PHILIPS EXPORT B.V., PHILIPS ELECTRICAL LAMPS, INC. AND PHILIPS INDUSTRIAL DEVELOPMENT, INC., PETITIONERS, VS. COURT OF APPEALS, SECURITIES & EXCHANGE COMMISSION AND STANDARD PH…

Petitioners challenge the Decision of the Court of Appeals, dated
31 July 1990, in CA-GR Sp. No. 20067, upholding the Order of the Securities and
Exchange Commission, dated 2 January 1990, in SEC-AC No. 202, dismissing
petitioners’ prayer for the cancellation or removal of the word
“PHILIPS” from private respondent’s corporate name.

Petitioner Philips Export B.V. (PEBV), a foreign corporation
organized under the laws of the Netherlands, although not engaged in business
here, is the registered owner of the trademarks PHILIPS and PHILIPS SHIELD
EMBLEM under Certificates of Registration Nos. R-1641 and R-1674, respectively
issued by the Philippine Patent Office (presently known as the Bureau of
Patents, Trademarks and Technology Transfer). Petitioners Philips Electrical Lamps, Inc. (Philips Electrical, for
brevity) and Philips Industrial Development, Inc. (Philips Industrial, for
short), authorized users of the trademarks PHILIPS and PHILIPS SHIELD EMBLEM,
were incorporated on 29 August 1956 and 25 May 1956, respectively. All petitioner corporations belong to the
PHILIPS Group of Companies.

Respondent Standard Philips Corporation (Standard Philips), on
the other hand, was issued a Certificate of Registration by respondent
Commission on 19 May 1982.

On 24 September 1984, Petitioners filed a letter complaint with
the Securities & Exchange Commission (SEC) asking for the cancellation of
the word “PHILIPS” from Private Respondent’s corporate name in view
of the prior registration with the Bureau of Patents of the trademark
“PHILIPS” and the logo “PHILIPS SHIELD EMBLEM” in the name
of Petitioner PEBV, and the previous registration of Petitioners Philips
Electrical and Philips Industrial with the SEC.

As a result of Private Respondent’s refusal to amend its Articles
of Incorporation, Petitioners filed with the SEC, on 6 February 1985, a
Petition (SEC Case No. 2743), praying for the issuance of a Writ of Preliminary
Injunction, alleging, among others, that Private Respondent’s use of the word
PHILIPS amounts to an infringement and clear violation of Petitioners exclusive
right to use the same considering that both parties engage in the same
business.

In its Answer, dated 7 March 1985, Private Respondent countered
that Petitioner PEBV has no legal capacity to sue; that its use of its
corporate name is not at all similar to Petitioners’ trademark PHILIPS when
considered in its entirety; and that its products consisting of chain rollers,
belts, bearings and cutting saw are grossly
different from Petitioners’ electrical products.

After conducting hearings with respect to the prayer for Injunction,
the SEC Hearing Officer, on 27 September 1985, ruled against the issuance of
such Writ.

On 30 January 1987, the same Hearing Officer dismissed the
Petition for lack of merit. In so
ruling, the latter declared that inasmuch as the SEC found no sufficient ground
for the granting of injunctive relief on the basis of the testimonial and
documentary evidence presented, it cannot order the removal or cancellation of
the word “PHILIPS” from Private Respondent’s corporate name on the
basis of the same evidence adopted in toto during trial on the
merits. Besides, Section 18 of the
Corporation Code (infra) is applicable only when the corporate names in
question are identical. Here, there is
no confusing similarity between Petitioners’ and Private Respondent’s corporate
names as those of the Petitioners contain
at least two words different from that of the Respondent. Petitioners’ Motion for Reconsideration was
likewise denied on 17 June 1987.

On appeal, the SEC en banc affirmed the dismissal
declaring that the corporate names of Petitioners and Private Respondent hardly
breed confusion inasmuch as each contains at least two different words and,
therefore, rules out any possibility of confusing one for the other.

On 30 January 1990, Petitioners sought an extension of time to
file a Petition for Review on Certiorari before this Court, which
Petition was later referred to the Court of Appeals in a Resolution dated 12
February 1990.

In deciding to dismiss the petition on 31 July 1990, the Court of
Appeals^[1]
swept aside Petitioners’ claim that following the ruling in Converse Rubber
Corporation v. Universal Converse Rubber Products, Inc., et al, (G.R. No.
L-27906, January 8, 1987, 147 SCRA 154), the word PHILIPS cannot be used as
part of Private Respondent’s corporate name as the same constitutes a dominant
part of Petitioners’ corporate names. In so holding, the Appellate Court observed that the Converse
case is not four-square with the present case inasmuch as the contending
parties in Converse are engaged in a similar business, that is, the
manufacture of rubber shoes. Upholding
the SEC, the Appellate Court concluded that “private respondent’s products
consisting of chain rollers, belts, bearings and cutting saw are unrelated and
non-competing with petitioners’ products i.e. electrical lamps such that
consumers would not in any probability mistake one as the source or origin of
the product of the other.”

The Appellate Court denied Petitioners’ Motion for
Reconsideration on 20 November 1990, hence, this Petition which was given due
course on 22 April 1991, after which the parties were required to submit their
memoranda, the latest of which was received on 2 July 1991. In December 1991, the SEC was also required
to elevate its records for the perusal of this Court, the same not having been
apparently before Court of Appeals.

We find basis for petitioners’ plea.

As early as Western Equipment and Supply Co. v. Reyes, 51 Phil.
115 (1927), the Court declared that a corporation’s right to use its corporate
and trade name is a property right, a right in rem, which it may
assert and protect against the world in the same manner as it may protect its
tangible property, real or personal, against trespass or conversion. It is regarded, to a certain extent, as a property right and one which
cannot be impaired or defeated by subsequent appropriation by another
corporation in the same field (Red Line Transportation Co. vs. Rural Transit
Co., September 6, 1934, 60 Phil 549).

A name is peculiarly important as necessary to the very existence
of a corporation (American Steel Foundries vs. Robertson, 269 US 372, 70 L ed
317, 46 S Ct 160; Lauman vs. Lebanon Valley R. Co., 30 Pa 42; First National
Bank vs. Huntington Distilling Co. 40 W Va 530, 23 SE 792). Its name is one of its attributes, an
element of its existence, and essential to its identity (6 Fletcher [Perm Ed],
pp. 3-4). The general rule as to
corporations is that each corporation must have a name by which it is to sue
and be sued and do all legal acts. The
name of a corporation in this respect designates the corporation in the same
manner as the name of an individual designates the person (Cincinnati Cooperage
Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10
NH 123); and the right to use its corporate name is as much a part of the
corporate franchise as any other privilege granted (Federal Secur. Co. vs.
Federal Secur. Corp., 129 Or 375, 276 P 1100, 63 ALR 934; Pauline vs. Portuguese
Beneficial Association, 18 RI 165, 26 A 36).

A corporation requires its name by choice and need not select a
name identical with or similar to one already appropriated by a senior
corporation while an individual’s name is thrust upon him (See Standard Oil Co. of New Mexico
Inc. v. Standard Oil Co. of California, 56 F 2d 973, 977). A corporation can no more use a corporate
name in violation of the rights of others than an individual can use his name
legally acquired so as to mislead the public and injure another (Armington vs.
Palmer, 21 RI 109, 42 A 308).

Our own Corporation Code, in its Section 18, expressly provides
that:

“No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical or deceptively or
confusingly similar to that of any existing corporation or to any other name
already protected by law or is patently
deceptive, confusing or contrary to existing law. Where
a change in the corporate name is approved, the commission shall issue an
amended certificate of incorporation under the amended name.” (Emphasis
supplied)

The statutory prohibition cannot be any clearer. To come within its scope, two requisites
must be proven, namely:

(1) that the complainant
corporation acquired a prior right over the use of such corporate name; and

(2) the proposed name is
either:

(a) identical or

(b) deceptively or
confusingly similar to that of any existing corporation or to any other name
already protected by law; or

(c) patently deceptive, confusing or contrary to existing law.

The right to the exclusive use of a corporate name with freedom
from infringement by similarity is determined by priority of adoption (1
Thompson, p. 80 citing Munn v. Americana Co., 82 N., Eq. 63, 88 Atl. 30; San
Francisco Oyster House v. Mihich, 75 Wash. 274, 134 Pao. 921). In this regard, there is no doubt with
respect to Petitioners’ prior adoption of the name “PHILIPS” as part
of its corporate name. Petitioners Philips
Electrical and Philips Industrial were incorporated on 29 August 1956 and 25
May 1956, respectively, while Respondent Standard Philips was issued a Certificate of Registration on 19
April 1982, twenty-six (26) years later (Rollo, p. 16). Petitioner PEBV has also used the trademark
“PHILIPS” on electrical lamps
of all types and their accessories since 30 September 1922, as evidenced by Certificate of
Registration No. 1651.

The second requisite no less
exists in this case. In determining the
existence of confusing similarity in corporate names, the test is whether the
similarity is such as to mislead
a person using ordinary care and discrimination. In so doing, the Court must look to the record as well as the
names themselves (Ohio Nat. Life Ins. Co. v. Ohio Life Ins. Co., 210 NE 2d 298). While the corporate names of Petitioners and Private Respondent
are not identical, a reading of Petitioner’s corporate names, to wit: PHILIPS EXPORT B.V., PHILIPS ELECTRICAL
LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC., inevitably leads one to
conclude that “PHILIPS” is, indeed, the dominant word in that all the
companies affiliated or associated with
the principal corporation, PEBV, are known in the Philippines and abroad
as the PHILIPS Group of Companies.

Respondents maintain, however, that Petitioners did not present
an iota of proof of actual confusion or deception of the public much less a
single purchaser of their product who has been deceived or confused or showed
any likelihood of confusion. It is
settled, however, that proof of actual confusion need not be shown. It suffices that confusion is probably or
likely to occur (6 Fletcher [Perm Ed], pp. 107-108, enumerating a long line of
cases).

It may be that Private Respondent’s products also consist of
chain rollers, belts, bearing and the like while petitioners deal principally
with electrical products. It is
significant to note, however, that even the Director of Patents had denied
Private Respondent’s application for registration of the trademarks
“Standard Philips & Device” for chains, rollers, belts, bearings
and cutting saw. That office held that
PEBV “had shipped to its subsidiaries in the Philippines equipment,
machines and their parts which fall under international class where chains,
rollers, belts, bearings and cutting saw, the goods in connection with which
Respondent is seeking to register “STANDARD PHILIPS x x x also
belong” (Inter Partes Case No. 2010, June 17, 1988, SEC Rollo).

Furthermore, the records show that among Private Respondent’s
primary purposes in its Articles of Incorporation (Annex D, Petition; p. 37,
Rollo) are the following:

“To buy, sell, barter, trade, manufacture, import, export
or otherwise acquire, dispose of, and deal in and deal with any kind of
goods, wares, and merchandise such as but not limited to plastics, carbon
products, office stationery and supplies, hardware parts, electrical wiring devices, electrical component parts and/or
complement of industrial,
agricultural or commercial machineries, constructive supplies, electrical
supplies and other merchandise which are or may become articles of commerce
except food, drugs, and cosmetics and to carry on such business as
manufacturer, distributor, dealer, indentor, factor, manufacturer’s
representative capacity for domestic or foreign companies.” (underscoring
ours)

For its part,
Philips Electrical also includes, among its primary purposes, the following:

“To develop, manufacture and deal in electrical products,
including electronic, mechanical and other similar products x x x.” (p.
30, Record of SEC Case No. 2743)

Given Private Respondent’s aforesaid underlined primary purpose,
nothing could prevent it from dealing in the same line of business of
electrical devices, products or supplies which fall under its primary
purposes. Besides, there is showing
that Private Respondent not only manufactured and sold ballasts for fluorescent
lamps with their corporate name printed thereon but also advertised the same
as, among others, Standard Philips (TSN, before the SEC. pp. 14, 17, 25, 26,
37-42, June 14, 1985; pp. 16-19, July 25, 1985). As aptly pointed out by Petitioners. “[p]rivate respondent’s choice of ‘PHILIPS’ as part of its
corporate name [STANDARD PHILIPS CORPORATION] x x x tends to show said
respondent’s intention to ride on the popularity and established goodwill of
said petitioner’s business throughout the world” (Rollo, p. 137). The subsequent appropriator of the name or
one confusingly similar thereto usually seeks an unfair advantage, a free ride
on another’s goodwill (American Gold Star Mothers, Inc. v. National Gold Star
Mothers, Inc., et al, 89 App DC 269, 191 F 2d 488).

In allowing Private Respondent the continued use of its corporate
name, the SEC maintains that the corporate names of Petitioners PHILIPS
ELECTRICAL LAMPS, INC. and PHILIPS INDUSTRIAL DEVELOPMENT, INC. contain at
least two words different from
that of the corporate name of respondent STANDARD PHILIPS CORPORATION, which
words will readily identify Private Respondent from Petitioners and vice-versa.

True, under the Guidelines in the Approval of Corporate and
Partnership Names formulated by the SEC, the proposed name “should not be
similar to one already used by another corporation or partnership. If the proposed name contains a word already
used as part of the firm name or style of a registered company, the proposed
name must contain two
other words different from the company already registered” (Emphasis
ours). It is then pointed out that
Petitioners Philips Electrical and Philips Industrial have two words different from that of
Private Respondent’s name.

What is lost sight of, however, is that PHILIPS is a trademark or
trade name which was registered as far back as 1922. Petitioners, therefore, have the exclusive right to its use which
must be free from any infringement by similarity. A corporation has an exclusive right to the use of its name,
which may be protected by injunction upon a principle similar to that upon
which persons are protected in the use of trademarks and tradenames (18 C.J.S.
574). Such principle proceeds upon the
theory that it is a fraud on the corporation which has acquired a right to that
name and perhaps carried on its business thereunder, that another should
attempt to use the same name, or the same name with a slight variation in such
a way as to induce persons to deal with it in the belief that they are dealing
with the corporation which has given a reputation to the name (6 Fletcher [Perm
Ed], pp. 30-40, citing Borden Ice Cream Co. v. Borden’s Condensed Milk Co., 210
F 510). Notably, too, Private
Respondent’s name actually contains only a single word, that is,
“STANDARD”, different from that of Petitioners inasmuch as the
inclusion of the term “Corporation” or “Corp.” merely
serves the purpose of distinguishing the corporation from partnerships and
other business organizations.

The fact that there are other companies engaged in other lines of
business using the word “PHILIPS” as part of their corporate names is
no defense and does not warrant the use by Private Respondent of such word
which constitutes an essential feature of Petitioners’ corporate name
previously adopted and registered and having acquired the status of a
well-known mark in the Philippines and internationally as well (Bureau of
Patents Decision No. 88-35 [TM], June 17, 1988, SEC Records).

In support of its application for the registration of its
Articles of Incorporation with the SEC, Private Respondent had submitted an
undertaking “manifesting its willingness to change its corporate name in
the event another person, firm or entity has acquired a prior right to the use
of the said firm name or one deceptively or confusingly similar to it.” Private
Respondent must now be held to its undertaking.

“As a general rule, parties organizing a corporation must
choose a name at their peril; and the use of a name similar to one adopted by
another corporation, whether a business or a nonbusiness or nonprofit
organization if misleading and likely to injure it in the exercise of its
corporate functions, regardless of intent, may be prevented by the corporation
having the prior right, by a suit for injunction against the new corporation to
prevent the use of the name (American Gold Star Mothers, Inc. v. National Gold
Star Mothers, Inc. 89 App DC 269, 191 F 2d 488, 27 ALR 2d 948).”

WHEREFORE, the Decision of the Court of Appeals
dated 31 July 1990, and its Resolution dated 20 November 1990, are SET ASIDE
and a new one entered ENJOINING private respondent from using
“PHILIPS” as a feature of its corporate name, and ORDERING the
Securities and Exchange Commission to amend private respondent’s Articles of
Incorporation by deleting the word PHILIPS from the corporate name of private
respondent.

No costs.

SO ORDERED.

Paras, Padilla, Regalado, and Nocon,
JJ., concur.

^[1]
Second Division, composed of Justice Jose
A. R. Melo, Chairman, Justice Antonio M. Martinez, Ponente, and
Justice Nicolas P. Lapeña, Jr., Member.