G.R. No. 234457 - Abel vs. Rule

Case Summary (G.R. No. 234457)

Petitioner

Emzee Foods, Inc. — defendant below — marketed and sold roasted pigs under the marks “ELARZ LECHON,” “ELAR LECHON,” “PIG DEVICE,” and “ON A BAMBOO TRAY.” Petitioner contended that the trademarks were owned by the Estate of the spouses Lontoc and that respondent lacked a valid assignment of rights; petitioner also denied bad faith and opposed awards of exemplary damages and attorneys’ fees.

Respondent

Elarfoods, Inc. — complainant below and registered owner of the subject trademarks — used and promoted “ELAR’S LECHON ON A BAMBOO TRAY” in commerce from its incorporation and secured Certificates of Registration from the Intellectual Property Office (IPO) for the subject marks in 2005 and 2006.

Key Dates and Procedural History

1989: Elarfoods, Inc. incorporated and began using the ELAR’S LECHON marks.
2001: Respondent filed trademark applications for “ELARS LECHON,” “ON A BAMBOO TRAY,” and “ROASTED PIG DEVICE.”
2001–2009: Bureau of Legal Affairs (BLA) proceedings; BLA initially found prior commercial use by the spouses and ruled respondent lacked exclusive ownership by assignment.
2005–2006: IPO issued Certificates of Registration to respondent for the three marks (valid for 10 years, with subsequent renewal).
2013: IPO Director General reversed BLA, declared respondent owner, and awarded damages/fees.
2015: Court of Appeals affirmed the IPO Director General but deleted moral damages.
2021: Supreme Court denied petitioner’s Rule 45 petition, affirmed CA decision with the additional remedy of a cease-and-desist injunction.

Applicable Law and Legal Framework

The Court applied the 1987 Philippine Constitution’s statutory framework as embodied in the Intellectual Property Code (R.A. No. 8293). Key statutory provisions relied upon include: Section 122 (acquisition of rights by registration), Section 147 (rights conferred by registration, including presumptions of ownership and protection against confusingly similar marks), and Section 168 (protection against unfair competition and remedies). Civil Code provisions governing assignment and perfection of incorporeal rights (Articles 1475 and 1624) were also considered regarding transfers of unregistered marks.

Factual Findings Relevant to Ownership

Respondent demonstrated continuous and exclusive use of the ELAR’S LECHON marks since incorporation, supported by sales invoices, advertising, and management by spouses Lontoc who publicly represented ELAR’S LECHON as respondent’s business. The IPO records show respondent’s Certificates of Registration for the subject marks and subsequent renewal, giving rise to the statutory presumption of valid registration, ownership, and exclusive rights.

BLA and IPO Director General Determinations

The BLA initially held that prior commercial use vested ownership in the spouses (and thus their Estate) and declined to recognize transfer to respondent absent a written assignment, further observing limitations of its jurisdiction on probate issues. The IPO Director General reversed the BLA, reasoning that the spouses’ incorporation and active management of respondent effectuated transfer of the business and its marks to respondent even without a formal written assignment, awarded moral, exemplary damages, and attorneys’ fees, and found petitioner liable for unfair competition and, after registration, trademark infringement.

Court of Appeals Ruling

The Court of Appeals affirmed the IPO Director General’s decision insofar as it found respondent to be the registered owner and petitioner liable for infringement and unfair competition. The CA applied the dominancy test to find confusing similarity between petitioner’s and respondent’s marks, affirmed the award of exemplary damages and attorneys’ fees, but deleted the award of moral damages on the ground that a juridical person cannot suffer physical or mental anguish.

Issues Raised on Review

Petitioner chiefly argued (1) ownership of the marks rests with the Estate of the spouses Lontoc and not with respondent due to absence of written assignment; (2) petitioner’s officers, as heirs, had rights to use the marks; (3) respondent was not the real party in interest; and (4) exemplary damages and attorneys’ fees lacked factual basis because petitioner acted without malice. Respondent maintained it was the lawful owner by operation of incorporation, continuous use, and IPO registration, and that petitioner acted in bad faith warranting exemplary damages and attorneys’ fees.

Supreme Court’s Resolution on Ownership

The Court concluded that respondent is the rightful owner of the subject trademarks. It relied on: (a) respondent’s valid Certificates of Registration, which create a presumption of ownership and exclusive rights under the IP Code; (b) the spouses’ conscious act of incorporating the business and continuously managing and representing it as respondent’s enterprise, effecting transfer of the business goodwill and marks to respondent even in the absence of a formal written assignment; and (c) Civil Code principles that assignment of incorporeal rights may be perfected by consent where marks were unregistered at the time of transfer. Petitioner did not rebut the statutory presumption of ownership.

Supreme Court’s Ruling on Unfair Competition and Infringement

Applying Section 168 of the IP Code and established jurisprudential tests for likelihood of confusion, the Court held that petitioner’s use of “ELARZ LECHON,” “ELAR LECHON,” “PIG DEVICE,” and “ON A BAMBOO TRAY” was substantially identical and likely to cause confusion with respondent’s registered marks. The dominancy test showed that the dominant element “ELAR” (aurally and visually) and the similar context of lechon products rendered confusion probable. Petitioner’s use therefore constituted unfair competition and, once respondent’s marks were registered, trademark infringement.

Remedies, Damages, and Equitable Relief

The Supreme Court affirmed the CA’s awards of exemplary damages (P4

Case Syllabus (G.R. No. 234457)

Case Caption, Procedural Posture and Relief Sought

Petition for Review on Certiorari under Rule 45 filed by Emzee Foods, Inc. (petitioner) seeking reversal of the March 27, 2015 Decision and September 11, 2015 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 133652, which affirmed the December 20, 2013 Decision of the Director General of the Intellectual Property Office (IPO).
Underlying administrative proceedings initiated by Elarfoods, Inc. (respondent) for unfair competition and trademark infringement based on petitioner’s use of marks substantially similar to respondent’s registered marks.
Remedies sought by respondent include declaration of trademark infringement and unfair competition, damages (moral, exemplary, attorney’s fees), costs of litigation, and injunctive relief to prohibit petitioner from using the contested marks.

Antecedent Facts and Background

In the 1970s spouses Jose and Leonor Lontoc established a business selling Filipino food and roasted pigs marketed as “ELARS Lechon.”
In 1989 the spouses Lontoc incorporated their food business; on May 19, 1989 Elarfoods, Inc. (respondent) was registered with the SEC.
Since incorporation respondent used the business name Elarfoods, Inc., and marketed its roasted pigs principally under the mark “ELAR’S LECHON ON A BAMBOO TRAY,” eventually becoming known as the “ELAR’S LECHON” brand.
The mark “ROASTED PIG DEVICE” is described as a design/representation of a roasted pig on a bamboo stick placed on top of a bamboo tray.

Allegations Against Petitioner and Initial Demand

Petitioner, without respondent’s knowledge or permission, sold and distributed roasted pigs using the marks “ELARZ LECHON,” “ELAR LECHON,” “PIG DEVICE,” and “ON A BAMBOO TRAY,” giving the appearance that petitioner was a branch or franchisee of respondent.
On October 2, 2001 respondent sent petitioner a Cease and Desist Letter urging cessation of use of the subject marks; petitioner allegedly ignored the demand and continued its use.
Respondent filed three separate complaints with the IPO for unfair competition and intellectual property violations based on petitioner’s use of marks similar to respondent’s registered and unregistered marks.

Administrative Consolidation, Petitioner’s Answer and BLA Ruling

On November 12, 2001 the Bureau of Legal Affairs (BLA) of the IPO ordered consolidation of the three complaints.
Petitioner countered that respondents were not the owners of the subject marks; instead petitioner asserted the spouses Lontoc (and ultimately their Estate) owned the marks by prior use and that respondent was merely an alter ego or business conduit of the spouses Lontoc.
Petitioner asserted “Elar” derived from initials L.R. (Lontoc-Rodriguez) and was used in multiple family businesses; petitioner argued goodwill and proprietary rights belonged to the Lontoc family, not respondent.
On August 8, 2005 BLA Director Estrelita Beltran-Abelardo dismissed the complaint, ruling that the spouses Lontoc, by prior commercial use, were the owners of the subject marks, and that respondent had at best usufruct rights; BLA held the Estate, not respondent, was the real party in interest and that the BLA lacked jurisdiction to finally resolve a probate/ownership dispute.

IPO Certificates of Registration and Subsequent Procedural Steps

During the administrative proceedings the IPO issued Certificates of Registration in favor of respondent for the marks: “ON A BAMBOO TRAY” (February 10, 2005), “ELARS LECHON” (April 28, 2006), and “ROASTED PIG DEVICE” (October 2, 2006). Each Certificate valid for 10 years from issuance.
Respondent sought reconsideration of the BLA dismissal on September 17, 2005; the BLA denied reconsideration by Resolution dated December 21, 2009.
Respondent appealed to the Office of the Director General of the IPO on February 10, 2010.

Ruling of the IPO Director General (December 20, 2013)

Director General Ricardo R. Blancaflor reversed the BLA dismissal and held there was no need for a written assignment to vest ownership in respondent because the spouses Lontoc incorporated respondent to leave a legacy and in doing so transferred rights and interests, including trademarks, to respondent.
Director General Blancaflor found that the spouses Lontoc actively managed respondent and represented to the public that they were its owners; petitioner admitted respondent was an alter ego of the spouses Lontoc, supporting identity of rights.
He explained a written assignment requirement applies only if the trademark is already registered or has a pending application; because the subject marks were not yet registered or applied for at the time of transfer, formal written assignment was not required.
Director General Blancaflor ruled petitioner’s concurrent use of the marks constituted unfair competition while the marks were unregistered and infringed the trademarks after registration.
Awards ordered by IPO Director General: moral damages PhP 500,000.00 (for injury to goodwill), exemplary damages PhP 400,000.00, attorney’s fees PhP 500,000.00, and costs of litigation; no actual damages awarded for lack of proof. The decision directed furnishing copies to relevant IPO bureaus for implementation.

Court of Appeals Ruling (March 27, 2015) and Reconsideration Resolution (September 11, 2015)

The CA affirmed the IPO Director General’s decision, emphasizing that respondent had Certificates of Registration which carry presumptive ownership and exclusive use of the trademarks.
Applying the dominancy test, the CA found petitioner’s marks “ELARZ LECHON” / “ELAR LECHON” likely to cause confusion with respondent’s “ELAR’S LECHON”: both feature the dominant term “ELAR”, have similar sound and pronunciation, and are used in the sale of lechon and related products.
The CA found petitioner liable for unfair competition because petitioner clothed its goods with the general appearance of respondent’s products through the use of similar marks on packaging and signages, and failed to notify the buying public that its goods were not respondent’s; the CA inferred intent to deceive.
The CA sustained exemplary damages, attorney’s fees, and litigation costs, but deleted the award of moral damages on the ground that respondent, as an artificial entity, cannot experience physical suffering and mental anguish.
Petitioner’s Motion for Reconsideration before the CA was denied in the September 11, 2015 Resolution.

Issues Presented to the Supreme Court

Whether petitioner is liable for damages for violating respondent’s intellectual property rights.
Whether an injunction against petitioner’s continued use of the contested marks is proper.
Whether the Estate of the spouses Lontoc, rather than respondent, is the rightful owner of the subject trademarks and thus the real party in interest.
Whether awards of exemplary d