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March 3, 2010
Petitioner contends that when a trade name is not registered, a suit for infringement
is not available. Petitioner alleges respondent has abandoned its trade name.
Petitioner points out that respondents registration of its business name with the DTI
expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee
shop in Libis, Quezon City that respondent made a belated effort to seek the
renewal of its business name registration. Petitioner stresses respondents failure to
continue the use of its trade name to designate its goods negates any allegation of
infringement. Petitioner claims no confusion is likely to occur between its trademark
and respondents trade name because of a wide divergence in the channels of
trade, petitioner serving ready-made coffee while respondent is in wholesale
blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper
noun "San Francisco" and the generic word "coffee" are not capable of exclusive
appropriation.
In 1998, respondent formed a joint venture company with Boyd Coffee USA under
the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged
in the processing, roasting, and wholesale selling of coffee. Respondent later
embarked on a project study of setting up coffee carts in malls and other
commercial establishments in Metro Manila.
In June 2001, respondent discovered that petitioner was about to open a coffee
shop under the name "SAN FRANCISCO COFFEE" in Libis, Quezon City. According to
respondent, petitioners shop caused confusion in the minds of the public as it bore
a similar name and it also engaged in the business of selling coffee. Respondent
sent a letter to petitioner demanding that the latter stop using the name "SAN
FRANCISCO COFFEE." Respondent also filed a complaint with the Bureau of Legal
Affairs-Intellectual Property Office (BLA-IPO) for infringement and/or unfair
competition with claims for damages.
Facts from the ruling:
Respondent maintains the law protects trade names from infringement even if they
are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA
8293)7 dispensed with registration of a trade name with the IPO as a requirement
for the filing of an action for infringement. All that is required is that the trade name
is previously used in trade or commerce in the Philippines. Respondent insists it
never abandoned the use of its trade name as evidenced by its letter to petitioner
demanding immediate discontinuation of the use of its trademark and by the filing
of the infringement case. Respondent alleges petitioners trademark is confusingly
similar to respondents trade name. Respondent stresses ordinarily prudent
consumers are likely to be misled about the source, affiliation, or sponsorship of
petitioners coffee.
1.) In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark
infringed on respondents trade name. It ruled that the right to the exclusive
use of a trade name with freedom from infringement by similarity is
determined from priority of adoption. Since respondent registered its
business name with the DTI in 1995 and petitioner registered its trademark
with the IPO in 2001 in the Philippines and in 1997 in other countries, then
respondent must be protected from infringement of its trade name.
2.) The BLA-IPO also held that respondent did not abandon the use of its trade
name as substantial evidence indicated respondent continuously used its
trade name in connection with the purpose for which it was organized. It
found that although respondent was no longer involved in blending, roasting,
and distribution of coffee because of the creation of BCCPI, it continued
making plans and doing research on the retailing of coffee and the setting up
of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse
must be permanent, intentional, and voluntary.
3.) The BLA-IPO held that petitioners use of the trademark "SAN FRANCISCO
COFFEE" will likely cause confusion because of the exact similarity in sound,
spelling, pronunciation, and commercial impression of the words "SAN
FRANCISCO" which is the dominant portion of respondents trade name and
petitioners trademark. It held that no significant difference resulted even
with a diamond-shaped figure with a cup in the center in petitioner's
trademark because greater weight is given to words the medium consumers
use in ordering coffee products.
4.) On the issue of unfair competition, the BLA-IPO absolved petitioner from
liability. It found that petitioner adopted the trademark "SAN FRANCISCO
COFFEE" because of the authority granted to it by its franchisor. The BLA-IPO
held there was no evidence of intent to defraud on the part of petitioner.
5.) The BLA-IPO also dismissed respondents claim of actual damages because its
claims of profit loss were based on mere assumptions as respondent had not
even started the operation of its coffee carts. The BLA-IPO likewise dismissed
respondents claim of moral damages, but granted its claim of attorneys
fees.
Both parties moved for partial reconsideration. Petitioner protested the finding of
infringement, while respondent questioned the denial of actual damages. The BLAIPO denied the parties partial motion for reconsideration. The parties appealed to
the Office of the Director General-Intellectual Property Office (ODG-IPO).
In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003
decision of the ODG-IPO in so far as it ruled that there was no infringement. It
reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The
appellate court denied respondents claim for actual damages and retained the
award of attorneys fees. In its 1 September 2005 Resolution, the Court of Appeals
denied petitioners motion for reconsideration and respondents motion for partial
reconsideration.
The Issue
The sole issue is whether petitioners use of the trademark "SAN FRANCISCO
COFFEE" constitutes infringement of respondents trade name "SAN FRANCISCO
COFFEE & ROASTERY, INC.," even if the trade name is not registered with the
Intellectual Property Office (IPO).
Supreme Court Ruling:
Coming now to the main issue, in Prosource International, Inc. v. Horphag Research
Management SA,9 this Court laid down what constitutes infringement of an
unregistered trade name, thus:
(1) The trademark being infringed is registered in the Intellectual Property Office;
however, in infringement of trade name, the same need not be registered;
(3) The infringing mark or trade name is used in connection with the sale, offering
for sale, or advertising of any goods, business or services; or the infringing mark or
trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or
advertisements intended to be used upon or in connection with such goods,
business, or services;
(4) The use or application of the infringing mark or trade name is likely to cause
confusion or mistake or to deceive purchasers or others as to the goods or services
themselves or as to the source or origin of such goods or services or the identity of
such business; and
(5) It is without the consent of the trademark or trade name owner or the assignee
thereof.10 (Emphasis supplied)
Clearly, a trade name need not be registered with the IPO before an infringement
suit may be filed by its owner against the owner of an infringing trademark. All that
is required is that the trade name is previously used in trade or commerce in the
Philippines.11
Section 22 of Republic Act No. 166,12 as amended, required registration of a trade
name as a condition for the institution of an infringement suit
However, RA 8293, which took effect on 1 January 1998, has dispensed with the
registration requirement. Section 165.2 of RA 8293 categorically states that trade
names shall be protected, even prior to or without registration with the IPO, against
any unlawful act including any subsequent use of the trade name by a third party,
whether as a trade name or a trademark likely to mislead the public.1avvph!1 Thus:
SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation
to register trade names, such names shall be protected, even prior to or without
registration, against any unlawful act committed by third parties.
(b) In particular, any subsequent use of a trade name by a third party, whether as a
trade name or a mark or collective mark, or any such use of a similar trade name or
mark, likely to mislead the public, shall be deemed unlawful. (Emphasis supplied)
marks involved is likely to cause confusion or mistake in the mind of the public or to
deceive consumers.14
In contrast, the holistic test entails a consideration of the entirety of the marks as
applied to the products, including the labels and packaging, in determining
confusing similarity.15 The discerning eye of the observer must focus not only on
the predominant words but also on the other features appearing on both marks in
order that the observer may draw his conclusion whether one is confusingly similar
to the other.16
Applying either the dominancy test or the holistic test, petitioners "SAN FRANCISCO
COFFEE" trademark is a clear infringement of respondents "SAN FRANCISCO
COFFEE & ROASTERY, INC." trade name. The descriptive words "SAN FRANCISCO
COFFEE" are precisely the dominant features of respondents trade name. Petitioner
and respondent are engaged in the same business of selling coffee, whether
wholesale or retail. The likelihood of confusion is higher in cases where the business
of one corporation is the same or substantially the same as that of another
corporation. In this case, the consuming public will likely be confused as to the
source of the coffee being sold at petitioners coffee shops.
Petitioners argument that "San Francisco" is just a proper name referring to the
famous city in California and that "coffee" is simply a generic term, is untenable.
Respondent has acquired an exclusive right to the use of the trade name "SAN
FRANCISCO COFFEE & ROASTERY, INC." since the registration of the business name
with the DTI in 1995. Thus, respondents use of its trade name from then on must
be free from any infringement by similarity. Of course, this does not mean that
respondent has exclusive use of the geographic word "San Francisco" or the generic
word "coffee." Geographic or generic words are not, per se, subject to exclusive
appropriation. It is only the combination of the words "SAN FRANCISCO COFFEE,"
which is respondents trade name in its coffee business, that is protected against
infringement on matters related to the coffee business to avoid confusing or
deceiving the public.
In Philips Export B.V. v. Court of Appeals,17 this Court held that a corporation has an
exclusive right to the use of its name. The right proceeds from 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.18
This Court is not just a court of law, but also of equity. We cannot allow petitioner to
profit by the name and reputation so far built by respondent without running afoul
of the basic demands of fair play. Not only the law but equity considerations hold
petitioner liable for infringement of respondents trade name.
The Court of Appeals was correct in setting aside the 22 October 2003 Decision of
the Office of the Director General-Intellectual Property Office and in reinstating the
14 August 2002 Decision of the Bureau of Legal Affairs-Intellectual Property Office.
WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005
Decision and 1 September 2005 Resolution of the Court of Appeals in CA-G.R. SP No.
80396.
Labor Arbiter:
On October 16, 2000, the LA granted the petitioners motion to dismiss,6 ruling that
the respondent was a corporate officer because he was occupying the position of
Vice President for Finance and Administration and at the same time was a Member
of the Board of Directors of Matling; and that, consequently, his removal was a
corporate act of Matling and the controversy resulting from such removal was under
the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of Presidential
Decree No. 902.
The respondent appealed to the NLRC
NLRC:
On March 13, 2001, the NLRC set aside the dismissal, concluding that the
respondents complaint for illegal dismissal was properly cognizable by the LA, not
by the SEC, because he was not a corporate officer by virtue of his position in
Matling, albeit high ranking and managerial, not being among the positions listed in
Matlings Constitution and By-Laws.
MOR:
Nonetheless, on April 30, 2001, the NLRC denied the petitioners motion for
reconsideration.11
The petitioners elevated the issue to the CA by petition for certiorari, docketed as
C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in reversing the correct decision of the
LA.
Ruling of CA
The position of vice-president for administration and finance, which Coros used to
hold in the corporation, was not created by the corporations board of directorsn but
only by its president or executive vice-president pursuant to the by-laws of the
corporation. Moreover, Coros appointment to said position was not made through
any act of the board of directors or stockholders of the corporation. Consequently,
the position to which Coros was appointed and later on removed from, is not a
corporate office despite its nomenclature, but an ordinary office in the corporation.
Coros alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the
labor arbiter.
The decisive issue is whether the respondent was a corporate officer of Matling or
not. The resolution of the issue determines whether the LA or the RTC had
jurisdiction over his complaint for illegal dismissal.
Ruling
We must first resolve whether or not the respondents position as Vice President for
Finance and Administration was a corporate office. If it was, his dismissal by the
Board of Directors rendered the matter an intra-corporate dispute cognizable by the
RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matlings President
pursuant to By-Law No. V,
The petitioners argue that the power to create corporate offices and to appoint the
individuals to assume the offices was delegated by Matlings Board of Directors to
its President through By-Law No. V, as amended; and that any office the President
created, like the position of the respondent, was as valid and effective a creation as
that made by the Board of Directors, making the office a corporate office
The respondent counters that Matlings By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices
Xxxx, to be considered as a corporate officer, must be elected by the Board of
Directors or the stockholders, for the President could only appoint an employee to a
position pursuant to By-Law No. V.
The directors or trustees and officers to be elected shall perform the duties enjoined
on them by law and the by-laws of the corporation. Unless the articles of
incorporation or the by-laws provide for a greater majority, a majority of the number
of directors or trustees as fixed in the articles of incorporation shall constitute a
quorum for the transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which there is a quorum
shall be valid as a corporate act, except for the election of officers which shall
require the vote of a majority of all the members of the board.
Conformably with Section 25, a position must be expressly mentioned in the ByLaws in order to be considered as a corporate office. Thus, the creation of an office
pursuant to or under a By-Law enabling provision is not enough to make a position a
corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held that the
only officers of a corporation were those given that character either by the
Corporation Code or by the By-Laws; the rest of the corporate officers could be
considered only as employees or subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King:20
In this case, respondent was appointed vice president for nationwide expansion by
Malonzo, petitioner's general manager, not by the board of directors of petitioner. It
was also Malonzo who determined the compensation package of respondent. Thus,
respondent was an employee, not a "corporate officer." The CA was therefore
correct in ruling that jurisdiction over the case was properly with the NLRC, not the
SEC (now the RTC).
A different interpretation can easily leave the way open for the Board of Directors to
circumvent the constitutionally guaranteed security of tenure of the employee by
the expedient inclusion in the By-Laws of an enabling clause on the creation of just
any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency
administering the Corporation Code, adopted a similar interpretation of Section 25
of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Moreover, the Board of Directors of Matling could not validly delegate the power to
create a corporate office to the President, in light of Section 25 of the Corporation
Code requiring the Board of Directors itself to elect the corporate officers. Verily, the
power to elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be delegated to
subordinate officers or agents.22 The office of Vice President for Finance and
Administration created by Matlings President pursuant to By Law No. V was an
ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the officers
to occupy them vested by By-Law No. V merely allowed Matlings President to
create non-corporate offices to be occupied by ordinary employees of Matling. Such
powers were incidental to the Presidents duties as the executive head of Matling to
assist him in the daily operations of the business.
Yet, the petitioners insist that because the respondent was a Director/stockholder of
Matling, and relying on Paguio v. National Labor Relations Commission24 and
Ongkingko v. National Labor Relations Commission,25 the NLRC had no jurisdiction
over his complaint, considering that any case for illegal dismissal brought by a
stockholder/officer against the corporation was an intra-corporate matter that must
fall under the jurisdiction of the SEC conformably with the context of PD No. 902-A.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings,
the complainants were undeniably corporate officers due to their positions being
expressly mentioned in the By-Laws, aside from the fact that both of them had been
duly elected by the respective Boards of Directors. But the herein respondents
position of Vice President for Finance and Administration was not expressly
mentioned in the By-Laws; neither was the position of Vice President for Finance and
Administration created by Matlings Board of Directors. Lastly, the President, not the
Board of Directors, appointed him.
However, the Tabang pronouncement is not controlling because it is too sweeping
and does not accord with reason, justice, and fair play. In order to determine
whether a dispute constitutes an intra-corporate controversy or not, the Court
considers two elements instead, namely: (a) the status or relationship of the parties;
and (b) the nature of the question that is the subject of their controversy
Xx
The fact that the parties involved in the controversy are all stockholders or that the
parties involved are the stockholders and the corporation does not necessarily place
the dispute within the ambit of the jurisdiction of SEC. The better policy to be
followed in determining jurisdiction over a case should be to consider concurrent
factors such as the status or relationship of the parties or the nature of the question
that is the subject of their controversy. In the absence of any one of these factors,
the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that
every conflict between the corporation and its stockholders would involve such
corporate matters as only the SEC can resolve in the exercise of its adjudicatory or
quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from
office at will, on one hand, and ordinary corporate employees who may only be
terminated for just cause, on the other hand, do not depend on the nature of the
services performed, but on the manner of creation of the office. In the respondents
case, he was supposedly at once an employee, a stockholder, and a Director of
Matling. The circumstances surrounding his appointment to office must be fully
considered to determine whether the dismissal constituted an intra-corporate
controversy or a labor termination dispute. We must also consider whether his
status as Director and stockholder had any relation at all to his appointment and
subsequent dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice President for Finance
and Administration because of his being a stockholder or Director of Matling. He had
started working for Matling on September 8, 1966, and had been employed
continuously for 33 years until his termination on April 17, 2000, first as a
bookkeeper, and his climb in 1987 to his last position as Vice President for Finance
and Administration had been gradual but steady, as the following sequence
indicates:
September 4, 2009
VALLE VERDE COUNTRY CLUB, INC., ERNESTO VILLALUNA, RAY GAMBOA, AMADO M.
SANTIAGO, JR., FORTUNATO DEE, AUGUSTO SUNICO, VICTOR SALTA, FRANCISCO
ORTIGAS III, ERIC ROXAS, in their capacities as members of the Board of Directors of
Valle Verde Country Club, Inc., and JOSE RAMIREZ, Petitioners,
vs.
VICTOR AFRICA, Respondent.
A year later, or on November 10, 1998, Makalintal also resigned as member of the
VVCC Board. He was replaced by Jose Ramirez (Ramirez), who was elected by the
remaining members of the VVCC Board on March 6, 2001.
Facts about Respondent:
Respondent Africa (Africa), a member of VVCC
questioned the election of Roxas and Ramirez as members of the VVCC Board with
the Securities and Exchange Commission (SEC) and the Regional Trial Court (RTC),
respectively. The SEC case questioning the validity of Roxas appointment was
docketed as SEC Case No. 01-99-6177. The RTC case questioning the validity of
Ramirez appointment was docketed as Civil Case No. 68726.
In his nullification complaint3 before the RTC, Africa alleged that the election of
Roxas was contrary to Section 29, in relation to Section 23, of the Corporation Code
of the Philippines (Corporation Code).
Arguments of Respondent:
Sec. 29. Vacancies in the office of director or trustee. - Any vacancy occurring in the
board of directors or trustees other than by removal by the stockholders or
members or by expiration of term, may be filled by the vote of at least a majority of
the remaining directors or trustees, if still constituting a quorum; otherwise,
said vacancies must be filled by the stockholders in a regular or special meeting
called for that purpose. A director or trustee so elected to fill a vacancy shall be
elected only for the unexpired term of his predecessor in office. xxx. [Emphasis
supplied.]
Africa claimed that a year after Makalintals election as member of the VVCC Board
in 1996, his [Makalintals] term as well as those of the other members of the VVCC
Board should be considered to have already expired. Thus, according to Africa, the
resulting vacancy should have been filled by the stockholders in a regular or special
meeting called for that purpose, and not by the remaining members of the VVCC
Board, as was done in this case.
Africa additionally contends that for the members to exercise the authority to fill in
vacancies in the board of directors, Section 29 requires, among others, that there
should be an unexpired term during which the successor-member shall serve. Since
Makalintals term had already expired with the lapse of the one-year term provided
in Section 23, there is no more "unexpired term" during which Ramirez could serve.
RTC:
Through a partial decision4 promulgated on January 23, 2002, the RTC ruled in favor
of Africa and declared the election of Ramirez, as Makalintals replacement, to the
VVCC Board as null and void.
SEC
Incidentally, the SEC issued a similar ruling on June 3, 2003, nullifying the election
of Roxas as member of the VVCC Board, vice hold-over director Dinglasan. While
VVCC manifested its intent to appeal from the SECs ruling, no petition was actually
filed with the Court of Appeals; thus, the appellate court considered the case closed
and terminated and the SECs ruling final and executory.5
CA : case is closed and terminated
To the Supreme Court:
VVCC now appeals to the Court to assail the RTCs January 23, 2002 partial decision
for being contrary to law and jurisprudence. VVCC made a direct resort to the Court
via a petition for review on certiorari, claiming that the sole issue in the present
case involves a purely legal question.
Issue:
As framed by VVCC, the issue for resolution is whether the remaining directors of
the corporations Board, still constituting a quorum, can elect another director to fill
in a vacancy caused by the resignation of a hold-over director.
As the vacancy in this case was caused by Makalintals resignation, not by the
expiration of his term, VVCC insists that the board rightfully appointed Ramirez to fill
in the vacancy.
The holdover period is not part of the term of office of a member of the board of
directors
The word "term" has acquired a definite meaning in jurisprudence. In several cases,
we have defined "term" as the time during which the officer may claim to hold the
office as of right, and fixes the interval after which the several incumbents shall
succeed one another.7 The term of office is not affected by the holdover.8 The term
is fixed by statute and it does not change simply because the office may have
become vacant, nor because the incumbent holds over in office beyond the end of
the term due to the fact that a successor has not been elected and has failed to
qualify.
Term is distinguished from tenure in that an officers "tenure" represents the term
during which the incumbent actually holds office. The tenure may be shorter (or, in
case of holdover, longer) than the term for reasons within or beyond the power of
the incumbent.
Based on the above discussion, when Section 239 of the Corporation Code declares
that "the board of directorsshall hold office for one (1) year until their successors
are elected and qualified," we construe the provision to mean that the term of the
members of the board of directors shall be only for one year; their term expires one
year after election to the office. The holdover period that time from the lapse of
one year from a members election to the Board and until his successors election
and qualification is not part of the directors original term of office, nor is it a new
term; the holdover period, however, constitutes part of his tenure. Corollary, when
an incumbent member of the board of directors continues to serve in a holdover
capacity, it implies that the office has a fixed term, which has expired, and the
incumbent is holding the succeeding term.10
After the lapse of one year from his election as member of the VVCC Board in 1996,
Makalintals term of office is deemed to have already expired. That he continued to
serve in the VVCC Board in a holdover capacity cannot be considered as extending
his term. To be precise, Makalintals term of office began in 1996 and expired in
1997, but, by virtue of the holdover doctrine in Section 23 of the Corporation
Code, he continued to hold office until his resignation on November 10, 1998. This
holdover period, however, is not to be considered as part of his term, which, as
declared, had already expired.
With the expiration of Makalintals term of office, a vacancy resulted which, by the
terms of Section 2911 of the Corporation Code, must be filled by the stockholders of
VVCC in a regular or special meeting called for the purpose. To assume as VVCC
does that the vacancy is caused by Makalintals resignation in 1998, not by the
expiration of his term in 1997, is both illogical and unreasonable. His resignation as
a holdover director did not change the nature of the vacancy; the vacancy due to
the expiration of Makalintals term had been created long before his resignation.
xxxx
It also bears noting that the vacancy referred to in Section 29 contemplates a
vacancy occurring within the directors term of office. When a vacancy is created by
the expiration of a term, logically, there is no more unexpired term to speak of.
Hence, Section 29 declares that it shall be the corporations stockholders who shall
possess the authority to fill in a vacancy caused by the expiration of a members
term.
As correctly pointed out by the RTC, when remaining members of the VVCC Board
elected Ramirez to replace Makalintal, there was no more unexpired term to speak
of, as Makalintals one-year term had already expired. Pursuant to law, the authority
to fill in the vacancy caused by Makalintals leaving lies with the VVCCs
stockholders, not the remaining members of its board of directors.
WHEREFORE, we DENY the petitioners petition for review on certiorari, and AFFIRM
the partial decision of the Regional Trial Court, Branch 152, Manila, promulgated on
January 23, 2002, in Civil Case No. 68726. Costs against the petitioners.
SO ORDERED.