G.R. No. 100098 - Emerald Garment Manufacturing Corp. vs. Court of Appeals

Case Summary (G.R. No. 100098)

Factual Background

Emerald Garment Manufacturing Corporation adopted and used the mark “STYLISTIC MR. LEE” in connection with clothing, alleging use since May 1, 1975. H.D. Lee Company, Inc. alleged prior registration and use in the Philippines of marks incorporating “LEE” and filed a Petition for Cancellation of Emerald’s Supplemental Register certificate SR No. 5054 on September 18, 1981. Emerald applied for registration of “STYLISTIC MR. LEE” on the Principal Register and published that application on February 20, 1984, prompting a notice of opposition by H.D. Lee on July 27, 1984.

Proceedings before the BPTTT

The BPTTT docketed the cancellation as Inter Partes Case No. 1558 and the opposition as Inter Partes Case No. 1860 and consolidated them on motion because a common question of law existed. The Director of Patents conducted hearings and received evidence including registration certificates, vouchers of advertising expenses, licensing agreements, and sales invoices.

Decision of the Director of Patents

The Director of Patents rendered a decision on July 19, 1988 granting private respondent’s petition for cancellation and opposition to Emerald’s registration. The Director found H.D. Lee Company, Inc. to be the prior registrant and user of the mark “LEE” in the Philippines and, applying the test of dominancy, concluded that the word “Lee” was the dominant element of Emerald’s mark and would likely cause confusion among purchasers.

Interim Relief and Appeal to the Court of Appeals

Emerald appealed to the Court of Appeals on August 3, 1988 and sought a stay of execution before the BPTTT. The BPTTT granted a limited stay on September 23, 1988 permitting only disposal of existing stock and prohibiting further production of goods bearing “STYLISTIC MR. LEE” pending appeal. The appeal proceeded to the Court of Appeals where the principal issue remained the likelihood of confusion between the competing marks.

Court of Appeals Decision

On November 29, 1990 the Court of Appeals affirmed the Director of Patents in all respects. The Court applied the dominancy test, found the word “LEE” to be the most prominent and distinctive feature of Emerald’s label, and held that ordinary purchasers would be guided by that striking mark rather than by minor letterings such as “STYLISTIC.” The Court emphasized similarity in dominant features, the parties’ engagement in the same trade, and the appellee’s prior registrations including composite marks such as “LEE RIDERS,” “LEESURES,” and “LEE-LEENS” as reinforcing the likelihood that the public would confuse Emerald’s goods with those of H.D. Lee.

Motion for Reconsideration and Denial

Emerald filed a motion for reconsideration on December 19, 1990, raising new defenses including laches and estoppel and alleging that H.D. Lee had appropriated the style of Emerald’s mark. The Court of Appeals denied reconsideration on May 17, 1991, holding that defenses not raised below could not be asserted for the first time on appeal and that the motion impermissibly changed the litigating theory without showing justification for the delay.

Issues Presented to the Supreme Court

Emerald assailed the Court of Appeals decision on three principal grounds: that H.D. Lee had imitated Emerald’s mark by registering a similar mark after the Director’s decision; that the defense of estoppel by laches need not be limited to the BPTTT proceedings and could be raised on appeal; and that H.D. Lee failed to prove actual commercial use of its “LEE” mark in the Philippines before filing its application for registration. Emerald also reiterated that its mark was not confusingly similar to H.D. Lee’s marks and that its Supplemental Register certificate constituted prima facie evidence of good faith.

Parties’ Contentions before the Supreme Court

Emerald Garment Manufacturing Corporation contended that it was the prior user of “STYLISTIC MR. LEE” since 1975, that H.D. Lee delayed suit and was estopped by laches, and that H.D. Lee failed to prove prior commercial use in the Philippines. H.D. Lee Company, Inc. maintained that it was the prior registrant and user of “LEE,” that Emerald’s mark contained the dominant element “LEE” which would likely mislead the buying public, and that cancellation and opposition were timely and proper.

Supreme Court’s Disposition

The Supreme Court reversed and set aside the decisions of the Director of Patents and the Court of Appeals. The Court concluded that the evidence did not establish that Emerald’s mark was confusingly similar to H.D. Lee’s marks and that H.D. Lee had not proved prior actual commercial use of “LEE” in the Philippines sufficient to establish ownership entitled to exclusive protection. The questioned decision and resolution were therefore reversed and set aside.

Legal Basis and Reasoning on Confusing Similarity

The Court reviewed the statutory definition of infringement in Sec. 22, R.A. No. 166, and reiterated that likelihood of confusion is a relative concept to be resolved according to the peculiar facts of each case. The Court discussed the two recognized tests—the dominancy test and the holistic test—and held that trademarks must be considered in their entirety rather than piecemeal. Applying these principles, the Court concluded that Emerald’s mark “STYLISTIC MR. LEE,” taken as a whole, was not a colorable imitation of H.D. Lee’s “LEE” marks.

Analysis of Prior Use and Evidentiary Findings

The Court emphasized that ownership of a trademark under Secs. 2 and 2-A, R.A. No. 166 depends on actual use in commerce in the Philippines and that registration in the supplemental register does not carry the same prima facie evidentiary weight as registration in the principal register under Sec. 20. The Court found that H.D. Lee relied chiefly on registration certificates and on testimony and vouchers that failed to establish commercial use in the Philippines prior to Emerald’s demonstrated sales and invoices beginning in 1975. The Court therefore found that H.D. Lee had not established the requisite prior use to displace Emerald’s claim.

Application of Tests and the Ordinary Purchaser Standard

The Court distinguished the present goods—jeans and related apparel—from low-priced mass consumer items and held that the ordinary purchaser of such goods is an ordinarily intelligent buyer who exercises a degree of care. The Court reasoned that the cost, buyer familiarity with brands, and discernible differences in overall presentation reduced the likelihood of confusion. The Court thus declined to apply the dominancy test in a manner that dissected the composite mark into isolated elements and instead considered the overall impression of “STYLISTIC MR. LEE.”

E

Case Syllabus (G.R. No. 100098)

Parties and Posture

Emerald Garment Manufacturing Corporation was the petitioner seeking annulment of the Court of Appeals decision and resolution under Rule 45 of the Revised Rules of Court.
H.D. Lee Co., Inc. was the private respondent that instituted cancellation and opposition proceedings before the Bureau of Patents, Trademarks and Technology Transfer.
The Bureau of Patents, Trademarks and Technology Transfer and the Court of Appeals were respondents in their adjudicative capacities for their actions upholding cancellation and opposition decisions.
The appeal to the Supreme Court challenged the Court of Appeals decision dated 29 November 1990 and its resolution dated 17 May 1991 rejecting a motion for reconsideration.

Key Facts

Petitioner obtained Certificate of Registration SR No. 5054 for the trademark "STYLISTIC MR. LEE" in the Supplemental Register, published and issued on 27 October 1980.
Private respondent filed a Petition for Cancellation of SR No. 5054 on 18 September 1981, alleging confusing similarity to its prior "LEE" trademarks and invoking Sec. 37 of R.A. No. 166 and Art. VIII of the Paris Convention.
Petitioner filed an application for registration of "STYLISTIC MR. LEE" in the Principal Register, published on 20 February 1984, and private respondent timely filed a notice of opposition on 27 July 1984.
The Director of Patents consolidated Inter Partes Cases Nos. 1558 and 1860 on 21 June 1985 and subsequently rendered a decision on 19 July 1988 cancelling petitioner's registration and sustaining the opposition.
Petitioner filed an appeal to the Court of Appeals and a motion to stay execution, and the BPTTT issued Resolution No. 88-33 on 23 September 1988 staying execution under express conditions.

Procedural History

Inter Partes Case No. 1558 arose from private respondent's 1981 cancellation petition against SR No. 5054.
Inter Partes Case No. 1860 arose from private respondent's 1984 opposition to petitioner's Principal Register application.
The Director of Patents decided in favor of private respondent on 19 July 1988 and the BPTTT stayed execution on specified terms on 23 September 1988.
The Court of Appeals affirmed the Director of Patents in a decision promulgated on 29 November 1990 and denied petitioner’s motion for reconsideration by resolution dated 17 May 1991.
Petitioner filed a petition for review on certiorari under Rule 45 before the Supreme Court, which decided the case.

Issues Presented

Whether petitioner's trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's "LEE" trademarks.
Whether private respondent was estopped by laches or otherwise barred from seeking cancellation or opposition given petitioner's claimed prior use since 1 May 1975.
Whether private respondent proved prior actual commercial use of the "LEE" mark in the Philippines before filing for registration.

Parties' Contentions

Petitioner contended that its mark is entirely different, that it was the prior user since 1975, and that registration in the Supplemental Register was prima facie evidence of good faith and ownership.
Petitioner further argued that private respondent was estopped by laches under Sec. 9-A of R.A. No. 166 for belatedly asserting rights.
Private respondent maintained that the dominant feature "LEE" in petitioner's mark was confusingly similar to its prior registrations and that petitioner could not raise new defenses for the first time on appeal.

Statutory Framework

Sec. 19-A, R.A. No. 166 provides that marks in the Supplemental Register are not subject to opposition until publication on registration in the Official Gazette and authorizes cancellation at any time if registrant was not entitled or mark was not used.
Sec. 9-A, R.A. No. 166 allows equitable principles such as laches and estoppel to be considered in inter partes proceedings before the pate