Case Summary (G.R. No. 172276)
Procedural History
The trial court initially dismissed the complaint (4 June 1990), which was reversed by the Court of Appeals (16 Feb 1993) and remanded. The case was transferred to the special RTC branch for intellectual property in Cebu City. The RTC (Branch 9) on 18 September 1998 found Dy liable for infringement. Dy appealed to the Court of Appeals, which on 1 September 2005 reversed and held no infringement; the CA denied reconsideration on 4 April 2006. Nestle petitioned the Supreme Court for review under Rule 45.
RTC’s Reasoning for Finding Infringement
Although the RTC acknowledged many outward differences in packaging and target consumers, it relied on the Supreme Court’s "concept of related goods" from Esso and concluded that NANNY and NAN belong to the same class (food products) and are thus related. The RTC emphasized that "NANNY" contains the sequence "NAN" and that the word "nanny" could connote childcare, leading to a not-so-remote probability of consumer confusion with an infant formula mark.
Court of Appeals’ Reversal and Rationale
The Court of Appeals reversed, applying the holistic assessment of overall appearance and packaging. It emphasized that the two marks are dissimilar in many respects: packaging material (cans vs. plastic packs), labeling imagery (nestling birds and Nestle logo vs. cows and green field), predominant colors, typography, price differences, product purpose (infant formula vs. full-cream milk for older children/adults), and market presentation. The CA reasoned that these cumulative differences, and the immediate visual and price cues, would prevent ordinary purchasers from being confused; therefore, NANNY was not a colorable imitation of NAN.
Legal Issue Presented
Whether respondent Martin T. Dy, Jr. is liable for trademark infringement for using the mark "NANNY" in connection with powdered milk, in light of petitioner Nestle’s registered mark "NAN."
Statutory Framework and Elements of Infringement
- R.A. No. 166, Sec. 22 defines infringement as unauthorized use of a reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with sale/advertising of goods when such use is likely to cause confusion, mistake, or deception.
- R.A. No. 8293 (Intellectual Property Code), Sec. 155.1–155.2 incorporates the dominancy concept and elaborates remedies; Sec. 138 grants prima facie evidentiary weight to certificates of registration and protection over goods and those related thereto.
- The Court summarizes infringement elements (from Prosource and related cases): (1) a registered mark actually used in commerce; (2) reproduction/copy/colorable imitation by another; (3) use in connection with sale/advertising of goods; (4) likelihood of confusion as to source/origin or identity of business; and (5) absence of consent. The gravamen is likelihood of confusion.
Types of Confusion and Analytical Tests
- Two forms of confusion: confusion of goods (buyer thinks they are buying the plaintiff’s product) and confusion of business (buyer believes products originate from or are connected to the plaintiff).
- Two primary tests: the dominancy test (focuses on dominant, essential features of the marks, including aural and visual impressions) and the holistic/totality test (considers entire labels, packaging, and other external features). Jurisprudence counsels that choice of test depends on the facts; no rigid rule applies and each case is decided on its merits.
Court’s Selection of the Dominancy Test and Its Justification
The Supreme Court held that, on the facts of this case, the dominancy test is appropriate and was consistently applied in comparable recent cases. The Court underscored prior holdings that the aural effect and dominant verbal component of a mark are critical in determining confusing similarity — citing cases where idem sonans (similar sound) and common dominant elements determined confusion despite packaging differences.
Application of Law to Facts — Dominant Feature Analysis
- The Court determined that "NAN" is the dominant, prevalent feature of Nestle’s product line, conspicuously used across product variants and emphasized in advertising.
- "NANNY" incorporates the entire sequence "NAN" as its first three letters; the aural effect of the two marks is confusingly similar. The Court considered established precedents recognizing that similar sounds and dominant common components can mislead consumers.
- Although there are differences in packaging, imagery, intended users, and price, the Supreme Court stressed that the registered owner is entitled to protection against appropriation in related goods and market expansions. Notwithstanding different market segments and price points, both
Case Syllabus (G.R. No. 172276)
The Case
- This is a petition for review on certiorari under Rule 45 of the Rules of Court (G.R. No. 172276, decided August 08, 2010) challenging the Court of Appeals' 1 September 2005 Decision and 4 April 2006 Resolution in CA-G.R. CV No. 62730, which found respondent Martin T. Dy, Jr. not liable for trademark infringement.
- The petition sought review of the Court of Appeals' reversal of the Regional Trial Court (RTC), Judicial Region 7, Branch 9, Cebu City, 18 September 1998 Decision in Civil Case No. CEB-19345, which had found Dy, Jr. liable for trademark infringement.
Procedural History
- 1 August 1985: Nestle sent a letter requesting Dy, Jr. to refrain from using "NANNY" and to stop infringing the "NAN" trademark; Dy, Jr. did not comply.
- 1 March 1990: Nestle filed a complaint for infringement before the RTC, Judicial Region 7, Branch 31, Dumaguete City.
- Dy, Jr. filed a motion to dismiss alleging failure to state a cause of action; the trial court, by order dated 4 June 1990, dismissed the complaint.
- 16 February 1993: The Court of Appeals set aside the 4 June 1990 order and remanded the case to the trial court for further proceedings.
- Pursuant to Supreme Court Administrative Order No. 113-95, Nestle moved to transfer the case to RTC, Judicial Region 7, Branch 9, Cebu City (a special court for intellectual property).
- 18 September 1998: The RTC, Branch 9, Cebu City, rendered a Decision finding Dy, Jr. liable for infringement.
- Dy, Jr. appealed to the Court of Appeals.
- 1 September 2005: The Court of Appeals reversed the RTC and found Dy, Jr. not liable for infringement.
- Nestle moved for reconsideration; 4 April 2006: the Court of Appeals denied the motion for lack of merit.
- Nestle filed the present petition for review on certiorari to the Supreme Court. The Supreme Court granted the petition and rendered the decision reported at 641 Phil. 345 (August 08, 2010).
Parties and Trademarks
- Petitioner: Societe Des Produits Nestle, S.A. (Nestle)
- Foreign corporation organized under the laws of Switzerland.
- Manufacturer of food products and beverages.
- Owner of Certificate of Registration No. R-14621 issued 7 April 1969 by the then Bureau of Patents, Trademarks and Technology Transfer for the "NAN" trademark.
- "NAN" line consists of PRE-NAN, NAN-H.A., NAN-1, and NAN-2.
- NAN classified under Class 6 — "diatetic preparations for infant feeding."
- Distributes and sells NAN milk products throughout the Philippines and invests heavily in training its sales force and in advertisements and press releases.
- Respondent: Martin T. Dy, Jr.
- Owner of 5M Enterprises.
- Imports Sunny Boy powdered milk from Australia and repacks it into three sizes of plastic packs bearing the name "NANNY" (80g, 180g, 450g).
- Prices for NANNY packs: P8.90 (80g), P17.50 (180g), P39.90 (450g).
- NANNY is also classified under Class 6 — "full cream milk for adults in [sic] all ages."
- Distributes and sells NANNY in Dumaguete, Negros Oriental, Cagayan de Oro, and parts of Mindanao.
Facts Pertinent to Infringement Allegation
- Nestle alleged that Dy, Jr.'s use of the mark "NANNY" infringed Nestle's registered "NAN" trademark.
- Nestle had notified Dy, Jr. by letter (1 August 1985) to cease using "NANNY"; Dy, Jr. did not desist.
- Evidence establishes Nestle's registered ownership of "NAN" (Cert. No. R-14621) and Dy, Jr.'s commercial use of "NANNY" on repacked Sunny Boy powdered milk sold in plastic packs at specified weights and prices and in specified geographic areas.
RTC Ruling (18 September 1998)
- The trial court found Dy, Jr. liable for infringement.
- The trial court initially examined whether the mark used would likely cause confusion or mistake or deceive customers, comparing NAN and NANNY:
- Found apparent physical and packaging differences:
- NAN sold in tin cans; NANNY sold in plastic packs.
- NAN labels predominantly blue and white; NANNY packs predominantly blue and green.
- NAN labels feature an elliptical figure with drawing of nestling birds overlapped by trade-name "Nestle"; NANNY packs show milking cows on a green field with snow-covered mountains.
- NAN wordmark appears in large, formal block letters; NANNY in small, irregular letters with curved ends.
- NAN products are milk formulas for infants; NANNY is instant full cream milk for adults.
- The trial court concluded that infringement could not be proven by the "test of dominancy" based on the absence of deceptive tendency from essential features alone.
- Found apparent physical and packaging differences:
- The trial court then applied the doctrine in Esso Standard Eastern, Inc. v. Court of Appeals (L-29971, Aug. 31, 1982) regarding related goods:
- Quoted the Esso decision that goods may be related so confusion of business may occur even if not competing.
- Concluded that because NANNY belongs to the same class as NAN (both food products) and because the word "nanny" means a "child's nurse," there was a not-so-remote probability that consumers might confuse NANNY with infant formula NAN.
- Thus, the trial court found infringement under the concept of related goods.
Court of Appeals Ruling (1 September 2005) and Resolution (4 April 2006)
- The Court of Appeals reversed the RTC and held Dy, Jr. not liable for infringement.
- Key reasoning of the Court of Appeals:
- The trial court had found no colorable imitation by NANNY of NAN, but then improperly applied the "concept of related goods" from Esso Standard despite the marks being dissimilar.
- Distinction emphasized: in Esso and similar cases the contending parties used the same or very similar marks (e.g., "Esso"), whereas in the instant case the marks are dissimilar ("NAN" vs. "NANNY").
- The CA held that the concept of related goods cannot be used to override the clear, material dissimilarities between the marks and packaging in this case.
- Reiterated and relied upon the holistic test — the totality of appearance of marks and packaging — stressing the glaring differences previously found by the trial court:
- Different product types (infant formula in cans vs. full cream adult milk in plastic packs), colors, pictorial elements, lettering style, pack sizes and pricing.
- Noted that the cheaper price of NANNY would warn ordinary purchasers and that a cursory examination of packaging woul