Saturday, March 19, 2016

Unfair competition - G.R. No. 162311

"x x x.

Generally, unfair competition consists in employing deception or any other means contrary to good faith by which any person 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 goodwill, or committing any acts calculated to produce such result.[62]

The elements of unfair competition under Article 189(1)[63] of the Revised Penal Code are:

(a) That the offender gives his goods the general appearance of the goods of another manufacturer or dealer;

(b) That the general appearance is shown in the (1) goods themselves, or in the (2) wrapping of their packages, or in the (3) device or words therein, or in (4) any other feature of their appearance;

(c) That the offender offers to sell or sells those goods or gives other persons a chance or opportunity to do the same with a like purpose; and

(d) That there is actual intent to deceive the public or defraud a competitor.[64]

All these elements must be proven.[65] In finding that probable cause for unfair competition does not exist, the investigating prosecutor and Secretaries Guingona and Cuevas arrived at the same conclusion that there is insufficient evidence to prove all the elements of the crime that would allow them to secure a conviction.

Secretary Guingona discounted the element of actual intent to deceive by taking into consideration the differences in spelling, meaning, and phonetics between LIVES and LEVIS, as wellas the fact that respondent had registered his own mark.[66] While it is true that there may be unfair competition even if the competing mark is registered in the Intellectual Property Office, it is equally true that the same may show prima facie good faith.[67] Indeed, registration does not negate unfair competition where the goods are packed or offered for sale and passed off as those of complainant.[68]However, the marks registration, coupled with the stark differences between the competing marks, negate the existence of actual intent to deceive, in this particular case.

For his part, Justice Cuevas failed to find the possibility of confusion and of intent to deceive the public, relying on Emerald Garment Manufacturing Corporation v. Court of Appeals.[69] In Emerald, the Court explained that since maong pants or jeans are not inexpensive, the casual buyer is more cautious and discerning and would prefer to mull over his purchase, making confusion and deception less likely.

We cannot subscribe to petitioners stance that Emerald Garment cannot apply because there was only one point of comparison, i.e., LEE as it appears in Emerald Garments STYLISTIC MR. LEE.Emerald Garment is instructive in explaining the attitude of the buyer when it comes to products that are not inexpensive, such as jeans. In fact, the Emerald Garment rationale is supported by Del Monte Corporation v. Court of Appeals,[70] where the Court explained that the attitude of the purchaser is determined by the cost of the goods. There is no reason not to apply the rationale in those cases here even if only by analogy.

The rule laid down in Emerald Garment and Del Monte is consistent with Asia Brewery, Inc. v. Court of Appeals,[71] where the Court held that in resolving cases of infringement and unfair competition, the courts should take into consideration several factors which would affect its conclusion, to wit: the age, training and education of the usual purchaser, the nature and cost of the article, whether the article is bought for immediate consumption and also the conditions under which it is usually purchased.[72]

Petitioner argues that the element of intent to deceive may be inferred from the similarity of the goods or their appearance.[73] The argument is specious on two fronts. First, where the similarity in the appearance of the goods as packed and offered for sale is so striking, intent to deceive may be inferred.[74] However, as found by the investigating prosecutor and the DOJ Secretaries, striking similarity between the competing goods is not present.

Second, the confusing similarity of the goods was precisely in issue during the preliminary investigation. As such, the element of intent to deceive could not arise without the investigating prosecutors or the DOJ Secretarys finding that such confusing similarity exists. Since confusing similarity was not found, the element of fraud or deception could not be inferred.

We cannot sustain Secretary Bellos opinion that to establish probable cause, it is enough that the respondent gave to his product the general appearance of the product[75] of petitioner. It bears stressing that that is only one element of unfair competition. All others must be shown to exist. More importantly, the likelihood of confusion exists not only if there is confusing similarity. It should also be likely to cause confusion or mistake or deceive purchasers.[76] Thus, the CA correctly ruled that the mere fact that some resemblance can be pointed out between the marks used does not in itself prove unfair competition.[77] To reiterate, the resemblance must be such as is likely to deceive the ordinary purchaser exercising ordinary care.[78]

The consumer survey alone does not equate to actual confusion. We note that the survey was made by showing the interviewees actual samples of petitioners and respondents respective products,approximately five feet away from them. From that distance, they were asked to identify the jeans brand and state the reasons for thinking so.[79] This method discounted the possibility that the ordinary intelligent buyer would be able to closely scrutinize, and even fit, the jeans to determine if they were LEVIS or not. It also ignored that a consumer would consider the price of the competing goods when choosing a brand of jeans. It is undisputed that LIVES jeans are priced much lower than LEVIS.

The Courts observations in Emerald Garment are illuminating on this score:

First, the products involved in the case at bar are, in the main, various kinds of jeans. x x x Maong pants or jeans are not inexpensive. Accordingly, the casual buyer is predisposed to be more cautious and discriminating in and would prefer to mull over his purchase. Confusion and deception, then, is less likely. In Del Monte Corporation v. Court of Appeals, we noted that:

Among these, what essentially determines the attitudes of the purchaser, specifically his inclination to be cautious, is the cost of the goods. To be sure, a person who buys a box of candies will not exercise as much care as one who buys an expensive watch. As a general rule, an ordinary buyer does not exercise as much prudence in buying an article for which he pays a few centavos as he does in purchasing a more valuable thing. Expensive and valuable items are normally bought only after deliberate, comparative and analytical investigation. But mass products, low priced articles in wide use, and matters of everyday purchase requiring frequent replacement are bought by the casual consumer without great care.[80] (Emphasis supplied)

We find no reason to go beyond the point of sale to determine if there is probable cause for unfair competition. The CA observations along this line are worth restating:

We also find no basis to give weight to petitioners contention that the post sale confusion that might be triggered by the perceived similarities between the two products must be considered in the action for unfair competition against respondent.

No inflexible rule can be laid down as to what will constitute unfair competition. Each case is, inthe measure, a law unto itself. Unfair competition is always a question of fact. The question to be determined in every case is whether or not, as a matter of fact, the name or mark used by the defendant has previously come to indicate and designate plaintiffs goods, or, to state it in another way, whether defendant, as a matter of fact, is, by his conduct, passing off defendants goods as plaintiffs goods or his business as plaintiffs business. The universal test question is whether the public is likely to be deceived.

In the case before us, we are of the view that the probability of deception must be tested at the point of sale since it is at this point that the ordinary purchaser mulls upon the product and is likely to buy the same under the belief that he is buying another. The test of fraudulent simulation is to be found in the likelihood of deception, or the possibility of deception of some persons in some measure acquainted with an established design and desirous of purchasing the commodity with which that design has been associated.[81]

In sum, absent a grave abuse of discretion on the part of the executive branch tasked with the determination of probable cause during preliminary investigation, We cannot nullify acts done in the exercise of the executive officers discretion. Otherwise, We shall violate the principle that the purpose of a preliminary investigation is to secure the innocent against hasty, malicious and oppressive prosecution, and to protect him from an open and public accusation of crime, from the trouble, expense and anxiety of a public trial, and also to protect the State from useless and expensive trials.[82]

x x x."