Case Summary (G.R. No. 143993)
Key Dates
McDonald’s introduced the Big Mac in the Philippines in September 1981 and secured Philippine registration of the BIG MAC mark on 18 July 1985 (based on a U.S. registration from 16 October 1979). Respondent L.C. Big Mak Burger, Inc. applied to register “BIG MAKA” on 21 October 1988. Petitioners filed suit on 6 June 1990; the RTC issued a TRO on 11 July 1990 and a preliminary injunction on 16 August 1990. The RTC rendered judgment for petitioners on 5 September 1994. The Court of Appeals reversed on 26 November 1999; its denial of reconsideration was entered 11 July 2000. The Supreme Court decision under review was rendered in 2004.
Applicable Law and Constitutional Basis
Primary substantive law applied: Republic Act No. 166 (the Trademark Law as amended) — specifically Sections 22 (infringement), 23 (remedies), and 29 (unfair competition) — with reference to its successors and the Intellectual Property Code (RA 8293). Procedural basis for the petition: Rule 45 of the Rules of Court (petition for review on certiorari raising questions of law). Because the decision date is after 1990, the 1987 Philippine Constitution is the governing constitutional framework for judicial review and exercise of appellate jurisdiction.
Facts Relevant to the Claim
McDonald’s owns and extensively uses the BIG MAC mark for its double-decker hamburger and other branded items; it invested substantial advertising and used the mark on packaging, paraphernalia, and signages. Respondents operated snack vans and outlets selling hamburgers and other foods and used the name/mark “Big Mak/Big Maka” on wrappers and in corporate identification. Petitioners opposed respondents’ trademark application and sent a demand to desist; respondents did not respond, leading to the 1990 suit alleging trademark infringement and unfair competition.
RTC Judgment and Rationale
The Regional Trial Court (Makati, Branch 137) found respondent corporation liable for trademark infringement and unfair competition, made the preliminary injunction permanent, and awarded actual, exemplary damages and attorney’s fees to petitioners while dismissing claims against the individual respondents and respondents’ counterclaims. The RTC reasoned that despite some physical distinctions in packaging and presentation, the use of BIG MAKA by respondents on hamburgers was likely to confuse ordinary consumers and constituted an attempt to appropriate the goodwill and reputation of McDonald’s BIG MAC.
Court of Appeals Ruling and Rationale
The Court of Appeals reversed the RTC. It treated respondents’ use primarily as a corporate or trade name rather than an exclusive product trademark and applied a holistic test comparing overall presentation, packaging, and market circumstances. The CA emphasized differences in packaging material, presence of other wording and mascots, diversified product lines, and different market channels (snack vans versus McDonald’s restaurants) to conclude there was no colorable imitation, no sufficient evidence of bad faith, and therefore no unfair competition.
Issues Presented to the Supreme Court
Procedural: whether Rule 45 was properly invoked (the petition raised questions of law, with conflicting factual findings between RTC and CA). Substantive: (1) whether respondents used BIG MAKA as a trademark for their hamburger products (not merely as part of a corporate name); (2) whether respondents are liable for trademark infringement and unfair competition under RA 166.
Jurisdictional/Procedural Disposition
The Supreme Court recognized that Rule 45 ordinarily allows only questions of law but accepted the petition under an established exception where the trial court and the Court of Appeals reached conflicting findings of fact in a trademark/unfair competition case. The Court therefore reviewed the case on its merits.
Validity of the BIG MAC Mark and Ownership
The Court affirmed that BIG MAC is a valid, distinctive mark (fanciful/arbitrary rather than generic or merely descriptive) and that registration on the Principal Register creates a prima facie presumption of validity and ownership. Challenges based on earlier Philippine registrations by third parties failed because Topacio had assigned his rights to McDonald’s and the Isaias Group’s registration was on the Supplemental Register, which does not afford the same protection as the Principal Register.
Types of Confusion and Legal Framework
Under Section 22, infringement is established when the defendant uses a reproduction, counterfeit, copy or colorable imitation of a registered mark in connection with goods or services such that confusion or mistake as to source or origin is likely. The Court distinguished two types of confusion: confusion of goods (product confusion where consumers buy one product believing it to be another) and confusion of business (source/affiliation confusion where non-competing but related products suggest a connection). RA 166 (and subsequent jurisprudence) extends protection beyond identical goods to related goods and source confusion.
Applicable Test for Likelihood of Confusion
The Court explained two jurisprudential approaches: the holistic test (examining overall presentation, packaging, and context) and the dominancy test (focusing on dominant or essential features of the marks and their aural, visual and connotative impressions). The Supreme Court reaffirmed its preference for the dominancy test and noted that the doctrine is reflected in later statutory formulations treating infringement as reproduction of a registered mark or a dominant feature thereof.
Application of the Dominancy Test to Facts
Applying the dominancy test, the Court found that BIG MAKA is dominantly similar to BIG MAC: aurally they are effectively identical (idem sonans), the first word is identical, and the second word shares key letters and sounds such that ordinary purchasers cannot distinguish them by sound and may not differentiate them visually in ordinary commercial encounters. The Court gave weight to the aural and visual impressions and to McDonald’s established reputation and advertising, concluding respondents adopted the dominant features of the BIG MAC mark and thereby created a likelihood of confusion when used on the same product—hamburgers.
On Respondents’ Claimed Good Faith and Explanations
The Court rejected respondents’ proffered explanation that the word “Maka” derived from familial names as not credible in context. The timing, the similarity to McDonald’s mark, and the absence of convincing proof of an honest, independent origin supported an inference
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Procedural Posture and Relief Sought
- Petition for review under Rule 45 assailing the Court of Appeals Decision dated 26 November 1999 and its Resolution dated 11 July 2000, which (a) found respondent L.C. Big Mak Burger, Inc. not liable for trademark infringement and unfair competition and (b) ordered petitioners to pay respondents P1,900,000 in damages.
- Trial court (Regional Trial Court, Makati, Branch 137) rendered a Decision dated 5 September 1994 finding respondent corporation liable for trademark infringement and unfair competition; the RTC permanently enjoined respondents, awarded actual damages of P400,000, exemplary damages of P100,000, and attorney’s fees and expenses of litigation of P100,000 (Judge Santiago Ranada, Jr., penned the RTC Decision).
- Court of Appeals (penned by Associate Justice Eloy R. Bello, Jr., with Presiding Justice Jainal D. Rasul and Associate Justice Ruben T. Reyes concurring) reversed the RTC on 26 November 1999 and awarded respondents P1,600,000 as actual/compensatory damages and P300,000 as moral damages; denied reconsideration 11 July 2000.
- Supreme Court review granted as exception to Rule 45’s limitation to questions of law, due to contradictory findings of fact between RTC and Court of Appeals (Court accepted petition despite presence of factual issues).
Parties and Corporate Identities
- Petitioners:
- McDonald’s Corporation (Delaware corporation) — owner of a family of marks including the Big Mac mark for its double-decker hamburger sandwich; registered in the U.S. (Certificate No. 1,126,102, 16 October 1979) and in the Philippine Principal Register (allowed 18 July 1985 based on home registration); operates global fast-food chain; advertized Big Mac extensively (P10.5 million from 1982–1990 for Big Mac alone); displays mark on paraphernalia, signages, items.
- McGeorge Food Industries, Inc. — domestic corporation and McDonald’s Philippine franchisee.
- Respondents:
- L.C. Big Mak Burger, Inc. — domestic corporation operating fast-food outlets and snack vans in Metro Manila and nearby provinces (Rizal, Laguna, Bulacan and Quezon); menu includes hamburgers and other food items (pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers, fruit juices, softdrinks, beverages).
- Private respondents: Francis B. Dy, Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and Grace Huerto — incorporators, stockholders and directors of respondent corporation.
Factual Background and Prelitigation Acts
- McDonald’s introduced its Big Mac hamburger sandwiches in the Philippine market in September 1981 while application for Philippine registration was pending.
- On 21 October 1988 respondent corporation applied with the PBPTT for registration of the “Big Maka” mark for hamburger sandwiches.
- McDonald’s opposed respondent’s application on ground that “Big Maka” is a colorable imitation of its registered “Big Mac” mark; McDonald’s informed respondent Francis Dy of exclusive rights and requested cessation of use; no reply received.
- On 6 June 1990 petitioners sued respondents for trademark infringement and unfair competition in the RTC, and on 11 July 1990 the RTC issued a temporary restraining order; on 16 August 1990 the RTC issued a writ of preliminary injunction replacing the TRO.
- Respondents admitted using the name “Big Mak Burger” in business but contended McDonald’s did not have exclusive rights, citing prior Philippine registrations by the Isaiyas Group (31 March 1979) in the Supplemental Register and by Rodolfo Topacio (24 June 1983) prior to McDonald’s registration; respondents alternatively argued no colorable imitation, no fraudulent passing off, and sought damages in counterclaim.
- Petitioners disclosed a Deed of Assignment dated 18 May 1981 by which Topacio’s rights were assigned to McDonald’s; petitioners emphasized Isaiyas Group’s registration was in the Supplemental Register and so afforded little protection.
Trial Court (RTC) Findings and Rationale
- RTC held (5 September 1994):
- Big Mac is a registered trademark of McDonald’s entitled to protection against infringement.
- Despite distinctions in physical features between “Big Mac” and “Big Maka” as appearing in signages, wrappers and containers, infringement goes beyond mere physical features; context and commercial setting matter.
- Both parties operate in the fast-food business; ordinary purchasers may not be discriminating and could be confused into buying a “Big Maka” thinking it originates from McDonald’s, especially given immediacy of hamburger purchases.
- Use of “Big Maka” in signages, wrappers and containers constituted infringement of the Big Mac trademark.
- Acts of defendants also constituted unfair competition under Section 29 of RA 166: defendants’ use of “Big Maka” aimed to take advantage of McDonald’s reputation, popularity and goodwill; defendants’ goods had the general appearance of plaintiff’s goods in wording and wrapping sufficient to influence purchasers to believe goods offered were those of McDonald’s.
- Dispositive relief ordered by RTC:
- Permanent injunction (writ of preliminary injunction made permanent).
- Defendant L.C. Big Mak Burger, Inc. to pay plaintiffs actual damages P400,000; exemplary damages P100,000; attorney’s fees and litigation expenses P100,000.
- Complaint against private respondents and all counterclaims dismissed for lack of merit or insufficiency of evidence.
Court of Appeals Findings and Rationale
- Court of Appeals (26 November 1999) reversed RTC and held:
- No colorable imitation: mere similarity in names insufficient; the overall presentation, essential, substantive and distinctive parts must be such as would likely mislead or confuse ordinary purchasers.
- Distinctions: McDonald’s Big Mac used to designate only one product (double-decker sandwich sold in Styrofoam box with McDonald’s umbrella logo and trademark in red block capital letters); defendants used corporate name L.C. Big Mak Burger, Inc. as business name for diversified food items sold through snack vans; defendants’ packaging is plastic; corporate name is presented with L.C. above and “Burger, Inc.” below “Big Maka”, printed in red-orange silhouette letters with distinctive mascot “Maky” (a chubby boy in red T-shirt and blue lower garment).
- Regarding unfair competition, the court found no sufficient evidence of malice or bad faith; defendants explained “Maka” derived from names Maxima and Kimsoy (parents of Francis Dy); burden upon plaintiffs to prove bad faith.
- Accordingly, Court of Appeals found respondents not liable for trademark infringement or unfair competition.
- Court of Appeals awarded respondents P1,600,000 actual/compensatory damages and P300,000 moral damages against petitioners — reversed by Supreme Court.
Issues Presented to the Supreme Court
- Procedural: Whether the questions raised are proper for a petition for review under Rule 45 (only questions of law allowed) given the presence of mixed fact and law and conflicting findings between RTC and Court of Appeals.
- Merits:
- Whether respondents used “Big Maka” not only as part of the corporate name “L.C. Big Mak Burger, Inc.” but also as a trademark for their hamburger products.
- Whether respondent corporation is liable for trademark infringement and unfair competition.
Supreme Court: Admissibility of Petition under Rule 45
- Rule 45 allows a petition raising only questions of law; questions of fact ordinarily preclude certiorari.
- Supreme Court acknowledged presence of questions of fact and law, but accepted petition as one of the recognized exceptions due t