Title
Diaz vs. People
Case
G.R. No. 180677
Decision Date
Feb 18, 2013
Diaz acquitted of trademark infringement; Supreme Court found no likelihood of confusion between his "LS Jeans Tailoring" and Levi’s trademarks, citing distinct marks and market segments.
trademark infringement
lack of evidence
likelihood of confusion

Case Summary (G.R. No. 180677)

Factual Background

The informations charged Diaz with acts committed “on or about August 28, 1998, and on dates prior thereto,” in Las Pinas City, involving the reproduction, counterfeiting, copying, and colorable imitation of registered Levis trademarks or their dominant features. The charged marks and dominant features included the arcuate design, the two-horse brand, the two-horse patch, the two-horse label with patterned arcuate design, the tab and composite arcuate/tab/two horse patch, and related features allegedly used without the consent, permit, or authority of the registered owner. The informations further alleged that the sale, offer for sale, manufacture, distribution, and preparatory steps for such counterfeit patches and jeans were “likely to cause confusion, mistake, and/or deceived the general consuming public,” thereby depriving Levis of exclusive rights over its trademarks and legitimate trade.

Evidence Presented in the Trial Court

Levi Strauss (Phils.), Inc. presented evidence that Levi Strauss and Company was engaged in the apparel business and owned trademarks and designs used on Levi’s jeans, specifically Levis 501 and the asserted dominant features (including the described leather patch with two horses pulling a pair of pants, the arcuate pattern with the inscription LEVI STRAUSS & CO, the arcuate design on the back pockets, and the tab on the structural seam of the right back pocket). The Court noted that these trademarks were registered in the Philippine Patent Office in the 1970s, 1980s, and early 1990s. The Court also recognized that Levi Strauss Philippines, Inc. was a licensee of the Levi Strauss company.

According to the prosecution’s evidence, upon receiving information that Diaz was selling counterfeit Levis 501 jeans in tailoring shops located in Almanza and Talon, Las Pinas City, Levi Strauss Philippines, Inc. engaged a private investigation group to verify the report. Surveillance and purchases from the shops showed that the jeans obtained were counterfeit or imitations of Levis 501. The complainant then sought NBI assistance for applications for search warrants. After the warrants were issued, NBI agents searched Diaz’s shops and seized several fake Levis 501 jeans.

The prosecution maintained that Levi Strauss Philippines, Inc. did not authorize the making and selling of the seized jeans. It asserted that each seized pair bore imitations of the registered Levis trademarks, including the arcuate design, the tab, and the two-horse leather patch. It also claimed that the seized jeans could be mistaken for original Levis 501 jeans due to the placement of those features.

Diaz did not deny that he owned the shops that were searched. He denied criminal liability and disclaimed that he manufactured Levi’s jeans. He asserted that he used the label LS Jeans Tailoring on the jeans he produced and sold, and that the LS Jeans Tailoring label was registered with the Intellectual Property Office. Diaz stated that his shops received clothes for sewing or repair and offered made-to-order jeans whose styles or designs were done according to customer instructions. He emphasized that since the shops began operating in 1992, he had received no notice or warning regarding his operations. Diaz further argued that the jeans he produced were easily recognizable because of the label LS Jeans Tailoring, the names of customers placed inside the pockets, and the presence of an LSJT red tab. He also asserted that the leather patch on his jeans had two buffaloes rather than two horses, and that his overall trade dress differed from the complainant’s products.

Trial Court Proceedings and Conviction

After the consolidated joint trial, the RTC found Diaz guilty beyond reasonable doubt of two counts of trademark infringement under Section 155 in relation to Section 170 of R.A. No. 8293, as charged in Criminal Case Nos. 00-0318 and 00-0319. The RTC sentenced Diaz in each case to imprisonment of two (2) years of prision correcional as minimum up to five (5) years of prision correcional as maximum, and imposed a fine of P50,000.00 per case, with subsidiary imprisonment in case of insolvency. It further ordered him to pay Levis Strauss (Phils.), Inc. exemplary damages of P50,000.00, and attorneys’ fees of P222,000.00, with costs de oficio.

Appeal and the CA’s Dismissal for Procedural Default

Diaz appealed to the CA, but the CA dismissed the appeal on July 17, 2007 for the belated filing of the appellant’s brief, and later denied his motion for reconsideration on November 22, 2007. The Supreme Court first addressed whether the CA properly dismissed the appeal for late filing. It considered Section 7, Rule 44 of the Rules of Court, which generally required the appellant to file the appellant’s brief in the CA within forty-five (45) days from receipt of notice that all evidence was attached to the record, along with the required copies and proof of service. It likewise applied Section 1(e), Rule 50, under which the CA “may” dismiss an appeal either motu proprio or on motion of the appellee if the appellant failed to serve and file the required number of copies within the time provided.

The Supreme Court held that the use of the word “may” in Rule 50, Section 1(e) indicated that dismissal for late filing was discretionary rather than mandatory. Even so, it found that, on the timeline, Diaz’s counsel repeatedly sought extensions and yet filed the brief only on May 28, 2007, which was eighteen (18) days beyond the third extension period granted by the CA. The Supreme Court acknowledged that the late filing could warrant outright rejection, and it held Diaz was generally bound by the acts of counsel.

The Supreme Court’s Decision to Review the Merits

Despite recognizing the procedural default, the Supreme Court stressed that Diaz’s appeal involved convictions with serious implications for liberty and personal fortune. It held that the interests of justice required looking beyond the technicalities and reviewing the merits because the records were already before the Supreme Court in a criminal appeal. Accordingly, the Court set aside the CA’s rejection of Diaz’s appeal and resolved the issue of guilt on the merits without remanding to the CA.

Legal Standards Governing Trademark Infringement

The Court recited the offense definition under Section 155 of R.A. No. 8293, particularly that any person who, without the consent of the owner of the registered mark, uses in commerce a reproduction, counterfeit, copy, or colorable imitation, or applies such imitation to goods and advertisements intended for use in commerce, is liable when the use is likely to cause confusion, cause mistake, or deceive. It emphasized that likelihood of confusion was the gravamen of the offense of trademark infringement.

The Court identified elements that required, among others, that the trademark infringed be registered; that the infringing mark be reproduced, counterfeited, copied, or colorably imitated; that the use be in connection with sale or advertising; that the use be likely to cause confusion or deceive purchasers as to goods or origin; and that it be without the trademark owner’s consent.

It further explained that to determine likelihood of confusion, the jurisprudence recognized two tests: the dominancy test and the holistic test. Under the dominancy test, infringement could be found if the competing mark contained the essential features of another. Under the holistic test, the Court considered the entirety of the marks, including labels and packaging, in assessing confusing similarity. The Supreme Court then relied on its earlier guidance that no rigid rules could govern trademark cases because each must be decided on its own facts, and that precedents should be applied only if sufficiently in point. It treated the holistic test as applicable because the criminal cases involved alleged trademark infringement in relation to jeans products, echoing the approach used in Emerald Garment Manufacturing Corporation v. Court of Appeals.

Application of the Likelihood-of-Confusion Tests

Using the holistic approach, the Court considered the competing marks as a whole. It noted that Levis 501 jeans were popular in the Philippines and were understood by the consuming public to be foreign-branded and relatively expensive. It reasoned that such jeans were available primarily in malls or boutiques as ready-to-wear items, not through tailoring shops like Diaz’s, and not as made-to-order garments. Based on these circumstances, the Court held that the consuming public could readily discern whether jeans were original or fake, or were manufactured by other brands.

The Court also treated as relevant, consistent with Emerald Garments, that jeans were not inexpensive household items, and that their cost predisposed buyers to be more cautious and discriminating. It likewise recognized that the average consumer ordinarily purchases by brand and therefore is more familiar with preferences such as Levis, rather than purchasing generically.

On the specific facts, the Court observed that Diaz used the trademark LS JEANS TAILORING in his jeans business and found that Diaz’s trademark was visually and aurally different from the LEVI STRAUSS & CO appearing on the patch of original Levis 501 jeans. It concluded that the word LS could not plausibly be confused as a derivative of LEVI STRAUSS because LS was connected with TAILORING, which suggested the jeans came from Diaz’s tailoring shops rather than from malls or boutiques selling original Levis 501 jeans. The Court also found other differences perceptible to consumers, including Diaz’s claim that the animal in the patch was a buffalo rather than two horses, and the distinction between Diaz’s red tab indicating LSJT and the complainant’s tab indicating LEVIS.

The Court additionally took note of the channels of trade and customer classes. It accepted that Levis and Diaz catered to different markets, with Levis pr

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