Case Digest: Asia Pacific Resources International Holdings, Ltd. V. Paperone, Inc., G.R. No. 213365-66, December 10, 2018

 Corporation Law | Corporation Name

• The petitioner Asia Pacific Resources International Holdings, Ltd., a company engaged in the production and sale of paper, alleged to be the owner of the trademark PAPER ONE since 2003.
• The petitioner alleged that the respondent Paperone, Inc., used the name PAPERONE in its corporate name without prior consent, with the intention of taking advantage of the petitioner's reputation and goodwill, and was designed to mislead the public into believing that the respondent's products were manufactured, licensed, or sponsored by the petitioner.
• The respondent argued that it had no obligation to secure prior consent or authority from petitioner. The respondent was registered with the SEC since 2001 and had no knowledge of the existence of the petitioner.
• Bureau of Legal Affairs (BLA) Director, Intellectual Property Office: Found respondent liable for unfair competition ordering the respondent to cease and desist from using PAPERONE in its corporate name.
• It ruled that petitioner was the first to use PAPER ONE in 1999 which had become a symbol of goodwill of its paper business. 
• Respondent’s use of PAPERONE in its corporate name was to benefit from the established goodwill of petitioner.
• However, there was no trademark infringement since PAPER ONE was registered in the Philippines only in 2003.
• CA: Reversed and set aside the IPO Director General's decision.
• It held that there was no confusing similarity in the general appearance of the goods of both parties and  the essential elements of unfair competition were not present.

WoN respondent is liable for unfair competition. YES

The relevant provisions of the Intellectual Property Code provide:

SECTION 168. Unfair Competition, Rights, Regulation and Remedies. -

168.1. A person who has identified in the mind of the public the goods he manufactures or deals in, his business or services from those of others, whether or not a registered mark is employed, has a property right in the goodwill of the said goods, business or services so identified, which will be protected in the same manner as other property rights.

168.2. Any person who shall employ deception or any other means contrary to good faith by which he shall pass off the goods manufactured by him or in which he deals, or his business, or services for those of the one having established such goodwill, or who shall commit any acts calculated to produce said result, shall be guilty of unfair competition, and shall be subject to an action therefor.

168.3. In particular, and without in any way limiting the scope of protection against unfair competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who is selling his goods and gives them the general appearance of goods of another manufacturer or dealer, either as to the goods themselves or in the wrapping of the packages in which they are contained, or the devices or words thereon, or in any other feature of their appearance, which would be likely to influence purchasers to believe that the goods offered are those of a manufacturer or dealer, other than the actual manufacturer or dealer, or who, otherwise, clothes the goods with such appearance as shall deceive the public and defraud another of his legitimate trade, or any subsequent vendor of such goods or any agent of any vendor engaged in selling such goods with a like purpose.

The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Unfair competition is always a question of fact. At this point, it bears to stress that findings of fact of the highly technical agency - the IPO - which has the expertise in this field, should have been given great weight by the Court of Appeals.

a) Confusing similarity

As to the first element, the confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. Likelihood of confusion of goods or business is a relative concept, to be determined only according to peculiar circumstances of each case.

It can easily be observed that both have the same spelling and are pronounced the same. Although respondent has a different logo, it was always used together with its trade name. It bears to emphasize that, initially, respondent's trade name had separate words that read "Paper One, Inc." under its original Articles of Incorporation. This was later on revised to make it one word, and now reads "Paperone, Inc.

At first glance, respondent may be correct that there would be no confusion as to the presentation or packaging of its products since it is not using its corporate name as a trademark of its goods/products. There is an apparent dissimilarity of presentation of the trademark PAPER ONE and the trade name and logo of Paperone, Inc. Nevertheless, a careful scrutiny of the mark shows that the use of PAPERONE by respondent would likely cause confusion or deceive the ordinary purchaser, exercising ordinary care, into believing that the goods bearing the mark are products of one and the same enterprise.

Relative to the issue on confusion of marks and trade names, jurisprudence has noted two types of confusion, viz.: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product; and the public would then be deceived either into that belief or into the belief that there is some connection between the two parties, though inexistent. Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation.

This case falls under the second type of confusion. Although we see a noticeable difference on how the trade name of respondent is being used in its products as compared to the trademark of petitioner, there could likely be confusion as to the origin of the products. Thus, a consumer might conclude that PAPER ONE products are manufactured by or are products of Paperone, Inc. Additionally, although respondent claims that its products are not the same as petitioner's, the goods of the parties are obviously related as they are both kinds of paper products.

The BLA Director aptly ruled that "to permit respondent to continue using the same or identical Paperone in its corporate name although not [used] as label for its paper products, but the same line of business, that of manufacturing goods such as PAPER PRODUCTS, therefore their co­existence would result in confusion as to source of goods and diversion of sales to [r]espondent knowing that purchasers are getting products from [petitioner] APRIL with the use of the corporate name Paper One, Inc. or Paperone, Inc. by herein [r]espondent."

The matter of prior right over PAPERONE, again, is a matter of factual determination; therefore, we give credence to the findings of the IPO, who has the expertise in this matter, being supported by substantial evidence. The Court has consistently recognized the specialized functions of the administrative agencies - in this case, the IPO. Berris Agricultural Co., Inc. v. Abyadang states, thus:

The determination of priority of use of a mark is a question of fact. Adoption of the mark alone does not suffice. One may make advertisements, issue circulars, distribute price lists on certain goods, but these alone will not inure to the claim of ownership of the mark until the goods bearing the mark are sold to the public in the market. Accordingly, receipts, sales invoices, and testimonies of witnesses as customers, or orders of buyers, best prove the actual use of a mark in trade and commerce during a certain period of time.

x x x x

Verily, the protection of trademarks as intellectual property is intended not only to preserve the goodwill and reputation of the business established on the goods bearing the mark through actual use over a period of time, but also to safeguard the public as consumers against confusion on these goods. On this matter of particular concern, administrative agencies, such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are in a better position to pass judgment thereon. Thus, their findings of fact in that regard are generally accorded great respect, if not finality by the courts, as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even p1reponderant. It is not th1e task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence.[24] (Emphasis supplied)

The BLA Director found, as affirmed by the IPO Director General, that it was petitioner who has priority rights over PAPER ONE, thus:

One essential factor that has led this Office to tilt the scales of justice in favor of Complainant is the latter's establishment of prior use of the word PaperOne for paper products in the Philippines. Records will show that there was prior use and adoption by Complainant of the word "PaperOne." PaperOne was filed for trademark registration on 22 March 1999 (Exhibit "D", Complainant) in the name of Complainant Asia Pacific Resources International Holdings, Ltd. and matured into registration on 10 February 2003. Respondent's corporate or trade name is Paper One, Inc. which existed and was duly registered with the Securities and Exchange Commission on 31 March 2001 (Exhibit "11", Respondent). If anyone files a suit and can prove priority of adoption, he can assert his right to the exclusive use of a corporate name with freedom from infringement by similarity (Philips Export B.V. et al. vs. CA, G.R. No. 96161). Respondent was incorporated in March 2001 by virtue of SEC registration No. A200104788 (Exhibit "11", Complainant) and was registered two (2) years thereafter as business name with the Department of Trade and Industry under DTI Business Name Registration No. 00068456 (Exhibit "13", Respondent). Complainant Asia Pacific Resources International Holdings, Ltd., APRIL for brevity, presented evidence of its use of the label PaperOne on paper products in the Philippines earlier than the date of its trademark application in 1999 when its marketing and promotion agent JND International Corporation ("JND" for brevity) licensed one of its clients, National Paper Products & Printing Corporation ("NAPPCO" for brevity) to import, sell and distribute Complainant's APRIL paper products in 1998 (par. 3, Exhibit "AA", Complainant). To support this declaration are documents evidencing transactions of NAPPCO with Complainant APRIL with the earliest documented transaction on 22 January 1999 (Exhibit "G", Complainant) bearing [I]nvoice [N]o. LCA9812133.

The fact of earlier use was not disputed by the Respondent. In point of fact, Respondent already knew of Complainant's APRIL existence prior to Respondent's incorporation as Paper One, Inc. in 2001. Most of the incorporators of National Paper Products & Printing Corporation or NAPPCO for brevity (Exhibits "H" and "H­-A" to "H-H", Complainant) which in late 1990s transacted with Complainant APRIL through Invoice No. LCA9812133 dated 22 January 1999, the earliest invoice noted (Exhibit "G", Complainant) are likewise incorporators of Paper One, Inc. (Exhibit "11", Respondent) namely Tan Tian Siong, Chong Ping Tat, Thelma J. Uy, Conchita Francisco, Sy Siong Sun, to name a few. Also, NAPPCO, through Complainant's marketing and promotion agent JND International Corporation, or JND for brevity (Exhibit "AA", Complainant) expressed interest in a letter dated 19 January 2000 to work with JND and APRIL, as its exclusive distributor and we quote "to become your exclusive distributor of 'Paper One' Multi Purpose Copy Paper" (Exhibit "AA-1-d", Complainant). Worth mentioning at this point is the jurisprudence pronounced in the case of Converse Rubber Corporation vs. Universal Rubber Products, Inc. and Tiburcio S. Evalle (G.R. No. L-27906, Jan. 18, 1987) where the court said:

Knowing therefore that the word "CONVERSE" belongs to and is being used by petitioner, and is in fact the dominant word in petitioner's corporate name, respondent has no right to appropriate the same for use on its products which are similar to those being produced by petitioner.

b) intent to deceive the public and defraud a competitor

The element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. Contrary to the ruling of the CA, actual fraudulent intent need not be shown. Factual circumstances were established showing that respondent adopted PAPERONE in its trade name even with the prior knowledge of the existence of PAPER ONE as a trademark of petitioner. As in all other cases of colorable imitations, the unanswered riddle is why, of the millions of terms and combinations of letters available, respondent had to choose those so closely similar to another's trademark if there was no intent to take advantage of the goodwill generated by the other mark.

With regard to the issue on damages, we likewise agree with the IPO that the actual damages prayed for cannot be granted because petitioner has not presented sufficient evidence to prove the amount claimed and the basis to measure actual damages.

WHEREFORE, the petition is GRANTED. The November 28, 2013 Decision and the July 9, 2014 Resolution of the: Court of Appeals in CA G.R. SP Nos. 122288 and 122535 are REVERSED and SET ASIDE. Accordingly, the November 10, 2011 Decision of the Intellectual Property Office Director General finding respondent liable for unfair competition is hereby REINSTATED.