Mercantile Law

SHANG PROPERTIES REALTY CORPORATION v. ST. FRANCIS DEVELOPMENT CORPORATION G.R. No. 190706 July 21, 2014 “True Test” of Unfair Competition

FACTS:

Respondent filed against petitioners before the IPO – Bureau of Legal Affairs (BLA), (a) an intellectual property violation case for unfair competition, false or fraudulent declaration, and damages arising from petitioners’ use and filing of applications for the registration of the marks “THE ST. FRANCIS TOWERS” and “THE ST. FRANCIS SHANGRI-LA PLACE,” and (b) a case opposing the petitioners’ application for registration of the mark “THE ST. FRANCIS TOWERS”, and (c) an inter partes case opposing the petitioners’ application for registration of the mark “THE ST. FRANCIS SHANGRI-LA PLACE”.

Petitioners denied the charges, maintaining that they could register the mark “THE ST. FRANCIS TOWERS” and “THE ST. FRANCIS SHANGRI-LA PLACE” under their names, contending that respondent is barred from claiming ownership and exclusive use of the mark “ST. FRANCIS” because the same is geographically descriptive because respondent’s as well as petitioners’ real estate development projects are located along St. Francis Avenue and St. Francis Street in Ortigas Center.

The BLA found that petitioners committed acts of unfair competition against respondent by its use of the mark “THE ST. FRANCIS TOWERS” but not with its use of the mark “THE ST. FRANCIS SHANGRI-LA PLACE.” It, however, refused to award damages in the latter’s favor.

Meanwhile, the BLA denied petitioners’ application for registration of the mark “THE ST. FRANCIS TOWERS”.

Both parties appealed the decision.

The IPO Director-General affirmed the rulings of the BLA that: (a) petitioners cannot register the mark “THE ST. FRANCIS TOWERS”; and (b) petitioners are not guilty of unfair competition in its use of the mark “THE ST. FRANCIS SHANGRI-LA PLACE.” However, reversed the BLA’s findingand dismissed the charge of unfair competition through their use of the mark “THE ST. FRANCIS TOWERS.”

On appeal, the CA found petitioners guilty of unfair competition not only with respect to their use of the mark “THE ST. FRANCIS TOWERS” but also of the mark “THE ST. FRANCIS SHANGRI-LA PLACE,” and ordered petitioners to cease and desist from using the mark “ST. FRANCIS”, and to pay respondent a fine.

Dissatisfied, petitioners filed the present petition.

ISSUE:

Whether or not petitioners are guilty of unfair competition in using the marks “THE ST. FRANCIS TOWERS” and “THE ST. FRANCIS SHANGRI-LA PLACE.”

RULING:

The petition is meritorious.

Section 168 of Republic Act No. 8293, otherwise known as the “Intellectual Property Code of the Philippines” (IP Code), provides for the rules and regulations on unfair competition. Section 168.2 proceeds to the core of the provision, describing forthwith who may be found guilty of and subject to an action of unfair competition — that is, “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 x x x.”

The Court has defined Unfair Competition as which is “‘the passing off (or palming off) or attempting to pass off upon the public of the goods or business of one person as the goods or business of another with the end and probable effect of deceiving the public.’

[In other words], the defendant gives his goods the general appearance of the goods of his competitor with the intention of deceiving the public that the goods are those of his competitor.”

The “true test” of unfair competition has thus been “whether the acts of the defendant have the intent of deceiving or are calculated to deceive the ordinary buyer making his purchases under the ordinary conditions of the particular trade to which the controversy relates.” Based on the foregoing, it is therefore essential to prove the existence of fraud, or the intent to deceive, actual or probable, determined through a judicious scrutiny of the factual circumstances attendant to a particular case.

Here, the Court finds the element of fraud to be wanting; hence, there can be no unfair competition.

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