INNOLAB INDUSTRIES, INC., PETITIONER, VS. UNITED LABORATORIES, INC., RESPONDENT.

Innolab Industries versus United Laboratories

The Case

This is a petition for review on certiorari brought by Innolab Industries, Incorporated against United Laboratories, Incorporated, arising from a trademark opposition before the Intellectual Property Office of the Philippines. Innolab sought to register the mark "INNOLAB" for goods in Classes 3 and 5 of the Nice Classification. Unilab opposed, invoking its long-registered mark "UNILAB." The case matters for two reasons. First, it settles that administrative procedure before the Intellectual Property Office is generally liberally construed, so that a mere failure to pay the appeal fee does not automatically finalize an adverse ruling. Second, and more importantly, it draws a bright line between a finding of similarity and a finding of likelihood of confusion, holding that the oppositor bears the burden of proving the latter with evidence, not mere assertion.

Procedural History

Innolab filed its trademark application with the Intellectual Property Office of the Philippines. After the notice of allowance was published in the Electronic Gazette, Unilab filed a verified notice of opposition. Innolab failed to file an answer, and the Bureau of Legal Affairs declared it in default. The Bureau then sustained the opposition and denied the application. Innolab appealed to the Bureau, but its appeal memorandum was denied outright because it was not accompanied by the filing fee. Innolab then elevated the matter to the Office of the Director General, which affirmed the dismissal on the ground that counsel's negligence was inexcusable, and so did not reach the merits. Innolab went to the Court of Appeals by petition for review under Rule 43. The appellate court denied the petition, holding that the right to appeal is a mere statutory privilege and that the failure to pay the fee bound the client. It nonetheless discussed the merits and agreed that the marks were confusingly similar. Reconsideration was denied, hence this petition to the Supreme Court.

Facts

On July 29, 2015, Innolab filed a trademark application for "INNOLAB" covering soaps, perfumery, cosmetics and personal care products in Class 3, and pharmaceutical and sanitary preparations and food supplements in Class 5. The mark was allowed and published. Unilab then opposed, claiming that the use of "INNOLAB" would damage its existing registered marks through confusing similarity. Unilab had registered "UNILAB" as early as May 25, 1983, with renewals covering, among others, Classes 3, 5, 30, and 32. It submitted certifications of registration and renewal, affidavits of use, and scanned images of its products bearing the "UNILAB and logo" mark.

The Intellectual Property Office sent Innolab a notice to answer, but Innolab did not file one. The Bureau of Legal Affairs declared Innolab in default and, in a decision dated April 19, 2017, sustained the opposition and denied the application. Innolab appealed, but the appeal was denied because the filing fee was not paid. Innolab explained that the omission was due to counsel's inadvertence amid a heavy volume of intellectual property cases.

The Director General affirmed the dismissal, refusing to relax the rules absent demonstrable merit, and never reached the substantive question. The Court of Appeals affirmed, adding that even on the merits the marks were confusingly similar because they sound the same, share the letter "N" and the last three letters "LAB," both have three syllables, and both are pronounced with the same intonation.

Issues

• Whether or not the Court of Appeals erred in affirming the outright dismissal of Innolab's appeal for nonpayment of the appeal fee.
• Whether or not the Court of Appeals erred in holding that the mark "INNOLAB" is confusingly similar to the mark "UNILAB" as to be likely to deceive or cause confusion.

Applicable Provisions

Section 123.1(d) of Republic Act Number 8293, the Intellectual Property Code, provides:

A mark cannot be registered if it is identical with an existing registered mark or is so nearly resembling such registered mark as to be likely to deceive or cause confusion.

This is the provision under which Unilab opposed the application, and it supplies both elements the Court separates: similarity, and likelihood of confusion.

Rule 18, Section 5 of the 2020 Revised Rules of Procedure for Intellectual Property Rights Cases provides:

In determining whether one trademark is confusingly similar to or is a colorable imitation of another, the court must consider the general impression of the ordinary purchaser, buying under the normally prevalent conditions in trade, and giving the attention such purchasers usually give in buying that class of goods. Visual, aural, connotative comparisons and overall impressions engendered by the marks in controversy as they are encountered in the realities of the marketplace must be taken into account. Where there are both similarities and differences in the marks, these must be weighed against one another to determine which predominates.

This rule frames the multifactor approach the Court uses to test likelihood of confusion beyond mere resemblance.

Ruling

On the first issue, the Court ruled in favor of Innolab. The general rule in proceedings before administrative agencies is liberality. Rules of procedure are tools for the attainment of justice and must not be rigidly applied when doing so would frustrate the ends of justice and deprive a party of substantive rights. Quasi-judicial bodies such as the Intellectual Property Office are not bound by technical rules, subject only to the requirements of due process. Here, the nonpayment of the appeal fee did not breach anyone's due process rights. By dismissing the appeal outright, the Director General rigidly applied the rules and denied the parties a genuine opportunity to be heard by a tribunal with technical expertise. The Office should have allowed Innolab to rectify its error and pay the fee belatedly.

On the second issue, the Court again ruled for Innolab. It agreed that there is a degree of similarity between the marks, but held that similarity alone is not enough. The provision requires that the assailed mark nearly resemble the registered mark as to be likely to deceive or cause confusion. Apart from similarity, there is the separate element of likelihood of confusion. As oppositor, Unilab bore the burden of proving that the similarity would likely confuse the ordinary purchaser, and it failed to present such evidence. The Court stressed that likelihood of confusion is a question of fact, ordinarily beyond its review, but it may resolve it under recognized exceptions, including when the findings are without citation of specific evidence. Both tribunals merely pointed out aural and visual similarities without evidentiary support. The Court also rejected the reliance on shared Nice Classification, since jurisdiction has abandoned product classification as a test of relatedness of goods. The Court remanded the case to the Intellectual Property Office for further proceedings, where the parties may present evidence on likelihood of confusion.

Doctrine

First, the general rule before administrative agencies is liberality. Strict application of procedural rules is called for only when the gravity of the violation is such that due process is breached. Second, under Section 123.1(d) of the Intellectual Property Code, similarity between marks is not equivalent to likelihood of confusion. The oppositor must prove both, and the second element requires substantial evidence, not mere assertion. Third, the dominancy test governs the comparison of marks, but it only identifies dominant features; it does not by itself establish likelihood of confusion. Fourth, likelihood of confusion is a question of fact that the Court may review when the findings below lack citation of specific evidence.

Disposition

The petition was granted. The Court set aside the rulings of the Court of Appeals and the Intellectual Property Office and remanded the case to the Intellectual Property Office for further proceedings, allowing Innolab to pay the appeal fee and the parties to present evidence on likelihood of confusion.

Remember This

Memorize this line: similarity is not likelihood of confusion, and the oppositor must prove the latter with evidence. Examiners use this case to test the distinction between the two elements of Section 123.1(d) and the liberal construction of administrative procedure.