Asia Pacific Resources International Holdings, Ltd. vs. Paperone, Inc.

The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Confusing similarity may result from external factors in the packaging or presentation of goods, and confusion of business exists when products are non-competing but related enough to produce confusion of affiliation. Actual fraudulent intent need not be shown; it may be inferred from the similarity of the appearance of the goods as offered for sale to the public.

Petitioner Asia Pacific Resources International Holdings, Ltd. is a foreign corporation engaged in the production, marketing, and sale of pulp and premium wood free paper. It owns the well-known trademark PAPER ONE, with Certificate of Registration No. 4-1999-01957. Respondent Paperone, Inc. is a domestic corporation organized in 2001, engaged in paper conversion such as the manufacture of table napkins, notebooks, and writing pads. The dispute concerns respondent's adoption of "PAPERONE" in its corporate name, which petitioner claims violates its prior rights over the trademark. The case was governed by the Intellectual Property Code (Republic Act No. 8293), specifically Section 168 on unfair competition.

Petitioner Asia Pacific Resources International Holdings, Ltd. (petitioner) is engaged in the production, marketing, and sale of pulp and premium wood free paper. It alleged that it is the owner of the well-known trademark PAPER ONE, with Certificate of Registration No. 4-1999-01957 issued on September 5, 2003. Petitioner claimed that respondent's use of PAPERONE in its corporate name without prior consent was done in bad faith, designed to unfairly ride on petitioner's goodwill and to mislead the public into believing that respondent's business or products were manufactured, licensed, or sponsored by petitioner.

Respondent Paperone, Inc. averred that it had no obligation to secure prior consent from petitioner to adopt its corporate name, as the DTI and SEC had allowed its use. Respondent was registered with the SEC on March 30, 2001, and its business name was registered with the DTI. Respondent denied awareness of petitioner's existence or the registration of PAPER ONE, noting that petitioner is a foreign corporation not doing business in the Philippines. While respondent's business dealt with paper conversion, it did not use its corporate name on any of its products.

The BLA Director found respondent liable for unfair competition, ruling that petitioner was the first to use PAPER ONE in 1999. The BLA found that petitioner filed PAPER ONE for trademark registration on March 22, 1999, which matured into registration on February 10, 2003. Respondent's corporate name was registered with the SEC on March 31, 2001. The BLA found that petitioner presented evidence of prior use of the label PaperOne on paper products in the Philippines earlier than its trademark application, through its marketing agent JND International Corporation, which licensed National Paper Products & Printing Corporation (NAPPCO) to import, sell, and distribute petitioner's products in 1998, with the earliest documented transaction on January 22, 1999. Notably, most of the incorporators of NAPPCO were also incorporators of Paper One, Inc., including Tan Tian Siong, Chong Ping Tat, Thelma J. Uy, Conchita Francisco, and Sy Siong Sun. NAPPCO had expressed interest in becoming the exclusive distributor of "Paper One" Multi Purpose Copy Paper in a letter dated January 19, 2000.

The BLA also observed that respondent's trade name initially had separate words reading "Paper One, Inc." under its original Articles of Incorporation, but was later revised to one word, "Paperone, Inc." The BLA Director ruled that permitting respondent to continue using the same or identical Paperone in its corporate name, although not used as a label for its paper products, would result in confusion as to source of goods and diversion of sales, since both parties are in the same line of business of manufacturing paper products.

• Unfair Competition: Petitioner maintained that respondent committed unfair competition by adopting PAPERONE in its trade name, claiming prior right over the trademark since petitioner was the first to use it for its paper products.
• Actual Damages: Petitioner maintained that it was entitled to actual damages amounting to P46,032,569.72 due to the unfair competition employed by respondent.

• No Obligation to Secure Consent: Respondent averred that it had no obligation to secure prior consent or authority from petitioner to adopt and use its corporate name, since the DTI and SEC had allowed its use.
• No Awareness of Petitioner: Respondent denied any awareness of petitioner's existence or the registration of PAPER ONE, as petitioner is a foreign corporation not doing business in the Philippines.
• No Use of Corporate Name on Products: Respondent argued that it did not use its corporate name PAPERONE on any of its products, and its products had been widely sold in the Philippines even before petitioner could claim any business transaction in the country.
• No Confusing Similarity: Respondent claimed that there was no confusing similarity in the general appearance of the goods, and petitioner failed to establish through substantial evidence that respondent intended to deceive the public or defraud petitioner.

• Unfair Competition: Whether respondent is liable for unfair competition.
• Actual Damages: Whether petitioner is entitled to actual damages.

• Unfair Competition: Yes. Respondent is liable for unfair competition under Section 168 of the Intellectual Property Code. The essential elements — confusing similarity in the general appearance of the goods and intent to deceive the public and defraud a competitor — were established, with the case falling under confusion of business rather than confusion of goods.
• Actual Damages: No. Petitioner is not entitled to actual damages because it failed to present sufficient evidence to prove the amount claimed and the basis to measure actual damages.

• Unfair Competition: The Court held that the essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor. Unfair competition is always a question of fact. The Court stressed that findings of fact of the highly technical agency — the IPO — which has expertise in this field, should have been given great weight by the Court of Appeals. As to the first element, the Court noted that confusing similarity may or may not result from similarity in the marks, but may result from other external factors in the packaging or presentation of the goods. The Court identified two types of confusion: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where the goods of the parties are different but related enough to produce confusion of affiliation. The Court found that this case falls under the second type of confusion — although there is a noticeable difference in how respondent's trade name is used on its products compared to petitioner's trademark, there could likely be confusion as to the origin of the products. A consumer might conclude that PAPER ONE products are manufactured by or are products of Paperone, Inc. The goods of the parties are obviously related as they are both kinds of paper products. The Court gave credence to the IPO's findings on prior right over PAPERONE, citing Berris Agricultural Co., Inc. vs. Abyadang, which states that the determination of priority of use of a mark is a question of fact, and administrative agencies such as the IPO are in a better position to pass judgment thereon. The BLA Director found that petitioner established prior use of the word PaperOne for paper products in the Philippines, with evidence of transactions dating back to January 22, 1999, and that respondent's incorporators, who were also incorporators of NAPPCO, had prior knowledge of petitioner's existence. As to the second element, the Court held that actual fraudulent intent need not be shown; it may be inferred from the similarity of the appearance of the goods as offered for sale to the public. The Court quoted the "unanswered riddle" — why, of the millions of terms and combinations of letters available, respondent had to choose those so closely similar to another's trademark if there was no intent to take advantage of the goodwill generated by the other mark.
• Actual Damages: The Court agreed with the IPO that the actual damages prayed for cannot be granted because petitioner has not presented sufficient evidence to prove the amount claimed and the basis to measure actual damages.

• Confusion of goods vs. confusion of business — Jurisprudence recognizes two types of confusion: (1) confusion of goods (product confusion), where the ordinarily prudent purchaser would be induced to purchase one product in the belief that he was purchasing the other; and (2) confusion of business (source or origin confusion), where, although the goods of the parties are different, the product, the mark of which registration is applied for by one party, is such as might reasonably be assumed to originate with the registrant of an earlier product. While confusion of goods exists when products are competing, confusion of business exists when products are non-competing but related enough to produce confusion of affiliation. The Court applied this doctrine to find that respondent's use of PAPERONE in its corporate name would likely cause confusion as to the origin of the paper products, even though respondent did not use its corporate name as a trademark on its goods.
• Deference to administrative agency findings — Findings of fact of administrative agencies such as the IPO, by reason of their special knowledge and expertise over matters falling under their jurisdiction, are generally accorded great respect, if not finality, by the courts, as long as they are supported by substantial evidence. It is not the task of the appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect to sufficiency of evidence. The Court applied this doctrine in reversing the CA, which had failed to give great weight to the IPO's factual findings on confusing similarity and prior use.
• Intent to deceive inferred from similarity — Actual fraudulent intent need not be shown in unfair competition cases; the element of intent to deceive and to defraud may be inferred from the similarity of the appearance of the goods as offered for sale to the public. The Court applied this doctrine to find that respondent's adoption of PAPERONE in its trade name, despite prior knowledge of petitioner's PAPER ONE trademark, indicated intent to take advantage of the goodwill generated by the other mark.

• "The essential elements of an action for unfair competition are: (1) confusing similarity in the general appearance of the goods, and (2) intent to deceive the public and defraud a competitor." — This passage states the canonical formulation of the elements of unfair competition under Section 168 of the Intellectual Property Code, which the Court applied to the facts of the case.
• "Thus, while there is confusion of goods when the products are competing, confusion of business exists when the products are non-competing but related enough to produce confusion of affiliation." — This passage defines the distinction between the two types of confusion recognized in trademark and unfair competition jurisprudence, which was central to the Court's finding of liability.
• "As in all other cases of colorable imitations, the unanswered riddle is why, of the millions of terms and combinations of letters available, respondent had to choose those so closely similar to another's trademark if there was no intent to take advantage of the goodwill generated by the other mark." — This passage articulates the inference of intent to deceive from the adoption of a confusingly similar mark, which the Court used to establish the second element of unfair competition.

• Berris Agricultural Co., Inc. vs. Abyadang, 647 Phil. 517 (2010) — Cited as controlling authority for the proposition that the determination of priority of use of a mark is a question of fact, and that administrative agencies such as the IPO, by reason of their special knowledge and expertise, are in a better position to pass judgment thereon; their findings are generally accorded great respect, if not finality, when supported by substantial evidence.
• In-N-Out Burger, Inc. vs. Sehwani, Inc. and/or Benita's Frites, Inc., 595 Phil. 1119 (2008) — Cited for the essential elements of an action for unfair competition and for the rule that actual fraudulent intent need not be shown, as it may be inferred from the similarity of the appearance of the goods.
• Shell Company of the Philippines, Ltd. vs. Insular Petroleum Refining Co., Ltd., 120 Phil. 434 (1964) — Cited for the proposition that unfair competition is always a question of fact.
• UFC Philippines, Inc. vs. Barrio Fiesta Manufacturing Corp., 778 Phil. 763 (2016) — Cited for the principle that findings of fact of the IPO should be given great weight by appellate courts.
• Canon Kabushiki Kaisha vs. Court of Appeals, 391 Phil. 154 (2000) — Cited for the proposition that likelihood of confusion of goods or business is a relative concept, to be determined according to the peculiar circumstances of each case.
• Skechers, U.S.A., Inc. vs. Inter Pacific Industrial Trading Corp., 662 Phil. 11 (2011) — Cited for the two types of confusion: confusion of goods and confusion of business.
• McDonald's Corp. vs. L.C. Big Mak Burger, Inc., 480 Phil. 402 (2004) — Cited for the definition of confusion of business as existing when products are non-competing but related enough to produce confusion of affiliation.
• Converse Rubber Corporation vs. Universal Rubber Products, Inc., G.R. No. L-27906, Jan. 18, 1987 — Cited by the BLA Director for the principle that one who knows that a word belongs to and is being used by another has no right to appropriate the same for use on its products which are similar to those being produced by the other.
• American Wire & Cable Co. vs. Director of Patents, 142 Phil. 523 (1970) — Cited for the "unanswered riddle" formulation regarding colorable imitations and intent to take advantage of another's goodwill.

• Section 168, Republic Act No. 8293 (Intellectual Property Code) — The provision on unfair competition, which states that a person who has identified in the mind of the public the goods he manufactures or deals in has a property right in the goodwill of said goods, and that any person who shall employ deception or any other means contrary to good faith to pass off his goods or business for those of another shall be guilty of unfair competition. The Court applied this provision to find respondent liable for adopting PAPERONE in its corporate name.
• Section 168.3(a), Republic Act No. 8293 (Intellectual Property Code) — The provision deeming as guilty of unfair competition any person who sells goods giving them the general appearance of goods of another manufacturer or dealer, which would be likely to influence purchasers to believe that the goods offered are those of another. The Court considered this provision in analyzing the element of confusing similarity.
• Rule 45, Rules of Court — The procedural rule under which the petition for review on certiorari was filed, governing appeals from the Court of Appeals to the Supreme Court.

The decision was penned by Justice Gesmundo. A Separate Concurring Opinion was written by Justice Leonen. The text does not provide the names of other justices who concurred in the decision.

N/A — The case text does not mention any dissenting opinion.