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Shangri-La Internaional vs. Court of Appeals [G.R. No. 111580.

June 21, 2001] Facts: The Shangri-La International Hotel Management, Ltd., Shangri-La Properties, Inc., Makati Shangri-La Hotel and Resort, Inc. and Kuok Philippine Properties, Inc. (hereinafter collectively referred as the Shangri-La Group), filed with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT) a petition, docketed as Inter Partes Case No. 3145, praying for the cancellation of the registration of the Shangri-La mark and S device/logo issued to the Developers Group of Companies, Inc., on the ground that the same was illegally and fraudulently obtained and appropriated for the latters restaurant business. The Shangri-La Group alleged that it is the legal and beneficial owners of the subject mark and logo; that it has been using the said mark and logo for its corporate affairs and business since March 1962 and caused the same to be specially designed for their international hotels in 1975, much earlier than the alleged first use thereof by the Developers Group in 1982. It claims that this mark is internationally well-known and is protected under the Paris Convention. On the other hand, Developers is the registered owner of the mark Shangri-La and S Logo in the Philippines under Regn. No. 31904 issued on May 31, 1983, which it started using in 1982. Likewise, the Shangri-La Group filed with the BPTTT its own application for registration of the subject mark and logo. The Developers Group filed an opposition to the application. Almost three (3) years later, or on April 15, 1991, the Developers Group instituted with the Regional Trial Court of Quezon City, Branch 99, a complaint for infringement and damages with prayer for injunction. The Shangri-La Group moved for the suspension of the proceedings in the infringement case on account of the pendency of the administrative proceedings before the BPTTT. This was denied by the trial court in a Resolution issued on January 16, 1992. The Shangri-La Group filed a Motion for Reconsideration. Soon thereafter, it also filed a Motion to Inhibit against Presiding Judge Felix M. de Guzman. On July 1, 1992, the trial court denied both motions. The Shangri-La Group filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 29006. On February 15, 1993, the Court of Appeals rendered its decision dismissing the petition for certiorari. The Shangri-La Group filed a Motion for Reconsideration, which was denied on the ground that the same presented no new matter that warranted consideration. Hence, the instant petition Issue: Whether or not Shangri-La International Hotel, etc. al. (Shangri-La Group) committed trademark infringement against Developers Group of Companies, Inc. (Developers) for its use of SHANGRI-LA mark and S device/logo?

Held: The Court ruled that Developers use of the SHANGRI-LA mark and S logo was in evident bad faith and cannot therefore ripen into ownership. The Court said: ...It is truly difficult to understand why, of the millions of terms and combination of letters and designs available, the respondent had to choose exactly the same mark and logo as that of petitioners, if there was no intent to take advantage of the goodwill of petitioners mark and logo. One who has imitated the trademark of another cannot bring an action for infringement, particularly against the true owner of the mark, because he would be coming to court with unclean hands. Priority is of no avail to the bad faith plaintiff. Good faith is required in order to ensure that a second user may not merely take advantage of the goodwill established by the true owner. Under Section 2, in order to register a trademark, one must be the owner thereof and must have actually used the mark in commerce in the Philippines for 2 months prior to the application for registration. Since "ownership" of the trademark is required for registration, Section 2-A of the same law sets out to define how one goes about acquiring ownership thereof. Additionally, it is significant to note that Section 2-A does not require that the actual use of a trademark must be within the Philippines. Hence, under R.A. No. 166, as amended, one may be an owner of a mark due to actual use thereof but not yet have the right to register such ownership here due to failure to use it within the Philippines for two months. DGCI's registration of the subject mark and logo was void due to the existence of bad faith and the absence of the requisite 2-month prior use.