PHILIP MORRIS, INC., BENSON & HEDGES (CANADA), INC., AND FABRIQUES DE TABAC REUNIES, S.A., (NOW KNOWN AS PHILIP MORRIS PRODUCTS S.A.), PETITIONERS, VS. FORTUNE TOBACCO CORPORATI…

Philip Morris versus Fortune Tobacco

The Case

This is a petition for review brought by Philip Morris, Inc., Benson and Hedges (Canada), Inc., and Fabriques de Tabac Reunies, S.A., now known as Philip Morris Products, S.A., against Fortune Tobacco Corporation. The petitioners are foreign corporations that own Philippine registrations for the cigarette trademarks MARK VII, MARK TEN, and LARK. The respondent is a Philippine company that manufactures and sells cigarettes under the mark MARK. The petitioners sued for trademark infringement and damages, and the case matters because it fixes the rule that registration alone gives a foreign registrant standing to sue, but not the right to protection, which depends on actual use of the mark in Philippine commerce and trade.

Procedural History

The petitioners filed a complaint for infringement of trademark and damages before the Regional Trial Court of Pasig City, Branch 166, where it was docketed as Civil Case Number 47374. Their prayer for a writ of preliminary injunction was denied, and that incidental matter eventually reached the Supreme Court in a separate case decided on July 16, 1993. After trial on the merits, the trial court rendered its decision on November 3, 1999, dismissing both the complaint and the counterclaim. It held that the petitioners failed to prove that their home countries grant reciprocal privileges to Philippine corporations, and that they were doing business in the Philippines without a license, so they were barred from maintaining suit. It also held that there was no infringement.

The petitioners appealed to the Court of Appeals, where the case was docketed as CA-G.R. CV Number 66619. The Court of Appeals, in its decision dated January 21, 2003, ruled for the petitioners on the matter of legal capacity to sue, but affirmed the dismissal on the ground that the trademarks were not well-known marks entitled to protection without actual use in the local market, and that the similarities were insufficient to cause confusion. The petitioners' motion for reconsideration was denied in a resolution dated May 30, 2003. The petitioners then came to the Supreme Court by petition for review under Rule 45.

Facts

Philip Morris, Inc., a corporation organized under the laws of the State of Virginia, is the registered owner of the trademark MARK VII for cigarettes, under a certificate of registration issued on April 26, 1973 by the Philippine Patents Office. Its subsidiary, Benson and Hedges (Canada), Inc., is the registered owner of the trademark MARK TEN for cigarettes. Another subsidiary, the Swiss company Fabriques de Tabac Reunies, S.A., is the assignee of the trademark LARK, originally registered in 1964 by Ligget and Myers Tobacco Company. Fortune Tobacco Corporation, a Philippine company, manufactures and sells cigarettes using the trademark MARK.

On August 18, 1982, the petitioners filed a complaint for infringement of trademark and damages against Fortune Tobacco. They alleged that they were foreign corporations not doing business in the Philippines and were suing on an isolated transaction. They claimed that their trademarks had gained international fame and acceptance through long and extensive use, and that Fortune Tobacco, without their consent, manufactured and sold cigarettes bearing an identical or confusingly similar mark, causing confusion among purchasers. They invoked the Paris Convention and Section 21-A in relation to Section 23 of Republic Act Number 166, as amended. Fortune Tobacco answered that MARK is a common word that cannot identify a product as belonging to the petitioners.

After trial, the trial court dismissed the complaint and the counterclaim. It found that the petitioners failed to prove reciprocity, that they were in fact doing business in the Philippines without a license, and that the marks did not point distinctly to origin or ownership, had not acquired a secondary meaning, and that no purchaser had testified to being deceived. The Court of Appeals affirmed the dismissal on the merits, and the case reached the Supreme Court.

Issues

• Whether or not the petitioners, as Philippine registrants of trademarks, are entitled to enforce trademark rights in this country.
• Whether or not the respondent committed trademark infringement against the petitioners by its use of the mark MARK for its cigarettes, hence liable for damages.

Applicable Provisions

Section 22 of Republic Act Number 166, as amended, defines trademark infringement:

Section 22. Infringement, what constitutes. Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy or colorable imitation of any registered mark or tradename in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy or colorably imitate any such mark or tradename and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to damages.

This provision supplies the test of infringement, which turns on the likelihood of confusion or deception of purchasers as to the source or origin of the goods.

Section 21-A of Republic Act Number 166, as amended, governs the right of foreign corporations to sue:

Section 21-A. Any foreign corporation or juristic person, whether or not doing business in the Philippines, which is a national of a country which grants to Philippine corporations or juristic persons substantially the same rights and privileges in the matter of trademark and tradename protection, may bring an action for infringement of trademarks or tradenames or for unfair competition.

This provision makes reciprocity, or membership in the Paris Convention, a condition for a foreign registrant to maintain an infringement suit in Philippine courts.

Sections 2 and 2-A of Republic Act Number 166, as amended, require actual use of the mark in local commerce and trade before registration and acquisition of ownership. These provisions are the basis for the Court's holding that registration without actual use does not entitle the registrant to protection.

Ruling

On the first issue, the Court held that the petitioners have standing to sue in Philippine courts, as the Court of Appeals had recognized, because their countries are members of the Paris Union and the reciprocity requirement is supplied by the Paris Convention. But the Court held that standing to sue is not the same as entitlement to protection. Registration gives the registrant the statutory presumptions of validity, ownership, and the exclusive right to use, but it does not confer an absolute right to the mark. The Court stressed that a trademark is a creation of use, and actual use is the perfecting ingredient of exclusive ownership. Since the petitioners admitted they were not doing business in the country and presented no evidence of actual sales, their registration alone did not entitle them to protection.

On the second issue, the Court held that there was no infringement. Applying Section 22 of Republic Act Number 166, as amended, the Court found that the petitioners failed to show that the respondent's use of the mark MARK was likely to cause confusion or mistake or to deceive purchasers as to the source or origin of the goods. The Court also held that the Intellectual Property Code and the TRIPS Agreement were inapplicable, because the complaint was filed in August 1982 and tried under Republic Act Number 166, as amended, while the Intellectual Property Code took effect only on January 1, 1998 and the Philippines adhered to TRIPS only on December 16, 1994.

Doctrine

A foreign corporation that is a national of a Paris Convention member country may sue for trademark infringement in Philippine courts without need of a license to do business, because the reciprocity requirement of Section 21-A of Republic Act Number 166, as amended, is supplied by the Paris Convention. However, registration of a trademark in the Philippines, unaccompanied by actual use in local commerce and trade, accords the registrant only the standing to sue for infringement; entitlement to protection is a different matter and depends on actual use. A trademark is a creation of use, and actual use is the perfecting ingredient of exclusive ownership; registration is merely an administrative confirmation of the existence of the right of ownership and does not perfect it. Infringement under Section 22 of Republic Act Number 166, as amended, requires that the use be likely to cause confusion or mistake or to deceive purchasers as to the source or origin of the goods.

Disposition

The petition was denied, and the decision of the Court of Appeals affirming the dismissal of the complaint was upheld.

Remember This

Memorize this line: registration without actual use gives a foreign registrant only the standing to sue, not the right to protection, because actual use is the perfecting ingredient of trademark ownership. Examiners use this case to test the distinction between standing to sue and entitlement to protection, and the rule that the Paris Convention does not dispense with the requirement of actual use in Philippine commerce.