Case Summary (G.R. No. 164321)
Factual Background
Petitioner registered the trademarks "SKECHERS" (Reg. No. 63364) and the stylized "S" within an oval design (Reg. No. 4-1996-110182) with the Intellectual Property Office. Petitioner sought and obtained two search warrants from the RTC against respondents’ outlet and warehouse for alleged trademark infringement under Section 155 of R.A. No. 8293. The warrants (Search Warrant Nos. 02-2827 and 02-2828) were executed and led to the seizure of more than 6,000 pairs of shoes bearing a stylized "S" logo.
Trial Court Proceedings
Respondents moved to quash the search warrants before the RTC, contesting the existence of confusing similarity between petitioner’s SKECHERS products and respondents’ Strong rubber shoes. On November 7, 2002, the RTC issued an order quashing the warrants and directing the return of the seized goods, finding that the two shoes displayed glaring differences and that an ordinarily prudent purchaser would not likely be misled.
Court of Appeals Proceedings
Petitioner filed a petition for certiorari with the Court of Appeals. On November 17, 2003, the Court of Appeals affirmed the RTC’s quashal, concluding that respondents’ shoes did not infringe petitioner's trademark. The Court of Appeals and the RTC had applied the Holistic or Totality Test in determining confusing similarity.
Supreme Court Proceedings and Motions
Petitioner filed a petition for review with the Supreme Court, which was dismissed by a Decision dated November 30, 2006. Petitioner and petitioner-intervenor separately filed Motions for Reconsideration of that Decision. Petitioner-intervenor had earlier filed a Petition-in-Intervention asserting that it was the sole licensed distributor of Skechers products in the Philippines. The present Resolution grants the motions and reconsiders and sets aside the November 30, 2006 Decision.
Issues Presented
Petitioner assigned errors contending that the Court of Appeals committed grave abuse of discretion by considering matters of defense in a criminal trial for trademark infringement when deciding the validity of the search warrants, and by effectively determining absence of guilt instead of limiting review to probable cause for issuance of the search warrants. Petitioner-intervenor challenged the adoption of the Holistic Test by the trial courts, asserted error in finding no probable cause, and contended that the Court of Appeals sanctioned the RTC’s departure from proper judicial procedure by upholding the quashal based solely on a finding of no confusing similarity.
Parties’ Contentions on Reconsideration
Petitioner argued that the seized items comprised commercial quantities of unauthorized reproductions of petitioner’s registered stylized "S", that returning the goods would harm petitioner’s goodwill and reputation, and that both the search-warrant court and the Court of Appeals had acted with grave abuse of discretion in applying the wrong legal test and in effectively making a preliminary finding of no guilt. Petitioner-intervenor urged rejection of the Holistic Test in favor of the Dominancy Test, maintained that probable cause existed for trademark infringement, and accused the lower courts of basing the quashal solely on absence of confusing similarity.
Legal Standard on Trademark Infringement
The Court restated that Section 155 of R.A. No. 8293 makes actionable the use or reproduction of a registered mark where such use is likely to cause confusion, mistake, or to deceive. Jurisprudence has developed the Dominancy Test and the Holistic or Totality Test to determine confusing similarity. The Dominancy Test focuses on similarity of the prevalent or dominant features of competing marks, emphasizing the aural and visual impressions on purchasers. The Holistic Test considers the entire appearance of marks as applied to products, including labels and packaging, and the totality of features.
Analysis and Findings of the Court
The Court determined that the stylized "S" constitutes the dominant feature of petitioner’s registered mark. Applying the Dominancy Test, the Court found that respondents used the same stylized "S" in substantially the same font and size and in the same locations on the footwear (side, tongue, and near the heel). The Court observed a number of additional similarities in overall design and color scheme: use of blue, white and gray; similar wavelike pattern of the midsole and outsole; two elongated designs on the midsole near the heel placed similarly; identical number and placement of outsole ridges; two grayish-white semi-transparent circles atop the heel collar in the same location; and the words "Skechers Sport Trail" versus "Strong Sport Trail" appearing in the same white lettering, font size, direction and orientation. The Court rejected the Court of Appeals’ analogy to the Superman "S" and its suggestion that the mere use of the letter "S&quo
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Case Syllabus (G.R. No. 164321)
Parties and Procedural Posture
- SKECHERS, U.S.A., INC. filed an application for search warrants with Branch 24 of the Regional Trial Court of Manila for alleged trademark infringement under R.A. No. 8293.
- INTER PACIFIC INDUSTRIAL TRADING CORP. and the multiple respondents operated an outlet and warehouse that were the subject of two search warrants served pursuant to the RTC orders.
- More than six thousand pairs of shoes bearing the stylized "S" logo were seized during the searches.
- The respondents moved to quash the search warrants and the RTC issued an order on November 7, 2002 quashing the warrants and directing the NBI to return the seized goods.
- SKECHERS, U.S.A., INC. filed a petition for certiorari with the Court of Appeals which affirmed the RTC decision on November 17, 2003.
- SKECHERS, U.S.A., INC. elevated the matter to this Court and on November 30, 2006 this Court issued a decision dismissing the petition.
- TRENDWORKS INTERNATIONAL CORPORATION intervened as petitioner-intervenor asserting status as sole licensed distributor of SKECHERS products in the Philippines.
- Both petitioner and petitioner-intervenor filed motions for reconsideration which this Court granted in the present resolution and the November 30, 2006 Decision was reconsidered and set aside.
Key Factual Allegations
- SKECHERS, U.S.A., INC. holds registration No. 63364 for the trademark "SKECHERS" and registration No. 4-1996-110182 for the stylized "S" within an oval design.
- Respondents marketed rubber shoes branded "Strong" that bore a stylized "S" mark and included labels and inscriptions such as "Strong Sport Trail."
- The challenged shoes displayed multiple similarities to petitioner’s Energy model including color scheme, midsole and outsole patterns, placement and size of the stylized "S," identical positioning of decorative circles on the heel collar, and identical white lettering for the product line inscription.
- Respondents’ shoes were offered at a lower price point than petitioner’s shoes and bore different hang tags and labels stating "Strong."
- Petitioner-intervenor claimed to be the exclusive local distributor of petitioner’s products at the time of the seizures.
Statutory Framework
- R.A. No. 8293 governs trademarks, unfair competition, and remedies for infringement in the Philippines.
- Section 155, R.A. No. 8293 makes actionable the use in commerce of any reproduction, counterfeit, copy or colorable imitation of a registered mark where such use is likely to cause confusion, mistake or deception.
- The essential element of trademark infringement under Section 155 is the likelihood of confusion.
Issues Presented
- Whether the Court of Appeals committed grave abuse of discretion by considering matters of defense and effectively determining guilt on the merits when it should have limited review to whether the RTC committed grave abuse in quashing the search warrants.
- Whether the Court of Appeals committed grave abuse of discretion in finding respondents not guilty of trademark infringement when the only triable issue for a search-warrant determination is the existence of probable cause.
- Whether the trial court and the Court of Appeals erred in applying the Holistic or Totality Test instead of the Dominancy Test in assessing confusing similarity.
Contentions of Petitioner
- SKECHERS, U.S.A., INC. contended that the trial court and the Court of Appeals improperly weighed defenses and merits instead of confining review to probable cause for issuance of search warrants.
- Petitioner asserted that the seized commercial quantities bearing unauthorized reproductions of the registered "S" trademark were intended for distribution in the Philippine market and would damage petitioner’s goodwill.
- Petitioner argued that the Dominancy Test should control and that respondent’s use of the stylized "S" infringed