Confusing similarity can arise from marks themselves or from other external features (packaging, presentation) and may result in product confusion (confusion of goods) or source/business confusion (confusion of business).
Analysis — Confusing Similarity (Court’s Reasoning)
The Supreme Court found that the marks at issue are identical in spelling and pronunciation (PAPER ONE / PAPERONE). Although respondent’s logo differs and it purportedly did not use its corporate name as a product label, the Court emphasized that confusion of business (source/origin) may exist even where product presentation differs. Given both parties operate in the paper industry and the identical verbal element, the Court concluded that use of PAPERONE by respondent in its corporate name would likely deceive an ordinary purchaser into believing the goods originate from the same enterprise or that there is affiliation. The Court credited IPO findings that petitioner established prior use in the Philippines (evidence of earlier transactions and invoices) and observed that priority of adoption is a factual question to be resolved by the IPO, an agency possessing technical expertise.
Analysis — Intent to Deceive and Defraud (Court’s Reasoning)
The Court held that actual fraudulent intent need not be shown; intent may be inferred from the similarity and from circumstances such as respondent’s adoption of an identical name despite prior use by petitioner and knowledge of petitioner’s presence in the market. The IPO found, supported by evidence, that respondent’s incorporators had connections to a distributor that transacted with petitioner, suggesting respondent had awareness of petitioner’s PAPERONE presence prior to its incorporation. The Court concluded that the unexplained choice of an identical name in the same line of business supports an inference of intent to take advantage of petitioner’s goodwill.
Deference to IPO Findings and Standard of Review
The Supreme Court reiterated the doctrine that factual findings of specialized administrative agencies (here, the IPO) receive great weight and are entitled to deference if supported by substantial evidence. Because priority of use and related factual determinations are within IPO’s technical competence, the Court declined to reweigh evidence de novo and reinst
...continue readingCase Syllabus (G.R. No. 213365-66)
Case Citation and Procedural Posture
- Reported at 845 Phil. 85; 115 OG No. 48, 13419 (December 2, 2019), Third Division decision in G.R. Nos. 213365-66, decided December 10, 2018.
- Petition for Review on Certiorari under Rule 45 assailing:
- November 28, 2013 Decision of the Court of Appeals in CA-G.R. SP Nos. 122288 and 122535 (reversing the IPO Director General), and
- July 9, 2014 Resolution of the Court of Appeals.
- Petition filed by Asia Pacific Resources International Holdings, Ltd. (petitioner); respondent is Paperone, Inc.
- Decision of the Supreme Court authored by Justice Gesmundo; concurring separate opinion by Justice Leonen.
- Record references cited from the rollo (petitioner’s petition, annexes, comments, and cited authorities) are repeatedly relied upon in the decision.
Nature of the Case and Reliefs Sought
- Action arose from a complaint for unfair competition, trademark infringement, and damages filed by petitioner against respondent.
- Petitioner sought relief for unfair competition and actual damages (petitioner sought P46,032,569.72 as actual damages).
- The appeal before the Supreme Court concerned only the issues of (1) respondent’s liability for unfair competition and (2) petitioner’s entitlement to actual damages; trademark infringement was expressly noted as not the subject of the present appeal.
Facts Established by the Record
- Petitioner’s business:
- Engaged in production, marketing, and sale of pulp and premium wood-free paper.
- Alleged owner of the well-known trademark PAPER ONE with Certificate of Registration No. 4-1999-01957 issued on September 5, 2003 (rollo pages 22 and 87 also indicate February 10, 2003 as a date of registration in parts of the record).
- Alleged that its PAPER ONE mark enjoyed legal protection internationally and significant goodwill due to aggressive marketing and promotion.
- Respondent’s business and registrations:
- Paperone, Inc. organized and existing since March 30, 2001; registered with the Securities and Exchange Commission (SEC) (SEC registration No. A200104788).
- Business name likewise registered with the Department of Trade and Industry (DTI).
- Business involved paper conversion (manufacture of table napkins, notebooks, intermediate/collegiate writing pads).
- Respondent asserted it did not use its corporate name PAPERONE as a trademark on products; claimed no obligation to secure petitioner's consent to adopt its corporate name; and denied awareness of petitioner’s existence as a foreign corporation not doing business in the Philippines.
- Evidence of petitioner's prior use in the Philippines:
- Petitioner presented evidence of use of the label PaperOne on paper products in the Philippines earlier than its trademark application in 1999.
- Documentary evidence included a transaction (Invoice No. LCA9812133) dated 22 January 1999 between petitioner (APRIL) and National Paper Products & Printing Corporation (NAPPCO), and other exhibits including distribution/marketing engagement with JND International Corporation and attempts/communications regarding exclusive distribution in January 2000.
- The BLA/IPO found that the fact of earlier use was not disputed by respondent and that some incorporators of NAPPCO were also incorporators of Paper One, Inc., indicating knowledge.
Parties’ Contentions
- Petitioner’s contentions:
- PAPER ONE is a well-known trademark with registered rights.
- Respondent’s adoption/use of PAPERONE in its corporate name was in bad faith, intended to ride on petitioner’s goodwill, and calculated to mislead the public into believing respondent’s goods were manufactured, licensed, or sponsored by petitioner.
- Petitioner sought monetary relief including P46,032,569.72 in actual damages.
- Respondent’s contentions:
- No obligation to obtain petitioner’s consent to adopt corporate name; DTI and SEC registrations permit use.
- Denied awareness of petitioner and claimed petitioner was a foreign corporation not doing business in the Philippines.
- Claimed its business and products differ (paper conversion products rather than petitioner’s products) and that respondent did not use PAPERONE on its products; thus, public confusion was unlikely.
Decisions Below: IPO/BLA Findings and Awards
- Bureau of Legal Affairs (BLA), Intellectual Property Office initially found respondent liable for unfair competition.
- Ordered respondent to cease and desist from using PAPERONE in its corporate name.
- Awarded petitioner P300,000.00 as temperate damages; P200,000.00 as exemplary damages; and P100,000.00 as attorney’s fees.
- BLA reasoning: Petitioner first used PAPER ONE in 1999; PAPERONE had become a symbol of goodwill; respondent’s use was to benefit from petitioner’s established goodwill.
- IPO Director General reviewed and affirmed the BLA decision with modification:
- Increased attorney’s fees award to P300,000.00.
- IPO Director General sustained the finding that petitioner established prior use of PAPERONE for paper products in the Philippines and that respondent knew of petitioner’s existence prior to respondent’s incorporation.
Court of Appeals Ruling (Reversed by the Supreme Court)
- The Court of Appeals reversed and set aside the IPO Director General’s decision, holding respondent not liable for unfair competition.
- CA held there was no confusing similarity in the general appearance of the goods of both parties.
- CA found that petitioner failed to establish, by substantial evidence, that respondent intended to deceive the public or defraud petitioner; hence the essential elements of unfair competition were not present.
Issues Framed Before the Supreme Court
- The Supreme Court identified the sole issues to be resolved as:
- Whether respondent is liable for unfair competition.
- Whether petitioner is entitled to actual damages.
Governing Statute and Legal Elements
- The Court relied on Section 168 of Republic Act No. 8293 (Intellectual Property Code), which:
- Re