Emerald Garment Manufacturing Corporation vs. Court of Appeals

A trademark infringement action fails where the marks are not confusingly similar under the holistic test and where the complainant, especially a foreign entity, fails to prove prior actual commercial use of the mark in the Philippines, as registration alone does not create ownership but merely recognizes a pre-existing right derived from use.

Private respondent H.D. Lee Company, Inc., a U.S. corporation, sought cancellation of petitioner Emerald Garment Manufacturing Corporation's registration for the trademark "STYLISTIC MR. LEE" and opposed its application for registration on the Principal Register. Private respondent alleged that petitioner's mark was confusingly similar to its previously registered "LEE" trademarks, constituting infringement under the Trademark Law (R.A. No. 166) and the Paris Convention. Petitioner countered that its mark was distinct and that it was the prior user in the Philippines.

• Nature of the Action: This was a trademark cancellation and opposition proceeding initiated by private respondent H.D. Lee Co., Inc. against petitioner Emerald Garment Manufacturing Corporation's mark "STYLISTIC MR. LEE," alleging infringement of private respondent's "LEE" trademarks.
• The Parties and Marks: Private respondent, a U.S. corporation, held several registrations for "LEE," "LEE RIDERS," "LEE LEENS," and "LEE SURES" in the Philippines. Petitioner, a domestic corporation, held a registration for "STYLISTIC MR. LEE" on the Supplemental Register.
• Proceedings Below: The Director of Patents, applying the dominancy test, found the word "LEE" to be the dominant feature of petitioner's mark and ruled it confusingly similar to private respondent's marks. The Court of Appeals affirmed.
• Evidence of Use: Private respondent claimed prior use through sales at U.S. military post exchanges in the 1960s and presented advertising expenses from 1981-1982. Petitioner presented sales invoices dating back to 1975 to prove its prior actual use in the Philippines.
• New Arguments on Appeal: In its motion for reconsideration before the Court of Appeals, petitioner raised for the first time the defenses of laches and that private respondent had "unclean hands." The Court of Appeals refused to consider these as they were not raised before the BPTTT.

• Laches and Estoppel: Petitioner argued that private respondent was barred by laches under Sec. 9-A of R.A. No. 166, as it waited over six years from petitioner's alleged first use (1975) to file the cancellation petition (1981).
• No Confusing Similarity: Petitioner maintained that its trademark "STYLISTIC MR. LEE" was entirely different from private respondent's "LEE" marks and that registration was prima facie evidence of good faith.
• Prior User: Petitioner contended it was the prior actual user of its mark in the Philippines, evidenced by sales invoices from 1975, while private respondent failed to prove commercial use before filing its application.
• Error in Procedure: Petitioner asserted the Court of Appeals erred in refusing to consider the defenses of laches and unclean hands raised for the first time in its motion for reconsideration.

• Confusing Similarity: Respondent countered that petitioner's mark was confusingly similar, as "LEE" was the dominant feature, and the goods (jeans) were identical, likely causing public confusion.
• Prior Registration and Use: Respondent argued it was the prior registrant and had established prior use through post exchange sales and advertising, entitling it to protection under the Trademark Law and the Paris Convention.
• Bar on New Issues: Respondent maintained that petitioner was barred from raising new defenses (laches, unclean hands) on appeal, as they were not pleaded or ventilated before the BPTTT.

• Confusing Similarity: Whether the trademark "STYLISTIC MR. LEE" is confusingly similar to private respondent's "LEE" trademarks.
• Prior Actual Use: Whether private respondent proved prior actual commercial use of the "LEE" trademark in the Philippines, a prerequisite for acquiring ownership.
• Laches: Whether the defense of laches was properly raised and, if so, whether it bars private respondent's action.
• Scope of Appeal: Whether the Court of Appeals erred in refusing to consider new arguments raised for the first time in a motion for reconsideration.

• Confusing Similarity: The trademarks are not confusingly similar. Applying the holistic test, the marks must be considered in their entirety. The dissimilarities between "STYLISTIC MR. LEE" and "LEE" are substantial. The nature of the goods (jeans, a considered purchase) and the ordinary purchaser (an "ordinarily intelligent buyer" familiar with brands) reduce the likelihood of confusion. The format of private respondent's variations ("LEE RIDERS") is distinct from petitioner's mark.
• Prior Actual Use: Private respondent failed to prove prior actual commercial use in the Philippines. Registration certificates are merely prima facie evidence and do not perfect a right; ownership stems from actual use. Self-serving statements and advertising expenses incurred years after petitioner's established use were insufficient. Petitioner's sales invoices from 1975 constituted proof of prior use.
• Laches: The defense is unavailing. The reckoning point for notice is the publication of petitioner's Supplemental Register certificate (27 October 1980), not the alleged date of first use. Private respondent's cancellation petition was filed less than a year later, which is not a "lengthy" delay.
• Scope of Appeal: The Court of Appeals did not err. Defenses not raised in the proceedings before the BPTTT constitute a change of theory impermissible on appeal.

• Holistic Test for Confusing Similarity — This test requires that the trademarks be considered in their entirety, as they appear in their labels or packaging, in relation to the goods they are attached to. The discerning eye must focus not only on the predominant words but on all features to determine if one is confusingly similar to the other. The Court applied this test, finding the overall impressions of "STYLISTIC MR. LEE" and "LEE" to be sufficiently distinct.
• Actual Use as the Source of Trademark Ownership — Under the Trademark Law (R.A. No. 166, Secs. 2 and 2-A), actual use in commerce in the Philippines is a prerequisite for acquiring ownership over a trademark. Registration is merely an administrative act declaratory of this pre-existing right and does not, by itself, create ownership. This principle was decisive in defeating private respondent's claim.

• "Registration does not, however, perfect a trademark right." — This passage underscores the fundamental principle that trademark rights originate from use, not merely from administrative registration.
• "The ordinary purchaser is not the 'completely unwary consumer' but is the 'ordinarily intelligent buyer' considering the type of product involved." — This defines the standard for assessing likelihood of confusion for relatively expensive, brand-conscious goods like jeans.
• "'LEE' is primarily a surname. Private respondent cannot, therefore, acquire exclusive ownership over and singular use of said term." — This highlights the limitation on monopolizing common surnames as trademarks against others with the same surname.

• Del Monte Corporation v. Court of Appeals, 181 SCRA 410 (1990) — Applied and followed for its development of the holistic test and for the principle that the cost of goods influences the degree of care exercised by the ordinary purchaser.
• Sterling Products International, Inc. v. Farbenfabriken Bayer Aktiengesellschaft, 27 SCRA 1214 (1969) — Cited for the rule that actual use in commerce is a prerequisite for acquiring trademark ownership, and that registration is merely declaratory of a pre-existing right.
• Philip Morris, Inc. v. Court of Appeals, 224 SCRA 576 (1993) — Relied upon to qualify the application of the Paris Convention, holding that municipal law on the requirement of actual use must prevail where there is a clash.
• Pagasa Industrial Corp. v. Court of Appeals, 118 SCRA 526 (1982) and Converse Rubber Corp. v. Universal Rubber Products, Inc., 147 SCRA 154 (1987) — Cited for the standard of proof required to establish actual commercial use, where "samples" or mere advertisements are insufficient.

• Sec. 2, R.A. No. 166 (Trademark Law) — Provides that trademarks must be "actually in use in commerce and services not less than two months in the Philippines" before an application for registration is filed. Applied to require proof of actual commercial use.
• Sec. 2-A, R.A. No. 166 — States that ownership is acquired by "anyone who... by actual use thereof in manufacture or trade... may appropriate to his exclusive use a trade-mark." Applied as the foundation for the actual use doctrine.
• Sec. 4(e), R.A. No. 166 — States that a mark that "is primarily merely a surname" is not registrable on the Principal Register. Applied to note that "LEE" is primarily a surname and cannot be exclusively monopolized.
• Sec. 20, R.A. No. 166 — Makes a certificate of registration prima facie evidence of validity and ownership. Interpreted as applying only to the Principal Register and as rebuttable, not conclusive.
• Sec. 9-A, R.A. No. 166 — Provides that equitable principles of laches, estoppel, and acquiescence may be considered in inter partes proceedings. Raised by petitioner but found inapplicable due to lack of lengthy delay.

• Justice Santiago M. Kapunan (ponente)
• Justice Bellosillo
• Justice Hermosisima, Jr.

• Justice Padilla — Dissented, voting to deny the petition. He agreed with the findings of the BPTTT and the Court of Appeals that petitioner's trademark "STYLISTIC MR. LEE" was confusingly similar to private respondent's earlier registered "LEE" trademarks, constituting infringement.