I

IN1EttEC1 UAI PRQFERfTP H I L I f' P I N F S

FILCON MANUFACTURING } IPV NO . 10--2005-00019,

CORPORATION (FILCON), } For : Violation of RA 8293

Complainant, }

}

-versus-- }

} ►CSP BOUTIQUE GENERA L

MERCHANDISE, CONRADO S. ]

PINEDA, OWNER/PROPRIETOR }

Respondents .- } DECISION NO.x---------------- -- ------ x

DECISIO N

This is an administrative case for violation of Republic' Act No .

8293 filed by Filcon Manufacturing Corporation ("Filcon" for brevity), a

corporation engaged in the business of manufacture, distribution and

sale of footwear clothing and other athletic gadgets and accessories

under the brand name Converse with principal office at Unit E, 2801 C,

East Tower, PSE Building, Exchange Road, Ortigas Center, Pasig City

against CSP Boutique General Merchandise and Conrado S . Pineda, abusiness establishment located at No . 13 Filmore Street, Palanan, MakatiCity .

On May 12, 2005, herein complainant filed its Complaint with

Urgent Prayer for the Issuance of a Restraining Order, alleging five (5)

causes of action :

1 . "In order not to unduly prejudice the consuming public and ruin

complainant's long established reputation, goodwill and good quality

Republic of the PhilippinesINTELLECTUAL PROPERTY OFFIC E

351 Sen . Gil Nuyat Ave ., Makati City 1200 Philippines • www .ipophil .go v.phTelephone: +632-7525450 to 65 • Facsimile : 1632-8904862 • email : mail@ipophil .gov .ph

products, the distribution and sale of feigned "CONVERSE" rubber shoe sby respondent CSP Boutique General Merchandise should be halted ." l

2 . "By reason of Respondent's unlawful act of selling rubber shoe sbearing counterfeit mark of "CONVERSE", complainant' Filcon

Manufacturing Corporation was constrained to institute the present

action for violation of Republic Act 8293, otherwise known is the

Intellectual Property Code of the Philippines, thereby incurring litigation

expenses . "

3 . "On account of the well established goodwill and reputation of

herein Complainant besmirched due to Respondent's unlawful act of

selling counterfeit "CONVERSE" ruhber shoes, an award of damages,

representing the loss of profit of herein complainant, equivalent to Two

Million Pesos (PHP 2,000,000 .00) in Philippine Currency, in favor ofcomplainant is warranted . "

4 . "In order to deter commission of similar acts and to serve as

example for public good, herein Respondent should be assessed

exemplary damages, the amount of which, though incapable of pecuniary

estimation, should not be less than rive Hundred Thousand Pesos (Php500,000.00) . "

5 . "For the protection of complainant's interest, the same was

constrained to engage the services of a legal counsel for a fee of Tenpercent (10%) of the amount recoverable . "

On May 18, 2005, the Director of the Bureau of Legal Affairs (BLA)issued a Notice of Raffle and a Notice to Answer. On same date, a Notice

of Hearing setting the summary hearing for the application for the

issuance of a Temporary Restraining Order on June 6, 2005 was likewise

issued . During the hearing on the application for TRO on June 6, 2005,

only the counsel for complainant appeared and moved for the resetting o f

1 No . 1 0 , Complaint offilcoti

~ . .. . • .

the hearing to June 30, 2005 . On June 1 7, 2005, complaina-nt .. filed a

Motion to Declare Respondents in Default for failure to file Answer . Onthe hearing of June 30, 2005, only complainant's counsel was present

and he moved that the Motion to Declare Respondent in Default be

deemed submitted for resolution . On September 6, 2005 an Order was

issued denying complainant's motion to declare respondent in default on

the ground that the Bureau did not acquire jurisdiction over the person of

respondents .7 On December 1, 2005, Order No . 2005-138 was issued

directing the complainant to cause the service of summons to

Respondent by publication . Howevei, complainant failed to comply with

the said Order so that on February 3, 2006, the case was dismissed underOrder No. 2006-01 (D) for failure of complainant to prosecute the case .

On February 15, 2006, complainant filed a Motion for Reconsideration on

the dismissal of the case on the ground that it did not receive the Order

directing them to cause service of summons by publication . The said

Motion was granted on March 20, 2006 and Complainant was directed

again to cause the service of summons through publication . On May 31 ,

2006, complainant submitted a Compliance showing that summons was

published on Atlas Peoples Balita, a newspaper of general circulation on

May 13, 2006 . For failure of Respondents to file an Answer within the

reglementary period after the publication, the Bureau motif proprio

declared them in default and set the ex parte presentation ofcomplainant's evidence on June 21, 2006 . Complainant beganpresenting its evidence on said date and terminated the same on August

24, 2006 and ordered Complainant to file its Formal Offer of Evidence .Complainant thereafter submitted its Formal Offer of Evidence on

October 3, 2006 . All the evidence of Complainant was admitted on

October 4, 2006 under Order No. 2006--1 76 . In the same Order, it also

directed Complainant to submit a Memorandum . The Memorandum wasfiled on November 16, 2006 . Hence, this Decision .

The issues to be resolved in this case are :

'Oiilci No . 2005 9O dLilcd Scptenibcr 6, 2 00 5 .

(I) WHETHER OR NO *T RESPONDENT IS LIABLE FOR

INFRINGEMENT OF TRADEMARK AND/OR UNFAIR COMPETITION

UNDER REPUBLIC ACT NO . 8293 ; an d

(2) WHETHER OR NOT RESPONDENT AND ITS OWNER/ OFFI~--ERS

ARE SOLIDARILY LIABLE TO COMPLAINANT FOR PAYMENT OF

DAMAGES PRAYED FOR, COST OF LITIGATION AND ATrORNEY'S

FEES .

Petitioner's pieces of evidence in support of its causes of action of

complainant consists of the followirig :

EXHIBIT

„C„

"L "„M„

DESCRIPTION

People's Balita Newspape r

Affidav it of Publicatio n

Philippine Certificate of Registration

No. R--12170 for the mark Chuck

Taylo r

Philippine Certificate of Registration

No. R32021 for the mark Co nverse

Judicial Affidavit of Ms. Estelita A.Adriano

Judicial Affidavit of Mr . Randy Esg.uerra

Judicial Affidavit of Ms . Teresita Cha n

Converse, Inc .

Philippine Certificate of RegistrationNo. 46782 of Converse All Star and

Chuck Taylor & Desiqn

Philippine Certificate of Registratidn

No. R-261 54 of Star and Chevron

Desiyn on Sho e

Philippine Certificate of Registration

No. 32751 of All Sta

r Authority of Filcon to institute action sfor infringement executed b y

Seu etarY s Cer ti ficate

Affidavit of Ronaldo Barros

z I.

•

°P°AND"P-1"

Certificate of Purchase of Couhter'fei t

Converse Rubber Shoe s

Sales Invoice issued by MIZ% CSP

6oulique

Counterfeit Converse rubber" shoes

purchased from responden t

Sample of a genuine Converse rubbershoe s

As borne by the records and evidence of this case, Converse, Inc .,is the owner of various Converse marks, namely: CHUCK TAYLOR,

CONVERSE, CONVERSE ALL STAR & CHUCK TAYLOR & DESIGN, STAR &

CHEVRON DESIGN ON SHOE and ALL STAR3. As owner of the said marks,

Converse, Inc., through herein complainant Filcon, its exclusive

distributor, manufacturer and licensee of athletic and leisure footwear

bearing the Converse trademarks which was duly authorized by Converse,

Inc. to prosecute the instant case,' is, conferred certain rights under

Section 147 .1 of the Republic Act No . 8293, which provides :

"SECTION 1,17 . Rights ( ;()il[ccrc•cL ---~ 147 .1 . 'I'lic invncr of arc•E;isicrccl tnatl: shall have thc cxclttst~,c right to pr(vcnt all Ill ird l)slt'llcy n o tItavtnt~ (Ile owner's consent from 11 sin4 " in the course of tradc iclcutiral o rs tntilar signs () r cc>utainct•s for goods or services which are identft-A or similartct Ihosc in respect of Which the Uaclc:nuirk is rcgistcrcd whcre such useWould result in a likclilt00d of confitsiom . In cstsc of tltc usc of an i(Icuticalsign for identical Foods or scrviccs, a likc•lihtxtcl of ccrnfttsion shall I,cl~resumccl . "

Corollary, complainant by virtue of the authority given to it by the

registered owner of the mark, has the right to prevent any unauthorized

use of the marks of Converse, Inc ., and is entitled to the remediesgranted under Section 155 of the IP Code, to wit :

"Skc1'ION 155. lZc•ntcclics ; Infritt};ctucnl . --- Any pet soil wltc~shall, wt l hout lie conseut of tlic t>wncr ul the res>i S tcrccl tusu~k : %

Bxliihits " 1 "" to J"~ v~rhihit "K" to "K 3"

155 .1 . Use I'll cc~ 11111 tc l(: c an~- 1_cl ) r0xluc_ti 0m, ccutttcrfcit, co liy, o rcolr>rsblc inritaticm ci( a rc€ ;istcsrcl nrtrl, or tJte same container or a dcrmiitant

fcstltsrc thereof in connection with Ilsc sale . trffcrittg lisr sstlr, cltstrlhsis'ion,ssclvcrltsint{ of any goods or sctvi ( cs including other stcl)snecessary to carry out the sale of any goods or srrvires oil or in rrm.trcctiunwnh which such use is likely t o esansr confusion, or t o cause ntistsr1 .e, of toclet-civc ; or

155 .2 . Itclwocluce, cotsirtcrliCis, < . uI>y o r (:t)lorssl)ly iuiit ;rtc• a tcgistcrccltttail : o t a clunrinstnt lc ;tturc tltcrc~~l ;irrcl aplily such reproduction, aouutcrfiat,Copy or colorahlc ituitation to laiycls, signs, prints, haclc ;s

,

gcs, wt_ahlrcrs,rrcrl,taclcs ur advertiscrnents intctulcrl tci be used in amiurerce 111)(m o r Illc<rnucc'tir>n with the sale, offcring for ssle, clistril~trtio~n, or aclvertisini, ofs~u~~cls or scrviccs ctu or ill atnncc.t~io,n witlt which such use is likely t o causec>nftrsio,n, or to cause ntist ;slcc, o r to dcccivc, Shill be lia b le ill a civil actiom

1i61- infi-in};cmcnt by the registrant for the remedies hcrcittaftcr set t*,rth :Provided, 'I'hat the infringement takcs I,Iacc at Iltc morncnt any of the actsstated in Subsection 155.1 or this ssrlrscctio~n are col lilt tutcd res ' arcllcss ofwhcthcr tlterc is actual sale of goods or scrvic :cs s ►sinf; ihc infrsns;inf ; nratrri ;tl .(ticc . 22, R .A . No 166i )

To establish trademark infringement, the following elements must

be present : (1) the validity of plaintift's mark ; (2) the plaintiff's ownershipof the mark; and (3) the use of the mark or its colorable imitation by the

alleged infringer results in "likelihood of confusion . Of these, it is the

element of likelihood of confusion that is the gravamen of trademark

infringement . 5

It must be underscored that once registered, not only the mark'svalidity but also the registrant's ownership of the mark is prima faciepresumed . In the instant case, the validity and ownership of

complainant's marks have not been questioned, as such the presumption

that the same is valid and that the registrant is the owner of the mark hasnot been rebutted. Being so, there is no more need to probe further onthe first two elements of infringement .

With regard to the third element of infringement, basic is the rule

that the central inquiry in an infringement action is whether there is alikelihood that an appreciable number of ordinarily prudent purchasers A*." ,

Mcr)onakt's (' rtn ;rti on, ct . ;sl . vs . L .C . Big Mtsk 13uikcs, GR . No. I43993 . August 18, 2(t04 .

0

•are likely to be misled or confused about the source or atfiJiation or

sponsorship of the goods or services . If consumers, upon Acountering

the defendant's goods or services would believe that they are produced

by or somehow affiliated with a plaintiff's goods or services, the

defendant's mark infringes the plaintiff's .6 As what can be inferred thepieces of evidence presented by complainant, Converse, Inc ., has beenusing its various marks in connection with the manufacture of shoes

made of rubber and other materials and clothing among others . The

appropriation and use by respondent of a similar mark on similar goods

would likely cause confusion on the unwary purchasing public as to make

them believe that the goods of respondent originated from or was

manufactured by complainant . Being so, there is no doubt that

respondent is liable for infringement of trademark .

Another violation which respondent may be liable under theIntellectual Property Code is unfair competition . Section 168 of RepublicAct No . 8 2 93 provides :

<`SI-*1C1'I()N IGfi . llnGtir Coml ) ctilion, Rights, Regtilali0ii andltem c ( lics . ---- 1 68 .1 . A person who has Identified ill lJrc Illind of 111 cllte f~ M >ds It(' nutnullct tires o r deals in, his business or services front those t>fo th c rs, whether o r not a reg istered uiarlc is ettihlc>yccl, has a hropcrly tight illthe t;t> odwill of the said goods, h usincss or scrviccs so idrnlificd, which willhe p ro tected ill the same manner as oilier property r1glils ,

16 8 .2 . Any person who shall enihluy decc p lion or any other nicanscontrary to good faith by Which lie shall pass off the goods ntauufactnrccl byhim o r ill which he deals, or his btisincss, o r services for those of the onehaving established such goodwill, o r who shall Commit '111V acts calcul',11cd toproduce said result, shall be guilty o f unfair competition, and shall he subjectto ;Ili action therefor .

16 8 . 3 . Ili particular, and witliciut ill any way limitittl; Iltc scope o fhro tcctic~rt alrstinst unfair cc>lnpet it toll, [lie following shall be decilled guilty oftinfstir r~~ml~ctitic~u ~

(~t) Any hcrson, who, is selling his goods and givcs tlicnt thegeneral al )pearattce of f;c ocls o f anollter manufacturer o r d estlcr, culter as totltc goods themsclvcs or ill the wral>I,in g, of die pack,,igcs ill which they arcanuaincd, or thc devices o r words Iliciccm, or in any o thcr fi• ;ttitnc o f' Iliciia phcarance, which woulcl be likely to infl (I cnce I )w- cItasers lo believe Ilt ;it Ilt e

° Ueben ;th 13oucheiux . Inlellectual Property- The Law of 'I'raclemarks, l'opyrighls, f'alents and 'I'r;ul cSecrets, 2000 ccl ., P . 9 6 )

7

gnucls offered :irc tltt)sc c>( a manufacturer or dealer, other than tlic ;stclii ;ilritartufactturr o r dealer, or Who odwswisc clothes til eappestrancc a s shall clcccive tlu I ) u N tc- aucl clcf aud at 100hcr of his Ic g iliniatctr,iclc, or any sul)scclucttt vendor of such 'gotxls or ally It;cnt of any vetlclorengaged in sclliu} ; such goods with a like lrurlxo,(1 ;

(1)) Any pcrsott who I ) any artifice, or clcvicc, or who employsany other Iitc 'Mns calcuLttcc] to in<luc:e the (alsc belief that suc-It l ) crs011 ISuflrring ► hc scrvicrs of ano tlicr who It ;ts iclcnttficcl such services in Iltc mindo l- tl ie I)tthlic ; () r

(c) Any person wlu~ shall mal:c lily false statement ill tlic courscof, trade o r Who shall cnntmil any c)Ilwr acI contrary tc) good i :tilli ()I - :t naturccalculated Ic) discredit tltc goods, bu SHI css or .11C IT iccS o f stn(,tlltrr .

Unfair competition is the employment of deception or any other

means contrary to good faith by which a person shall pass off the goods

manufactured by him or in which lie deals, or his business, or services,

for those of another who has already established goodwill for his similar

goods, business or services, or any acts calculated to produce the sameresult . The universal test question is whether the public is likely to bedeceived . Nothing less than conduct tending to pass off one man's

goods or business as that of another will constitute unfair competition .Actual or probable deception and confusion on the part of the customers

by reason of defendant's practices must always appear ." 7

Unfair competition has two elements namely : (1) goodwill and (2)intent to defraud or deceive on the part of the respondent . Goodwill hasbeen defined as "the advantage or benefit which is acquired by an

establishment beyond the mere value of the capital stock, funds or

property employed therein, in consequence of the general public

patronage and encouragement which it receives from constant or habitual

customers on account of its local position, or common celebrity, or

reputation for skill, or necessities, or punctuality, or from other

accidental circumstances or necessities, or even from ancient partialities

or prejudices ."" On the other hand, intent to deceive or to defraud is a

state of mind and may only be shown through overt acts or conduct of

\sia liatwcrv Inc ., vs . Court of Ahltc,,1 Is, ( ; .It . No . ItliS eli . luly 5, 1993, i~unti ; (5h c11 Co . oI iltr PI u III , p incs ,I .t(l . vs Intiular I'ctiolcnm lictining Co. Ltd . et al ., 120 I'lul . 134"139) ." liaclua(1i N IoIor ( .tt. vs . I osc IPt stI ,( ; .It No. -1 ISIt) . llccctnler 24, 1939, I 6 7 11 ill 1(i ~

8

• +.

the respondent . Such intent may be inferred from the similarity in theappearance of goods manufactured or sold by the person sought to beheld liable for unfair competition . ) Also, all the surroundingcircumstances must be taken into account, especially the identity or

similarity of names, the identity or similarity of their business, how farthe names are a true description of the kind and quality of the articlesmanufactured or the business can ied on, the extent of the confusionwhich may be created or produced, the distance between the' place ofbusiness of one and the other party, etc.1 0

There is no doubt that Converse, Inc . and complainant hasgenerated goodwill by the continued use of the various marks ofConverse . On the other hand, the fraudulent intent of respondent to pass

off its goods as that of complainant was manifested by the use of product

tags which misrepresents that it was an ORIGINAL converse chuck taylor

shoes when in fact it was merely a counterfeit or an imitation of theoriginal . This proves that respondent is guilty of unfair competition .

Lastly, as to the prayer for damages, the Supreme Court said in thecase of Development Bank of the Philippines vs . Court of Appeals, I I that :

"In order that damages may he recovered, the best evicienceobtainable by the injured party must be presented . Actual orcompensatory damages cannot be presumed, but must be duly proved,and so proved with a reasonable degree of ce rtainty. A court cannot relyon speculation, conjecture or guesswork as to the fact and amount ofdamages, but must depend upon competent proof that they have beensuffered and on evidence of the actual amount thereof . If the proof isflimsy and unsubstantial, no damages will be awarded, "

In this case, except for the self-serving statement of Mr . Esguerra,

no evidence was presented to prove the actual damages incurred bycomplainant . While there was a statement that there was a reduction of

the sales to 10% in 2005 as compared to 2004, no documents was

presented to substantiate the same . Even in the testimony of Teresit a

La Ychana vs . C'hua Scc o1Q Ang Si Ileng vs . Wellington Dcparlment Store, Inc ., G .R . No . I_.-4531 . Janumy 10, 1953,192 Phil 448~' ' 6, .R . No . 1100.51 . October 16, 1995

«Chan, while she stated that the estimated unrealized sales amount to TwoMillion (P2,000 .000 .00) Pesos for the period of five (5) years cannot be

given credence as it is merely self-serving and no docurnentary, evidence

was presented to substantiate the same . The computation rnade byTeresita Chan made in a separate sheet merely summarizes what she has

testified and does not merit any probative value as the same is

uncorroborated by substantial evidence .

Nevertheless, complainant is entitled to temperate damages asprovided under Article 2224 of the Civil Code12 In one case the SupremeCourt enunciated :

"Temperate damages arc included Within the Context ol,compensatory damages . In arriving at a reasonable level ol' Icntpcraledamages to bc awardetl, trial courts arc guide() by our rulittg Il)al :

" . .'I'hcre are cases where from the nature of the case, clefiuitcproof ol- pecuniat-y loss cannot be olferecl, <allltouglh the Court is convince(Ithat there has been such loss . For instance, iqjury to one's coil]merci .► 1credit or to the goodwill of a business firin is often hard to showcertainty in teru i S of money. Should damages be denied fiw that rcasot)?The judge should be empowered to calculate moderate (lainages if) suchcases, rather than that time I)lainliff sllctulcl suffet-, without redress front lhedel*enelanl's wrongful act ." (Arattct,t v . Bank of ntnerica, 40 SCR/1 144,145)"

1 3

However, although the assessment of damages is left to the sound

discretion of the court, nevertheless, the same may only be recovered

when the court finds that some pecuniary loss has been suffered but its

amount cannot be determined with reasonable certainty in terms ofnloney. 1 4

In the case at bar, Converse Inc . and complainant has obtainedreputation and goodwill in its business through the continuous use of its

1 ' Articlc 2224 . I'ctnpcratc ot Moderate Damages, which are mo te than nominal but less Ihancoitpcnsalory damages, may he recovered when the cuuit Finds Ihril suni e hecuniaiy loss has been sufferedbut it ,., anwum ca not, rout the nature olllie case, he pni ved with certainty .

lie in vs . Cowl ot- Appeal s'rulaitino, Arlurti, (bmt7icotarics aiul .lurisprudencc on Ihe (' ivil Cnlc of thc I'hilip p ines, Vol . V, 1995

13d ., page 661-662 ciling Viclorinv, ct . at vs . N o ra, ((' A . 52 DG 911 ,

10

various marks in commerce not only in the Philippines but also in

different parts of the world . Due to the proliferation of t*a:unterfeitgoods bearing its marks and the acts of infringement artd unfair

competition of respondent, this Bureau recognizes that such act's'brought

about considerable loss to it although the amount of injury to its

reputation or goodwill cannot be determined with certainty . As such, this

Bureau finds that the amount of Five Hundred Thousand (P500,000 .00)Pesos as temperate damages is appropriate .

With respect to attorney's fees, it is well settled doctrine that no

premium should be placed on the right to litigate and not every winning

party is entitled to an automatic grant of attorney's fees . The party must

show that he falls under one of the instances enumerated in Article 2208

of the Civil Code . In this case, since petitioner was compelled to engage

the services of a lawyer and incurred expenses to protect its interest and

right over the subject property, the award of attorney's fees is proper .

However there are certain standards in fixing attorney's fees, to wit : (1)

the amount and the character of the services rendered ; (2) labor, time

and trouble involved ; (3) the nature and importance of the litigation and

business in which the services were rendered ; (4) the responsibilityimposed ; (5) the amount of money and the value of the property affected

by the controversy or involved in the employment ; (6) the skill and the

experience called for in the performance of the services ; (7) the

professional character and the social standing of the attorney ; and (8) the

results secured, it being a recognized rule that an attorney may properly

charge a much larger fee when it is contingent than when it is not ." 1 5

In this case, it is only proper to sustain the award of attorney's fees

since respondent has constrained complainant to incur expenses to

protect its interest against the infringement and unfair competition . In

awarding the attorney's fees in this case, it was taken into account that

complainant incurred expenses in securing the services of the lawyer, th e

" 1 ( ; R N o 140192 Apiil 12, 20115 1I' :uiay 12ecrcatiou ('cutci Awl I)evcl pment ('oip , Vs (' :urilina M :uienzn Fauslu + nnd Anunciacicm I auslu Pacun ;iyen, Kcepomdcius .

( I

payment of filing fees and the cost of the publication of summons andother expenses incident to the prosecution of this case and as suchBureau awards the amount of P200, 000 .00 as attorney's .fees i ricludingthe cost of litigation .

WHEREFORE, premises considered, respondent is hereby ordered to

CEASE and DESIST from further infringing and/ or using the various

registered marks of Converse, or any reproduction or colorable imitation

thereof in connection with the sale, offering for sale, distribution of its

goods and other related goods . Respondent is also directed to paycomplainant the amount of Five Hundred Thousand (P5 00,000 .00) Pesosas and by way of temperate damages and Two Hundred Thousand

(P200,000 .00) as and by way of attorney's fees .

SO ORDERED .

Makati City, 20 February 2-Cf07 _

ESTA LITA-BELTRAN ABELARDO

Dire tor, Bureau of Legal Affairs V

1 2